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Morning Reading
Good morning. Hope you had an enjoyable holiday. Among our starter topics today -- Dubai, Scottish beer and ridiculousness at Wal-Mart.
Dubai is the Lehman Bros. of the Persian Gulf (Slate):
Like so many other blue-chips that garnered headlines during the boom years, it was held aloft by loans and a global bubble heavily concentrated in commercial real estate. Now that it has stopped paying debts owned by government-controlled companies, Dubai looks less like Singapore and more like an institution whose epic fail in 2008 helped paralyze the global financial system: Lehman Bros.
Dubai is one of many ticking time bombs (The American):
If nothing else, last week's events in Dubai should remind us that the global economy is far from out of the woods. It should also remind us how premature it is for policy makers to start implementing exit strategies from the past year's extraordinary global monetary and fiscal policy easing.
Holiday retail numbers are a mirage (Clusterstock):
Davidowitz predicts "the noise will be taken out" about "strong" Black Friday sales in the coming weeks and a sobering reality will settle in: "People will look a stores closing and a rash of bankruptcies after Christmas. People will start to look at this and say 'wow, this is terrible,'" he says.
This business owner would agree with that (NPR)
Last year at this time, they managed 55 full-time employees.
Today, the nine workers left are trying to keep busy inside this lonely machine shop in a gritty corner of the San Gabriel Valley, a metropolitan area east of Los Angeles.
"We're a high-profit, low-output operation here," Albert Ceja says. "People just stopped purchasing stuff, and that really hit us hard."
But some things never change (LA Times) A Wal-Mart on Black Friday:
But in Upland, employees said, customers began tearing into merchandise that had been shrink-wrapped and were supposed to be opened at 5 a.m.
"This was without a doubt the worst I've ever seen it," said one employee, who said she has worked a dozen Black Fridays.
"They wouldn't let people line up," she added. "They were belligerent. They just bombarded the store."
The World's Strongest Beer (Asylum UK) 32% abv. Love the name:
Tactical Nuclear Penguin will be available to buy online and from two off licenses one in London and one in Edinburgh, at £30 and £250 which also buys you a share in the company and will go towards building a £2.3m "eco-friendly, carbon neutral brewery in Aberdeen". Strong beers and green credentials.
Welcome back, Scott!
This is a bit tangential, but Dubai’s got me thinking…
Obama was quick to note that "credit is the life blood of our economy" when he took office. But Dubai has me wondering if wide-scale waste is an inevitable result of low interest rates and easy credit. Would Dubai ever have happened without overly easy access to credit? Like Kai noted on the show yesterday, everyone seemed to know Dubai’s outlandish “growth†was crazy as it was occurring. I certainly didn’t believe demand was driving the building of the world’s biggest skyscrapers in the middle of the desert. Now, less than 2 years from Kai’s realization, Dubai is broke.
We’ve experienced similar waste here. Much of America's "growth" over the last few decades has been intangible. And what do Americans have to show for it now? Much of it existed on paper and is now gone. We’ve built a ton of tract homes and big box stores that sit vacant, but we’re as reliant as ever on ancient and worn infrastructure.
Has anyone proven out the relationship between long-term, artificially-low interest rates (easy credit) and wasteful "growth"?
Maybe easy credit is more a cancer than a life blood. After all, it’s clear the American economy isn’t working for average Americans, and hasn’t been for some time.
i CANNOT HELP BUT LOOK AROUND THE AREA WHERE I LIVE ON THE EAST EDGE OF PORTLAND OR AND SEE SO MUCH WASTE. I CAN SEE LOTS OF OLDER HOUSES THAT ARE ON LARGE LOTS THAT ARE PROBABLY RENTALS AND NOT BEING KEPT UP. THEY ARE JUST WAITING FOR THE REAL ESTATE MARKET TO PICK UP AND BE TORN DOWN AND SOME CHEAPLY BUILT MULTI FAMILY HOUSING WILL GO UP. OF COURSE THE VAST MAJORITY OF THE McMANSIONS BUILT IN THE PAST FEW YEARS WHERE NOT EXACTLY WELL BUILT, THEY LOOKED FANCY BUT UNDERNEATH IS A WHOLE NOTHER STORY. IT ALL COME DOWN TO THE BUILDING INDUSTRY GETTING GETTING RID OF THE INDIVIDAUL BUILDERS WHO MAY HAVE DONE A COUPLE OF SMALLER HOUSES AT A TIME AND MADE A DECENT LIVING BUT DIDN'T MAKE ANYONE FILTHY RICH. NOW IT SEEMS UNLESS YOU WANT TO BE FILTHY RICH OR AT LEAST ACT LIKE IT OR MAKE SOMEONE ELSE RICH YOU ARE A
NOTHING!
Right. This is exactly what I'm talking about. Not to mention that those McMansions were often built with shoddy materials, like toxic dry wall from China, which is now making McMansion inhabitants sick. If that's "growth," I'll take my health and economic stagnation, thank you very much.
