Voice of the White House

July 9, 2009

Washington, D.C.:
“We are nowhere near the end of this economic crisis. The whole banking system is facing serious trouble, and if or when it collapses, who knows what the result will be? Temporary abandonment of checks and a cash-only economy? Money printing presses running 24 hours a day? "Helicopter" Ben Bernanke dropping cash from the sky? Nationalization by the Government? Whatever it is, it will probably be chaotic and ugly, considering that the relatively minor subprime crisis triggered our present problems.

Moreover, Obama & Co. are not fond of the very rich, whose greed they blame for this crisis, (forgetting the greed of everyone else who participated in the housing frenzy,) and if the banking system collapsed, anyone with more than the FDIC-insured amount of cash in any bank would lose it, which might mean enormous losses for the wealthy. (Remember too, that on occasions when banks have gone under and the FDIC has reimbursed depositors, that process has taken several months to over a year.)

Also, since most businesses operate on bank credit, I do not think stocks of ANY business are a good thing to hold right now. Even profitable businesses might find themselves denied revolving credit, and thus short of operating cash. What we have seen so far might be only the overture to a tragic opera. It might be a good idea to keep watching how all this develops, and if it looks likely to fall apart a year or so down the road, to timely withdraw enough cash from the bank to keep oneself and/or one's business going for a month or so. Longer than that, the government would surely step in and fix the banking situation somehow.

Finally, which the article does not mention, apart from the rising numbers of unemployed, even still-working Americans have suddenly turned fiscally conservative, and are accumulating savings and paying down debt at a rate which I have seen quoted at 7% of income, up from about 0.1% a year ago. If the crisis worsens, as seems likely, this will only go up. This means very bad news for the rest of the world and their factories which produced the toys America used to consume. And bad news for American corporations which had moved their manufacturing offshore to take advantage of cheap labor. And bad news for domestic businesses selling non-essential goods and services.

Of this we can be sure: We are still heading down, with no bottom in sight yet.”