U.S is Rapidly Sinking Into Depression – Don’t Believe Otherwise
Posted by Administrator on October 10, 2008
I called this over two years ago. Check out my previous warning about the housing bust, and ensuing bank collapses, at Shadow Democracy. Editor’s Note – Shadow Democracy (link active for now) was a previous blog by the author and I. The current financial crisis is one that will change the course of history, much like the Great Depression of the 1930′s. Even before the so-called economic experts have gotten around to officially labeling this mess a “recession,” the U.S. economy is already rapidly coming apart at the seams. In just the last week, over $2 trillion in retirement savings has evaporated (check any financial website you like), and the Dow Jones Industrial Average has shed over 13% of it’s overall value.The government’s $700 billion spending spree, in a vain effort to avert financial panic, isn’t working either, as I myself, and other experts predicted. Cheap credit, once the mother’s milk of the U.S. economy, is nearly frozen solid. The doctored numbers can’t hide the pain anymore. Years of short-sighted and foolish financial practices ranging from poor lending practices, a complete lapse of oversight, and high paying jobs withering on the vine, have all exposed the U.S. ‘sham economy’ for what it really is – a rob-Peter-to-pay-Paul pyramid scheme, driven by debt, who’s time is at an ugly end. Greed has been replaced by fear; hope by panic; trust, by deception. Look what is happening:
- Home prices are in a state of “free fall,” which in turn is driving homeowners to abandon their homes, which ultimately results in foreclosed homes, driving prices down even further.
- Consumer debt is at an all-time high, and credit card payment losses are choking the available credit for consumers and businesses.
- Unemployment is through the roof and projected to hit 10% by the end of 2009
Understand, that the catastrophe has only begun. Intense financial hardship for millions of Americans and devastating losses for rich investors will coincide, much like the 1930′s, as we will experience deflation (falling prices), and then entrenched depression. This crisis could have been averted, but it is too late now.
The U.S. government’s highly touted bailout may buy some time, but no matter what happens going forward, it cannot force banks to make risky loans or compel investors to buy sinking corporate and government bonds – no matter how hard it tries.
And if this isn’t enough, here is the worst of it. Unlike the 1930′s, there may be no Roosevelt to recognize what needs to be done, and that is re-ignite the middle class by providing jobs in (WPA) style, government backed programs. Why not? Because the U.S. government is completely and utterly BROKE. Even if we wanted to, let’s say, initiate a giant public works program to rebuild roads and bridges, we couldn’t, because the U.S. can’t raise that kind of money to finance a project of that magnitude!
I will be posting many articles in the coming months to help guide you through the turmoils ahead. The end of a destructive era is upon us all, but we will still have the elements for a great recovery. The question is, can this crisis deliver long-lasting benefits to all those who survive it.
Here is what you should be doing right now:
Replace wild spending with prudent saving. Unaffordable luxuries must go right now and be replaced with affordable necessities. DON’T BUY ANYTHING ON CREDIT NO MATTER HOW MUCH IT HURTS!
Pull 50% of your money out of the stock market (if you have any invested), and cut your 401k or 403b contribution to 1% or 0% for the next 12 months.
Lastly, buy some precious metals. At minimum, 15% of your investments should be in gold and silver, particularly silver, as it is projected to rise higher than gold as a percentage of money invested.
Recovery is not going to come quickly, as I believe the deepest declines are still ahead.
Buckle up, it’s going to be a long 5 to 7 year ride my friends. The experts assume the financial system is strong enough to withstand this crisis, but they assume wrong. I’ll tell you why in coming posts, along with more truth and advice.
Marc said
Matt, you don’t even have a Dow chart leading up to 2008, just 2006, you don’t provide a single link, no credentials and absolute no discussion of what government prevention measures are going to do to the credit market. One question, why the hell should anyone listen to you then?
Things are bad to be sure, but you could at least back up some of your claims.
pacer521 said
cool post. That chart is a bit fake though.
http://culturedecoded.wordpress.com/2008/10/09/the-mental-factor-of-politics-how-one-mindset-can-change-thousands/
MJ "revoltingpawn" said
@Marc
Don’t you read the paper? The economy is in downward free fall…
In the first sentence Matt said two years ago he predicted that a housing crisis would lead to recession and worse(follow the link). The point of the chart was to show that the stock market was at a high when he started taking about this. We all know what has happened to stock prices since 2006.
Before anyone points out the post is only from one year ago… Matt is a personal friend of mine and I can tell you he has been predicting the current economic collapse for at least two years.
@Pacer521
What is fake about the chart and how was your link relevant to the post?
Marc said
I’m not saying Matt was or wasn’t predicting the fall, I was questioning his reasoning for his advice now.
Many people saw this coming but the opportunity to get rich and hope you got your cash out before the crash was too tempting.
However, before I decide yay or nay on his current advice, i want to see how he came to those conclusions and why.
Anyone can read the paper, if you’d rather have me read the paper than read here i’ll do so.
MJ "revoltingpawn" said
@Marc
Read his past articles on Shadow Democracy and Capitol Street then wait for up coming posts on the same subject by Matt here.
I am sure Matt will respond himself when he has time… I will say most people were not predicting the magnitude of this stock crash or the coming serve recession or possible all out depression two years ago.
Matthew J. Podoba said
Marc,
I understand your skepticism, and I know we’ve had run-ins with each other on my blog ‘Capitol Street’, so I’ll be brief…
Wake up and smell the coffee my friend.
The pro free market, talking heads, have been nothing but wrong for the past two years on this market. Why? Because they have billions invested that are literally going up in smoke. They need these foolish bailout plans to work because they don’t want to face reality, and it doesn’t take a genius to figure it out. The simple facts are these…
I predicted (and many links can be provided) that the entire economy was being driven by home mortgage debt and risky debt at that. Once that blew up, the market began to tank from a high of 14,000+ downward 39% to the current 8451, because there’s nothing left in thi country to drive growth – and the market will go lower. There are scores of banks about to implode, the likes of which we haven’t seen since the 1930′s. 401k’s are evaporating. What is America going to retire on Marc? Any ideas? Corporate raiders destroyed vested pensions, and shipped our manufacturing base to China, now they’ve killed 401k’s. You understand that a massive retirement shortfall will be the “next” bailout crisis don’t you? Where is the money going to come from to rebuild this mess? More debt? We’re almost at the point of not being able to borrow anymore. $10 trillion+ and counting. We are headed for depression right now – no doubt about it. Deflation is already setting in with rapidly decreasing oil prices, while credit remains frozen solid, and unemployment skyrocketing. Sound like 1932???
So I say, protect what you have, and run to the security of precious metal if you can. Save your money, it’s going to be a long and bloody war. If you are one of these free market conservatives that is offended by the obvious, all I can say to you is – we tried the short-sighted, get-rich-quick-and-screw-the little-guy method of macro-economics, now we need to revert to the Democrat’s way of doing things. It worked for FDR, it can work for us – as long as we don’t elect a Republican president or Congress for another twenty years or so, to fuck things up again. I said it once and I’ll say it again…Republicans can’t run the economy. Just ask Bill Clinton,he’ll tell you. He had to clean up ‘Reaganomics’, which is hopefully dead and buried…thank God.
Matthew J. Podoba said
A few more things…
Here are some interesting parallls between what is going on now and what was going on in 1929.
Auto companies were on the edge of collapse and many banks already had capitulated. The Fed was concerned with inflation rather than saving the economy, even though they were in a gigantic deflationary period. At that time, the president and his administration were guaranteeing Americans “the fundamentals of the economy are strong.”
Sound familiar?
Ben said
Matthew,
I am in agricultural production with limited economic, much less, macro… education. I’ve learned my lessons from hard-knocks and having to clean up any financial mess of my own because bankruptcy is not an option for my future. However, I recently read a book titled “Ahead of the Curve” which effectively outlined many of your comments to a tee. It seems that you are correct in that the engine of economic growth, consumer spending, an effective leading indicator of our growth potential, is empty. It is increadible that there is anyone in the world that could see a glossy finish on this problem. The only point that I think you might be a little optimistic about is the timeline for real recovery. Maybe 7 to 10 years. It is going to take a great deal of time to pay off the gov. stimulus 700B, much less the other monies they are pumping into our economy that isn’t published, then we must deal with our own lustful debt. I’ve read in other places the real gov. number could be 1.2T. Wow, let’s see how long it will take to pay that off, plus the bad debt banks have yet to be given, and interestingly enough that money comes from the same place…us, the American taxpayer. Yep, let’s print more money, lower the value of the dollar, and push out the calamity for as long as we can with no respect to what our scary little world will look like. This isn’t a zero sum game. Are we peter or paul? Either way, you can’t fix this kind of broke without major bloodletting. Up until a year or so ago our economic fundamentals were strong, but then we ran out of money, faux or not. No more foundation for growth, we’re a consumer nation. What a bunch of crap. Where is the candidate for any office that just stands up and say’s, “get ready folks, save, scrunch, and make some better decisions of how to measure wants and needs. Cut up your credit cards, stop spending what you don’t have and focus on paying down your current debt! Taxes are going up, spending will be cut, and even then times are going to be tough. What is really patriotic is to make sound personal decisions and look around you to help those around you with good will, encouragement, and a helping hand so that we can all disolve our want’s for expensive services” But no, I hear… how about “I’ll fix your problems with hope, change and then there is “my friends” – I think both of these guys are more interested in sitting in the oval office than being really honest with us. We need to fix our own problems with better choices. Regulation is a must to styme greed but for heavens sake, everyone has a part in this crap! We better open our minds to what is going on around us and do a self check!
Matthew J. Podoba said
Ben,
Thanks for your insight. Your entire comment is spot on. A debt driven economy can’t last, and paying off that debt will take a generation. Great comment. Please visit again.
Marc said
Matt,
I wasn’t necessarily disagreeing with your advice (though I’d say that there are those of us that can and can’t afford to be investing our free dollars in the stock market, and if you’re in such a freak over your investments that you’re following the market herd towards precious metals, well, you may have reconsidered putting so much into stocks into the first place) I was mostly curious as to how you got your math.
I too looked at the markets roughly a year ago and said that if the housing bubble bursts, based on the percentage GDP that housing and housing related industries, and debt-equities based on the housing market, that the crash would have an initial bottom around 8,000 (different blog, different times, and feeling of forlorn sadness at being right).
When i then did my investments with my own limited cash i shopped the market for investment firms not doing subprime loans, found charles swab is the only firm that openly said as much and have done rather despite the crash.
However, i had laid into you here because i had wished to get into a further discussion and could not because I couldn’t find the source material for your claims.
Ben said
Relative to previous increases in precious metal prices in tough economic times, what does it mean when everything is falling? Gold included. Isn’t this further evidence that we are heading for desperate times? Should we expect deflation across the board? And shouldn’t it be shocking that even with Obama being elected the DOW fell nearly 500 points? All bad news I guess?