Via: The Daily Reckoning
The “Panic of ‘08″ will be followed by “The Collapse of ‘09.” In 2008, when the world’s largest financial firms and equity markets crumbled, Wall Street’s woes preoccupied the media.
In 2009, the focus will broaden to include a range of calamities that will leave no sector unscathed. Next in line is retail, which accounts for some 70 percent of consumer spending, 26 percent of which is holiday sales
After the numbers are tallied to reveal a dismal retail Christmas, more big chain bankruptcies will follow. Besides leaving masses unemployed, defunct retailers will leave behind thousands of empty stores. Who will rent them? Nobody!
Add to these empties commercial space vacated by defunct financial firms and an array of troubled businesses, from restaurants to architectural firms, to high tech operations, to offset printers, etc., etc. The inescapable result (that we predicted over a year ago and is only now being discussed in the business media) is a commercial real estate bust that will be costlier, wreak greater havoc and prove more intractable than the residential market decline.
Because most people don’t live and shop on Wall Street, the “Panic of ‘08″ was viewed by Main Street as if from afar – even though many were losing money. But when commercial real estate crashes it will hit much closer to home. The depressive atmosphere of thinly shopped, half- vacant malls will strike emotional chords and all the senses.
In office buildings, vacant floors and empty cubicles will dampen the workday spirit of the still-employed; ever present reminders of laid- off friends and colleagues and of the fragility of employment.
Abandoned, untended business and industrial parks will highlight the already mournful scene. In cities studded with soaring towers and new construction predicated on eternal economic growth, streets lined with “For Rent/For Sale” signs will complement stilled cranes and uncompleted buildings.
As retail and commercial real estate collapse, the credit card sector and all its interrelated processing and back office support businesses will suffer and be forced to scale back. Hordes of consumers who have been living off credit cards and racking up debt to the limit will lack the funds to service their debt… much less pay it off, and they will be forced to default. Given the nearly $3 trillion in consumer debt at risk (excluding auto and mortgage) an inevitable default snowball will add momentum to the in-progress Collapse of ‘09.
While we alone predicted the “Panic of ‘08″ (and even took out the domain name “Panicof08.com” on 7 November 2007), we are not alone in predicting a Depression.
The “D” word is being uttered – in some cases by those who have the most to lose and whose best interests are not served by spreading gloom and doom. “The world and country are in a depression,” said celebrity tycoon Donald Trump. He then later softened the blow, downgrading it to a “virtual depression.”
The rest of the article is available at The Daily Reckoning
The Daily Reckoning offers an independent and critical perspective on the Australian and global investment markets. Slightly offbeat and far from institutional, The Daily Reckoning delivers you straight-forward, humorous, and useful investment insights from a world wide network of analysts, contrarians, and successful investors. Founded in 1999, The Daily Reckoning is published in 7 countries with a worldwide readership of almost 1 million people
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I have a curiosity…If the US dollar collapses or the current system fails etc, what will happen with peoples’ debt (school loans, credit cards..)?