Friday, January 22, 2010

Double Dipping

Nearly all men can stand adversity, but if you want to test a man's character, give him power.
-- Abraham Lincoln (1809 - 1865)

Most economists but not all politicians admit that we are in the midst of a recession, at the very least. Some call it the Great Recession and some call it a mini-Depression. According to Bernanke and Geithner we are on the mend and while somewhere between 10% and 25% are unemployed (if you calculate the various categories of Not Working), the government’s standard line is that we are on track to recovery. Maybe later this year, maybe next year at the latest. Of course, if you are a Federal or State Civil Service employee, you are more likely to be unaffected by economic events around you. Federal and State governments have so far been loath to fire or lay-off civil service workers. But, that too could change if things get bad enough. To wit, California.
Then there’s Lloyd Blankfein and the Goldman Sachs “Bank,” formerly known as an “Investment Bank.” The latter gets no government bailout money; the former can take whatever it can get. And, it certainly did.

Obama’s big mistake was in not sweeping out the Goldman Sachs employees (current and former) so as to emulate FDR’s clean sweep of the crooks. Instead we have Geithner and Bernanke in the shadows of the biggest con man, former Treasury Secretary Henry Paulson, who saved Goldman but killed Lehman and Bear Sterns. Of course, as a former CEO, he knew where the stock warrants were buried. While all of us were getting the picture on Main Street, Washington was still under Blankfein’s control. At least when Joe Kennedy was picked to run the S.E.C., he was known to be a crook who would catch the others.

What was on the horizon last year was the possibility of a double-dip or, even more ominous, a VW. The first refers to a second downdraft and the second refers to yet another uptick after the double-dip, followed by still another drop in economic activity.
Somewhere along these lines comes the possibility of Depression.
There were numerous drops in the Dow back in Depression number one and the last, which occurred in 1933, was the killer. At that point, the Dow had lost 90% of its value.

Recently, in addition to the bad news about Dubai’s default on its Sovereign debt, there is speculation about a default in Greece. The Greek economy is now saddled with debt totaling 133% of GDP. Souvlaki can’t solve that alone. And, Germany is entering double-dip territory. Recently, there have also been figures in the U.S. that belie a cause for concern that we may also suffer that fate. We now may be heading down again.
The fact that China is now tightening its belt while our own banks take more of the remaining credit off of the table, does not bode well for small businesses or their shrinking employment roster.

If we are entering a double-dip recession (which to some appears to be a Depression), some trends will accelerate.
In Manhattan, restaurants, clothing stores and real estate agencies continue to tout their special sales while beginning to close up shop.
Several condo developments have been abandoned in favor of hotel projects but the sluggish sales at locations like Trump SoHo, 350 West Broadway, and 311 West Broadway – are a signal that brokers still manipulate the truth. There is money around but the number of sales is off significantly and the discounts are deep.

In the Hamptons, as the new government takes shape under Anna Throne-Holst in Southampton, the Town is still struggling with anemic property tax receipts and evaporating transfer taxes. Available funds are becoming harder to come by.
The investigation into what happened to the missing $13 million in Town coffers is shifting from Linda Kabot to former Supervisor Skip Heaney – according to a lengthy document she forwarded to the investigating team. For the first time, Heaney criticized the Southampton Press for its coverage in this regard – a highly unusual complaint given its heavily pro-Heaney and pro-Republican history. With a Republican Party that is fractured and a Democratic Party that has never had a strong grip on reality, both the Independent Party (led by Al Gregor) and the Conservative Party (Frank McKay) have become more important.
Wherever that $13M investigation leads, the Town now needs the money. Loss of numerous Town jobs and a further contraction in available cash is now more of a possibility.
Restaurants have closed, real estate agencies have gone out of business and more and more shops are for rent.
Sales of properties beyond the upper limit of $750,000 are scarce and prices are still dropping.

Look for Bridget Fleming to fill the vacancy created by Throne-Holst who was elected Southampton Town Supervisor – and keep an eye on Regina Calcaterra for State Senator, who is challenging Ken LaValle. She is strong on gay rights and has the bona fides to pull off an upset over the incumbent.

Times really are a’changin.