Headed for a Jobless Recovery

The size of the Balance Sheets for US banks and companies is shrinking. Companies are fighting to stay profitable in this challenging environment. And they will succeed, I'm sure of that fact. Challenge is how to grow the company. No one is focusing on it and I do not think it would be on their radar for some time. As a result, companies will turn around. Leaner, meaner(literally) and profitable. If the companies fire enough people, shut down enough plants and cut enough costs and yet survive they will eventually be profitable, albeit with a smaller revenue base. However, the people that were spitted out with pink slips will not be assimilated back in the system anytime soon. Net, Net this will be a jobless recovery and it may take a decade or more to reach full employment of 4-5%.

Impact of Global Meltdown on China

This could be the biggest challenge for the most populous country in the world. For decades China has been growing by being the world's manufacturing base. Prosperity had kept the dissenters from voicing their thoughts against the communist regime.

All that is now set to change. With the slowdown, will come slower growth(the GDP growth in China for 3rd Quarter is already come down to 9%) and joblessness and with it will come mass unrest putting great strain on the country's political system.

Unless China can generate internal consumption to keep its people engaged and prosperous the political scene could change there in the next 3-4 years. There will be a meltdown in coming years. How long can the govt differ it is to be seen.

What could help is large scale govt spending on Infrastructure projects and welfare schemes. Good news is that with 2 Trillion dollars they have the deep pockets to make it happen. How well they manage it still needs to be seen. One thing is for sure, in this Global Financial Crises, the stakes for China are as high as for US.

Greenspan is Culpable for this mess

I've been reading about the housing bubble since 2004 on fool.com. They knew it was coming but no one knew when. Greenspan knew about it but dismissed it as mere froth 2005.

I think the reason he chose to overlook it instead of dealing with it was because he wanted US to come out of the recession that started in 2000-2001. People were afraid that like Japan, US will also face a long recession. Housing bubble delivered US out of the recession in a much shorter time.

This time however, even that hope is gone. There is no froth left anywhere in any sector. The winter is going to be long and harsh. Remember, the US "lost decade" started in 2007...