by Jack Lee
“The situation is likely to get worse before it gets better,” said Nick Kounis, an economist at Fortis in Amsterdam. “There will be no real recovery before 2010.”
Russian stock market loses 75% of value! On Sept. 16, Moscow’s largest stock exchange, MICEX, fell by a whopping 17.5 percent, making our stock market gyrations look mild. The rival RTS exchange was down by 11.5 percent. This has created panic in Moscow and this crisis threatens to reverse the gains for democracy and capitalism. A hint of what lies ahead came last July when Russian Prime Minister Vladimir Putin made an unexpected public attack on Russia’s largest steel producer accusing them of price fixing. This was taken as an effort to divert attention away from government failures and also set the stage for nationalizing companies should the economy continue to spiral down.
Update: 07:14 a.m. DOW off 141 in early morning trading.
The German economy, Europe’s largest, contracted by a bigger-than-expected 0.5 percent in the third quarter, confirming it has entered its worst recession in years. Ireland and Italy have also slipped into recession this year, while Spain’s economy contracted in the third quarter for the first time in 15 years. Growth in the Netherlands and Portugal stagnated. 27 of the worlds top economies are now in trouble.
At home the picture grows more dire.
California’s budget cut-backs were based on borrowing and economic growth, now analysts are warning the budget deficit could balloon to over 23 billion in the red by next year. Gov. Schwarzenegger has decided this is the time to raise taxes – a plan called “plausible, but painful” by most democrat legislators. It would include a 1 1/2 cent increase in the sales tax, a nickel-a-drink increase in alcohol taxes, an oil severance tax and cuts to a wide range of government programs. The taxes would generate about $4.5 billion; the cuts would save $4.7 billion to cover the $11 billion budget shortfall for this year, however a shrinking economny could easily double this number.
At the end of August we had just 27 states declaring a recession and even a few were still expanding. Moody’s (Wall Street rating firm) has determined that 49 states are now in trouble, the last three to enter recession are Hawaii, Minnesota and Utah. Alaska is the only state with a still-expanding economy. The District of Columbia still has an expanding economy, thanks only to a massive government spending. Whatever happens to the rest of the nation, you can count on D.C. looking pretty good by comparison.