The Worst Case Scenario (Someone Has to Say It) 309 comments
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Since the economy began sliding downhill in late 2007, mainstream economic and market experts have consistently erred on the sunny side.
As late as June 2008, mainstream consensus held that the U.S. was heading for a “soft landing” and would avoid recession. Several months later, the slump was acknowledged to have started in January 2008, but we were supposed to see renewed growth by mid-2009, with unemployment peaking in the eight-to-nine percent range. A quick “shovel-ready” stimulus bag was supposed to set us back on the road to prosperity.
In January, recovery projections were pushed forward to late 2009. Today, the consensus is for a mid-2010 recovery, with unemployment peaking at just over 10 percent. Clearly, the mainstream has struggled to catch up to reality for well over one year. What are the chances that they finally have it right this time?
Moreover, the mainstream continues to see what is going on as a plain-vanilla recession that will be quelled with some on-the-fly monetary and fiscal tinkering. Washington, we are told, will pull us out of this slump—as soon as the masses can be enticed back to the shopping malls. Then things will return to how they were before. But what if the experts and politicians are wrong not only on their ever-changing recovery timeline, but also on the nature—nay, the very existence—of a recovery?
America’s reigning political-economic ideology has demonstrably failed. Given that its government is obviously fumbling along without a clue, its foreign and domestic credit is tapped out, and its 300 million people are discovering that their hopes for continuous material improvement will never be met, could the U.S. be headed the way of the USSR?
Instead of a recovery as the mainstream envisions it, what if America permanently bankrupts, impoverishes, and marginalizes itself? What if its cherished institutions fail across the board? For example, what happens when the police realize that their under-funded pension plans cannot support a decent retirement? Will they stay honest, or will they opt to survive by any means necessary? These are questions that the mainstream does not even begin to contemplate.
In the interests of providing you with an alternate vision—something outside the mainstream—below are ten predictions for America through the year 2012. This is not boilerplate doom-saying. Rather, I am laying out in highly specific terms what will happen over the next three-odd years. Others have thrown around the term “Depression”, but I am going to tell you precisely what it means for you, your investments, and your community.
When these predictions come true, I expect to be rewarded with a seven-figure consulting gig, a book contract, or a high-level position in whatever administration succeeds the doomed Obama team—that is, if anyone succeeds it at all.
Prediction one. The twenty-five-year equities bubble pops in 2009. U.S. and foreign equities markets will stop treading water and realign with economic reality. Stock prices will cease to reflect the “greater fool” mentality and will return to being a function of dividend yields, which have long been miserable. The S&P 500 will sink below 500. In a bid to stem the panic, the government will enforce periodic “stock market holidays”, and will vastly expand the scope of its short-selling prohibitions—eventually banning short-selling altogether.
Prediction two. With public pension systems and tens of millions of 401k holders virtually wiped out—and with the Baby Boomers retiring en masse—there will be tremendous pressure on the government to get into the stock market in order to bid up prices.
Therefore, sometime in 2010, the Federal Reserve will create and loan out hundreds of billions of fresh dollars to the usual well-connected suspects, instructing them to buy up stocks on the public’s behalf. This scheme will have a fancy but meaningless name—something like the “Taxpayer Assurance Equities Facility”. It will have no effect other than to serve as buyer of last resort for capitulating smart-money types who want to get out of stocks entirely.
Prediction three. Millions of new retirees—including white-collar people with high expectations for a Golden Retirement—will be left virtually penniless. Thousands will starve or freeze to death in their own homes. Hundreds of thousands will find themselves evicted and homeless, or will have to move in with their less-than-enthusiastic children. Already strained by the rising tide of the working-age unemployed, state and local welfare services will be overwhelmed, and by 2012 will have largely collapsed and ceased to function in many parts of the country.
Prediction four. “Quantitative easing” will fail to restart previous patterns of lending and consumption. As the government sends out additional “rebate” checks and takes ever-more drastic measures to force banks to lend, hyperinflation could take hold. However, comprehensive debt relief via a devaluation of the dollar is even more likely. This would entail the government issuing one “new” dollar for some greater number of “old” dollars—thus reducing both debts and savings simultaneously. This would make for a clean slate a la Fight Club.
As there are many more debtors than savers in the U.S., the vast majority would support devaluation. The Chinese and other foreign holders of our bonds would be screaming mad, but unable to do anything. Every country that has not found a way out of dollar-denominated reserve assets by 2012 will see its reserves eliminated.
Prediction five. The government will stop pretending that it can finance continuous multi-trillion-dollar deficits on the private market. By late 2010, the sole buyers of new U.S. Treasury and agency bonds will be the Federal Reserve and a few derelict financial institutions under government control. This may or may not lead to hyperinflation. (See prediction four).
Prediction six. As the need for financial industry paper-pushers declines and people have less money to spend on lawyers and Starbucks (SBUX), unemployment will rise until the private sector has eliminated all of its excess capacity and superfluous or socially needless jobs. The government’s narrow unemployment figure (U3) will rise into the high teens by late 2010. The government’s broader unemployment figure (U6) will cease to be reported when it reaches 25 percent—it will simply be too embarrassing. Ultimately, one in three work-eligible Americans will be unemployed, underemployed, or never-employed (e.g. college grads permanently unable to find suitable work).
Prediction seven. With their pension dreams squashed, and their salaries frozen or cut, police and other local government workers will turn to wholesale corruption in order to survive. America’s ideal of honest, courteous, and impartial cops, teachers, and small-time local functionaries will have come to an end.
Prediction eight. Commercial overcapacity will strike with a vengeance. By 2012, thousands of enclosed malls, strip malls, unfinished residential developments, motels, truck stops, distribution centers, middle-of-nowhere resorts and casinos, and small-city airports across America will turn into dilapidated, unwanted, and dangerous ghost towns. With no economic incentive for their maintenance or repair, they will crumble into overgrown, plywood-and-sheet-rock ruins.
Prediction nine. By the end of 2010, tens of millions of households will have fallen behind on their mortgages or stopped paying altogether. Many banks will be unable to process the massive volume of foreclosure paperwork, much less actually seize and resell the homes.
Devaluation (as mentioned in prediction four) could ease the situation for those mortgage holders still afloat, but it would also eliminate any incentive for most banks to stay in the mortgage business. In any case, the housing market in many parts of the country will lock up completely—nothing bought or sold.
With virtually no loans being made, even the government will finally acknowledge that most banks are fundamentally insolvent. A general bank run will only be averted through a roughly one trillion-dollar recapitalization of the FDIC, courtesy of new money from the Federal Reserve.
Prediction ten. As an economy is never independent of the society within which it functions, the next few paragraphs will focus on social and political factors. These factors will have as much of an impact on market and consumer confidence as any developments in the financial sector.
Whether rightly or not, President Obama, having come to power at the dawn of this crisis, will be blamed for it by over 50 percent of the population. He will be a one-term president. In response to his perceived socialization of America, there will be a swarm of secessionist and extremist activity, much of it violent. Militias and armed sects will be more prominent than in the early 1990s. Stand-off dramas, violent score-settlings, and going-out-with-a-bang attacks by laid-off workers and bankrupted investors—already a national plague—will become an everyday occurrence.
For both economic and social reasons, millions of immigrants and guest workers will return to their home countries, taking their assets and skills with them. The flow of skilled immigrants will slow to a trickle. Birth rates will plummet as families struggle with uncertainty and reduced (or no) income.
Property crime will explode as citizens bitter over their own shattered dreams attempt to comfort themselves by taking what is not theirs. Mutinies and desertions will proliferate in an increasingly demoralized, over-stretched military, especially when states can no longer provide the educational and other benefits promised to their National Guard troops.
There will be widespread tax collection issues, and a huge backlash against Federal and state bureaucrats who demand three-percent annual pay raises while private sector wages remain frozen or worse. In short, the “Tea Parties” of tomorrow will likely not be so restrained.
Finally, between now and 2012, we are likely to see another earth-shaking national embarrassment on the scale of the 9/11 attacks or Hurricane Katrina and its aftermath. This will demonstrate conclusively to all Americans that their government, even under a savior-figure like Obama, cannot, in fact, save them.
By 2012, there will be a general feeling that the nation is in immediate danger of blowing up or coming apart at the seams. This fear will be justified, given that the U.S. has always been held together by the promise of a continuously rising material standard of living—the famous “pursuit of happiness”—rather than any ethnic or religious ties. If that goes, so could everything else. We were lucky in the 1930s—we may not be so lucky again.
Disclosure: no positions relevant to this column.
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This article has 309 comments:
1) this recession is far more severe than any recent previous ones
2) in some industries (like most commodities, automobile, petrochemicals, etc.) the de-stocking was so severe that there's got to be some kind of re-stocking at some point. That is just normal. This is the "second derivative" improvement we are observing now.
3) don't be fooled by the media, the FED, and the big brokerage firms that are trying to bring back a positive tone to this market. These people are incentivised by markets that go up, not down. Beware more particularly of Goldman Sachs, a virtuose in the ability to screw their clients at their own profit. Strangly enough, they have been quite vocoal about improvement in commodities and in China (too funny, like they know what is going on threre!)
4) the bank stress test is just a big joke. The average american is over indebted, has a mortgage that worth way more than his home (if he bought it since 2003), and can not count on a quick rebound in the job market to increase his purchasing power. This means more bad loans coming down the road for banks and more need for capital.
In short, this is easy folks, for as long as the residential and the banks problems are not resolved, all rallies should and will be considered as bear market rallies. Keep on your lucky hat bulls but you will be disappointed.
Good luck to every one that buying this rally on hope.
Your points are well-enumerated, though I believe you left out a few, for example: continuing layoffs and wage reductions that erode discretionary consumer spending, cascading defaults from eastern Europe, shortfalls in municipal, county & state budgets, and falling global trade volume.
It seems to me that for a Bullish economy to arise, no more than one or two of the misfortunes you list can be tolerated, whereas, for a Bearish scenario to continue, only a few of the misfortunes need occur.
If that is the case, unfortunately, I estimate that the odds are significantly on the Bearish side.
Regards, Ubu.
On the other hand, you forgot about the "dog and cat plague" which will cause all of us to adopt apes as pets, who will then wind up taking over the planet.
The future is murky. The clouds are dark in spots. It is not going to happen as you describe however...
You seem confident that it won't turn out as described - would you care to tell us how it will turn out?
If you don't at least realize there's a snake eyes on the dice, find another pastime.
Likewise if you don't realize Obamas moves to date are detrimental to the future health of the economy, you're living in a dreamworld.
Taking control of auto manufacturers, continuing $50 an hour for assembly workers, will not produce cars that a populace without money or hope is going to buy!!. That's a dreamworld!.
Not prosecuting executives who have bankrupted their companies and continue to grab bonuses for themselves and Fed funds at the same time, will not discourage the practice. When dishonesty pays you're in a dreamworld.
Doubling the monetary base of the Country will lead to High/Hyper inflation, even if you turn off the tap, which is all you can do. To believe otherwise is to live in a dreamworld.
And worst of all: Denial of the above, just because you don't like it.
Is the ultimate dreamworld. Prepare Grasshoppers, winter's coming.
As far as why the market does not yet reflect any of this, remember the repeal of Glass-Steagall. The market, through TARP and .25% interest, is being pumped. The biggest banks are allowed to day-trade. They don't want to lend any money. Why should they? They can try to manipulate the market as it perfectly legal for them to do so.
This is why it is very easy in America to always be looking through rose-colored glasses. As long as the market turns positive, everything's fine. But why is it "positive"?
Finally. We actually need about 5% of the lawyers we now support. Lawyers feed off the carcasses of just about every person and corporation that is productive. Lawyers make money off people with personality disorders, the individuals who would have been kicked out of the wago train 130 years ago, or chased away from the cave and fire 20,000 years ago.
It's time to subject the legal profession to the same critical reviews we apply to health care (a service we can't live without), to reduce wasteful spending on legal services (which we can hardly tolerate).
The fact that I, as a Futures trader, am completely out of this market is my lead card in this play. Now, beyond that, my wife and I (childless, retired in a mountain top community, zero debt, and cash heavy) are in the final stages of a major move away from the USA:
1. We will sell our house for whatever it will fetch.
2. We are moving to Latin America.
3. I will trade into foreign currencies as quickly as I can and at the most ripe moment.
4. We will break all ties to the US tax system, since Tax rates on the "rich" (traders, income producers, and titans of industry - - those who make more than a dollar a day (HA!), will see their tax rates beat what we already see in the EU.
5. We will find our health care somewhere else as this will never be solved and the AMA has a complete strong-hold over the industry. Even the last word of my last sentence tells us something (profits from health is counter productive and leads to what we have now: huge insurance premiums, deductibles and we are scared doo-doo-less that a single health crisis will wipe us out---we are in our 50's and the BIG C could kills us in more than one way).
6. We will continue to believe not one word of the Wall Street spew we read every day.....and not one word of the 10Q's and Quarterly reports which contain lies, and misleading data...
I could go on and on, but folks the good OLE USA is doomed.
Thanks for saying it.
We can't afford all the lawyers that the law schools have pumped out in the last 40 years, and as the economy shrinks we have to shrink the number of lawyers. We actually need about 5% of the lawyers we now have, and most of what lawyers now do is nothing more than bleed the life and cash out of everything good and useful in this country.
Leading to Prediction 11: Reasonable, nice, productive people who have intact social skills wake up one morning and convince 19 out of every 20 lawyers around them to change careers and finally do something that doesn't destroy everything around them. Those lawyers who don't cooperate are sent to the countries where their former union clients and tort complainants have chased all the useful and productive work that used to be done in this country, and they set about the business of surviving parasitic infections and tribal conflicts.
Lawyers are predators who feed off the carcasses of individuals and corporations who actually do useful things and make useful things, to support a hugely inefficient and unregulated profession that is dominated by people with personality disorders who were born to argue or steal from the majority of people who are nice.
On May 03 10:25 AM Doc 224899 wrote:
> "...people have less money to spend on lawyers..."
>
> Thanks for saying it.
>
> We can't afford all the lawyers that the law schools have pumped
> out in the last 40 years, and as the economy shrinks we have to shrink
> the number of lawyers. We actually need about 5% of the lawyers we
> now have, and most of what lawyers now do is nothing more than bleed
> the life and cash out of everything good and useful in this country.
>
>
> Leading to Prediction 11: Reasonable, nice, productive people who
> have intact social skills wake up one morning and convince 19 out
> of every 20 lawyers around them to change careers and finally do
> something that doesn't destroy everything around them. Those lawyers
> who don't cooperate are sent to the countries where their former
> union clients and tort complainants have chased all the useful and
> productive work that used to be done in this country, and they set
> about the business of surviving parasitic infections and tribal conflicts.
>
>
> Lawyers are predators who feed off the carcasses of individuals and
> corporations who actually do useful things and make useful things,
> to support a hugely inefficient and unregulated profession that is
> dominated by people with personality disorders who were born to argue
> or steal from the majority of people who are nice.
On May 03 10:14 AM Pcatlow wrote:
> The piece is an interesting and compelling read. I lean more towards
> the author's view than against.....but, the time-line will be stretched
> out further.
>
> The fact that I, as a Futures trader, am completely out of this market
> is my lead card in this play. Now, beyond that, my wife and I (childless,
> retired in a mountain top community, zero debt, and cash heavy) are
> in the final stages of a major move away from the USA:
>
> 1. We will sell our house for whatever it will fetch.
> 2. We are moving to Latin America.
> 3. I will trade into foreign currencies as quickly as I can and at
> the most ripe moment.
> 4. We will break all ties to the US tax system, since Tax rates on
> the "rich" (traders, income producers, and titans of industry - -
> those who make more than a dollar a day (HA!), will see their tax
> rates beat what we already see in the EU.
> 5. We will find our health care somewhere else as this will never
> be solved and the AMA has a complete strong-hold over the industry.
> Even the last word of my last sentence tells us something (profits
> from health is counter productive and leads to what we have now:
> huge insurance premiums, deductibles and we are scared doo-doo-less
> that a single health crisis will wipe us out---we are in our 50's
> and the BIG C could kills us in more than one way).
> 6. We will continue to believe not one word of the Wall Street spew
> we read every day.....and not one word of the 10Q's and Quarterly
> reports which contain lies, and misleading data...
>
> I could go on and on, but folks the good OLE USA is doomed.
I have lost all faith in the markets, banks, government, and the dollar! I have worked my entire career investing my time and retirement money into companies that make stupid decisions with that hard-earned money. I now understand why and how the federal reserve is devaluing the currency and feel completely betrayed as a result. If I ever do return to a good paying job, I will invest my family’s financial future in gold and silver that I hold. Never again will I feel like a victim of the system! I might not have the biggest nest egg, but I will be able to purchase food for my family when the author’s scenario above comes to pass.
But, in the end the single biggest problem we have is too much debt.
If this ultimately is forced to be restructured we can begin to pro--
gress. And ultimately if prices become cheap enough here it will make sense once again to manufacture in the U.S.;-)
On May 03 11:35 AM Gregman2 wrote:
> Jake, I love reading you--this is akin to the film "MadMax." I tend
> to a greee with a few of your points (and scenarios). I too have
> wondered what a total breakdown and Balkanization would look like
> in the U.S.
> But, in the end the single biggest problem we have is too much debt.
>
> If this ultimately is forced to be restructured we can begin to pro--
>
> gress. And ultimately if prices become cheap enough here it will
> make sense once again to manufacture in the U.S.;-)
That Russian analyst Panarin puts it at 50% within 2 years. The author didn't give a likelihood. But if you haven't assigned a real risk factor (not zero or one) to this outcome, you might consider it.
Government is not shrinking. Today's government consumes 45% of the economy by its spending, plus another 13% of the economy via its un-funded regulatory mandates - - leaving less than half of the economy to the free-market private sector.
"45% of our economy today is dependent on government spending & control."
Slow, gradual government expansion over time is not recognized by the masses which gradually become dependant upon it. This leads to serfdom to the state. America is more a socialistic nation, and less a free-market economy, then ever before in its history, because our total economy has become significantly more government-dominated and dependent. Our founding fathers are rolling in their graves and weeping for the children of this once great land.
We are being extinguished and stupefied as a people, reduced to a flock of timid, subservient sheep of which the government is the shepherd.
mwhodges.home.att.net/...
On May 03 12:00 PM Sober Realist wrote:
> "The Despotism of Dependency" --- we have arrived.
>
> Government is not shrinking. Today's government consumes 45% of the
> economy by its spending, plus another 13% of the economy via its
> un-funded regulatory mandates - - leaving less than half of the economy
> to the free-market private sector.
>
> "45% of our economy today is dependent on government spending &
> control."
>
> Slow, gradual government expansion over time is not recognized by
> the masses which gradually become dependant upon it. This leads to
> serfdom to the state. America is more a socialistic nation, and less
> a free-market economy, then ever before in its history, because our
> total economy has become significantly more government-dominated
> and dependent. Our founding fathers are rolling in their graves and
> weeping for the children of this once great land.
>
> We are being extinguished and stupefied as a people, reduced to
> a flock of timid, subservient sheep of which the government is the
> shepherd.
> mwhodges.home.att.net/...
>
think of all the stops they have pulled out that use to work. Nothing is working now, the debt is simply too big and we are trying to cure debt by adding more. Height of insanity, bring 60's logic and policies to a 2009 ression and you get the greater depression with a lot of inflation and social unrest. Good luck to the fools who still believe in this government nonsense. Wake up it's over
At any point in time the scenarios outlined above could occur, its just that many don't realize untile some event, like September occurs and they go from one extreme to the other.
You are the pendulum that has swung too far. And I would bet 10 years ago you were one of those preaching the "new economics" and the suspension of the business cycle.
It seems to me that the author's future senarios are highly likely to occur within the time frame given. It is interesting to note that at least five civilization's calendars end with year 2012. I would like to know from Pcatlow, the former commodity trader which Latin American country to move to. My wife and I are considering that same strategy. Will they let me bring my two dogs into the country?
and so called socialism (hardeyhar)
are apparently too stupid to realize that most of our current problems were created by less regulations
see:
unregulated mortgages and greed and
a totally unregulated wall street a la Goldman Sachs-
now accepting tenders for a new Skylab company.....
If this is the situation that awaits us a prudent course of action is to dump all equities, buy guns and ammunition, sell your home for what it is worth, move up into the mountains and live the rest of your life in seclusion from society. Short of doing that can we have an alternate scenario for the future of our great republic? Here is an alternate scenario:
Prediction #1 – this great nation that survived and thrived its way through dozens of big and small crises since its founding will actually step up and lead the world out of the current quagmire which it was largely responsible in causing. President Obama who is much despised by the free market pundits will put a foundation and infrastructure in place for future and growth and prosperity. Unprecedented intervention (called meddling by some) by the Fed and the Treasury that has actually calmed the markets and led to the bull rally of the past few weeks will continue until the economy finds a firm footing at which point in time they will disengage just as fast allowing the newly fortified free market system to flourish and thrive into the future. At the end of the day Obama will likely go down in history books as one of the greatest presidents and leaders that led the recovery from rock bottom to a future of prosperity and wealth. Don’t get me wrong – I am not for Obama’s stimulus plan as I was for the republican agenda of giving credits to small businesses that would have helped this recession end a lot sooner. However, any spending is better than no spending even if some of it is wasteful and I believe that the impact of the stimulus plan has been greatly underestimated by economists. As a side note I am making a case that a reverse Black Swan event could be in the making for which I have constructed a portfolio that I named the Slumdog Millionaire Portfolio which is listed in my SeekingAlpha InstaBlog.
Prediction #2 – America has been stuck doing what it is not good in doing refusing to accept that a re-tooling of the education system and the workforce is needed for the new economy. That is why we build cars and things that we really are not the best people to be building instead of taking roles in the knowledge economy. Look at what Obama is doing with the auto industry. When he is done with the industry it will be restructured in such a way that either it will become competitive with the rest of the world or it will simply not exists. Look at his emphasis and investment in education. A massive re-tooling of our economy will happen over the next few years and the younger generation of today will find new jobs in the knowledge economy while the rest of the world will fill the vacuum we have created. American companies will lead in every sector as we build the blueprints for the rest of the world to implement. If you look at the situation today it is the leading American companies that are manufacturing in China and India and elsewhere that would bring the products back here to sell and now there is a momentum shift where we will lead the manufacturing of these goods and sell these goods to the people who manufactured it in the first place. We will emerge on top of the food chain being the master designers of products and services for consumption by us and the rest of the world. We will no longer be the leading consumers of the world as the rest of the world will step in as the newly created wealth will allow them to lead the kind of lifestyle we have taken for granted.
Prediction #3 – Let us step down from the macro level view to the micro view. Let us look at housing. The housing blip is only temporary. Every year America creates over a million and half households and we over- manufactured housing to far exceed demand. And now the pendulum of capitalism has swung to the other side and we are massively under manufacturing. The excess inventory we have due to foreclosures will dry up in the next year or two and we will then have a massive housing shortage unless the slack gets picked up sooner than having to wait two years. As it turns out this is already happening. Homebuilders are seeing an uptick in demand and new housing permits will start going up in the near future. A new class of investors has emerged that are buying up foreclosed homes that are helping put a bottom to the housing prices. The govt incentives to buy homes and ultra low once-in-a-generation interest rates is working as many Americans who could never afford a home are stepping into buy one. The housing crisis will be over soon.
Prediction #4 – What about the jobs situation? Being driven by consumer spending as we are for a significant portion of our GDP, the enormous pullback in spending by both people who have money and jobs and people that don’t caused an artificially low spending quarter to register at the end of 2008. However, this blip is only temporary. As people feel more secure about their jobs and the economy they will spend more as is already evidenced by the spending numbers, the consumer confidence numbers and the confidence number in Obama. Inventory numbers have reduced to a point where even a modest upsurge in spending will revitalize the need to build up inventory and thus hiring and thus job creation. It seems like people are ignoring these numbers instead choosing to look in the rearview mirror and focus on numbers that are already history. Jobs are always a lagging indicator and you will see media sensationalize job loss reports over the next several weeks while choosing to under-report new job creation that is bound to happen. If you look hard enough you will notice that jobs are being created and consumer confidence will keep going up. More and more jobs will be created in America but now we will begin to service the needs of Chindians and the consumers in the rest of the world!
Prediction #5 – This whole gobbledygook about crumbling 401K and retirement system will not come to pass because rising equity markets will undo the damage that has been done and set these systems on the path to recovery. 5 years down the road many Americans will look back and regret not having taken advantage of the greatest generational once-in-a-lifetime investment opportunity to better their future. However, a majority will find their savings replenished thanks to the equity market resurgence and also thanks to their own newer spendthrift ways that caused their savings to accelerate decently over the years! A few of us will be much more prosperous because during one of the darkest times in American history we had the common sense to know that this great nation of ours will not come to pass instead it will survive and thrive and we invested in her future.
Prediction #6 – Commercial overcapacity will be absorbed by the new entrepreneurs who will emerge to take advantage of the once-in-a-lifetime opportunity to build new businesses and new enterprises. These new entrepreneurs are the ones who gave their life to corporate America only to be disposed when the economy contracted when they were mercilessly thrown to the roadside. Of all the countries I have seen no country like America exists in that it offers the best unfettered system for an entrepreneur to build a business with the least amount of regulations and headaches and zero corruption. Expect to see thousands such entrepreneurs who took the risk today emerge prosperous a few years down the road. Never underestimate the power of small businesses as they are the ones that led us out of the past recessions and will do so again this time around.
As I have said through the body of my response I happen to think completely contrary to the viewpoints expressed by this author. I happen to think that the kick in the jewels we got during 2008 has served as a wakeup call and awakened us in that we will emerge stronger from this fiasco and will actually work our way towards greater prosperity than in the past. In other words, we may very well have a reverse black swan event in the making and I urge readers not to miss what I believe is a once-in-a-lifetime opportunity to invest in the future or America and the world.
Factually and historically unlikely. Sex is the entertainment and final luxury of poor. They don't need a house, or even a bed. The dirt will do. Sex is also, paradoxically, the ultimate luxury of the rich and is distinguished from the poor only by surroundings and circumstance. Therefore, the birthrate of this dystopic state will rapidly ascend to Third World country proportions.
The next shoe to drop will be when world oilfields continue to deplete while new supplies remain at a standstill as most oil companies have shut down exploration, especially in the United States. Even a slight uptick in the economy will bring oil demand past our ability to produce it and make $150 oil look cheap soon thereafter. That will take care of the rest of people's ability to spend our way out of this mess. Thank you Barney Frank and friends for having the misguided desire for everyone to own a home, even those who could not repay! Democrate ideas and desires often are wanted by many of our population, but they almost always totally lack common sense and are doomed to fail. This time, they just may have succeeded in destroying us.
On May 03 01:38 PM InvestBaboo wrote:
> Dear Author, you have done one-up on Roubini. He is Dr. Doom but
> you are Dr. Death! This is a very entertaining read but I was disappointed
> not to see that Russian professor fruitcake's prediction of America
> breaking into different nations one aligned with and protected by
> the Swine Flu Republic (AKA Mexico), one aligned with the Russians,
> one aligned and protected by the Canadians and so on and on. To those
> interested doomsday readers -- please Google the words "Russian Nut
> Fruitcake Professor USA breakup predictions" and you will find meaningful
> links.
>
> If this is the situation that awaits us a prudent course of action
> is to dump all equities, buy guns and ammunition, sell your home
> for what it is worth, move up into the mountains and live the rest
> of your life in seclusion from society. Short of doing that can we
> have an alternate scenario for the future of our great republic?
> Here is an alternate scenario:
>
> Prediction #1 – this great nation that survived and thrived its way
> through dozens of big and small crises since its founding will actually
> step up and lead the world out of the current quagmire which it was
> largely responsible in causing. President Obama who is much despised
> by the free market pundits will put a foundation and infrastructure
> in place for future and growth and prosperity. Unprecedented intervention
> (called meddling by some) by the Fed and the Treasury that has actually
> calmed the markets and led to the bull rally of the past few weeks
> will continue until the economy finds a firm footing at which point
> in time they will disengage just as fast allowing the newly fortified
> free market system to flourish and thrive into the future. At the
> end of the day Obama will likely go down in history books as one
> of the greatest presidents and leaders that led the recovery from
> rock bottom to a future of prosperity and wealth. Don’t get me wrong
> – I am not for Obama’s stimulus plan as I was for the republican
> agenda of giving credits to small businesses that would have helped
> this recession end a lot sooner. However, any spending is better
> than no spending even if some of it is wasteful and I believe that
> the impact of the stimulus plan has been greatly underestimated by
> economists. As a side note I am making a case that a reverse Black
> Swan event could be in the making for which I have constructed a
> portfolio that I named the Slumdog Millionaire Portfolio which is
> listed in my SeekingAlpha InstaBlog.
>
> Prediction #2 – America has been stuck doing what it is not good
> in doing refusing to accept that a re-tooling of the education system
> and the workforce is needed for the new economy. That is why we build
> cars and things that we really are not the best people to be building
> instead of taking roles in the knowledge economy. Look at what Obama
> is doing with the auto industry. When he is done with the industry
> it will be restructured in such a way that either it will become
> competitive with the rest of the world or it will simply not exists.
> Look at his emphasis and investment in education. A massive re-tooling
> of our economy will happen over the next few years and the younger
> generation of today will find new jobs in the knowledge economy while
> the rest of the world will fill the vacuum we have created. American
> companies will lead in every sector as we build the blueprints for
> the rest of the world to implement. If you look at the situation
> today it is the leading American companies that are manufacturing
> in China and India and elsewhere that would bring the products back
> here to sell and now there is a momentum shift where we will lead
> the manufacturing of these goods and sell these goods to the people
> who manufactured it in the first place. We will emerge on top of
> the food chain being the master designers of products and services
> for consumption by us and the rest of the world. We will no longer
> be the leading consumers of the world as the rest of the world will
> step in as the newly created wealth will allow them to lead the kind
> of lifestyle we have taken for granted.
>
> Prediction #3 – Let us step down from the macro level view to the
> micro view. Let us look at housing. The housing blip is only temporary.
> Every year America creates over a million and half households and
> we over- manufactured housing to far exceed demand. And now the pendulum
> of capitalism has swung to the other side and we are massively under
> manufacturing. The excess inventory we have due to foreclosures will
> dry up in the next year or two and we will then have a massive housing
> shortage unless the slack gets picked up sooner than having to wait
> two years. As it turns out this is already happening. Homebuilders
> are seeing an uptick in demand and new housing permits will start
> going up in the near future. A new class of investors has emerged
> that are buying up foreclosed homes that are helping put a bottom
> to the housing prices. The govt incentives to buy homes and ultra
> low once-in-a-generation interest rates is working as many Americans
> who could never afford a home are stepping into buy one. The housing
> crisis will be over soon.
>
> Prediction #4 – What about the jobs situation? Being driven by consumer
> spending as we are for a significant portion of our GDP, the enormous
> pullback in spending by both people who have money and jobs and people
> that don’t caused an artificially low spending quarter to register
> at the end of 2008. However, this blip is only temporary. As people
> feel more secure about their jobs and the economy they will spend
> more as is already evidenced by the spending numbers, the consumer
> confidence numbers and the confidence number in Obama. Inventory
> numbers have reduced to a point where even a modest upsurge in spending
> will revitalize the need to build up inventory and thus hiring and
> thus job creation. It seems like people are ignoring these numbers
> instead choosing to look in the rearview mirror and focus on numbers
> that are already history. Jobs are always a lagging indicator and
> you will see media sensationalize job loss reports over the next
> several weeks while choosing to under-report new job creation that
> is bound to happen. If you look hard enough you will notice that
> jobs are being created and consumer confidence will keep going up.
> More and more jobs will be created in America but now we will begin
> to service the needs of Chindians and the consumers in the rest of
> the world!
>
> Prediction #5 – This whole gobbledygook about crumbling 401K and
> retirement system will not come to pass because rising equity markets
> will undo the damage that has been done and set these systems on
> the path to recovery. 5 years down the road many Americans will look
> back and regret not having taken advantage of the greatest generational
> once-in-a-lifetime investment opportunity to better their future.
> However, a majority will find their savings replenished thanks to
> the equity market resurgence and also thanks to their own newer spendthrift
> ways that caused their savings to accelerate decently over the years!
> A few of us will be much more prosperous because during one of the
> darkest times in American history we had the common sense to know
> that this great nation of ours will not come to pass instead it will
> survive and thrive and we invested in her future.
>
> Prediction #6 – Commercial overcapacity will be absorbed by the new
> entrepreneurs who will emerge to take advantage of the once-in-a-lifetime
> opportunity to build new businesses and new enterprises. These new
> entrepreneurs are the ones who gave their life to corporate America
> only to be disposed when the economy contracted when they were mercilessly
> thrown to the roadside. Of all the countries I have seen no country
> like America exists in that it offers the best unfettered system
> for an entrepreneur to build a business with the least amount of
> regulations and headaches and zero corruption. Expect to see thousands
> such entrepreneurs who took the risk today emerge prosperous a few
> years down the road. Never underestimate the power of small businesses
> as they are the ones that led us out of the past recessions and will
> do so again this time around.
>
> As I have said through the body of my response I happen to think
> completely contrary to the viewpoints expressed by this author. I
> happen to think that the kick in the jewels we got during 2008 has
> served as a wakeup call and awakened us in that we will emerge stronger
> from this fiasco and will actually work our way towards greater prosperity
> than in the past. In other words, we may very well have a reverse
> black swan event in the making and I urge readers not to miss what
> I believe is a once-in-a-lifetime opportunity to invest in the future
> or America and the world.
One disagreement with the scenario: #5 -- the Fed is not, ultimately, controlled by the government; it is an organization of privately-owned banks. In a situation as extreme as depicted here, they very well could decide to bail on the "public interest" and try to save their own capital by taking themselves out of the loop. Of course, that would only accelerate other elements of the process.
On May 03 12:17 PM Northstar10000 wrote:
> Article is spot for those who pause for a moment and project out
> current trends. Don't even think you can't do it that way. Every
> resesion has been brought under control by greater government spending
> and greater social unease. The current Fed government is comprised
> of those raised on 60's logic that socialism will be the answer.
> Unfortunately we are at critical mass in spending and debt.
> think of all the stops they have pulled out that use to work. Nothing
> is working now, the debt is simply too big and we are trying to cure
> debt by adding more. Height of insanity, bring 60's logic and policies
> to a 2009 ression and you get the greater depression with a lot of
> inflation and social unrest. Good luck to the fools who still believe
> in this government nonsense. Wake up it's over
Yes, the writer did go overboard on some of his predictions, but be aware that our government is guilty of not telling the whole truth. Government numbers are always wrong and restated a month later. We just can trust them.
The true cost is the way that litigation risk causes cover your ass decisions on the part of potential defendants. Its the lack of Obstetricians in John Edwards home state. Its the smartest young people avoiding high risk activities like medicine, and experienced doctors eager to retire so they aren't risking their life savings with every day at work.
I think FASB 157 is a natural result of accountants wanting to cover their asses from liability. After enrons accountants were prosecuted (rightly or not), it's only natural that others would prefer the safe course. By marking to market values, accountants avoided risky judgement calls about the performance of mortgages, but this created a self-perpetuating cycle of destruction, by impairing banks ability to lend.
Lawyers perform a valuable service by protecting rights - they're very important to a society based on laws and property rights. But the situation has gotten out of hand. I think its a major conflict of interest for lawyers to be writing the laws - they are naturally biased to think in terms of settling issues in court, which is a disaster for everybody else.
I think we are ruled by an oligarchy of lawyers, government employees and activist organisations. Outright communism would be an improvement over defining industrial and energy policy in court, one case at a time.
On May 03 02:27 PM WAKEUP wrote:
> Big Jake still can't believe the U.S.A.'s voters REJECTED any more
> years of Bush-like rule.
The rest of your predictions are excessively pessimistic. Although some may come to pass to a very limited extent, I doubt that they will happen to any extent approaching your dire prognostication. My expectation is that people will wake up to the need for real change, and bring back policymakers with Reagan-like and Volcker-like realism to set us on a path of meaningful recovery.
Re your "Prediction #1 – this great nation that survived and thrived its way through dozens of big and small crises since its founding will actually step up and lead the world out of the current quagmire which it was largely responsible in causing." - It would seem to me that a lot of the world just might have had enough of being led by America for now thanks? Perhaps if you think in terms of how America can work in with the "global team" and what America's realistic place in that team might be mid to longer term instead of so much in terms of "leadership" you'll be a bit closer to the mark.
The same theme comes through in your Prediction #2 where you comment "We will emerge on top of the food chain being the master designers of products and services for consumption by us and the rest of the world." - Your thinking is a bit grandiose for mine - Sort of the antithesis of the nutty Russian professor you mention who is predicting a disintegration of the US. I think those sorts of predictions are a bit nutty too - But I also think it is a bit nutty for America for think it is going be master of the universe again anytime soon - Let's face it - America had its chance - And blew it really badly (sadly) - And the Chinese are onto it and France and Germany and Russia - Plus a few others I suspect.
Re Prediction #6 - The good old American way of offering "the best unfettered system for an entrepreneur to build a business with the least amount of regulations" sounds like a fundamental part of the problem to me rather than the solution? Might be wise to have a real good think about that before American business continues happily on its unfettered, unregulated way perhaps?
Not that America shouldn't come out of this mess relatively OK - After a lot of hard work and pain with its citizens ultimately accepting that the good old days are gone - Because America really does have a very great amount going for it from what I can see.
A final point: A fair few of the perspectives from the main article reminded me of what happened in the 1990s when Russia collapsed catastrophically in a debt based, money printing, hyerinflationary scenario - I can only hope Mr Obama and Co don't lose their way on the QE thing or America might not come of things nearly as well as I guessing at this stage. Still, Volcker is on the sidelines waiting to be let off his leash. That's encouraging. But a reverse black swan? Doubt it - More like a lot of pain I'd say.
jameshowardkunstler.ty.../
Lastly, I'm not leaving the USA but I am worried about it's future. I don't think the predictions are that good but some of it may occur in some smaller dosage. The future of our country is very bleak.
me. First, back in 1968 it was SS retirement at the age of 62, then came IRA's and retirement at 65, then 401Ks, then stock market play, talk about privatizing, I call "Bull-shit". I don't want to work until the day I'm dead. Give it up America, get us old folks out of the work force and you young kids get to work building your future in this country. We baby boomers can spend the money and you can get paid for providing the goods and services and you can have babies, cook-outs, birthday parties, buy homes, buy cars but the thing is YOU NEED TO GO TO WORK!!!
Your number 4 is ludicrously silly and wrong. One cannot simultaneously have inflation and deflation (which you are predicting in your other comments). It just cannot happen.
Anyone that worries about inflation in 2009 has lost touch with reality. Prices keep falling everywhere.
Even for the most basic items. Recently, every week, at my local Publix (which probably is the best managed and most profitable grocer in the US), there are increasing numbers of items at discounts or "sales" plus increasing numbers of "buy one, get one free." The latter means that prices have fallen by 50%--especially since the cashiers don't stop one from stocking up on the "buy one, get. one free" items.
"Government numbers are always wrong and restated a month later. We just CAN'T trust them."??
On May 03 07:31 PM secmaven wrote:
> I now live on social security income for which over the years my
> employers and myself have invested hundreds of thousands of dollars.
> So let the hyper inflation come!
www.youtube.com/watch?...
On May 03 10:11 AM Doc 224899 wrote:
> "...people will have less money to spend on lawyers..."
>
> Finally. We actually need about 5% of the lawyers we now support.
> Lawyers feed off the carcasses of just about every person and corporation
> that is productive. Lawyers make money off people with personality
> disorders, the individuals who would have been kicked out of the
> wago train 130 years ago, or chased away from the cave and fire 20,000
> years ago.
>
> It's time to subject the legal profession to the same critical reviews
> we apply to health care (a service we can't live without), to reduce
> wasteful spending on legal services (which we can hardly tolerate).
1. invest like crazy, make the most of this depressed situation.
2. invest like crazy, make the most of this depressed situation and if things go to hell. well, last thing you'll have to worry about is paper money.
On May 03 03:17 AM Egg wrote:
> Prediction 11: None of the Above (Someone has to say it)
I regret wasting my time reading this article.
On May 03 01:25 PM MudEngineer wrote:
> I recently read that the total outstanding derivatives sum up to
> over 200 trillion dollars. Assuming that their values have plummeted
> at least 30% as most are tied to mortgages gone bad on depreciating
> real estate, that means a loss of 60 trillion dollars. Throwing
> even 5 trillion dollars at the problem is like pissing into the wind.
>
>
> It seems to me that the author's future senarios are highly likely
> to occur within the time frame given. It is interesting to note
> that at least five civilization's calendars end with year 2012.
> I would like to know from Pcatlow, the former commodity trader which
> Latin American country to move to. My wife and I are considering
> that same strategy. Will they let me bring my two dogs into the
> country?
Disclosure: Legless
Good luck!
Noworries
It seems like for my entire life we (the USA) has been on the verge of total meltdown. I remember people building bomb shelters for the nuclear war back in the 70s and 80s. Then in the 90s everyone was freeking out about the year 2000. Then there was the avian flu, the Iraqi WMDs (remember the whole duct tape your house thing?), and now swine flu. I remember reading advice on a gold site in 1999 that said that we should all spray paint our homes, flip our cars over, and light our cars on fire so the mob would think our homes were already hit... man I am glad I didn't follow that advice.
Anyways, thanks for the great article, it was very interesting.
On May 04 05:38 AM rick12345 wrote:
> North Korea, Pakistan, China and Afghanistan will form a secret alliance
> bringing about the onset of WW3. The Swine flu mutates with the bird
> flu to form a deadly new strain. After a massive nuclear war, the
> few people left in the world will face a nuclear winter that ultimately
> brings about a new Ice age, lasting 2000 years.
You accurately point out many of the problems facing this country. The US Dollar has weak fundamentals. The US Economy has overcapacity and there is no vital growing industry to absorb the unemployed. As well, the US debt and looming medicare and social security obligations are daunting.
I agree with Bruce Kasting "Neither your worst fears nor your highest expectations will come true."
I am not a pollyanna saying "everything is rosy - we will pull through all of this just fine and become a vibrant economy like we were in the 90's." But, I am also not a doom and gloomer saying that the US is doomed.
The fact is that the rest of the developed world faces similar problems to ours. I am not sure the extent of the debt and future entitlement problems in other countries. In some countries its better, and in other countries, much worse: Look at Italy and Greece they both have higher debt/GDP than we do and they are both were recently ranked as having a 10% chance of default on their sovereign debt.
On May 03 06:13 PM john1940 wrote:
> Let me try to help just a few of the responders on just one issue.
> The Federal Reserve is not a private bank. It's a bank created by
> federal law and designed for independence in it's action. There
> are 12 member banks that take care of Federal Reserve responsibilities
> in designated sections of the country. It is audited regularly and
> monitored by Congress. Profits go to the federal government. Go
> to www.federalreserve.gov... for a
> start on FRB. Then try Wikipedia. Stay out of the internet and
> blogs for information. A lot of internet sources are good but most
> of America's poorly educated can't differentiate nonsense from fact.
>
>
> Lastly, I'm not leaving the USA but I am worried about it's future.
> I don't think the predictions are that good but some of it may occur
> in some smaller dosage. The future of our country is very bleak.
I am of the same opinion. My question to you is why Latin America. I have 3 options in which I am currently building assets.
1. Latin America, specifically an island in Panama. Easy to grow food and fish, no A/C or heat required. But, more anarchy is likely.
2. Texas, specifically East Texas. Easy to grow food, fish, and livestock, plenty of natural gas for A/C. Republic of Texas seems viable.
3. Austria, specifically the foothills of the Alps. Easy to grow food, fish, and livestock, plenty of hydropower and wood for heat. Sense of community.
I have been building all three to have options, but I think I might need to consolidate. Any thoughts?
A place where the citizens are culturally not given to conflict and perhaps a generation at most away from the farm is the best candidate. Google escapeartist.
You are right about needing to consolidate and SOON!
On May 04 01:00 PM pragmattist wrote:
> Pcatlow:
>
> I am of the same opinion. My question to you is why Latin America.
> I have 3 options in which I am currently building assets.
>
> 1. Latin America, specifically an island in Panama. Easy to grow
> food and fish, no A/C or heat required. But, more anarchy is likely.
>
> 2. Texas, specifically East Texas. Easy to grow food, fish, and livestock,
> plenty of natural gas for A/C. Republic of Texas seems viable.<br/>3.
> Austria, specifically the foothills of the Alps. Easy to grow food,
> fish, and livestock, plenty of hydropower and wood for heat. Sense
> of community.
>
> I have been building all three to have options, but I think I might
> need to consolidate. Any thoughts?
www.stopshortingstocks.../
www.petitiononline.com...
finance.groups.yahoo.c.../
This economy will revert to a usual cyclical pattern, and 5, 10, 15 years when we sit on another bubble, we will once more forget that using margarita mixers as collateral to make margarita-backed securities is a relatively foolish plan.
On May 03 07:44 PM The Geoffster wrote:
> How can you live on social security?
Not my base case, but not out of the question either.
These are very apocalyptic predictions. While I am unable to label each of the ten (10) predictions with a likelihood figure, I would nonetheless venture to suggest an eleventh one below.
In the event that all 10 would come to past, a logical outcome as the 11th would be a coup d'etet by our military, as civil government had then been totally disintegrated.
However, whether our military is qualified, willing, and able to govern would be the subject of a different debate.
Let us hope that this would not come true, as we often looked upon those countries that went through coup's with such disdain and scorn.
Wait a minute, didn't good old Oliver Cromwell and his merry band of Puritan Round Heads do a good job with the Commonwealth? Remember the Bay Colony? Unfortunately, he died early with UTI, which would be easily treatable today with antibiotics.
Teutonic
This means, the rest of the world is powerless to prop up their currencies in the face of the US $. As the $ depreciates, so to will the currency market as a whole.
No nation in the world has a stronger safety net than the US, & that net is what's going to enable America's wealthy to re-organize their businesses & use capital to expand. Failed businesses in India & China will be gobbled up by America's Fortune 5000.
So I think America will recover her wealth faster than other nations. As for jobs, that's another story. America's Fortune 5000 shifted jobs overseas because they were looking for profits over market share. Foreign companies setup shops in America because they are looking for market share over profits. Toyota, Honda, & Kia are fine examples of this. So America's tax policies need to be competitive enough to attract companies looking for growth whether they be domestic or foreign.
Essential to those policies is the replacement of a general minimum wage standard with a sector based one. The sector based standard must be competitive with the global cost of labor. The excess in the wage is the difference between the value of America's marketplace vs that of say China's. I think America will face this reality on a municipal govt level first.
If the Dummycrats are not prepared to make these changes so that America is more competitve in the global economy than they will be voted out. As Clinton once said, "It's the economy stupid."
As for civil unrest, I agree it's coming to some degree. We already have the emergence of tent cities which basically act like refugee camps. They stress existing social services & when the govt comes up short, breakouts are inevitable. Our prisons are already filled to capacity so incarceration is giving way to "home arrest" which isn't much of a deterrent to criminal behavior.
But that can be acquiesed to a degree as well. The idea of "buy a home, get a greencard" is gaining support. If a foreign is able to buy a US home outright, he will get a greencard & be on a fast track for US citizenship. It's inevitable in a nation where the marketplace is the greatest asset that citizenship would be for sale.
Some have estimated such a policy to produce 1 mil new home sales / yr! If that were to happen, the tent cities would dry up as home values would begin to rise again.
However, I decided to say this:
Big Jake, you do your readers a disservice. Use your typing finger for something worthwhile, like poking yourself in the eye.
Most of the comments/ratings here reveal a level of hysteria that is disturbing. There is no reason for such incredible pessimism (unless you find it exciting, that is, and want to revel in morbid fantasies). When writers like this spew their melodramatic garbage in the form of cheap thrillers and lurid ghost stories, does anyone pause to think that the country is relatively young, vibrant and still in the experimental stages?
Why would any of these scenarios be even a vague possibility? There are plenty of smart people in the nation who can and will rebuild what needs to be rebuilt (if anything ends up broken) and tweak problem areas that develop in the future.
Even if a worst-case scenario develops, we are strong, valuable people who love this country. Do you think we'll let it fall?
Don't fear-monger yourselves out of a good investment smorgasbord because you're too busy seeking thrills at the end of a hypodermic.
There's no nutrition in that.
True, the prediction might just come true if we continue to spiral down, until that point our politicians would have no choice but to sell a river and a mountain to pay off our debts.
My granddad,viewing earth's worn cogs, Said,Things are going to the dogs"
His grandad, in a house of logs,Said,Things are going to the dogs"
His grandad, from the Irish bogs,Said "Things are going to the dogs"
His grandad, in rough jungle yogs, Said, "Things are going to the dogs".Well, here's one thing I'd like to state: The dogs have had a good long wait.
Lighten up, Big Jake, its not the end of the world.
>And the probability is extraordinarily high right now. I give it about a 5% chance over a 3 year >horizon.
If each of the 10 items has its own P{occurrence} (and some are not binary), and the P{occurrence} for each prediction is equal, a P{single predicted event} of .933033, i.e. 93% P[occurrence}, yields a 5% P{occurrence} for the set of 10 events. I’m not sure I would assess P{occurrence} = 93% for any of these predictions.
On May 03 10:14 AM Pcatlow wrote:
> The piece is an interesting and compelling read. I lean more towards
> the author's view than against.....but, the time-line will be stretched
> out further.
>
> The fact that I, as a Futures trader, am completely out of this market
> is my lead card in this play. Now, beyond that, my wife and I (childless,
> retired in a mountain top community, zero debt, and cash heavy) are
> in the final stages of a major move away from the USA:
>
> 1. We will sell our house for whatever it will fetch.
> 2. We are moving to Latin America.
> 3. I will trade into foreign currencies as quickly as I can and at
> the most ripe moment.
> 4. We will break all ties to the US tax system, since Tax rates on
> the "rich" (traders, income producers, and titans of industry - -
> those who make more than a dollar a day (HA!), will see their tax
> rates beat what we already see in the EU.
> 5. We will find our health care somewhere else as this will never
> be solved and the AMA has a complete strong-hold over the industry.
> Even the last word of my last sentence tells us something (profits
> from health is counter productive and leads to what we have now:
> huge insurance premiums, deductibles and we are scared doo-doo-less
> that a single health crisis will wipe us out---we are in our 50's
> and the BIG C could kills us in more than one way).
> 6. We will continue to believe not one word of the Wall Street spew
> we read every day.....and not one word of the 10Q's and Quarterly
> reports which contain lies, and misleading data...
>
> I could go on and on, but folks the good OLE USA is doomed.
I could go on and on and on, as our friend as here in this article. This simply won't play out. Economics and geopolitics, my friends. So many forget they play hand-in-hand. I am not advocating anything here...I just call reality, as it is. The US Dollar is the fait currency of the world, we can indeed print our way out of this, despite "Big Jake's" assertion we can't (Big Jake, we have printed more currency since November than in the previous 93 years - and the dollar ROSE against most major currencies - in your scenario, how can that possibly be?).
Them's the fact's my friends - Might Makes Right, as the Brits used to say. Before, of course, an any historian knows, they reached a point of government debt (study your history - Britain ruled 76.3% of the world's landmass based on a fantastic creation stemming from Belgium - The Treasury Bond) where their economists, spurred on by an uneducated media, a political correctness that ate away the heart of UK's strong, prideful resilience, and a public that listened to the doom, began shedding debt and delevering...and were exposed. No more Projection of Power, no more mightiest economy in the world, no more Empire. Again, no advocacy here...I call it as it is. In reality.
Cheers!
On May 03 01:38 PM InvestBaboo wrote:
> Dear Author, you have done one-up on Roubini. He is Dr. Doom but
> you are Dr. Death! This is a very entertaining read but I was disappointed
> not to see that Russian professor fruitcake's prediction of America
> breaking into different nations one aligned with and protected by
> the Swine Flu Republic (AKA Mexico), one aligned with the Russians,
> one aligned and protected by the Canadians and so on and on. To those
> interested doomsday readers -- please Google the words "Russian Nut
> Fruitcake Professor USA breakup predictions" and you will find meaningful
> links.
>
> If this is the situation that awaits us a prudent course of action
> is to dump all equities, buy guns and ammunition, sell your home
> for what it is worth, move up into the mountains and live the rest
> of your life in seclusion from society. Short of doing that can we
> have an alternate scenario for the future of our great republic?
> Here is an alternate scenario:
>
> Prediction #1 – this great nation that survived and thrived its way
> through dozens of big and small crises since its founding will actually
> step up and lead the world out of the current quagmire which it was
> largely responsible in causing. President Obama who is much despised
> by the free market pundits will put a foundation and infrastructure
> in place for future and growth and prosperity. Unprecedented intervention
> (called meddling by some) by the Fed and the Treasury that has actually
> calmed the markets and led to the bull rally of the past few weeks
> will continue until the economy finds a firm footing at which point
> in time they will disengage just as fast allowing the newly fortified
> free market system to flourish and thrive into the future. At the
> end of the day Obama will likely go down in history books as one
> of the greatest presidents and leaders that led the recovery from
> rock bottom to a future of prosperity and wealth. Don’t get me wrong
> – I am not for Obama’s stimulus plan as I was for the republican
> agenda of giving credits to small businesses that would have helped
> this recession end a lot sooner. However, any spending is better
> than no spending even if some of it is wasteful and I believe that
> the impact of the stimulus plan has been greatly underestimated by
> economists. As a side note I am making a case that a reverse Black
> Swan event could be in the making for which I have constructed a
> portfolio that I named the Slumdog Millionaire Portfolio which is
> listed in my SeekingAlpha InstaBlog.
>
> Prediction #2 – America has been stuck doing what it is not good
> in doing refusing to accept that a re-tooling of the education system
> and the workforce is needed for the new economy. That is why we build
> cars and things that we really are not the best people to be building
> instead of taking roles in the knowledge economy. Look at what Obama
> is doing with the auto industry. When he is done with the industry
> it will be restructured in such a way that either it will become
> competitive with the rest of the world or it will simply not exists.
> Look at his emphasis and investment in education. A massive re-tooling
> of our economy will happen over the next few years and the younger
> generation of today will find new jobs in the knowledge economy while
> the rest of the world will fill the vacuum we have created. American
> companies will lead in every sector as we build the blueprints for
> the rest of the world to implement. If you look at the situation
> today it is the leading American companies that are manufacturing
> in China and India and elsewhere that would bring the products back
> here to sell and now there is a momentum shift where we will lead
> the manufacturing of these goods and sell these goods to the people
> who manufactured it in the first place. We will emerge on top of
> the food chain being the master designers of products and services
> for consumption by us and the rest of the world. We will no longer
> be the leading consumers of the world as the rest of the world will
> step in as the newly created wealth will allow them to lead the kind
> of lifestyle we have taken for granted.
>
> Prediction #3 – Let us step down from the macro level view to the
> micro view. Let us look at housing. The housing blip is only temporary.
> Every year America creates over a million and half households and
> we over- manufactured housing to far exceed demand. And now the pendulum
> of capitalism has swung to the other side and we are massively under
> manufacturing. The excess inventory we have due to foreclosures will
> dry up in the next year or two and we will then have a massive housing
> shortage unless the slack gets picked up sooner than having to wait
> two years. As it turns out this is already happening. Homebuilders
> are seeing an uptick in demand and new housing permits will start
> going up in the near future. A new class of investors has emerged
> that are buying up foreclosed homes that are helping put a bottom
> to the housing prices. The govt incentives to buy homes and ultra
> low once-in-a-generation interest rates is working as many Americans
> who could never afford a home are stepping into buy one. The housing
> crisis will be over soon.
>
> Prediction #4 – What about the jobs situation? Being driven by consumer
> spending as we are for a significant portion of our GDP, the enormous
> pullback in spending by both people who have money and jobs and people
> that don’t caused an artificially low spending quarter to register
> at the end of 2008. However, this blip is only temporary. As people
> feel more secure about their jobs and the economy they will spend
> more as is already evidenced by the spending numbers, the consumer
> confidence numbers and the confidence number in Obama. Inventory
> numbers have reduced to a point where even a modest upsurge in spending
> will revitalize the need to build up inventory and thus hiring and
> thus job creation. It seems like people are ignoring these numbers
> instead choosing to look in the rearview mirror and focus on numbers
> that are already history. Jobs are always a lagging indicator and
> you will see media sensationalize job loss reports over the next
> several weeks while choosing to under-report new job creation that
> is bound to happen. If you look hard enough you will notice that
> jobs are being created and consumer confidence will keep going up.
> More and more jobs will be created in America but now we will begin
> to service the needs of Chindians and the consumers in the rest of
> the world!
>
> Prediction #5 – This whole gobbledygook about crumbling 401K and
> retirement system will not come to pass because rising equity markets
> will undo the damage that has been done and set these systems on
> the path to recovery. 5 years down the road many Americans will look
> back and regret not having taken advantage of the greatest generational
> once-in-a-lifetime investment opportunity to better their future.
> However, a majority will find their savings replenished thanks to
> the equity market resurgence and also thanks to their own newer spendthrift
> ways that caused their savings to accelerate decently over the years!
> A few of us will be much more prosperous because during one of the
> darkest times in American history we had the common sense to know
> that this great nation of ours will not come to pass instead it will
> survive and thrive and we invested in her future.
>
> Prediction #6 – Commercial overcapacity will be absorbed by the new
> entrepreneurs who will emerge to take advantage of the once-in-a-lifetime
> opportunity to build new businesses and new enterprises. These new
> entrepreneurs are the ones who gave their life to corporate America
> only to be disposed when the economy contracted when they were mercilessly
> thrown to the roadside. Of all the countries I have seen no country
> like America exists in that it offers the best unfettered system
> for an entrepreneur to build a business with the least amount of
> regulations and headaches and zero corruption. Expect to see thousands
> such entrepreneurs who took the risk today emerge prosperous a few
> years down the road. Never underestimate the power of small businesses
> as they are the ones that led us out of the past recessions and will
> do so again this time around.
>
> As I have said through the body of my response I happen to think
> completely contrary to the viewpoints expressed by this author. I
> happen to think that the kick in the jewels we got during 2008 has
> served as a wakeup call and awakened us in that we will emerge stronger
> from this fiasco and will actually work our way towards greater prosperity
> than in the past. In other words, we may very well have a reverse
> black swan event in the making and I urge readers not to miss what
> I believe is a once-in-a-lifetime opportunity to invest in the future
> or America and the world.
On May 04 05:38 AM rick12345 wrote:
> North Korea, Pakistan, China and Afghanistan will form a secret alliance
> bringing about the onset of WW3. The Swine flu mutates with the bird
> flu to form a deadly new strain. After a massive nuclear war, the
> few people left in the world will face a nuclear winter that ultimately
> brings about a new Ice age, lasting 2000 years.
On May 05 10:50 AM Troy Jensen wrote:
> Right on, Egg, you have it right, "Prediction 11 - None of the Above,
> Somebody had to say it." This perhaps is the most RIDICULOUS thing
> I have ever read. And frankly, some of the comments below, "fleeing
> to Latin America and swapping dollars for foreign currencies as fast
> as possible..." Good Lord. This truly is the simplest concept I have
> ever come across. The United States cannot fail, because the world's
> other nation's can't do without it. Arrogant? It's not meant to be.
> It's simple...reality. If the scenario played out above, what would
> China (and the 50%+ GDP directly tied to the U.S. - probably more
> if you have some sense of the true money flows - funny how small
> Caribbean countries continue to buy a significant percentage of our
> debt, every single week) do? Can you imagine the turmoil through
> Southeast Asia? How would Russia react to the largest population
> in the world banging over their Southeastern border to take back
> their (in their view) rightful Mongolian territory? And WHERE in
> the world are you going to unwind you GIANT positions in the US Dollar
> to, Mr. Columnist? With nine carrier fleets capable of taking on
> four major war theaters, each at the same time, where does flight-to-safety
> look like to you? Gold? Finite commodity, don't be a silly 19th century
> economist. The Euro? Brace yourselves, my Socialist friends, live
> a few years in Europe. Demography is Destiny, and the Europeans have
> some pretty mighty trouble on their hands. And if this scenario were
> to play out, what would Europe use as defense against the absolute
> NEED for the Russians to begin advancing west for infrastructure
> and tactical reasons, because their eastern flank is being overrun
> by the largest employer in the world, the Chinese army? That mighty
> Euro-Force? The thought of tying my currency reserves to the fate
> of the mighty European Union Armed Forces would not let me rest easy
> at night. All this talk about the Chinese Army and our impending
> military disadvantage...does the "Doom and Gloom" crowd even realize
> China does not have a SINGLE aircraft carrier yet? Not one? Do you
> know the lead time to build just one of our Nimitz-Class carriers?
> Reality check!
> I could go on and on and on, as our friend as here in this article.
> This simply won't play out. Economics and geopolitics, my friends.
> So many forget they play hand-in-hand. I am not advocating anything
> here...I just call reality, as it is. The US Dollar is the fait currency
> of the world, we can indeed print our way out of this, despite "Big
> Jake's" assertion we can't (Big Jake, we have printed more currency
> since November than in the previous 93 years - and the dollar ROSE
> against most major currencies - in your scenario, how can that possibly
> be?).
> Them's the fact's my friends - Might Makes Right, as the Brits used
> to say. Before, of course, an any historian knows, they reached a
> point of government debt (study your history - Britain ruled 76.3%
> of the world's landmass based on a fantastic creation stemming from
> Belgium - The Treasury Bond) where their economists, spurred on by
> an uneducated media, a political correctness that ate away the heart
> of UK's strong, prideful resilience, and a public that listened to
> the doom, began shedding debt and delevering...and were exposed.
> No more Projection of Power, no more mightiest economy in the world,
> no more Empire. Again, no advocacy here...I call it as it is. In
> reality.
> in the final stages of a major move away from the USA:
>
> 5. We will find our health care somewhere else as this will never
> be solved and the AMA has a complete strong-hold over the industry.
PCATLOW - I read somewhere that you can get Blue Cross/Blue Shield of Peru for only $80 per month.
The good news, however, is that you probably have a heckuva screenwriting career out here in Hollywood if you should decide to go for it. Attend a few seminars, read some of those forumlaic screenplay structure books, pump out a few drafts and you never know. Nobody loves doom and gloom better than Hollywood, and no one seems to eat it up better than U.S. audiences (could be wish fulfillment, perhaps).
All that nonsense being said, it is nice to see someone actually pointing out the fact that a simple return to the good old ways (i.e., borrowing endlessly to consume needlessly) is not very likely (even if it were somehow desirable). If I read another article about how we're going to return to 3% GDP growth by mid-2010, I think I'll choke; the U.S. hasn't had actual 3% GDP growth (subtract MEWs, financial tomfoolery, dot com bubbles, etc.) in nearly two decades - and now we think they're somehow right around the corner?! That kind of kind exaggeration makes yours seem downright unimaginative. So keep it up, Jake. It was fun to read; turn it into a movie and you've got something.
that lower wages leads to lower tax base, which will lead to slimmer pensions for govt workers. Be careful for what you wish.
This US centric view of economic dynamics is one of the reasons that the US and sadly, brain-dead Europe, aren't pulling us out of this anytime soon.
This US centric view of economic dynamics is one of the reasons that the US and sadly, brain-dead Europe, aren't pulling us out of this anytime soon.
I thought it already popped in 2007-2008?
>> the government eventually banning short-selling altogether.
It took a herculean effort for them to re-instate the uptick rule. This will never happen.
>> Prediction two. With public pension systems and tens of
>> millions of 401k holders virtually wiped out—and with the Baby >> Boomers retiring en masse—there will be tremendous
>> pressure on the government to get into the stock market in
>> order to bid up prices.
Where will they get the money? The Chinese are getting wise and are about to cut us off. The government is already tapped out.
>> Prediction four. “Quantitative easing” will fail ...
>> However, comprehensive debt relief via a devaluation of
>> the dollar is even more likely.
Agreed
it can finance continuous multi-trillion-dollar deficits on the private market. By late 2010, the sole buyers of new U.S. Treasury and agency bonds will be the Federal Reserve and a few derelict financial institutions under government control. This may or may not lead to hyperinflation. (See prediction four).
Au contraire - the scenario above, if it came true, would certainly lead to hyperinflation. This is exactly what happened in the Weimar Republic.
>> Prediction six. As the need for financial industry paper-pushers declines and people have less money to spend on lawyers and Starbucks (SBUX), unemployment will rise until the private sector has eliminated all of its excess capacity and superfluous or socially needless jobs. The government’s narrow unemployment figure (U3) will rise into the high teens by late 2010. The government’s broader unemployment figure (U6) will cease to be reported when it reaches 25 percent
Wrong again. They will get work in newly-created government programs
On May 03 11: