Macroeconomic performance

By now, the problem should be obvious.  As pricing power declines, raw materials costs are rising (highlighted by the 65 prices paid number in the August ISM and 63 in September).  This should erode margins which were the source of the earnings beats of the 2nd quarter.  As prices fall, total revenue will continue to miss expectations.  Credit is contracting at historical rates with commercial real estate and option ARM resets looming.  Record foreclosures portend future losses and the shutdown of banks at an escalating rate.  Credit will not expand soon increasing the likelihood of further price decreases as consumers increase personal savings rates.
 The government reflation experiment has ensured that company costs cannot reach equilibrium with weak final goods markets.  This is similar to the Great Depression except that artificial wage inflation has been replaced by artificial commodity inflation to create the disequlibrium.  To cut rising costs, the only option is to reduce salaried employees, or shut down completely due to losses in core operations.  Rising unemployment will create further weakness in final goods.  This portends continued macroeconomic performance below trend for a length of time not seen since the Depression.  Asset prices will eventually fall to the market solution, government intervention aimed at avoiding this harsh reality will only delay the inevitable and probably assure a more painful destination in the process.