Some Things to Look For in 2009
Shopping Malls Closing – Shortly after Christmas we will start to see shopping malls of varying sizes declare bankruptcy and close. Shopping malls are driven by the larger “anchor” clients. These are the stores that would bring in the foot traffic. And these stores are closing in massive numbers. The little guys cannot keep a mall going. They do little or no advertising. This will hit the banks hard since shopping malls are very costly. It is doubtful anyone will come along to buy them soon. The banks will have to do maintenance on the malls, carry insurance and maintain security, which means more expenses for the banks.
Cities and States Going Bankrupt – The cities and states are in trouble and some are even asking for bailouts. What happened is their spending was up due to increased revenue from property taxes. Think real estate boom, high values, high property taxes, lots of real estate sales resulting in sales tax revenues. Now with foreclosures, lower values, reduced real estate sales, bankruptcies etc their revenue is way down. Delinquency rates on tax payments are high. Also regular city and state sales tax revenue is way down. Retail sales are low.
Businesses are closing in wholesale quantities. This is going to mean layoffs in the public sector. Bailouts may help for a while but layoffs are going to come. We have already seen some pensions going into default and bankruptcies from the public sector pensions as well. More doom and gloom on the way. Bear in mind this should affect the City, County and State law enforcement agencies as well. They are not immune, not even the corrections system which may need to be downsized.
Higher Taxes – This seems inescapable. The Fed, Cities, Counties and States all prefer to raise taxes rather than downsize. You can’t always get what you want so they will have their tax raise and it will not work and then they will downsize. Getting blood from a stone is not going to work. Governments run by non-business people do not understand this very well. Who are they going to tax – the homeless, those without jobs, those in foreclosure, the retail stores that closed, the record numbers of people in bankruptcy – get the idea. Those that are still trying to live the dream and work are going to be getting hit with more and more taxes on the local and federal level. Eventually they will be busted out or living at a lower standard of living than those on public assistance.
Public assistance is not going to be cut into due to fear of riots, which cost even more money. The net effect of this will be the emergence of a black market economy based on cash, barter and precious metals keeping the various governments out of the transactions. This will reduce government revenues from taxes even further. Reduced government payrolls combined with more hungry and homeless people generally leads to higher crime rates.
Now add into the equation less police and corrections workers leading to early release programs from the prisons. California who is currently saying they are bankrupt tried this in the recent past but backed off before execution. There are millions of people in jail running about $25,000 a year each in expenses. This is a big drain that will need to be done away with. When released these people for the most part will be unemployable due to their skill set and prison record, which means more crime. The people on probation and parole will also be released early to cut expenses, again more crime.
Health Care – Fifty million people without health care coverage is a bad thing and that is the count in the USA now. When they are out of work, out of credit and have no health care they will become desperate. Not that many sick people are content to just go home and go to bed until they get sick enough to die. Health care companies are paying the health care providers 90 days late now. This will only get worse.
As more and more people lose their jobs fewer people will have health care. Rates will go up. Enrollments will then drop more. The end of this cycle is health care providers going bankrupt. Doctors and hospitals will not get the payments owed them, which by then would be at least 120 days worth. This will mean more trouble for the already financially distressed hospitals. And so the story goes on.
Martial Law, Riots, and Extreme Gun Control – These are all possibilities. Hard to say for sure what will develop. A bad economy can lead to riots. Riots are expensive, more debt results. Riots can lead to martial law and extreme gun control laws as emergency measures. All this is bad and very hard to predict with any accuracy. It is reasonable to expect some of these things.