Madness – US Confidence Plunges to a Record Low. Consumers aren’t confident about the future. What, they are surprised that real estate prices can’t rise forever? They’re surprised that interest rates on their adjustable-rate mortgage went up? Where have they been? What were they thinking? Madness of the crowd convinced them that there is no history worth reading.
Denial – No matter how bad things look, there’s always a bright spot. As in the article linked above…
S&P noted one bright spot as the acceleration in decline was only moderate in August from July.
Amazing.
Regrets – I regret that I bought the home in which I currently reside, purchased before things got ridiculous, instead of one way over what I could afford, because it looks like people who signed up for liar’s loans may well get bailed out and be allowed to stay in the homes they couldn’t afford. If that happens, how will you feel about paying part of that mortgage payment? That’s what you’ll be doing.
Posted in
Economy,
Housing Bubble Tags:
Depression,
Economy,
housing,
Housing Bubble,
real estate
In truth, if you’ve been reading this blog, and the websites and books recommended here, you know this whole thing started years ago, lug-nuts beginning to loosen and slowly rotate without any change being noted by the vast majority of Americans. But, it’s hard to ignore the problem now.
The credit crisis has flared and is now building again in intensity. The stock market, when it opens today (in about an hour from this writing) will almost certainly crash, possibly big.
The European and Japanese stock markets have “been mauled,” on what could very well be known in the years that come as “Black Friday,” or maybe “Bloody Friday.” Whatever the case, it won’t be pretty.
This week has seen a LOT of building bad news. Unemployment projections are looking bad. The snowball of advertising cancellations for November and December, where advertisers cancel already placed advertising orders with radio and television stations and newspapers. Massive layoff talk has been out in the open this week. Despite the fact that oil prices are tumbling, and with them, the price of gas at the pump, economic activity is quickly winding down.
Also out in the open in the news this week, has been talk of state and local tax shortfalls. When there’s lower economic activity, tax revenues fall, and so the amount of money states and cities have to spend on services falls pretty fast. This causes more layoffs, and since in many areas, states and cities are high headcount employers, the problem spirals and can crash pretty quickly.
Which it is most certainly doing.
Posted in
Economy Tags:
Depression,
Economy,
Financial Crisis,
Recession,
Unemployment
Taking a break from the slow-motion crash our economy is currently engaged in, and turning to one of the byproducts of those problems, this morning’s Rude Awakening from Agora Financial has some sobering words about coming shortages in power. Think blackouts and brownouts.
Earlier this week, I attended a privately sponsored presentation on U.S. energy policy. The main speaker was a senior faculty member from Carnegie Mellon University. This guy has been “doing electricity†for about 40 years or so. He has written reports for the National Academy of Sciences. When the people at the U.S. Department of Energy have a question about electricity, they call this CMU professor.
The news is not good. In 2007, there were about 144 new coal-fired power plants on the drawing boards of the U.S. energy utilities. But, said the professor, “We will probably build none of them.†Indeed, “The electric industry in the U.S. is in terrible shape,†said the CMU man. So we should expect local and regional brownouts and blackouts to become common occurrences “within five years.†But the first isolated instances of brownout and blackout will hit us much sooner than that.
As is the thesis of this site, we are in for challenging times.
Posted in
Economy,
Peak Oil Tags:
Electricity,
Nuclear Power,
Power
I must admit, I’ve been mystified by the reaction, or more accurately the lack of reaction by Americans with regard to our imploding economy. But I get it now, thanks to Dmitri Orlov’s excellent Reinventing Collapse: The Soviet Example and American Prospects
. Orlov, an American with Russian roots, was able to watch the collapse of the Soviet Union while visiting a number of times during that collapse.
At the height of the intensity of the bailout drama a couple weeks ago, I visited a nice, mid to upscale mall where I occasionally shop (I needed the Apple Store, my only consumerist passion). I was amazed that even though our economy was on the verge of meltdown with anyone who knew anything about what was going on tense and wondering how the next couple days were going to play out, the everyday consumers flowing around me in the mall seemed completely unaware that anything unusual was going on. I realize now that they weren’t completely unaware of dramatic things going on, they were simply convinced that it wouldn’t affect them. That’s a distinction that was lost on me that day, as the well-practiced credit-card presentation moves were displayed even as the Secretary of the Treasury Henry Paulson got down on one knee to beg Nancy Pelosi to pass the $750 Billion bailout bill.
I was comfortable spending a little money that day, because I have protected myself from short-term disruptions in the everyday workings of our economy. Having cash on-hand, safely stored along with enough food, water and household goods to easily weather a couple months disruption is something I recommend to anyone who asks my advice about what could possibly happen. But looking around, I realized that few, if any, of my fellow shoppers had protected themselves in that way.
Reading Orlov’s new book yesterday, I realized that we Americans are asleep about what could happen to us because we don’t believe anything catastrophic could happen to us. And that’s not a completely unreasonable assumption, since nothing bad has happened to us in almost 80 years. Plus, it’s been almost 150 years since war has been seen on our shores, as wars are something that Americans have to travel a long way to participate in. It’s been that way since the Civil War ended in 1865. Europe lives with that collective memory still relatively fresh. Even if Europeans haven’t lived through it first-hand, it’s a part of their history that’s closer to the surface.
We in America are living in one of the best-insulated pockets of comfort the world has ever seen, and that will make the troubles that are almost certainly coming much harder to deal with. The shock Americans will feel when the ATMs don’t work will be devastating. When the grocery shelves are cleared by those with a little cash on-hand, the panic will set in. Most people don’t plan for disruption because they don’t believe it is possible. Waking up to the realization that their assumptions in that regard aren’t true will be a difficult experience.
The alarm has most certainly gone off. The government is frantically doing what it can to keep hitting the snooze button, but when it’s morning, you can only do that for so long before waking can no longer be delayed.
Posted in
Economy,
US Tags:
Depression,
Economy,
Financial Armageddon,
Recession,
Stock market crash
2 Questions:
1. How important can the endorsement of Barack Obama by Colin Powell be, considering:
Colin Powell is the one, as Secretary of State, who delivered testimony about Iraq having the Weapons of Mass Destruction. If he’s so good, why didn’t he know that wasn’t true? If he DID know it wasn’t true, why didn’t he resign, rather than lie to us?
2. Why isn’t the media holding Obama to his promise to take federal campaign funds, thus limiting his ability to raise money himself. The answer is this: The media is profiting from a staggering $150 Million he raised last month. They get a huge windfall in tough economic times for television and radio and in return, they support Obama.
I’m no fan of John McCain, but what a mess we’re in for. The problem with an Obama Presidency is that the real issues will be overshadowed by the ones that don’t matter: Race, experience, the charge that will be leveled that Obama bought the office. It’s all going to take away from the real problem – that we’ve entered the most dangerous recession of our time, and will probably suffer a Greater Depression.
I predict the race issue will be a big problem. A big portion of the U.S. is simply not interested in a black President. Militant and vocal Black America will soon become disillusioned when things don’t change overnight to put them on top. Liberal White America, who (if it happens) will have elected Obama, will bear the brunt of the Militant Black community’s anger. After all, the Democrats are still basically white. With the “super-majority” in Congress they expect to get, the Democrats will be seen as blocking Black America’s triumph. The backlash could be devastating, and won’t help anyone.
I don’t envy Barack Obama if he becomes President. Black America will expect to see a White House and Administration filled with African-Americans. Liberals call fears of that “racist,” but only because they don’t believe it will happen. If it doesn’t happen, Obama has problems with Black America, who will believe they’ve elected him. If it does happen, it will scare a lot of non-black people who will have voted for Obama, and they will start to reconsider their previous assertion that “race doesn’t matter.”
Sadly, it does.
Posted in
Economy,
Politics,
US Tags:
Campaign,
Election,
McCain,
Obama,
Presidential Election
The question is no longer “if?” But rather “when?” and “how bad?”
Answers: 2009, and very bad.
We’ve got lots of data about what happens when economies slide into recession, but fortunately, little experience with what it’s like to enter a depression. My view is, we’re about to collect some data and add to our experience level.
Despite our lack of first-hand experience with depressions, one thing is clear – the beginning of an economic event like this can be like a snowball rolling down a hill, picking up energy and mass as it goes. That snowball is bearing down on us right now. Believe it.
Here are some important cues:
- The volatility of the market. Been watching the DOW lately?
- Shipping slowdowns – The less stuff coming into “Consumerland” (the U.S.), the less stuff that will be sold, with all sorts of negative results like layoffs, lower sales tax collections (resulting in state and city budgetary shortfalls, resulting in layoffs, and on and on. Stories here, here and here. In short, the Port of Long Beach is showing a 15.8% decline in inbound containers September to September, and a 10.8% slowing so far in 2008.
- The amazing lack of visible results of the $750 Billion bailout Bernanke and Paulson engineered. The problem sucked all that money up in a hurry, didn’t it? Now, there’s talk of another bill.
- Unprecedented demand for Gold, despite the horrible performance of the paper version of the metal, as well as the mining stocks. Try to buy gold coins or bullion. You can’t. Yet the price of the metal is languishing
So, it’s more important than ever to protect yourself and your family. I’m writing a FREE report about how to start the process of doing just that. Click HERE to get it.
Posted in
Economy,
Society,
US Tags:
Bailout,
Depression,
Economy,
Money,
Recession
It’s an amazing time when the optimists among us are expecting only a severe recession. But that’s the case right now. Most observers know what is coming. It’s a Depression (capital “D” intended) that’s coming, called by some another Great Depression, and by others the Greater Depression. I think that’s accurate.
Why? We have built our house on the shifting sands of credit, not financially stable savings. We made the mistake of assuming paper profits that were so inflated they weren’t even taxed (how insubstantial must a type of profit be for even the U.S. Government not to recognize it?). Sure, Capital Gains on Real Estate used to be taxed when the property was sold, but no longer. That, as much as anything should have tipped us off that they weren’t real.
Over the next two years, Americans will learn some hard lessons. Among them:
- Real Estate prices cannot and do not go up forever.
- Houses and ATMs are two very different things.
- Our leaders don’t know nearly as much about the economy as they pretend to.
- Spending more than you make doesn’t work for individuals, businesses or governments.
So, Americans are left watching the spectacle devoted to what the government is going to do to fix this. Soon, maybe in the next 3 weeks, maybe in the next 3 months, we as a society will come to the conclusion that the government hasn’t the first clue about how to fix the problem. At that point, Americans’ attention will shift to what they can do individually to protect themselves. My suggestion is that you make that shift now.
Toward that end, I’m putting together a report titled “A New Great Depression: What you can do to prepare your family and yourself for economic disaster.” It’s going to be a free report, downloadable from this site when it’s finished, hopefully by the end of the week.
In it, I’ll lay out where we are right now as an economy, and some of the things I believe we’ll be facing as Americans over the next 10 years. The report will have a set of steps to prepare for the aftermath of the collapse we’re seeing unfold right now.
As soon as I have it finished, I’ll post the link to download the report.
Posted in
Economy,
Housing Bubble,
Politics,
Society Tags:
Depression,
Dow,
Economy,
Greater Depression,
Market Crash,
Recession
In a word, that event is here. So, there’s no longer any need for the warning banner.
Whether or not what we’re seeing in the Dow and credit markets meltdown is what the web bots predicted for October 7th, the past week has seen a dramatic economic “event” unfold. As of this writing, it is still unfolding as TRILLIONS of dollars are being lost and entire financial worlds wiped out. I believe that in the years that come, we will look back on the week of October 6th, 2008 as when world slowly, groggily started waking up to the reality of the Greater Depression.
Jim Sinclair on today:
Gold is about to VAULT UP.
I am reliably informed that the paper versus bullion gold war is lost by paper gold at a $930 close.
Gold will vault to slightly under $1000 then get pushed back, but not much at all. Directly after that we are off to $1200.
A Bank Holiday is moving from possible to PROBABLE.
- Have you fully protected yourself?
- Have you distanced yourself as much as possible away from financial agents holding your assets?
- Have you gotten paper certificates for your shares or became a direct registration book entry at the transfer agent?
- Have you protected your retirement accounts the same way as your shares above but in the name of the retirement account and the trust holding them?
- Have you closed your Money Market fund accounts regardless of what assurances your bankers offer?
- Have you withdrawn from your Credit Union?
- Have you exited your corporate retirement fund?
- Do you have significant gold and related shares investments?
It is getting UGLY out there as each day an attempt to postpone a bank holiday fails. Almost every other day lately financial leaders of the world have announced new plans that were “the final answer” to the super-glued credit market. All these plans have had no effect. The Dow fell like a rock off a cliff.
This says all efforts have failed.
Once again, Sinclair is short and direct. His counsel is sound.
Next post. Nuts and bolts about what you can do.
Posted in
Economy,
Society