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
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
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
—WCN Warning: Economic/Terrorist event possible—
Congress refused to pass a $700B bailout bill on Monday. The reasons for the failure of this bill, if you listen to the media are basically, two:
1. Many people don’t believe there really is a dire economic emergency that requires Congress to take action to hold off a “Greater Depression.”
2. Republicans, childishly miffed over being insulted by Speaker of the House Nancy Pelosi, who while speaking just before the vote layed all the blame at the feet of the Bush Administration.
Typically, these two reasons are basically made of that substance, bovine-produced, that is often said to be “hitting the fan.”
The huge outpouring of “VOTE NO TO THE BAILOUT BILL” from an angry populace was in fact, a vote of NO CONFIDENCE to our elected leaders, who often fail to remember that they do, in fact, work for US. We were saying “we’re not going to allow the same fools who created this problem attempt to SOLVE this problem, because we’re not confident they know how to do so.”
The vote on Monday was a startling and very welcomed affirmation that we call the shots, and if Congress wants to keep the cushy jobs they live their lives trying to hang on to, they’ll do what we tell them to do, or they’ll be out on their asses.
NO to a bailout. NO to the people who created this crisis (Bush, Bernanke, Paulson, Congress) spending hundreds of billions of our dollars to try and fix this problem.
In NPR’s defense, in a story that followed the one cited above on Morning Edition, a much friendlier friendly version of this opinion surfaced. Though the concept of “no confidence” wasn’t meantioned, I believe that future events will make this very, very clear.
Posted in
Economy,
Politics Tags:
Bailout,
Congress,
Depression,
Economy,
Recession
—WCN Warning: Economic/Terrorist event possible—
Despite the massive outcry from constituents that demanded their elected officials vote against yesterday’s $700B Wall Street bailout, observers and some marching-in-lockstep lawmakers are saying, to quote Billy Crystal’s character from The Princess Bride, “Miracle Max,” the bill is only “mostly dead.” In other words, there may still be a way for Congress to circumvent the wishes of the American People and pass a bill that gives Wall Street liars and gamblers a “do-over,” paying for their gambling bill and making them whole.
If only I would have had access to that kind of bailout the last time I went to Vegas.
Washington, DC needs to hear this: The American People don’t want to send the message that it’s OK to bail out thieves and gamblers.
Sure, there will be hardship. That’s a consequence of cutting corners and looking to “get something for nothing.” What many on Wall Street are seeking to avoid is not only the harsh reality of paying the bill on a bad investment, but also jail time. And there WILL be jail time. The hardship must come, if we truly want to cleanse our economy of this problem. What those responsible for the fiasco caused by OTC derivatives and toxic debt repackaging really fear is the outrage the hardship will create. Outrage that will inspire investigations, trials and prison time.
It will be tough, but it’s necessary.
Posted in
Economy Tags:
Bailout,
Depression,
Economy,
Recession
—WCN Warning: Economic/Terrorist event possible—
As we wait for the markets to open (in about 40 minutes from this writing), many readers of WCN are asking “what will happen if the economy ‘melts down?’”
That’s a good question. The answer to which brought a chilling silence to the assembled Congressional leaders when Bernanke and Paulson briefed them several days ago, pleading for the adoption of the $700B bailout plan.
In short, the result could very well be the end of the United States of America as a viable economic entity. To be blunt and even shorter: Chaos.
The United States is an economic system that depends on a lot of moving parts working together in complicated subsystems. Money must flow, in the form of credit, trucks must roll, supplying a long supply line of commerce that stretches from the manufacturer of millions of products all the way to the checkout stand, and people must go to work so they can earn paychecks that go into bank accounts so all of this can be paid for.
If there’s no money to buy loads of plastic, made-in-China stuff at Wal-Mart, there are no jobs for the Wal-Mart checkers, with no money going into THEIR checking accounts, etc. If money can’t flow to pay for fuel, big trucks pulling semi-trailers can roll into your local Safeway to deliver the food that you use YOUR bank credits to buy and take home. Without those trucks rolling, there’s nothing on the shelves of that Safeway.
Chaos.
If you were watching CNN or Fox News over the weekend, you may be wondering why all of these professional, usually cool-under-fire politicians were on camera clearly shaken, unsure and in my estimation, on a couple of occasions, almost ready to cry. They were staring into the abyss, know that even if they passed a bailout package, there was no guarantee that it would save them from the plunge along with the rest of us.
And it was interesting seeing them so shaken. It is absolutely critical that you realize these people who pretend to serve us in Washington, DC have created a system that almost totally insulates them from the challenges we “unwashed masses” face in our lives. From health care to a retirement system that is completely detached from our Social Security system. Their system is well-funded and not, as ours is, bankrupt. To see these people, who by the way created this crisis, sweating it along with the rest of this, is interesting.
—Update—
Here we go…Down +100 9:34am…
Down 300+ 10:45am…
Posted in
Economy,
Politics Tags:
Bailout Plan,
Congress,
Depression,
Economy,
Recession
Was the 20th Century. Americans wanted to keep the rally alive and make the 21st Century American as well. The “financial tsunami” currently washing over our economy suggests this century won’t belong to us. But who will dominate?
Many believe China. Others say Brazil. Russia, of course, has their own ideas about who should dominate. It’s a tough call. With the blank check bailout Congress is currently debating (and will eventually, whether they want to or not, will pass) a plan that effectively converts us from a Capitalist country to a Communist one. I know that’s hard to believe, but it’s essentially true. We are setting up a system in which the government owns and lends. By buying up billions in mortgages, the U.S. Government is converting millions of American homes into public housing.
That’s not the government’s job. But in bailing out Wall Street and buying bad investments from the fools who made them, the government is taking ownership of things it has no business owning. It’s the kind of huge government expansion the founders cautioned against.
Posted in
Economy Tags:
Bailout,
Depression,
Economy,
Recession