Have We Avoided the Depression Many Feared?

by | Dec 9, 2009 | Forecasting, Headline News | 13 comments

Do you LOVE America?


    President Obama spoke about the economy at the Brookings Institution.

    “We acted to get lending flowing again, so businesses could get loans to buy equipment and ordinary Americans could get financing to buy homes and cars, to go to college, and to start or run businesses. We enacted measures to stem the tide of foreclosures in our housing market, helping responsible home owners stay in their homes and helping to stop the broader decline in home values which was eating away at what tends to be a family’s largest asset.

    To achieve this and to prevent economic collapse, we were forced to extend assistance to some of the very banks and financial institutions whose actions had helped precipitate the turmoil. We also took steps to prevent the rapid dissolution of the American auto industry.”


    Now, partly as a result of these and other steps, we are in a very different place today than we were one year ago. We may forget, but we’re in a very different place. We can safely say that we are no longer facing the potential collapse of our financial system and we’ve avoided the depression many feared.

    This all sounds great, and if you were a follower of only the news coming out of the White House or main stream media, you might actually believe this drivel.

    Commercial and Consumer Lending

    Lending has not started flowing yet. In fact, according to the Federal Reserve, as of October 9, 2009, total loans at commercial banks have fallen at a 19% annual rate over the past three months, while loans to businesses have dropped at a 28% annualized pace. (source: Market Watch)


    Contrary to Mr. Obama’s review of the facts, consumer lending has not improved, and has dropped significantly, even while banks were supposedly lending. To make it easy for non-believers, we direct you to a graphical representation of this, provided by Karl Denninger at Market Ticker:


    Home Prices and Foreclosures

    For the time being, it can be argued that the broader decline in home prices has been stopped. But really, it’s more of a delay than anything else. Home prices were overvalued at the top of the real estate bubble. Will anyone really argue this point? Here is an excellent and simple to understand video from Glen Beck. You’ll notice that housing prices were inflated nearly 100% over what the average cost of a home should be in real terms based on decades of data:

    If cyclical analyst Martin Armstrong is right about his Forecast for Real Estate, we can expect the real estate bust to continue for not months, not years, but possibly decades.

    Regarding foreclosures, a responsible observer must wonder if we have actually “stemmed” the tide. Perhaps we have seen some month over month positive numbers, but the broader trend is pointing up for foreclosures and delinquencies, especially if you consider the fact that a second wave of the mortgage meltdown is going to fire up some time in the 2nd quarter of next year.

    Forced Bail Outs

    No one “forced” the White House, Congress, Fed and Treasury to bail out incompetent financial institutions. If anything, it was these government branches and agencies that forced the American taxpayer to be used as collateral to bailout companies that should have gone broke. They are, in fact, still insolvent, and it is a matter of time before the mathematical reality hits.

    Did we really prevent the rapid dissolution of the American auto industry? Perhaps no one has noticed, but the fact of the matter is, auto sales are down, significantly, year over year, as is detailed in the following chart from Motor Intelligence:


    Cash for clunkers did nothing but extend the game a bit longer and strap tens of thousands of Americans with more debt in a time when they should be saving, not spending. The cars sold actually pulled forward future sales, so we may very well continue to see car sales decline further in 2010 and beyond.

    The Depression Has Been Avoided

    As mentioned previously, it is likely that the banking system is insolvent. For more information on this, we can turn to one of our favorite analysts yet again, Karl Denninger:

    The entire banking system and likely The Fed, given the quantity of Fannie and Freddie paper it has been and is “eating”, is insolvent.  These facts are why the government is lying – they’re well-aware of the near-zero cure rates and know that these facts mean that the banking industry has nowhere near sufficient capital to withstand these losses without folding like a paper cup getting stomped on by an elephant.

    Mr. Obama’s comments are a blast from the past. In June of 1930, when a delegation came to see Herbert Hoover to request a public works program, President Hoover responded with:

    “”Gentlemen, you have come sixty days too late. The Depression is over.”

    From the time President Hoover made his comments in June to December 31, 1930, the Dow Jones dropped 33%. By December of 1931, the Dow had dropped a whopping 70%. We know the rest of the story.

    A depression has not been avoided. Some have not yet noticed. Some refuse to admit it. Others realize what is happening.

    We are living through the next Great Depression right here and now.

    Click here to watch the President’s speech at the Brookings Institution…


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      1. President Oh Bama says

        Blah Blah Blah

        Blah Blah Blah

        Blah Blah Blah

        Blah Blah Blah

      2. Don’t believe a word of it Colonel!

      3. Believe me, I DON’T.

        It’s what we used to call in the Corps, BRAVO SIERRA.

      4. Great post, mac! It’s important to be mindful that the worst may be yet to arrive…..

        – TomOfTheNorth

      5. You totally blow your credibilty by citing Glen Beck.  Get some real research to support your theory.

      6. What is your problem with Beck? He ALWAYS supports his arguments with facts, he never offers opinion without documentation, and most of his views are developed by video quotes from opposing attitudes. So what’s your issue? You’re not just another stupid “Oh well if I have to explain” guy, you’re too smart for that. Have you ever actually listened to him? He agrees with 90% of what you say. Or isn’t that enough for you?

      7. BTW Mac. Love your site. Your fair to all sides.

      8. Thanks Greyson, your comment is much appreciated!

        I do listen to Glen Beck on the radio, as well as watch his show when I have time, plus all the Youtube vids. He does a great job of supporting his information, and while one may argue with his opinions, his facts are always solid. I guess what I meant by my above comment is that I can understand where someone with a left-ward leaning compass might have issues with him 🙂

        As a side note, I want to stress that I am currently without party affiliation, but I definitely agree more with principles of the “right” than I do with the “left.” Actually, there are very few, if any, ideas on the socialist left that I can agree with. My real problem with many politicians on the right is that they talk a good game about certain issues, but never really get it done.

        Thanks for visiting and have a great day!


      9. Re Beck – I for one simply can not understand why some people dislike him as much as they do.  Sure, he might be a bit nuts…and heck, he might even be a racist (though I don’t think so), but all he really does is play video clips and sound bytes that support his opinions.

        The Van Jones thing was classic.  The alleged “smear campaign” against Jones consisted of nothing but Jones in his own words.

        Then, his assessment of Jones was SO ridiculous that Jones was fir…err, I mean he resigned.

        Comrade Olbermann’s report on Beck and Jones was the best.  He claimed Beck was clearly a racist because the only thing Jones had done/said that was remotely “questionable”  was calling Republicans @$$holes (yeah, he didn’t bother mentioning anything else).  Well, in my mind, Republicans aren’t much better than Democrats…so that was probably one of the more intelligent things Jones had said.

        In the end – if he is really such and idiot, and his theories and facts are SO far off base, his opponents should have no problem “disproving” his claims, as opposed to simply calling him names.

        I have yet to see that happen.  For all I know, it would be easy to do…but I haven’t seen it yet.

      10. I guess what really does it for me here in all this data, and from other sites, is the fact that bank lending is declining and continues to decline. As far as I know, and I realize it’s limited, you CANNOT have a reduction in credit within a credit-based economy which can only repay its debts athrough continual credit EXPANSION. Until someone explains to me how the system can survive this I will never believe we have avoided a depression.

        Couple that with the fact that the US is the world’s biggest debtor, and the US dollar itself is in dire straits, and I don’t even see how it’s remotely possible that we are done with this. Not by a long shot.

      11. Just be thankful that the banks haven’t started lending yet.  When they do, the effects of a doubled money supply will manifest itself in the form of either inflation or higher interest rates.  Pick your poison.

      12. Comments…..I’ve always liked Beck. He shoots you with the straight truth and has documents to back it up.
        Some don’t like him because he is a *right in your face* person with the truth.

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