Early this morning a Bloomberg article proclaimed Subprime Defaults Blamed for Corporate America Earning Setbacks :

Railroads, chemical producers and insurance companies are blaming the worst U.S. housing slump in 16 years for their earnings woes.

Burlington Northern Santa Fe Corp., the second-biggest U.S. railroad, said lower shipments of housing products and lumber reduced second-quarter earnings. DuPont Co., the third-largest chemical maker, said slumping demand for kitchen and bathroom countertops was partly responsible for its profit drop. Genworth Financial Inc., the former insurance unit of General Electric Co., said earnings will be at the “lower end” of its forecast this year as mortgage-insurance claims increase.

“The subprime slime is oozing,” said Gary Shilling, president of A. Gary Shilling & Co. in Springfield, [New Jersey, who correctly predicted the recession in 2001. ``As home equity evaporates, that takes out the foundation of strong consumer spending growth, which has been the mainstay of the economy.''

Now while I believe that the 2007 subprime meltdown has caused all kinds of havoc with the economy, there are still other important things to consider.  For all the problems in subprime, there's a limit to what subprime can affect. 

On Monday, Paul Farrell of Marketwatch asked an interesting question:

How good are you at predicting big turning points? Remember how the assassination of a little-known Archduke triggered the First World War? Can you predict the Archduke "event" ... that pushes America over the edge and into a recession and bear market? Well, can you? After all, five years is a long bull market.

Farrell listed 20 potential "triggers" that could push America over the edge. While conceding that it'll probably be some combo of multiple triggers, a perfect storm, he asked readers to identify the "tipping point"  His list of possible triggers includes:

1.   War/military defense budget busting
2.   Real estate bubble raging
3.   Foreign trade imbalance, trillions new debt
4.   China's economy overheating
5.   Private-equity imploding
6.   'Homeland Insecurity' failures
7.   Hedge funds hurting retirement plans
8.   Oil rocketing toward $100 a barrel
9.   Weak U.S. dollar keeps sinking
10. Federal budget deficits
11. Social Security entitlements
12. Medicare's massive deficits
13. Health-care insurance deficit
14. Climate change fuels global wars
15. Personal savings shortfall
16. Consumer debt surging
17. Corporate pension defaults
18. Local government pension deficits
19. International credibility deficit
20. Washington politics in endless gridlock

Will another one of these possible factors be the "Archduke assassination" moment for stocks and the economy, or is subprime the villain that will be mentioned in future textbooks?  Are other factors of any significance- or do we blame it all on subprime? 

Why does this matter?

For one thing, it seems unlikely that all of Wall Street's woes [or the nation's] have been brought on by loans to subprime borrowers.  Will CEOs [as well as Americans and our government officials] be able to achieve plausible deniability and shirk responsibility by saying:

Darn subprime anyway.  It causes cavities, raises cholesterol, installs viruses on computers and , oh, it ate my homework- as well as messing up the corporate bottom line. [and the U.S. economy]

I think subprime is the trigger- but I don’t think it’s the assassin.  Let’s not get so consumed in blaming subprime that we forget there’s a few other teensy problems out there.

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