I regulary visit the whenshtf.com forums. They’ve got some very knowledgeable members and often engage in worthwhile discussion. This post was inspired by member LAPD77. You can follow the discussion in this thread.
LAPD77:
So what do you guys think? Is the Rally over? Are good times ahead, or is this the beginning of the Greatest Depression?
Mac Contemplates….
IMHO, we are already in the Greatest Depression. 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. Shadowstats.com 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 siezes 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.”
The truth is not hard to find. For most people, the hard part is accepting. They’ll look for 2 minutes and find the truth, not accepting it, they will spend a lifetime looking for a lie they can accept. Find the truth and accept the truth and the truth shall set you free.
It’s much easier for people to believe that it will go on forever. Most people have an aversion to change, especially when their entire belief system is questioned.
Most of the people I chat with about politics and such complain about the corruption of politicians and government, but that’s about as far as they go. They put their faith in the system of checks and balances. If they were to dig a little deeper — literally spend a few hours researching, they would see that the checks and balances themselves have been corrupted.
Good stuff, Mac.
I’ll only say this:
IMHO, if things do, somehow, appear to return to”normal” any time soon (e.g., we see an improvement in unemployment, housing stabilizes, etc.)…
It will be nothing but a mirage created by all of the BS still flying around (e.g., mark-to-fantasy accounting)…
…and the mirage will quickly fade.
The high unemployment, etc. SUCKS – big time…but it is a sign that the economy is trying to heal itself…as are falling prices in general.
Anything that prevents this stuff from happening is only prolonging the pain…if not making it worse in the long run.
Had they let the system clean itself back in 2001 we may have gotten through this mess.
The real problem is with monetary policy and over extended credit lending. I really don’t think they can stop until the system as we know is seizes up. The drug literally has to kill us before we realize how dangerous it is, it seems.
I am not hoping for this scenario — but all signs point to overdose at this point. Rick, it’s like you said — any ‘recovery’ will be temporary. Obviously no changes have been made by governments and too-big-to-fail institutions. How this is going to lead to sustainable economic growth is beyond me.
Yep…on all accounts.
I have been saying for almost 10 years now that the “system” as we know it cannot continue for much longer.
Ignoring all the media, all the government statistics, and just focusing on how middle class America is doing – it is truly frightening. How many more years can families endure 20/25% increases in insurance premiums (if they can afford it at all), 2-3x increases in heating costs every other year, 10-15% increases every year in basic foods (eggs,milk,bread,etc), continually rising property taxes with no end in sight, astronomical auto maintenance fees – the list goes on and on. In public schools now they want the parents to pay for practically everything, from tissues to glue sticks to you name it. The average cost for a middle schooler where I live is $200 per school year. No joke. Everytime we turn around somebody has their hand out.
And now credit is freezing up, so I’ve been told but I still continue to receive the credit card offers in the mail (not as many though). Have not had a raise in over 2 years and have averaged one every other for the past 6. On top of that we have 2-3 rounds of layoffs per year (jobs moving to India at 1/6 the cost), so I’m constantly on my toes.
Now I read that healthcare costs are going to be “shockingly” high this year, to borrow a phrase from a big news web site. Isn’t it already shocking? I mean, 47 million people cannot afford health insurance, with probably another 50-75 million who even with insurance are one accident away from bankruptcy.
When will we have enough? When will we fight back?
I am continually told I am a gloom and doomer by my family. Well, what light is there at the end of the tunnel? Please, somebody show me because I would really like to see it.
Is it doom and gloom to try and understand the reality of what is actually happening?
You have pointed out that the average working American is seeing his wealth literally evaporate because of high costs from government and private industry.
We have over $100 Trillion in commitments over the next 30 years in this country. I don’t have the exact figures here (who really does? ha!) but the number from Larry Edelson over at Weiss Research is something like $1 million in liabilities for every man, woman and child in the United State over the course of their lifetime. That is what the government needs to collect in taxes from each person to pay off their gross financial mismangement.
Pray-tell, non-“doom and gloomers”, how is that going to happen, exactly?
Add that public sector liability to daily cost of living, and there is no way that the system sustains. It is a practical impossibility at this point.
Everybody here seems to have a grasp on reality. While the rest of the “sheep” and the “ostriches” either nibble on grass or bury their heads, the wolves eat them and the tics suck them dry, many of us are thinking of ways to survive while we reset this country. I don’t just want to see a crash, I want to see the people responsible hurt real bad for a long time. I want to see justice.
Frankly, I’m hoping for a crash that will clear out the mess. I know it will be painful (so was my gallbladder surgery) and I know it won’t be fun (every have a tooth drilled?) but it will be interesting. What is not interesting is the year after year of banksters and government mafia stealing from the people while taking their liberty at the same time.
Let the doom and gloom come! I’m ready for it.
Any preppers/survivalists on here?
Great article Mac. Keep ’em coming! I land here instead of InfoWhores. Its more informative and I use less tin foil.
😉
-NR