Jan. 23rd reporting - Illinois unemployment at 10.1% - up 1.3% from a year ago. Home price index down 8.5% from a year earlier. Commercial real estate is now on the burner - a lot of loans will reset in the 2nd quarter. I saw Alexi G. talking about his family's bank yesterday and how badly they have been hit by this. Small community lenders that did biz loans for strip malls and office space will be crunched as the number of vacancies multiplies. Bad Biz kills the demand for houses and depresses prices.
I know that you know all this, but it is amazing to met to see how the have/have not gap is widening.
I'm tired of hearing that old saw about "it's small businesses that create jobs." Not entirely. I think it's larger businesses that place orders with myriad small(er) companies to make parts that in turn needed nearby delivery companies and lunchrooms and stores and office space for other small businesses that create jobs. I read this today in one of my old car mags:
Fordism was a system of volume production and volume consumption. Fordism combined mass production - building large volumes of cars - with mass consumption - making the price inexpensive so more could afford them - to produce economic growth and widespread material advancement for all.
Henry did this by introducing the Model T, a simple yet high quality car with such a low price that it was affordable to a broad segment of the population.It sold in large volumes which kept the price down. Then Ford went further, utilizing new manufacturing techniques which reduced costs even further and helped to bring the price even lower. He was thus able to pay his workers a decent wage and thus made consumers out of them, increasing the demand for his car. Soon workers on the factory floor could buy one of the cars they made, and homes, and all kinds of consumer goods and send their kids to school.
Well we are still getting cheap (and cheaper_ goods to buy, but they aren't made here, so there are not the number of good manufacturing jobs to support better wages and lifestyle. And what we have to spend is going overseas. We are left selling each other insurance and delivering pizzas. People want more but can't earn the dough to support what they already have, and many are being dragged down by upkeep and taxes. Of course, they willingly signed on for the debt because "real estate always goes up" and things were always going to get better.
The Model T was an entry level car, simple, inexpensive, affordable. It was the all-time best seller. The only car to challenge that was the VW, which was much the same. Now, companies like Hyundai and Kia produce very slick cars that are worlds apart from the above, but still cheaper than most of the others. Obviously they learned something we didn't.
Posted Thursday Mar 4, 2010 14:20
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