Marvin Clark

10 Reasons to Believe That We're in a Depression

You are correct. Our U-3 and U-6 Unemployment figures, 10.2% and 17.5%, respectively, does not jibe with so robust numbers.


On Nov 21 10:56 AM TeresaE wrote:

> Now for the $64,000 question:
>
> How much of this "exporting" is nothing more than sending pieces
> to China for them to do final assembly and ship back to us? (a lot)
>
>
> How much is assembled here with CHINESE parts? (a lot)
>
> These numbers are so bogus. Unless you live in manufacturing and
> see the truth, you have no idea how far corrupted our "export" and
> GDP has become.

10 Reasons to Believe That We're in a Depression

I wish I could move markets. I'm just the messenger. Not to own gold at this moment is illogical.


On Nov 20 11:17 PM kbear2 wrote:

> This guy is full into Gold and Silver. He is only pushing this view
> to enhance his own holdings as most of these "analysts" do.
> Wake up people.

10 Reasons to Believe That We're in a Depression

Tekatl, you offered great points, too. Thanks. There are only so many items you can include in one article. BTW, G.19 Federal Reserve reports show in Q4 2007, there was $.5 trillion in wealth destruction and in 2008 $11.8 trillion in wealth destruction. So, we are taking Japanese size losses it's that our unraveling only started in July 2007. It's early...


On Nov 20 06:13 PM Tekatl wrote:

> Marvin, great work. A couple things I would like to add
>
> We are in a depression and headed into more of a japanese economic
> rut than most think, some of the below are cut and pastes directly
> from my blog and yes to the other posts, there are always 2 sides
> of the fence and what side of the fence you decide to be on will
> reap great rewards:
>
> 1. Protectionism through Weak Dollar exacerbating the "Great" Recession:
> the weak dollar is of course not a tariff or a restrictive quota,
> but the US Fed has been systematically decreasing the dollar, which
> is impeding global free trade.
>
> 2. (Wrote in September) In the 80's, Japan's financial markets and
> real estate market created a bubble much like our bursted bubble
> today. Although we are not having to issue 100 year bonds and US
> citizens are not acquiring foreign skyscrapers and other forms of
> real estate around the world, at our real estate apex much like Japan's,
> real estate values were over-valued creating their bubble, where
> trillions were wiped out. Sound familiar? Although we have not lost
> trillions(yet), we have not fully felt the repercussions of the easy
> credit which we are feeling in our residential real estate, but not
> quite yet in our commercial sectors, which means our bubble is still
> half full. Whenever there is easy credit, there is increased risk
> taking and an increase in the likelihood for default. Furthermore,
> with increasing bank regulations, loan officers and the investment
> community are having a hard time finding profitable investments and
> consumers are starting to increase their savings at a time when the
> economy really needs their old spending habits. As these savings
> rates increase and people fear the safety of their banks, who already
> give little incentive to save with the bank with low interest rates,
> compared to burying a can in the backyard or under the mattress,
> the government started to subsidize those failing banks and businesses.
> Sound like AIG, Citi, BOA, Merrill or familiar? Yes, well this was
> Japan back then. Alarming? It should be because they called this
> period of time "the lost decade". The Nikkei bottomed out around
> 7600, we hit a bottom of 7000. Furthermore, we are stuck at the moment
> when Japan started their unsuccessful quantitative easing policy
> creating their "lost decade", where they tried to artificially create
> inflation. In addition, this is what the news is talking about when
> they are talking about the United States being the next carry trade.
> Furthermore, Japan is still stuck in deflation or stagflationary
> economy, where the Nikkei 225 is stuck at half its peak value. The
> main reasons for this deflated "lost decade" are bubbles in equities
> and real estate.
> During the "lost decade", the banks continued to lend to companies
> and individuals that continued to invest in real estate, when the
> values dropped, these loans went unpaid and banks delayed the decision
> to collect on the collateral in hopes that asset prices would improve,
> escalating deflation. In addition, these banks were unable to lend
> more money until their cash reserves were built up to cover potential
> bad loans. This is where TARP was helpful for us to some degree.
> TARP was designed to reduce the quantity of these bad loans and to
> increase the funds available for economic growth, kind of like grease
> for the economy. In fear of insolvent banks, Japanese citizens were
> afraid of bank failures increasing their holdings in gold and real
> estate. Interestingly, sounds all too familiar and Japan's economy
> is still in a rut.
> Now, Japan has a dilemma with it's demographic shift, much like our
> "Greying of America" compounded with a decreasing birth rate and
> decreasing wages, exacerbating deflation. Decreasing wages caused
> by retiring, top pay scale, baby boomers being replaced with lower
> pay, contract hire, and part time employees decreasing salaries close
> to 10 percent in the last decade.(This week, the employment numbers
> show a huge spike in Temp Workers, sounds like the last sentence)
>
>
> 3. (wrote last month)The 4th Quarter is all about Retail numbers
> caused by High unemployment, currently at 10.2%, was supposed to
> hit 10.2 percent in the Q2 2010, so has much further to go. Current
> survey that most are looking on buying things for themselves. Retailers
> numbers will be affected by the dilemma of Margins vs Volume. companies
> are having to rely on volume at the cost of margin. I'd rather take
> margin anyday over profit, but retailers have to go the volume route
> now causing deflationary pressures on consumer goods and remember
> in #2, harder for japanese companies to make a profit. As in Japan,
> will prices drop as demand drops and form a supply glut causing,
> in their case, a deflationary spiral, where business were unable
> to make enough profit, no matter how low they set their prices. Let's
> hope not, they just "celebrated" their 20th anniversary of economic
> stagnation. As Nouriel Roubini stated this week, their is a carry
> trade bubble forming, the Japanese Yen was and still is a carry trade
> preferred. Now, investors have another option, the US Dollar.

10 Reasons to Believe That We're in a Depression

Ah, the days of bread and circuses...


On Nov 20 05:41 PM TraderMark wrote:

> Good post Marvin. People like their lists so a "top 10" list is appropriate
> as we distract the Roman masses with games :)

10 Reasons to Believe That We're in a Depression

Yes, an imbalance in wealth distribution is a factor in economic contraction.


On Nov 20 11:09 AM Mike from NYC wrote:

> One additional topic I'd like to add:
>
> 11. The wealth and income imbalance. Never since the days prior to
> the passage of legislation creating the income tax and the estate
> tax has there been such an imbalance of the rich vs. the rest of
> us. Only a few years ago the top 10% owned more than 70% of the wealth
> but in more recent reports it has been stated that the Top 1% own
> almost 90% of the wealth.
>
> The Forbes 400 reported that the 400 richest Americans own a combined
> $1.4 TRILLION - that is .0013% of the population.
>
> It is my belief that wealth and income balances will eventually destabilize
> our government as the poor get poorer and the rich get richer. <br/>
>
> What do you think?

10 Reasons to Believe That We're in a Depression

I would compare this depression to the US 1836 transcontinental inspired bubble and France's 1720 Mississippi Bond episode.


On Nov 20 06:03 AM supose wrote:

> There have been several depressions and these seem to have clear
> and unique markers:
>
> 1. Depressions are proceeded by an unprecedented (at the time) credit
> bubble
>
> 2. Depressions result in deflation, especially with respect to financial
> assets reflecting the future decline in hard assets
>
> 3. The financial markets collapse as a consequence of deflation and
> a resultant flight to safety
>
> 4. Depressions have secular impacts across many industries
>
> 5. Depressions are global
>
> 6. Unemployment rises dramatically in many regions
>
> Given these markers, I believe we are in a depression and in uncharted
> waters due to the level of government debt relative to our future
> debt repayment capacity. Inflation seems like a natural consequence.
> I'm not sure I appreciate what this means for our society but some
> form of secular change is likely to occur.

10 Reasons to Believe That We're in a Depression

Thanks, Mark.


On Nov 19 02:17 PM Mark Bern wrote:

> j-dub - You've got a healthy sense of humor, buddy. We're all going
> to need it for as long as it takes to get the politics of this great
> nation heading back in the right direction. I don't mean that the
> correct direction is to the right. I mean, simply put, that we need
> to head more toward the moorings of our Constitution.
>
> To the Author: Excellent article! All points well articulated. It
> is the existence of people like you that give us all hope! Keep up
> the good work.

10 Reasons to Believe That We're in a Depression

I hope that you're right and that I'm wrong. But, no one thought in 1930 that entire decade would become a washout.


On Nov 19 02:11 PM bobbybutte wrote:

> As a person who has become financially independent SOLELY through
> investing let me add a few things
>
> Ill give you 158 billion reasons why we will have no depression<br/>
>
> Mr warren Buffett the only person to ever earn over 150 billion for
> he and his investors allocating capital has told you it is not happening
>
>
> Want more proof. none of the big shorts like paulson Rogers Soros
> chanos kass are shorting financials here like they were
>
> Want more proof Chinese economy would fold if america's 12 trillion
> dollar econmy just died out or even went back drastically
>
> Fact is you can continue to get debt as long as someone is willing
> to back you
>
> China will back us but at what price?
>
> Forget all this depression crap.not happening
>
> what happened last year wa sa massive deleveraging

10 Reasons to Believe That We're in a Depression

I wish I could write a happier missive this holiday.


On Nov 19 12:31 PM GreenMom wrote:

> Mr. Clark, thank you so much for the time it took to put together
> all of these puzzle pieces, lining up the chickens and buzzards that
> are coming home to roost.

10 Reasons to Believe That We're in a Depression

Switch channels to Bloomberg.


On Nov 19 12:49 PM j-dub wrote:

> COUNTERPOINT:
>
> Since I lost my job earlier this year, I am able to stay home and
> watch CNBC all day, everyday. And I've learned three very valuable
> pieces of information from watching day in and day out that I am
> happy to pass on:
>
> 1) Everything is fine.
>
> 2) Our government is making ALL the right moves because Ben Bernake
> is a genius.
>
> 3) The economy is just a bit behind schedule concerning employment.
> That'll solve itself. (refer to #1)
>
> Watch a lot more CNBC Mr. Clark, and you'll come to the same conclusions.
> They don't get involved with all those fancy numbers and such and
> it's fun to watch Cramer jump around.

If This Is a Recovery...

John, I agree with everything you say except your conclusion; we are in the early stage of a depression. The next phase of this depression is when cities and states "officially" run out of money and the "severance package" class runs out of funds and can't find work. The bell will toll for this economy in the spring of 2010 when it is announced that YOY state and federal tax revenue is down double-digits.

Boo!: October 30, day of the dead on Wall Street

Thanks, Michael. Rule # 1 when writing - entertain yourself.


On Nov 01 08:02 AM Michael Clark wrote:

> Marvin: I really enjoy your posts. Always wonderfully written, with
> so much wisdom and wit.

Boo!: October 30, day of the dead on Wall Street

Replacing a 13 trillion dollar economy, driven 70% by consumer spending, is easier said than done.


On Nov 01 09:58 AM Ricard wrote:

> "How do you persuade companies to build things for customers they
> have recently laid and will not rehire anytime soon?"
>
> Find new customers (overseas). Companies do not need persuading
> - they merely need freedom to search for opportunity.

Replace Ben Bernanke with Paul Volcker

That may be your opinion of Volcker, however, he did engineer a decline in inflation in the 1980s. This will become our next battle.


On Oct 20 03:30 PM flow5 wrote:

> You are obviously ignorant of Volckers record as Chairman of the
> Federal Reserve Board. He is a bad leader and an incompetent economist.

Replace Ben Bernanke with Paul Volcker

Excellent. If you can figure out how to ban the Chicago boys' economic policy from our economy, I will personally nominate you for a Nobel Prize.


On Oct 19 10:37 AM Ransome wrote:

> I'm thinking the deposit banks are not up for paying more interest
> on deposits. This may be a poor reason to hold rates down but it
> could push them over the edge. The flow of money is chasing short
> term returns instead of long term investment. Goldman is going gangbusters
> because they can borrow short and invest short. Deposit banks can
> not do that. If interest rates climb and the deposit banks don't
> respond, money will flow like a river out of the banks. This is
> a big experiment in financial capitalism where moving money for short
> term gains becomes 40% of GDP, replacing industrial capitalism which
> is now less than 10% and agriculture which is 1%. The Fed is captured.
>
>
> Look at the stock market, we no longer value companies, we play the
> pricing spread, the asymmetric information spread, not the value
> spread. Everyone is a crook because there is so much money to be
> made the fast way. It is almost beyond regulation. Besides, this
> money generated by financial capitalism is kept from the so called
> "productive forces" that make a society and a national economy strong.
> People seeking Alpha don't want to hear this, but the productive
> forces are so weak, you can't even give money away. Without productive
> forces, money becomes valueless, hence the move into gold. You don't
> need burning inflation to destroy the value of money. I'm sure we
> will muddle through until the next collapse because financial capitalism
> is not sustainable by itself.
>
> We fueled the productive forces in Asia, weakened the productive
> forces at home, while fueling the speculators at home. The bailout
> further damaged the weakened productive forces at home and bailed
> out the speculators. This is why we need Volcker, Bair and Warren.
> I think they understand.
>
> The monetarists and the Chicago School must be banned from the economy
> and take Harvard while you are at it as they are a big promoter of
> financial capitalism, the economic Nosferatu that drains energy from
> the productive forces. Warren must have been considered an Alien
> from Outer Space at Harvard as she did not support borrow and spend
> nor debt till you drop.