The Greatest Depression Is Coming 219 comments
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Good times will not be returning any time soon.
We continue to lose jobs month over month. And, while the statistics being released are showing a slow down, this is basically a fabrication. There are thousands of people falling off of unemployment compensation each week — none of them are reflected in the official numbers. Shadowstats.com estimates unemployment is above 20%. Take it for what you will, but these numbers are rapidly approaching the unemployment rate during the last well known depression.
Credit is contracting. The last decade in America has seen credit, or debt, however you want to look at it, essentially become a second income. No more. The banks may be getting billions in loans, but for the individual on the street, credit is frozen. Couple this with the loss of primary income streams and you have a lot of people with no money for even essential goods.
Foreclosures continue to mount. In addition to the foreclosures of the last 2 years, we have millions more in play right now, regardless of the mortgage programs the government institutes. Job Loss + Credit Contraction means there is no way millions of people will be able to make their monthly payments. Nowadays, once you lose your job, you aren’t going to have an easy time finding a new one that adequately services personal debt. In real terms housing prices are not done dropping. There are some conservative down-side estimates that say an additional 15% is likely. But, what if they are underestimating? What if it turns out to be 30%, or more? If we are in a depression, the downside is huge. Japanese real estate lost 80% (adjusted for inflation) in the 1990’s (and so did their stock market!). In some parts of the country, home owners would probably agree that the 45% their homes have already lost would constitute a depression.
Debt defaults keep rising. Bank of America just released their numbers and lost upwards of $2 billion dollars, due in part, to credit card defaults. This is not the sign of a healthy consumer. When a consumer defaults on a credit card, that is leading indicator that they will not get easy credit if they need it in the future. A default in 2009 is a big red flag for lenders. Empirically, this seems like it may be a leading indicator for continued credit contraction on the consumer side.
Small businesses are getting hit hard. Small business is the engine that runs the entire economy, employing around 70% of the workforce. Right now, they have no access to loans, and the consumer is drying up. To survive, they’ve had to cut costs significantly. The next step will be to cut jobs. Many have already resorted to letting people go. As much as owners may not want to let go of their people, they realize they have no choice at this point. Incidentally, many major corporations showing “better than expected” results employed these same strategies. But, the businesses themselves, not necessarily by choice, are perpetuating the negative feedback loop. As they lay off employees, more consumer income is destroyed, leading to fewer revenues across the board for a majority of businesses, big and small.
The Middle Class is holding on for dear life. If small business drives jobs and production, it is the middle class that drives consumption. And the middle class is getting hammered for all of the reasons mentioned above. Many middle class families are realizing, or will realize very soon, that their lifestyle choices are going to need changes. Cut out the gym and take a jog instead. Why pay $100 for cable when you can get similar, if not better, news and movies online for $30 a month? Is organic really necessary at the grocery store when one can save 30% buying the regular stuff we grew up on? Do I really need to get a new car when my 2005 Explorer is just fine? Why go out and spend $100 when dinner and a movie at home a couple of Fridays a month saves enough money to pay the electric bill? These and other questions are going through the collective mind of middle class America. They are desperately trying to avoid becoming a member of working or under class America. The initial step to maintain stability is the same as with small businesses - cut spending.
Visualize a car engine. When there is enough motor oil, the pistons are firing up and down rapidly and the system runs efficiently. When the oil dries up, the engine begins to deteriorate. It’ll go for a little while longer. And it’ll become much more violent and volatile each time it fires. Invariably the engine seizes up and fails.
What we see in many aspects of the system right now are pistons that are firing violently. First a crash in the stock market. Then trillions in bailouts. Then an historic and massive stock market swing in the other direction. We see individuals speaking out in public, on the airwaves and on personal blogs en masse about one topic or another. Whether it is rep-on-Obama or dem-on-Bush bashing, there are extreme levels of divisiveness and heated, sometimes violent clashes. The system is moving into extreme peaks and troughs at a much more rapid pace now than anytime in the last 50 or more years.
We are in the opening stages of the Greatest Depression, a term coined by Trends Forecast founder Gerald Celente. The next stage, as Mr. Celente has said, will be “like nothing we've ever seen in our life time.”
Welcome to the Greatest Depression.
Disclosure: Short BAC
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As long as there is a willingness to accept the reality of our situation, and to address the underlying root causes of the predicament, then any disaster may be averted.
And you're really collecting some great data to support your "The Middle Class is holding on for dear life." meme.
Put the tin foil hat down.
Good article.
Venndata, U6 is already at 17+% unemployment and many places like Fla are about 20% U-6, the old way of measuring it.
Many in Washington, wall street just don't know or want to know how bad main street has become. Another number that gov has badly made is inflation. For most people from 2000 to 2008 real inflation, what we actually paid for things has went up 100% which means our wealth has dropped 50%.
Now add our wages have barely increased and many have had a 40% pay cut in buying power. So those who think people spending is going to bring us out are fooling themselves. This is the same inflation, loss of real wealth that happened under Regean/Bush41.
The whole US is going to be completely changed by this debt, mismanagement and it's going to take a decade to recover from. Even more if repubs don't stop fighting it.
On Oct 17 07:18 AM Philly Jim wrote:
> The real economic disaster will come when Boeing, Lockheed Martin,
> Raytheon, SAIC, Exxon, Chevron, GE and other U.S. conglomerates follow
> in Halliburton's steps and relocate elsewhere. Elsewhere, is offering
> attractive incentives for talented and productive individuals and
> companies, not to mention better living conditions. Who would have
> ever imagined finding better living conditions outside of the U.S.A.?
Yeah, no kidding. Where your comment gets a little scary is when you talk about "social phenomenom that increase consumer capital". I don't know what kind of "social phenomenom" you're talking about, but the only decent long-term solution to "too much debt" is "spend less while you pay it off" or "declare bankruptcy". Either choice among consumers will solve the problem, and any OTHER choice will just create NEW problems. And as for the banks, instead of creating Japanese-style zombies (which is exactly what the Wall Street cronies in the Treasury department have done to our banking system), we should have crammed all of those banks' debtholders down to common, and presto: the balance sheets would have been fixed and the banks would be able to lend to creditworthy customers. This is what our disgusting Treasury department should have done instead of its Band-Aid bailouts.
On Oct 17 07:32 AM LilBob wrote:
> To me this is fear mongering, brought on by a lack of willingness
> to understand what's really going on in the economy. During the
> Bush administration we had an increase in the concentration of capital
> in the hands of the wealthiest Americans, just like we saw in this
> country during the "Robber Baron" age from roughly 1895 to the early
> 1930s. In a capitalist economy, there are two kinds of capital:
> investor capital and consumer capital-we can also refer to these
> two types of capital as supply capital and demand capital. When
> capital becomes too highly concentrated in the hands of investors
> while working class wages stagnate, we end up with a situation where
> sales decline generally while new more aggressive investment schemes
> are fabricated to create the illusion of increasing wealth for the
> investment class. The only solution to this problem is for social
> phenomenon that increase consumer capital-restore the consumer base-thereby
> making it possible for businesses to keep their doors open. The
> reason we are in a recession is because of several years of misperception
> on the part of the American public-people believed that their wealth
> was increasing and loaded up on debt when their actual wealth-as
> measured in wages and ability (from say, job benefits) to access
> critical services (such as health care) was in steep decline. <br/>
>
> As long as there is a willingness to accept the reality of our situation,
> and to address the underlying root causes of the predicament, then
> any disaster may be averted.
But wait a minute. Wasn't that the GWB philosophy that got us into this mess?
On Oct 17 07:32 AM LilBob wrote:
> To me this is fear mongering, brought on by a lack of willingness
> to understand what's really going on in the economy. During the
> Bush administration we had an increase in the concentration of capital
> in the hands of the wealthiest Americans, just like we saw in this
> country during the "Robber Baron" age from roughly 1895 to the early
> 1930s. In a capitalist economy, there are two kinds of capital:
> investor capital and consumer capital-we can also refer to these
> two types of capital as supply capital and demand capital. When
> capital becomes too highly concentrated in the hands of investors
> while working class wages stagnate, we end up with a situation where
> sales decline generally while new more aggressive investment schemes
> are fabricated to create the illusion of increasing wealth for the
> investment class. The only solution to this problem is for social
> phenomenon that increase consumer capital-restore the consumer base-thereby
> making it possible for businesses to keep their doors open. The
> reason we are in a recession is because of several years of misperception
> on the part of the American public-people believed that their wealth
> was increasing and loaded up on debt when their actual wealth-as
> measured in wages and ability (from say, job benefits) to access
> critical services (such as health care) was in steep decline. <br/>
>
> As long as there is a willingness to accept the reality of our situation,
> and to address the underlying root causes of the predicament, then
> any disaster may be averted.
The first step to recovery is to admit the problem. Having another pull off that bottle doesn't work.
Now what is your solution to this mess? Please tell!
Do I start buying up survival food and run to the mountains to live?
Somebody on Capitol hill please wake up. A weak currency only provides a very temporary boost to the exporters. It is the easiest quick fix but one with very painful side effect. Long term, a weak currency slowly but surely leads to the irrecoverable economic downfall of a country.
On Oct 17 07:18 AM Philly Jim wrote:
> The real economic disaster will come when Boeing, Lockheed Martin,
> Raytheon, SAIC, Exxon, Chevron, GE and other U.S. conglomerates follow
> in Halliburton's steps and relocate elsewhere. Elsewhere, is offering
> attractive incentives for talented and productive individuals and
> companies, not to mention better living conditions. Who would have
> ever imagined finding better living conditions outside of the U.S.A.?
This "analysis" is the flip side of the supply-sider critique of big government liberalism. By being selective about which time period is looked at, both extremes can claim economic success and blame the other for failure
On Oct 17 07:32 AM LilBob wrote:
> To me this is fear mongering, brought on by a lack of willingness
> to understand what's really going on in the economy. During the Bush
> administration we had an increase in the concentration of capital
> in the hands of the wealthiest Americans, just like we saw in this
> country during the "Robber Baron" age from roughly 1895 to the early...
In 1930, none of these things happened except the suckers rally and the yield curve. 2009Q2 GPD fell at annual rate of 1.0%. In 1930 GDP contracted 9% and there was a 10% deflation as well. In 1931 GDP contracted another 6% with another 10% deflation. In no way are we anything like the situation of 1930-3.
In every major depression (such as this article predicts) there was a huge stock market bubble and crash before the depression started. I was a lot more worried after the 2000 Nasdac crash.
On Oct 17 09:39 AM jay brebner wrote:
> the richest 10% drives consumption not the middle class. the middle
> class buys what it needs but the upper class buys what it wants.
> I believe it is something like 50% of consumption. while they have
> taken a hit as well there are a lot of toys/assets to buy now at
> lower prices and if they were smart they'd be buying it all up starting
> now.
On Oct 17 10:44 AM Angel Martin wrote:
> "This "analysis" is the flip side of the supply-sider critique of
> big government liberalism. By being selective about which > time period is looked at, both extremes can claim economic > success and blame the other for failure"
What/whom will provide and apply the defibrillator?
How and when can this be done when the US Senate behaves like the worst of the politburos?
When the House of Rep.s are mainly in preparation for their upcoming lobbying job?
When the Treasury and FED are the Banksters free money making machine at zero interest rates?
When the average American hasn't a clue about any of this, and a lot less.
When those that do understand are either profiting/gaming the system or are at war with each other ideologically/politica... or for some other reason.
When the Corporate media successfully and profitably plays Americans for fools every single day.
When the systematic destruction of our currency is deemed to be one of our only "solutions".
The list could go on for many pages.
Yes , we are entering a Greater Depression, and are in the beginning stages of it.
It's been a long time coming, but for most Americans , the future is now.
1.Banks closed and any money that you had on deposit vanished
2. The Bank/Sheriff foreclosed on a home and physically removed you. the same day.
3. There was little work and any work was to put food on the table.
Sometimes that food was 1 chicken to feed 6 people at super.
4. Heat was from a wood burning stove and at night a warmed brick from the stove was placed under a blanket provided a small amount of warmth.
5. 5 to 6 people would share one bedroom and one bathroom ( a sink and a wash tub) with water from the well and cast iron pump.
6. The toilet was outside
7. Mustard and lard sandwiches were common. Potatoes were a main staple.
8. Kids walked to school as much as 5-6 miles each way. There were no snow days.
9. Colds were cured by a dose of kerosene
10. At Christmas one orange in the stocking was greeted with joy.
GET THE POINT?
There were no fat people, no food stamps, no unemployment benefits, no health insurance no social security benefits, and no disability benefits when you got hurt or killed at work ....blah, blah, blah....
But when things get bad don't underestimate the generosity of the common folk, the poor, the middle class and a few of the upper class They will help and share to the best of their ability. Only the rich bastards who want to use a "THE GREATEST RECESSION" for personal benefit will die from loneliness or some debilitating disease or social disorder (riot/burning etc).
Do you still think the current economic cancer be declared a DEPRESSION?
I just finished reading and commenting on an article about unintended consequences. I'd like to suggest one very plausible unintended consequence I've not yet seen discussed. There has been much publicity about recent actions by banks who are widely cutting credit-card limits to the amounts currently outstanding on the account. I'm betting that many stressed consumers have been paying their monthly minimums with an eye to keeping available the unused credit in that account. With that buying power increasingly being removed, I would not be surprised to see an acceleration in non-payments on credit cards.
Indeed, I'm beginning to wonder about the possibility of a massive revolt by middle America triggered by this thought process: "I'm not going to be able to obtain additional credit or preserve a good credit score anyway, so why not follow the advice of a rapidly expanding field of debt consultants urging people to walk away from their debts or to settle such debts for twenty cents or less on the dollar?" On a news broadcast this week, there was an item about a person who had stopped paying on her mortgage early this year and still has not received a foreclosure notice. She's been living rent-free and presumably doing her part to support surprisingly strong retail sales through the additioinal buying power her debt-avoidance has made possible. How long before such anecdotal evidence becomes an accepted tactic for economic survival?