Top 10? The ten states facing the biggest budget holes

California tops the list of the 10 states in the deepest financial hole. But not by much. Arizona is a close second. (For more on the state and local budget crisis, higher taxes, and the effect on the economic recovery see my post http://jubakpicks.com/2009/11/10/will-rising-state-taxes-sink-the-recovery-in-2010-and-then-there-are-coming-federal-tax-increases-in-2011-and-beyond/ )

The Pew Center on the States put together the list by ranking states on the percentage change in revenue from the first quarter of 2008 to the first quarter of 2009 and by the size of the budget gap for fiscal 2010—that the fiscal year that ends in June 2010 for many states—creating by those drops in tax revenue. (And by looking at other factors not included in the table below. To see more follow this link to the full study http://www.pewcenteronthestates.org/uploadedFiles/wwwpewcenteronthestatesorg/BeyondCalifornia.pdf )

Here’s the list:

1. California          16.2% drop in tax revenue      49.3% size of gap
2. Arizona              16.5% drop                                   41.1% gap
3. Rhode Island   12.5% drop                                   19.2% gap
4. Michigan           16.5% drop                                   12% gap
5. Oregon               19.0% drop                                   14.5% gap
6. Nevada               1.5% increase                             37.8% gap
7. Florida               11.5% drop                                   22.8% gap
8. New Jersey      15.8% drop                                   29.9% gap
9. Illinois               10.9% drop                                 47.3% gap
10. Wisconsin        11.2% drop                                  23.2% gap

The average for all 50 states, according to the Pew Center, is an 11.7% drop in tax revenue and a 17.7% budget gap.

Is the New Frugality just hype?

Jimmy Choo—well, his iconic Sex-in-the-City shoes anyway—is now on the war-torn economic frontline. So is Stella McCartney. Anna Sui. And, of course, McDonald’s.

The battle is over the New Frugality, the current marketing hot button as the United States gradually emerges from the Great Recession.

Is the New Frugality simply marketing fluff, a way to get consumers to feel good about spending themselves into debt again?

Or does it mark a real change in the zeitgeist? Will consumers start counting pennies and calculating value in a way that shifts the power of the brands that rule the global economy?

Companies from Procter & Gamble to Wall-Mart to Louis Vuitton desperately want to know.

The battle comes to an H&M near you on November 14. Read more

China’s economy shifts into a higher gear

Good news, bad news from China.

Good news first: China’s economy continues to roar ahead.

Retail sales climbed at an annual rate of 16.2%. Exports slowed their slide and the trade surplus almost doubled to $24 billion in September. GDP growth looks well on its way to exceed 10% in the fourth quarter of 2009. The Chinese economy grew by 8.9% in the third quarter.

All that’s good news for investors counting on China to power the global economic recovery until the U.S. economy can pick up some momentum

Now, the bad news. China’s money supply grew at a record annual pace and money poured into urban fixed-assets. That’s another word for real estate. Investment in those assets has now increased by 33% in the first ten months of the year.

That will worry investors who fear that China is creating an unsustainable bubble built on cheap money.

With the economy soaring and liquidity racing ahead, the guessing now focuses on when the Beijing government will start to rein in the money supply and when it will end the dollar peg for the renminbi that has been in effect since the global economy went into a stall. The renminbi has been pegged at 6.83 to the dollar since July 2008. The Chinese government had allowed the currency to appreciate by 21% against the dollar in the previous three years.

The betting now is interest rates in China and the currency exchange rate will start to rise in March. That would give the economy another four months or so to build up momentum.

That delay will b e painful for China’s trading partners who are already suffering from competition with a cheap Chinese currency. Another four months of momentum, however, would be good news for commodity economies, commodity producers, and any supplier that sells to China.

If you or your business think it’s harder to get a loan, you’re right. Still.

When will banks start lending again?

Wasn’t in October.

Doesn’t look like November.

Maybe 2010?

That would be a relief for any investor counting on 3% or better growth from the U.S. economy next year. The economy can’t start cooking if banks aren’t lending.

The Federal Reserve’s October survey of bank lending officers is a downer. Read more

Will rising state taxes sink the recovery in 2010?

The taxman cometh.

That’s not only going to be individually painful in 2010 but the collective hit to consumers could be enough to stall the economic recovery.

2010, though is the short-term. The International Monetary Fund, in a burst of pre-holiday cheer, warned on November 3 to expect ten years of spending cuts and tax increases.

Ten years.

Now that I’ve got your attention, let’s start with the short-term squeeze, more to the long-term, and then see if there are any strategies for keeping the taxman from our doors. Read more