I was at my local Bank of America branch Monday morning (November 17/2008) when a staffer told me the bad news. The markets are down again…City Bank is cutting FIFTY thousand jobs!
What? Did he say Citi is cutting 50 thousand jobs? 50 – as in 10, 20, 30, 40, 50? Not 500, not 5-thousand…50-thousand? (Well 52-thousand to be exact!) Citi Group is also selling off assets. The New York-based banking giant has been bleeding cash for the last year or so. Last quarter, it lost 3-billion-dollars!
Still, I was in shock. And for the first time since this “crisis” began, I was scared. I’m beginning to get a taste of what it felt like during the Great Depression and I don’t like it! When 50-thousand people clean out their desks and go home, there go 50-thousand people whose spending power just got cut to zero or near zero.
About half of these job cuts, some 26-thousand, will be here in the U.S. That means fewer people taking public transportation; fewer people ordering out or eating out; fewer people able to pay their mortgages, meaning more homes are likely to be foreclosed; fewer people going to the movies; fewer people buying big-ticket electronics; fewer people making charitable donations; fewer people buying gas or cars…or taking vacations. Toll revenues go down, tax revenues go down, and people’s hopes and dreams go down.
Experts have been warning American consumers that they were over-exposed. Was no-one listening? There were voices urging both consumers and the government to cut down on debt. Too much borrowing. But who cared. The Bush administration’s first response was to give people a 600-dollar “tax rebate” and send them out to stimulate the economy. Shop, Baby, Shop! Buy, Baby, Buy!
Now credit card companies are stealthily lowering consumers’ credit limits. If someone charged 5-thousand-dollars on a card with a 10-thousand-dollar limit and the credit card company lowers the credit limit to 6-thousand, or 5-thousand, that person’s FICO score is messed up! Just like that. And now that consumer runs into all kinds of credit issues, especially if the consumer is using several credit cards with high balances.
The Wall Street Journal says the mining industry is beginning to feel the pinch. Seems China’s building boom is contracting and demand for steel and metals worldwide is slowing. The Journal says America’s largest steelmaker (by production), U.S. Steel, plans to lay off almost 700 unionized workers.
Cruise ships are feeling the pinch. Now is a mighty good time to go cruising, if you can afford it. Retailers are panicking about the holiday shopping season – they say it’s make or break. (Retailers always say that!) But this time they may just be right. Experts say there may be a rash of closings after the holidays, if sales tank!
Here in Massachusetts, tolls are being raised. Some as high as 7-dollars (for cars/cash. With transponders it’s $6.00. Taxis pay $9.00 cash). People are taking creative ways to avoid the tolls, cutting through formerly quiet suburbs. Residents are beginning to gripe that they can no longer reverse out of their driveways!
Amid all this, I have an uneasy feeling over a statement from Citi Group. The bank says it has lower exposure to U.S. consumer mortgages than other banks, like Bank of America and JPMorgan Chase.
Sooo…if Citi has lower exposure than those other banks and it’s laying off 50-thousand people…what does that tell us about those other banks with higher exposure? Massive layoffs there too…? Not necessarily. But still, very, very scary!
On a more positive note:
While Ford, Chrysler and GM are in Washington begging for a bailout, Honda (Japan’s number two carmaker) today dedicated its new plant in Indiana.
Nearly 900 people are making fuel efficient Honda Civics at its Greensburg plant. Did you hear that Detroit…you and your leading cheerleader, Senator Carl Levine (D-MI)? Honda plans to add a second shift next year. The plant is expected to produce 200-thousand cars annually, and employ 2-thousand workers at full capacity. (Honda says it got 30-thousand applications!)
The first cars rolled off the line October 09/2008. Honda apparently isn’t looking for a bailout from Congress.
Why did Honda even bother building a new plant? It can as well just march up to Chrysler or GM and take over their building. They don’t seem to know what to do with it, anyway.