More and More See It Coming

The past couple posts on the excellent Financial Armageddon blog (which supports the Panzer book Financial Armageddon) have been talking about the feeling a financial meltdown is coming. Many sites and theories use charts, graphs and historical data that all point to the crisis that is coming. On October 27, Mr. Panzer posted an email from a lady without serious economic training or experience who just feels we’re living in an economy and financial construct that just isn’t sustainable (my words, not hers).

She’s right. It amazes me how few people see the current situation clearly, with its subprime mortgage fiasco, derivatives market, collapsing dollar and credit addictions and doesn’t see that it has to correct and collapse. That more and more people without a lot of technical knowledge in the finanacial sector start to feel collapse coming is disconcerting. It means the rumbling that presages the quake has started, and everyone is starting to feel the shaking, even though many analysts are so deep in denial or data that they can’t believe it’s really coming.

Here’s what rational thought tells us:

1. When you get something for nothing, someone’s paying the bill. In the case of our credit economy, for every dollar borrowed, one is lent by someone. Eventually, that someone decides not to lend anymore, at least at the old interest rate.

2. Prices and “values” can’t keep rising forever. There are otherwise intelligent, rational people who truly believe that the “value” of their home will keep rising indefinitely, and their $245,000 home that they purchased a few years ago for $125,000 will eventually be able to be sold for $500,000 or even $1 Million. My question is always “your real estate’s value has doubled in the past few years. Has your income? If not, do you think that people who buy million dollar homes will want yours? At that point, it usually dawns on them that prices can’t keep going up indefinitely.

3. Past performance is no guarantee of future earnings. The world is so profoundly different than it was even 20 years ago. The way and speed at which information travels (as well as armies and germs too, by the way) are so accelerated that the United States is no longer immune from trouble it has been insulated from in the past. Bad stuff and people can get here pretty fast, though many would say both are here in great abundance already.

Since starting WhatComesNext, I’ve been pretty conservative, using links to point the way to ideas I find compelling and connected as they relate to what life is going to be like in the near future. From here, that’s going to change, and I’m going to start laying out in greater detail exactly what I think is coming for us. I’ll backup what I say with links, history and evidence, but will not restrain from telling you the reader, exactly what I think could happen in given circumstances. The future is not set in stone, but in many ways, the direction the road we’re traveling is clear.

It will always be the goal of WhatComesNext.net to give you a roadmap.

Posted in Economy