Looking for a recovering economy in the next few months? Don't bet on it.
First, there are the bond investors, with the takeover of the banks, Chrysler and General Motors by the government, do not expect many to buy bonds from any company that may become a target of the government.
Second, government debt. With the increase of government debt, do not expect any company to borrowing money with short term debt. If the economy recovers, most experts believe interest rates will skyrocket. Therefore, any company borrowing money for expansion would be wise to borrow in such a manner as to not expose them to borrowing money at a cost they couldn't repay. Therefore, companies will be shy to expand on borrowed funds.
Third, cap-and-trade. Cap and trade, if passed, will increase electricity costs. India has already said it will not impose C02 restrictions. China is also not likely too. So if a company is going to expand, if it can, it will expand to those countries. Thus reducing jobs in the U.S. and delaying or reducing any recovery.
Thursday, July 2, 2009
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