The U.S. Economy: Chicken Little was Right

Here in the U.S. we’re days – maybe weeks - away from a true financial meltdown.
The president knows it – hence his speech today; Congress knows it. Wall Street knows it. And consumers - who control the destiny of the economy - are slowly beginning to realize it.

Gas is selling at $4.50 + a gallon. Winter heating cost is a monster lurking on the horizon. Home prices are tumbling and with it valuable equity. There is a list of dangerously close-to-failure banks published today. Foreclosures are running at an unprecedented rate as are personal bankruptcies. Our largest mortgage financial institutions, Freddie Mac and Fannie May, are described by Goldman Sachs as “insolvent.” We’ve got a war costing us $3 trillion. Another war, this time with Iran, hanging over our head by a frayed thread.

The holders of our currency in the Middle East, who use the dollar as the oil trading currency, are showing impatience at their losses, holding their earnings in US dollars that lose value daily. They may step away – as Iran has already done and Venezuela is calling for - and spread their earnings in a basket of alternative currencies. The dollar is worth less and less and its southern trend shows no sign of slowing - $1.60 for a Euro today. A $1.60. A run on the bank at IndyMac despite reassurances from the Fed. A full blown Bear market. A prediction that a number of airlines will fail. Consumer essentials price rises. Consumer debt at an all time high; default rates growing.

What’s holding the house of cards together? Consumer confidence. That’s it. That’s all that holds this ball of wax we call an economy together at the best of times.

American consumers, known for their balls-to-the-wall attitudes, are getting fidgety. Bush today looked nervous as he stumbled through his press conference trying to tell us that the economy is growing. Wall Street is scared; petrified that the US consumer will see through their repeated reassurances and realize that not only are they being lied to, but the smoke they’re seeing in the financial market is in fact their net worth, their life savings, their pensions, their future, burning.

If the consumer herd thinks for a second that any of the banks, that are reportedly on the precipice, are going to collapse – Citibank, Wamu, Wachovia – they will stampede to get cash out of the banks, heralding a depression and the end of the economic world as we know it today.

What’s the trigger? The collapse of a major financial institution. The disappearance of the once familiar into oblivion – an airline perhaps. A war in Iran that causes oil to double, triple. A banker or politician with the balls to tell the American public the truth; that we’re broke and our economy is in the toilet.

A solution? Why ask me? This fiasco’s been in the works for years. Politicians, the White House, business leaders watched and let it happen. And they’re expecting us, the average Joe to bail them out. We don’t have any more to give. Frankly I think that Chicken Little might be right after all; the sky is falling.