Black Friday and a Hint of Black Tuesday

Another day and more bad economic news.

It is the day after Thanksgiving, when minds turn toward shopping for Christmas presents that often go to oneself. It will be interesting to see how all the sales go, some stores and online firms have had them going all week already. My gut feeling is that they will be down because high unemployment combined with overextended credit means no money to spend.  Personally, I can’t afford gifts or even to mail Christmas cards this year, unless I find a way to get extra cash – which is very hard for a chronically ill disabled guy.

But I doubt I’m alone in this boat.  One of the shoes I’ve been predicting to drop has been the hidden problems with commercial real estate loans. Nobody has been more ambitious in growing their commercial land than Dubai and things have come to a head there.  The city state of Dubai has asked for a suspension of their loan payments for six month and that has spooked the world markets today.  UK banks are particularly at risk due to this, but the ripple effect looks to be large and spanning the globe.  The Dow Jones opened with a 200 point slide before stabilizing around 150 points down.

Meanwhile, the dollar continues to slide.  I wouldn’t consider Japan to be that strong an economy due to its going into deflation. So if the US dollar is so weak against it what does it say about the US economy?  We will be seeing considerable inflation as this continues and that in turn will depress domestic spending even further.

Oil is down as well, going below $75 a barrel due to the Dubai crisis. I remember when a crisis was a much bigger thing, but that is the media for you.  Gold and precious metals are down for the same reason but that will be temporary as foreign central banks move out of the US dollar.

All the ballyhooing going on by various governments that the recession is over seems to be more propaganda (and wishful thinking) than reality.  The instability still remains and the world market reactions reflect it. With commercial real estate investments set to blow up and only a lull in the home loan failures, much will go wrong with in the next 10 months.