The Greatest Depression Is Coming

Discussion in 'Economics' started by ByLoSellHi, Oct 18, 2009.

  1. The Greatest Depression Is Coming

    October 17, 2009

    Good times will not be returning any time soon.

    We continue to lose jobs month over month. And, while the statistics being released are showing a slow down, this is basically a fabrication. There are thousands of people falling off of unemployment compensation each week — none of them are reflected in the official numbers. estimates unemployment is above 20%. Take it for what you will, but these numbers are rapidly approaching the unemployment rate during the last well known depression.

    Credit is contracting. The last decade in America has seen credit, or debt, however you want to look at it, essentially become a second income. No more. The banks may be getting billions in loans, but for the individual on the street, credit is frozen. Couple this with the loss of primary income streams and you have a lot of people with no money for even essential goods.

    Foreclosures continue to mount. In addition to the foreclosures of the last 2 years, we have millions more in play right now, regardless of the mortgage programs the government institutes. Job Loss + Credit Contraction means there is no way millions of people will be able to make their monthly payments. Nowadays, once you lose your job, you aren’t going to have an easy time finding a new one that adequately services personal debt. In real terms housing prices are not done dropping. There are some conservative down-side estimates that say an additional 15% is likely. But, what if they are underestimating? What if it turns out to be 30%, or more? If we are in a depression, the downside is huge. Japanese real estate lost 80% (adjusted for inflation) in the 1990’s (and so did their stock market!). In some parts of the country, home owners would probably agree that the 45% their homes have already lost would constitute a depression.

    Debt defaults keep rising. Bank of America just released their numbers and lost upwards of $2 billion dollars, due in part, to credit card defaults. This is not the sign of a healthy consumer. When a consumer defaults on a credit card, that is leading indicator that they will not get easy credit if they need it in the future. A default in 2009 is a big red flag for lenders. Empirically, this seems like it may be a leading indicator for continued credit contraction on the consumer side.

    Small businesses are getting hit hard. Small business is the engine that runs the entire economy, employing around 70% of the workforce. Right now, they have no access to loans, and the consumer is drying up. To survive, they’ve had to cut costs significantly. The next step will be to cut jobs. Many have already resorted to letting people go. As much as owners may not want to let go of their people, they realize they have no choice at this point. Incidentally, many major corporations showing “better than expected” results employed these same strategies. But, the businesses themselves, not necessarily by choice, are perpetuating the negative feedback loop. As they lay off employees, more consumer income is destroyed, leading to fewer revenues across the board for a majority of businesses, big and small.

    The Middle Class is holding on for dear life. If small business drives jobs and production, it is the middle class that drives consumption. And the middle class is getting hammered for all of the reasons mentioned above. Many middle class families are realizing, or will realize very soon, that their lifestyle choices are going to need changes. Cut out the gym and take a jog instead. Why pay $100 for cable when you can get similar, if not better, news and movies online for $30 a month? Is organic really necessary at the grocery store when one can save 30% buying the regular stuff we grew up on? Do I really need to get a new car when my 2005 Explorer is just fine? Why go out and spend $100 when dinner and a movie at home a couple of Fridays a month saves enough money to pay the electric bill? These and other questions are going through the collective mind of middle class America. They are desperately trying to avoid becoming a member of working or under class America. The initial step to maintain stability is the same as with small businesses - cut spending.

    Visualize a car engine. When there is enough motor oil, the pistons are firing up and down rapidly and the system runs efficiently. When the oil dries up, the engine begins to deteriorate. It’ll go for a little while longer. And it’ll become much more violent and volatile each time it fires. Invariably the engine seizes up and fails.

    What we see in many aspects of the system right now are pistons that are firing violently. First a crash in the stock market. Then trillions in bailouts. Then an historic and massive stock market swing in the other direction. We see individuals speaking out in public, on the airwaves and on personal blogs en masse about one topic or another. Whether it is rep-on-Obama or dem-on-Bush bashing, there are extreme levels of divisiveness and heated, sometimes violent clashes. The system is moving into extreme peaks and troughs at a much more rapid pace now than anytime in the last 50 or more years.

    We are in the opening stages of the Greatest Depression, a term coined by Trends Forecast founder Gerald Celente. The next stage, as Mr. Celente has said, will be “like nothing we've ever seen in our life time.”

    Welcome to the Greatest Depression.
  2. All these extremists articles both bullish and bearish are ridiculous.

    We aren't going into "the greateset depression", and we aren't going to have a "massive market surge" either.

    Things will get bad again sometime next year, but we aren't going to S&P 300 and we aren't going to S&P 3000 anytime soon either.

    Extremists are just guys looking for publicity.
  3. I do not agree
  4. nickdes


    I do believe that America is in trouble...this president and his policies are destructive to our way of life.
  5. So, from March low, it isn't a massive market surge. I don't what will qualify for your massive market surge. :D
  6. If you read my post, you would have realized the link is calling for a "massive market surge" STARTING NOW.

    Not gonna happen.
  7. I keep wondering if we are going to get a black Monday, Thursday or Friday this October. Therefore, I am being very cautious with stocks until November. If we do get a nice correction, I plan to get much more aggressive with stocks because, seasonally, the market goes up starting at the end of October. I think Obama and Bernanke are going to keep interest rates low and keep printing money into next year, so hopefully, this seasonal pattern will continue. Obama has expended a lot of political capital trying to get his health care reform bill passed and he cannot afford a bear market right now. However, our day of reckoning for all of this spending will come.
  8. as was the previous one

    and the one before him

    and the one before him.

    When was it that you had a Prez who wasn't encouraging you to borrow to finance a consumption binge?
  9. The president before George Washington.
  10. Jym


    Cyrus Griffin?
    #10     Oct 19, 2009