Back from a trip - a few musings on recent events.....

Was away for a few days. Still think things are worse than you think they are.....

Musings:

1. The G-20 went better than expected (!), esp the $1.1Trillion for the IMF. But the absence of global stimulus coordination will come back to bite in 6 months or so
2. Why am I reminded right now of the mood a year ago, after Bear tanked? Same deal: everyone (not just Kudlow) is finding silver linings, and missing the forest for the trees. Seems more likely than not that we're being lulled to sleep by momentary events (like the mirages that housing is bottoming, and that banks are healing), and when the real bad news piles up later this summer and into the fall, look out.
3. One forest being the US consumer. Folks, consumers cannot and will not ever again spend like they did over the past 20 years. Period. Credit will not be there, generational change matters, wealth (housing, stocks) has been epically destroyed, and attitudes shifted. Absent this spending where is long-term recovery coming from? Where are Chinese exports going?
4. Some systemically important banks are in horroble shape, even with all the federal bailouts. Best headline from yesterday: Bank Losses To Exceed Great Depression -Calyon's Mayo This will continue to be the case, imo, at least until the really radical solutions along the lines of those proposed by Krugman and Johnson are adopted
5. The media is tired of bad economic news, and I fear it will therefore mislead ill-informed Americans into false optimism, and, worse, poor financial decision-making. Two examples from mainstream outlets just today. Both attempt to be balanced, but the headlines alone are worrisome: Economic ‘Green Shoots’ Recovery hopes begin to blossom Spring is in the air, especially at editors' desks!
6. Some reasons to still be very concerned about what the future might bring:

• The American consumer can no longer carry the world's economic load, and the necessary re-balancing is not happening. Folks, the US consumer has lost, thus far, $12 Trillion wealth.
• Eastern Europe is still in terrible shape, and its banks are inextricably intertwined with Western Europe. as the East goes south, so too might the West
• US "Recovery", if and when it arrives, will by necessity be weak: Economy Falling Years Behind Full Speed
• GM's heading to bankruptcy, top speed: GM shares skid on bankruptcy preparation news This will be tough on employment, to put it mildly, and will ripple through the economy for a very long time. The Cti and/or BOA bankrutcies will be equally stressful.
• As John Thorhill in the FT summarizes, exit strategies from this mess are all unpleasant and/or unrealistic: Here is that FT article Excerpts:

Many policymakers still seem to believe the global economy will revert to its previous pattern. One glorious morning US consumers will begin borrowing and spending again while the Chinese will continue to manufacture and save. But with US households having lost an estimated $12,000bn of wealth, the world is desperately in need of a new consumer. “The only region that is mathematically capable of replacing US consumer demand [Europe] is the least likely to do so,” grumbled one participant.....

The four options to redress public finances – default, inflation, increased taxes, or decreased spending – are also economically unpalatable and, in political terms, potentially lethal.

The danger is that things will grow worse politically just as they improve economically.

More upcoming - missed you all!