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Thin ice is visible on the horizon

Thin ice is visible on the horizon

On any rational assessment, the popular new president is skating on thin ice. Pollyanna bulletins about the economy puff up from the White House and Federal Reserve, like auguries of a new pope through the Vatican chimney. “Habemus spem.” We have hope. We’ve just heard it from President Obama: “We are starting to see glimmers of hope across the economy.” From Fed Chairman Ben Bernanke, who’s so far unleashed $12 trillion in booster money, we get the always-sinister reassurance, like Death giving the Appointee in Samarra a friendly tap on the shoulder, “the foundations of our economy are strong.” The economic news in the near and medium term is ghastly. Retail sales crashed again in March, nowhere worse than in the car market, though electronics and building materials were way off, too. They now reckon there’ll be just over 2 million housing foreclosures in 2009, up 400,000 from 2008. Industrial output is going through the floor at an annual rate of 20 percent, the biggest quarterly drop since the end of the Second World War. US industry is now running at only 70 percent of capacity, the worst number since they started tracking this stat in 1967. Job losses are currently running at 650,000 a month. Round the next corner are credit card delinquency and the longheralded slump in commercial real estate, where vacancy rates are already running at 15 percent. Capital One, a huge issuer of Visa and MasterCard, just said the annualized net charge-off rate for US credit cards — debts the company reckons will never be paid — rose to 9.33 percent in March from 8.06 percent in February. In other words, Capital One — whose credit card promotions take up hefty space in the mailbag of every US postman — is in big trouble, and about one in 10 of these credit card holders will have a messed-up credit rating for several years to come. Wall Street and its boosters are trying to pretend that indeed the worst is over. The Dow and S&P Index have been rallying for five weeks. Wells Fargo, the huge

San Francisco-based bank, second-biggest home lender, announced that first-quarter net income rose 50 percent to $3 billion. No one seriously believes the bank is in anything other than continuing huge trouble, and will soon need — so Bloomberg News surmises — $50 billion to settle nearterm commitments. The profit figure stems from newly relaxed rules about the valuation of Wells Fargo’s assets. In other words, it’s thin economic ice from here to the horizon. Robert Reich, now teaching economics at UC Berkeley and formerly labor secretary in the Clinton administration, wrote a piece recently, titled “Why We’re

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