Sunday, February 1, 2009

By Their Fruits You Shall Know Them

Read this chilling forecast of a rust-belt New York City, caused by a drastically shrunken financial sector. This by Martin Hutchinson of the prophetic website Prudent Bear, which forecast the economic crisis years ago. A sample:

For the financial practitioners of New York and London, the future is thus bleak. Rewards will be greatly reduced, as the market operates ferociously both on the income side and the employee costs side of their employers. Headcount will also be greatly reduced, as functions are eliminated, work is outsourced to the Third World and the weaker entities go bankrupt or are merged into competitors. The decline in practitioners’ incomes might be as much as 80%, even after a modest market recovery, though the number of practitioners should reduce by only 50% to 60%.

That also promises a weak future for the local beneficiaries from financial services incomes in New York or London. Such losers would include local housing markets and those of the smarter resorts, together with the army of real estate agents, decorators, construction companies and lawyers that have benefited so egregiously during the bubble. It would also include local restaurants, clothing retailers, jewelers and other high-end products and services. The tourism business will find far fewer takers for the kind of “short break” luxury sybaritic packages in which it has recently specialized. Thus the short-term knock-on effect on the overall economy of poorer bankers will be severe, even though the long-term economic benefits of eliminating the dead-weight costs of the bloated banking community will be even greater.

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