So let's suppose we grow another 50-100% here within the next 6-18 months 200-300% in Asia unemployment has not improved significantly and rates still 0% then bubble pops Banks fold again, unemployment adds another 3-5%, Fed will hysterically screams DEFLATION, nation in danger so what would they do? another 3 trillion stimulus and triple monetary base? and another 12 months cycle before next bust?
Something like that, maybe longer. At some point, America will enter its economic and financial "end game"... press, press, press... with debt and stimulus until the house of cards implodes. Could be in it right now...
I think it's more uncomfortable, for sake of appearing a fool, to presume everything will work. Imagine... AMZN at $260/share, 2% inflation rate, unemployment reversing at 10.5% and trending for the next few years towards 6%, government tax revenues increasing, interest rates staying low as housing rebounds well enough to whet investor appetites in agencies after the MBS program is done (due to lack of corporate debt supply) and increased savings financing government debt successfully, the dollar gaining a little bit of strength after the "recovery" becomes entrenched, and banks paying off all TARP loans once they've recapitalized (reducing govt debt financing requirements another few hundred B) .... Imagine better yet with an increased revenue base (due to larger money supply) the implications of 10%+ government tax revenue growth (just assuming present taxes stay the same). Imagine how ridiculous it would be to suggest we'll be in an unexpected surplus 5 years from now. This could just as easily be the reality. All of these crash prognostications are just as absurd as the above picture. (Or maybe AMZN at $520 a share is even more realistic. OK I'll get off the pipe.) All I know is this: black swans are way too fashionable to be even black swans anymore... The white swan is the new black swan.
Step 1: Create a false MasterCard economy via easy credit. Step 2: Create a false MasterCard recovery via TARP. Step 3: Watching the whole system meltdown---priceless.
You raise an interesting point scriabinop23. However let me take you on a quick journey back to mid-February 2007. It's nearly 4 years since the Iraq invasion commenced, coinciding with a bottom in many global stockmarkets, including the USA. You go on TV and predict that within the next 3 years: > the S&P 500 will fall by more than 50% from its peak > recession and unemployment over 10% > FRE, FNM and AIG will be quasi-nationalised > LEH, WaMu, CIT will fail > BSC, close to failure, only survived because it was bailed out by JPM > CFC and MER, both close to failure, only survived because they were bought by BAC > GM will be bailed out by the government and then finally "allowed" to fail > Over half a trillion dollar slush fund to bail out companies that took excessive risks > Despite the above slush fund, C and BAC required additional bailouts to prevent their failure Would this constitute a black swan? To many it would. Yet it happened. In the same way, it's entirely possible that: > A severe depression will hit the US (and other countries) in the next 5 years > Severe inflation or hyperinflation in the US (and other countries) within the next 5 years > A muddle through period in the next 10 years, (a second "lost decade") with chronically high unemployment and the $SPX at 1100 in 2019.
Great post. As far as "what if" scenarios go, I don't think anybody has considered the possibility of an economic rebound! Everyone seems to "know" there is impending doom on the horizon. Like one poster mentioned, beginning of 2007 if you went on TV and predicted all of the mayhem that occured in fall 2008, you would have been laughed at. I'd imagine that most people reading your post will laugh at the scenario, but the simple fact of the matter is that it is entirely possible and nobody knows how this will all play out.
gotta get those XMas gifts...lol I actually had to stop and think for the moment when I saw that: "wow they're bringing that back again??"
umm...uh...WHAT? a LOT of people knew the insane housing bubble was going to hit the fan in a big way what the hell are your talking about?