Saturday, July 25, 2009

The Spinning Wheel

Mike Shedlock presents a bleak picture for the nation’s Hotels. It is very interesting to note that a heavy majority of the distressed hotels all refinanced between 2005-07. It tells Us that business managers all recognized the altered nature of loan structure after 2004, and bankers knew of the insufficiency of collateral and Interest rates; with the lack of loan structure sure to bring the financial crisis We all know and love. It lends credence to a belief that Some have that We should adopt a policy of ‘Hang Them High’ towards the Bankers. The new finance instruments were obviously light on repayment without collateral, and possessing of unsustainable Interest rates. The most telling element is the bankers’ acceptance and rapid expansion of the style of finance; clearly recognizing lack of contractual commitment to the issuances.

The state of the economy created by the financial crisis seems no better, with all Railroad stats appearing to be down about 15-20% year over year; while the total is down drastically from a lot of years. I believe this loss of traffic in the Railroad system may be systemic rather than cyclic, and may be around for a long time. This would indicate a Sea Change in the economy, where Expertise rather than Product becomes the basic transference mechanism. It seems to me that We are entering an era of more heavily capitalized, smaller Plant capacity with higher Production per Unit. No one wants the high use of Carbon energy generated under the previous Cargo numbers, Fewer can afford the pretension of foreign luxury items, and None want to finance the expansion of the transport network. The current economic conditions suggests a spread of modern technology back to the small towns, where Pollution is actually easier handled, Living Costs are lower–therefore lower Wages, and the Community College system is geared up to train technological specialties. I think We are in for another technical revolution, one I predicted by at the turn of the century.

The grasp of the previous discussion may better integrated with review of this article. There is vast spread in the Wage and Income levels by geographical locale within the United States today. I believe that this spread is unsustainable, and Production must move to a cheaper Wage scenario; a factor which will take pressure off Land prices and Construction around concentrated areas, while raising Wages and Prices in rural areas. I simply expected the Move to be more gradual than I now consider. My current evaluation stands that it will occur within the next decade, with a Transfer of 40% of Production Capital away from the metropolitan areas. lgl

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