AN EMPTY BOOM: NY CAN'T RELY ON WALL ST. BINGE

NY Post ^ | July 29, 2009 | Nicole Gelinas

[Scanian]

OVER the last two years, it has looked like New York would have to adjust to living without so many golden eggs from the Wall Street goose. But now Wall Street profits are booming again -- so we can relax, right?

Wrong. This is an empty boom that's based on government subsidy, not economic reality. Goldman Sachs and the rest are benefitting from conditions that can't last -- the two big ones being zero interest rates and the implicit backing of the federal government in the wake of last fall's bailouts.

These conditions let Wall Street make big, speculative bets with borrowed money -- which was the recipe for the grand financial party of the last decade and for last fall's meltdown. It can't last -- and it temporarily prevents the financial sector from coming up with a new, more sustainable formula. That may mean lower profits.

The danger is that Wall Street's last manic party may give city and state politicians the excuse to avoid getting the government's financial house in order.

In his report on the city budget Monday, Comptroller (and mayoral candidate) Bill Thompson outlined the continued impact to the city's $59.6 billion budget from the Wall Street meltdown: Tax revenues have "evaporated."

Two years ago, the city expected to reap $37.3 billion in tax revenues for the current fiscal year (which started four weeks ago). Today, it expects to take in just $35.3 billion for that same fiscal year. And that includes what the recent sales-tax hike is to bring in; without it, it's a 7.8 percent drop in expected revenues.

Personal-income-tax collections, in particular, are expected to be down 37 percent over two years, and won't return to 2008 levels for five years.

These taxes are a measure of how much wealthy Wall Street workers

[Cheap_Hessian]

Empty boon is right. It will be interesting to see how well the Treasury's auction of $39 billion in five-year notes will go today after yesterday's disappointing two-year Treasury auction.

[Adder]

This is an empty boom that’s based on government subsidy, not economic reality.

At least SOME people get it.

[PSYCHO-FREEP]

Yes,

A completely false and baseless “rally” which the Democrats and the media intend to use to get their agenda passed.

Put the American people back to sleep as quickly as possible at all costs.

Which explains the recent reports on the State Run Media that the economy is pulling out of the recession, all is great with ObaMao.

[Adder]

Octobers are usually when the “bad” happens...wonder what surprise this one will bring?

Sooner or later the fed money will be accounted for and things will just collapse.

I’ve gotten more in Denninger’s camp than in Warren Buffet’s. [Does it show???]

[Red in Blue PA]

Actually, September is worse than October historically.

[Vaduz]

You may be right but I think more bad things happen in october.