Seth Chalnick

Washington's Dilemma: This Isn't a Recession, It's a Collapse

Excellent, informative, interesting post.

What's (not so) funny is that folks talk about the Great D as something that could never happen again... that we've learned lessons since then about opening fiscal policy, etc. and that we're a much wealthier blah blah.

But everywhere we look, it seems credit is tightening, and the problems are piling up. The government can encourage lending… but investors must ultimately decide how much to lend and at what premium. And the flaw of the encouragement method is that it makes smart money wonder if it is so smart to lend then what’s with all the encouraging?

History will look back at the recent downturn as the measly little subprime problem. Recently there was an article posted on SA entitled something like “Option Arms are the New Subprime”. It is a good piece but… closer to the mark would have been: “Prime is the New Subprime”.

Further, our supply chain these days are far more sophisticated and specialized… which seems to me that it would also have more vulnerability to break down.

We have way more mouths to feed these days, many of which are attached to bodies that lack the hands-on skills and perseverance of our forefathers.

The working class seems pretty in tune with what is happening here. They may not have the vocabulary to label lopsided charts… but the shoppers of these families are starting to complain over dinner that the expiration dates of perishable items they bought in the store today are set to go bad a day or two after tomorrow.

The only folks who don’t seem to see the 40% real estate correction coming… are the folks who still have the 40% left to lose.

If the huge jump to savings really reflects our collective poverty… then what happens when the real stimulators of the economy… the rich but not yet wealthy folks, who own these houses that are about to correct by 40%... what happens when they do finally get the memo?