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 Greed has been replaced by fear; hope by panic; trust, by deception.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.
