Just The Beginning, More Losses And Social Unrest, Great Depression 2.0 On The Way

Sad but true, the worst is yet to come. We’ve yet to even scratch the surface of the financial & social losses that are to come. It’s been over two years since I started sounding the alarm via e-mails and this blog, and not because I’m some sort of psychic, but rather because the writing has been all over the walls. It just took some reading. The threat of a recession was real then, and now that it is finally here (and for over a year now), the threat of a “Great Depression 2.0” is even more real.

There have been others that have been warning us all for much longer and I thank them for having alerted me as well. Among them were; Peter Schiff from Euro Pacific Capital and David Walker, former United States Comptroller General. Both of which continue to try to wake up the American public to the reality that is unfolding in front of us.

Nonetheless, there are still idiots and/or optimists that are saying that this recession will be all be over and done with come Q3 2009. Don’t believe it for a second. This recession we’re in is serious stuff. This is not your grandparent’s recession. This is the culmination of over 70 years of the collective mind forgetting every last piece of common sense in how to run global, government, corporate and personal finance. This time it will be much worse and it will be a depression.

Go ahead, call me what some people called me two years ago… a nut job, a Chicken Little, a pessimist, or a party pooper, but the worst IS yet to COME. Think LA Riots, think post-Katrina looting, think unemployed, homeless, hungry and angry inner city residents turning over and burning cars in protest of the sad state of affairs.

Rioters during the 1992 LA Riots turn over a police vehicle

Once that begins to happen, our government will need to, regardless of what they might otherwise state publicly, detain thousands, maybe hundreds of thousands of people in camps. All in trying to maintain law & order.

This will be only part of the social consequences from our financial collapse and the economic decisions that have led to our over consumption, under production, outsourcing, deforestation, pollution, environmental, political and societal damage.

However, we will first have to experience further losses of jobs, homes, companies, banks, local governments, retirement accounts, life savings, followed by further bail outs, followed by a deflation/inflation roller coaster ride, and finally the total collapse of the dollar (potentially being replaced by the “Amero“). I think by then a large number of people will just lose it and crack under pressure. Then we’ll have a series of people going postal, rioting, looting and all out mayhem and disorder in the streets. Certainly some places more so than others (think NYC compared to Utah).

Add to that the increasing number of natural weather disasters that we are experiencing brought on by global warming (or just the natural cycle of things – if you don’t buy the whole global warming bit) and you’ll have even die-hard atheists converting to one of the many religions that promises eternal salvation before or after suffering through apocalyptic times.

Stay safe and have a plan of action!

Great Depression 2.0 Underway

It’s all happening right in front of our very eyes. All that so many spoke and wrote about for so long. I tire in repeating the same things over and over again. So I won’t… and I haven’t for a few months now. Months that I have used for planning and putting into action an exit strategy in response to our current economic climate. Those who know me are aware of those measures. Those who don’t, can re-read my postings and get an idea of our current economic state and can devise their own plan.

You can also turn to your favorite news source to see what American bank, airline, auto manufacturer, or any other business has recently gone under or has been sold to a foreign entity. Feel free to post any comments to this blog. Best of luck! -C. Smith

Chief U.S. Accountant Quits, America “Will Fall Like Rome” States David Walker

David Walker, Comptroller General of the United States, has said that our government is “bankrupting America” and is using unethical accounting worse than Enron’s. He sees “striking similarities” with Rome and thinks both [political] parties are gluttons in a spending orgy.

You must read this article:
Bernanke’s Recession

Chicken Smith View:

That article provides 11 reasons why we’re already in a recession. There are many more reasons. Just browsing through the previous posts on this blog you can find a lot more.

Gold is nearing $1,000 per ounce. Something most people last year or the year before would have told you is “unreasonable”. Most people don’t know what’s going on.

Think about it. The top United States Government accountant. Yes, America’s Comptroller General, David Walker, the guy who has access to all our government books (cooked or otherwise), has spent the past few years on a nation-wide Fiscal Wake-Up Tour trying to wake-up Americans (laymen, industry leaders, politicians & the Federal Reserve) to the fact that we’re overspending and under-saving and that we’re headed for a collapse (ala Roman Empire). That very same guy has decided to quit his job. Did he just get tired of speaking to the wall?

If that doesn’t scream “the recession is here” to you, then please carry on with your spending and market “investments” as usual (and pray that 401k will still have something in it when you need it). Otherwise, “Wake Up!” we’re in a recession and possibly headed for a Second Great Depression, and it can easily take 5 years or more to see any signs of an improvement. If you haven’t saved anything up until now, now is a good a time as any. It could get ugly.

The Economy Crisis Is Contained… Yeah, Right!

Some News Links From Contributing Editor RH:

China’s Inflation Hits American Price Tags…
http://www.nytimes.com/2008/02/01/business/worldbusiness/01inflate.html?_r=3&hp&oref=slogin&oref=slogin&oref=slogin

‘It’s going to be much worse’ Famed investor Jim Rogers sees hard times ahead for the United States – and a big opportunity looming in China…
http://money.cnn.com/2008/01/30/news/international/okeefe_rogers.fortune/index.htm

U.S. Economy: Payrolls Fall for First Time Since 2003…
http://www.bloomberg.com/apps/news?pid=20601087&sid=agPvpBGH.EX4&refer=home

Countrywide And Chase sent letters to customers last week telling them they could no longer borrow against their credit lines because the total debt on the home exceeded the market value of the property. The lender says it is using computer modeling to determine which of its customers would have their cash spigot shut off…
http://globaleconomicanalysis.blogspot.com/2008/02/countrywide-and-chase-shut-off-cash.html

Home Depot to lower 10% of headquarters staff. For now!
http://www.marketwatch.com/news/story/home-depot-lower-10-headquarters/story.aspx?guid=%7BB2D577A3%2DA185%2D4D73%2D9AAF%2D377BDC78AB6A%7D

Say It Ain’t So, Municipal Bonds Are the New Junk: Joe Mysak
http://www.bloomberg.com/apps/news?pid=20601039&refer=columnist_mysak&sid=auPmzvv3Al.g

Bush Says ‘Serious Signs’ U.S. Economy Is Weakening…
http://www.bloomberg.com/apps/news?pid=20601087&sid=aJZqcryZJIqw&refer=home

Where a recession is already hitting hard…
http://articles.moneycentral.msn.com/Banking/HomebuyingGuide/WhereARecessionHasAlreadyHitHard.aspx

It’s just the beginning… -RH

Chicken Smith View:

I know, you’re probably thinking; “boy, these people don’t let up that the sky is falling.” Well, it ain’t just us. It’s a lot of people all over the world that recognize the trouble we’re in and the uncharted waters we’re headed towards.

As you can probably see, people are only now starting to wake up to this, just as I started waking up to this towards the end of 2006, and others, much smarter than I, have been predicting a decline for much longer than I have (check out Peter Schiff). Sooner or later you’ll have to recognize it. If you don’t see the signs that we’re in a recession and possibly headed for worse, I can only think of a few excuses for that reasoning at this point in time:

1. Your wealthy – I figure if you’ve got a lot of cash coming in, and someone else is managing your money, you might not feel all the cash that’s going out. I’m choosing to define wealthy as someone who’s combined household income after taxes is above $750,000. Although if you make that amount, chances are you probably have lost some money in the stock market recently, so you must have felt it.

2. You’re a hard working schmuck and your wife handles your money – Well, here’s how I figure it; the more inflation hits us, the more you have to work, the more you work, the less time you have to stop and see what’s really going on. As the bills come in, your wife simply insists that you have to work more, ok, well maybe she’s working more too, but the point is you can’t afford to stop to smell the roses.

3. You’re a student – Everything is already expensive, you already owe a lot of money, and you don’t know any better. Keep reading and learning, these are tough economic times we’re headed towards, similar to our depression years that started in 1929 and lasted well over 10 years.

If you don’t fall into one of those categories above, then surely you must be seeing it everywhere, from food prices to heating prices, from housing crises to financial crisis, from social woes to political woes, from health insurance to home insurance, from the falling dollar to the negative savings rate. Even global weather is lining up right along the rest of our economic uncertainties to produce the “perfect storm” of a world financial collapse that is being spear headed by the U.S. Granted, unless those terrorists decide to attack us again, we’ll all survive this and things will eventually get better, but they’ll certainly get worse before we even see the light at the end of the tunnel.

Economy Fails, Lose A Turn (or a year or more)

Chicken Smith View:

One year ago on January 31, 2007, the DOW closed at 12,621.69.

Today, on January 31, 2008, the DOW closed 12,650.36. This is growth? This is cause for celebration?

So what happened to all the records that the DOW broke over the course of 2007? What happened to that glorious bull market everybody was rushing to be a part of? Nothing. It was never really there. And now we’re back to January 2007 levels. What’s next 2006, 2005, 2004?

Oh, the numbers did get to 14,000, but it was all irrational exuberance. Not a true representation of a market economy. That got left behind along with the old century. Today, it is no longer supply based on demand, rather it is demand based on supply — if you’ve got the money (or credit) and it’s available, just buy it. Who cares if it’s any good, everything eventually goes up, doesn’t it? Besides, when stocks are down, isn’t that the best time to buy?

Have you purchased eggs lately? Inflation is going through the roof! I don’t have to remind you of the housing mess, but what about the dollar mess? Or the frivolous lawsuit mess? Or the credit crunch? Or the political mess? Or the health care mess? Live in Massachusetts and can’t afford health insurance? No problem, just pay an outrageous fine for every month you weren’t insured to the Department of Revenue and at least those who don’t even work will be able to get some sort of sub-standard subsidized health care while you get taxed to death (you can thank Mitt Romney for that one).

It seems every aspect of our modern, “first-world” civilized life is taking a turn for the worse. And remember that the stock market is a trailing indicator, so that means we’ve yet to feel that pain. And that talk of a recession? Too late, we’re already waist deep in it.

What to do? You’ve got me. I’ve recommended everything from getting solar panels and digging your own water well to learning another language and exiting our currently collapsing U.S. society. The truth is, nobody knows what’s going on, nor what the best course of action is. For all I know, the rest of the world will suffer right along with us.

My feeling is that the U.S. will be in a recession and/or depression for at least five years. I’ve heard numbers as high as 15 and 20 years, which lead me to believe it can easily get to 10 years of economic turmoil or more. If the Great Depression is any indicator, we may be in this for over 20 years! According to this chart of the stock market crash of 1929, I’d say we might be headed for a big drop, followed by a “Short Recovery” followed by never-ending drops.

Head for the hills? Fuggit about it, just charge up your credit cards and hope Visa & MasterCard collapse before you do.

Why Hasn’t The Stock Market Crashed Yet? Joe?

Chicken Smith View:

As our markets keep trying to correct themselves (ie, come down off their high horse), there are major players in the system who are constantly propping up the markets with unnecessary and undue infusions of capital. Among these players are the Federal Reserve, corporations, foreign investors, and an ever growing group of individual investors — your average Joe.

It used to be that the majority of traders were, to a large extent, all professionals. In today’s financial markets, that no longer seems to be the case. Given the right tools, every Joe-six-pack can be a day trader.

What does this translate into? Potentially, a bunch of novices could be keeping (or at least helping to keep) our financial markets afloat. Every Tom, Dick and Harry now has a brokerage account or three, and the problem is that they all know just enough to make them think their “buy low, sell high” strategy combined with their computer savvy (so called “smart” trading software) will keep them out of trouble. They’re wrong.

The idea is simple; buy when prices are at their lowest and sell when prices are at their highest. However, this simple notion assumes one knows when something is at its lowest or highest price in real time. Retrospectively, we can all check the charts and see when something peaked or bottomed, but while its happening, we simply just don’t know, the price of a stock can climb or fall dramatically in a matter of minutes if not seconds.

The very concept that the “buying low and selling high” strategy will produce great returns is fraught with error, as one should never base their investments on price alone.

Even seasoned professional investors will sometimes fall for the herd mentality and begin following the bulls and buying when the markets are taking a tumble (also known as everything being “on sale”). Something that has, coincidentally, been occurring a lot lately. So it’s not too difficult to see how Tom, Dick & Harry can easily fall for it as well.

With online brokerages and local banks offering $7, $4 and even free online trades, it is now easier than ever to be a day trader, even if you don’t know a single thing about stocks or short term capital gains.

But that’s not enough to discourage your average Joe, who is just itching to jump in the stock market game, especially since he was one of the fortunate to be watching TV at 3am on a Sunday morning and plunked down hundreds of dollars for an investor kit that included “smart” trading software. Which, by the way, if properly configured, can do all the thinking for him… and we all know how much thought Joe wants to put into this.

Recently, whenever the Dow Jones Industrial Average Index (DJI) takes a 100 point nose-dive, it seems the very next day there is a 100 point jump. And vice-versa. So, is this really the natural and logical effect of a market driven by a bunch of professional traders? Or should the question really be: Just how many “Joes” are out there?

The Economic Truth Is Hidden Between The Lines

Chicken Smith View:

If you’ve seen Alan Greenspan’s recent peddling of his book in the media, you might think he’s an articulate fellow. However, the truth is he always had a convoluted way of saying things that left you either confused or thinking he agreed with you. This was dubbed “Fed Speak.” Even after leaving his post as Fed Chief, he still hasn’t changed his ways. Following are some recent quotes from Greenspan and what the average person might think of it, followed by what I think of it.

According to Bloomberg on November 18th: Former Federal Reserve Chairman Alan Greenspan said the dollar’s decline hasn’t affected the global economy and is a “market phenomenon.”
The Average Person Might Think: …Wow! Our dollar is doing phenomenally well. I’ll go shop for some more stuff made in China now.
Chicken Smith View: …what a bunch of crock! Define “market phenomenon.” Even the Great Depression can be classified as a “market phenomenon”.

And notice how Greenspan carefully crafts his sound bites with escape clauses and conditional statements…

Greenspan: “…dollar’s decline hasn’t affected the global economy…”
The Average Person Might Think: …oh, ok, so everything is fine with our economy. I mean the US is part of the global economy right?
Chicken Smith View: …the global economy is fine, but the American economy, taken on its own, is not fine.

Greenspan: the U.S. economy is “doing reasonably well”
The Average Person Might Think: …yeah, we’re doing reasonably well! My stocks are higher than last year, isn’t that all that matters?
Chicken Smith View: …considering how bad things will get later, we’re doing just fine. By the way, don’t forget to calculate inflation when valuing your stock earnings. Here’s a hint; it’s not 2%.

Greenspan: “So long as the dollar weakness does not create inflation”
The Average Person Might Think: …see, as long as there’s no inflation we’re ok. And the Fed says there’s no inflation, so we must be ok.
Chicken Smith View: …yeah, and I have brunch with Elvis & Lincoln every Sunday morning. Is he nuts? How can the dollar weakness not create inflation?

Greenspan: “If we can get beyond this housing problem I think we’ll do pretty well”
The Average Person Might Think: …it’s just a housing problem …everything else is actually doing pretty well. I mean, my stocks are up, right?
Chicken Smith View: …as soon as someone invents a time-machine, we’ll just skip over the forthcoming depression. Or not. Because we can’t just get beyond this housing problem, it’s a major part of this mess. So I guess that means we won’t do “pretty well”, huh Mr. ex-Fed Chief? BTW, isn’t the stock market a lagging indicator?

Read between the lines!!! A great economy does not need conditional statements like Greenspan is making. If the economy is doing well, it’s just that. You don’t need to preface it by saying it’s doing “reasonably well.” A great economy does not need “if this” or “so long as that” to quantify its position.

Greenspan is trying his hardest to sugar-coat the messes he made between 2001 and 2003. However, he’s actually telling some truth, it’s just not what you think you’re hearing. The truth is there’s an economic recession on its way that can turn into a depression if people (although mostly banks, corporations, and politicians) don’t wake up and stop begging the Fed to continue lowering interest rates to bail out certain sectors of the economy or groups of people.

People should request that their congressmen and senators express their constituency’s demands that the Fed not continue using stall tactics (ie, lowering interest rates) to delay an inevitable recession. It will only delay the problem thereby assuring an even bigger recession and/or depression.

Our Scary Economy – Spoiled Brat or Dope Junkie?

Chicken Smith View:

“I want more candy!” says the 4 year old. “No, you’ve had enough!” replies the mother. Then the wailing and crying commences with interspersed pleas for leniency, promises of “I won’t ask for more if you give me some” and “please… just a little bit more?” maybe throw in a little temper-tantrum and some more whining as many 4 year olds can and will be prone to do. I’m sure many can relate.

Now, take the not too dissimilar scenario of a dope junkie trying to get another fix from her “sugar-daddy”. I don’t even need to change the quotes from the 4 year old above. The dialog is practically the same and the problem is practically the same — an absurd insistence for something that may satiate an immediate desire, but will, in the long-run, cause more harm than good (ie, bad teeth, bad personality, and bad health for both the child and the junkie).

Let us take a look at what is and what has been going on and let’s try to determine if we are witnessing the same type of problem in our economy: the rationale of a 4-year-old and the addiction of a junkie.

For starters, everyone is always referencing the “Business Cycle” as proof that markets, and therefore our economy, will naturally go up and down as part of the “cycles” although eventually it all goes up in the long run. What they generally don’t take into account is one little wrench that can skew many an upward trending chart: inflation.

Business and economics is much more complicated than what relegating it to a simple up and down line graph tends to portray. Living in our U.S. of “A” glass-bubble has caused us to ignore the fact that economies around the world have historically tumbled and shown long periods of downward trending line charts that seem all but a mystery to us on American soil. But make no mistake, charts do not discriminate and can and will make use of positive and negative trends on any continent.

We are currently witnessing inflation in our country at levels not felt since 1973. While that may sound reassuring in a round-a-bout sort of way (ie, “well at least it’s something we’ve already been through”), the fact is that we are at the start of a recessionary cycle, not the end of one, so this is only the beginning. If inflation continues the way it has been recently, we’ll easily exceed those 1973 levels and start entering into uncharted territory.

Think there’s no inflation, because the Fed says so? Think again. When the Fed says inflation is under control, they are only referencing core-inflation (as in long-term, according to their magic ball). Unfortunately, core-inflation does not include food and energy prices, which, if you’ve gone shopping for food or have been paying your energy bills within the past few years, you may have noticed how much they have shot up.

Energy is increasingly becoming more expensive due to emerging economies and their increasing demand for it. The same goes for food, as our American population has increased dramatically in the past century, while our farmlands have remained about the same. So now we purchase a lot of our goods from abroad — at world-market prices.

Inflation, of course, has caused our dollar to weaken, as you now need more of it to buy what you could last year with less of it. That, in turn, causes other currencies to have more value in relation to our dollar. Take the Canadian Dollar for instance. Just three years ago, one American Dollar would get you $1.30 Canadian, today, that same American dollar gets you about 95 Cents Canadian. That’s more than a 25% depreciation in under 3 years! It’s no wonder Canadians are flocking across the border on weekends to purchase goods here. It’s all at 25% off!

We are clearly experiencing increased levels of inflation that will have significant repercussions the longer it continues. And, unfortunately, it looks like inflation is here to stay for a while.

So, going back to our original premise, we have an economy that is beginning to slide downward with heightened inflation. So why do the markets look like they’re doing so well? Again, inflation. The reason the charts look so good is the same reason that’s causing prices to go up. Inflation. Because you now need more dollars to buy something today than you did yesterday, everything goes up in relation. Hence the Dow Jones Index has gone up close to 2,000 points since last year. Naturally, it’s not all due to inflation, but a lot of it is based on the illusion of a sound and strong economy with controlled inflation, when that’s clearly not the case.

Obviously, there needs to be a “correction” as many like to call it. However, what the economy needs is not a mild correction, it needs a major shake-up. Not by my desires, mind you, but rather by what is naturally supposed to occur in a market driven society. That means, once prices become over-inflated, as is currently the case (yes, they are, as everyone has become too accustomed to credit, whether it be credit cards, home equities, or other forms), people need to recognize the situation and cut back on spending to let prices adjust to pre-inflationary levels.

Instead, we do everything possible to avert “disaster” (the mild correction), but what is really happening is we are simply delaying the disaster for a later day and making it bigger in the process. How have we been averting it? The Federal Reserve. At the smallest sign of trouble or the smallest clamor of the people, it succumbs to their pleas and simply lowers interest rates to “stimulate” spending. In effect to squelch the cries of the people, but ignoring the larger implications.

In 2001, our economy was in a sad state of affairs. We were still going through the dot com bust when all of a sudden we get 9/11. Jobs were being sent overseas, prices were going up, and we were headed for a recession. The Fed, in an effort to “avert” further disaster, decided to lower the interest rates to “stimulate” spending in the economy. In light of the circumstances, one can give them a pass on this. However, two years later, the Fed was still lowering the rates, month after month. All to satiate the whines and moans of the addicts (all of us) begging for just one more rate cut. This, can be said, stimulated the economy a bit too much.

The over availability of cheap money (ie, credit at low interest rates) brought about the biggest boom in real estate and our overall economy since World War II. This certainly brought us out of the slump we were in, however it also took us past the correction point and into an inflationary period. This was due to the huge demands of homes and all the other goods and services that were being purchased as a result of a booming economy. Unfortunately, all on credit.

When things are looking good and money is changing hands so fast and small fortunes are being created left and right, people are willing to spend more money, thereby exacerbating the problem (inflation). We are now done with this period of irrational exuberance (to quote ex-Fed Chief Alan Greenspan, one of the architects of this mess), and the problems to come are many and long-lasting.

So now come the problems. Employment weakens (don’t just look at today’s numbers, see the big picture), foreclosures go up, the dollar goes down, inflation goes up, and again, the people (everyone, not just you and me, government and especially businesses) cry out for rate cuts. The same rate cuts that got us into this mess in the first place.

The Fed, unfortunately, has delivered. Is their hope to satiate the desires of a drugged society or to improve the economy? If the latter, rate cuts, no matter how much the 4 year old cries, is not the solution.

Employment Plunges, Credit Tightens, Gold Climbs, Market Crash Forecast, Great Depression Ahead

The behavior in what we are observing in the last seven weeks is identical in many respects to what we saw in 1998, what we saw in the stock-market crash of 1987,” Greenspan was quoted by the newspaper as saying… http://www.reuters.com/article/ousiv/idUSN0640900320070907

Citigroup Unit Won’t Take New Mortgage Bank Clients… http://www.bloomberg.com/apps/news?pid=20601087&sid=aP1Ebhaa1J30&refer=home

The utterly ugly employment figures for August (a fall in jobs for the first time in four years, downward revisions to previous months’ data, a fall in the labor participation rate, and an even weaker employment picture based on the household survey compared to the establishments survey) confirm what few of us have been predicting since the beginning of 2007: the U.S. is headed towards a hard landing…. http://www.rgemonitor.com/blog/roubini/213894

33 percent of home loans didn’t close last month. A third of home loans originated by mortgage brokers failed to close in August as investors shied away from riskier borrowers, a new survey says… http://www.mcall.com/business/local/all-mortgages.6029291sep06,0,7164270.story

Countrywide May Cut Staff by 12,000. Countrywide Financial Corp., the nation’s biggest mortgage company, may reduce its workforce by 10,000 to 12,000 in the next three months, a 20 percent cut… http://www.bloomberg.com/apps/news?pid=20601087&sid=aQhytb8fv1Tk&refer=home

LEHMAN CUTS 850 MORE JOBS: Lehman Brothers Holdings Inc., which shut its subprime mortgage business last month, is cutting 850 more jobs, mostly at a U.S. subsidiary catering to borrowers with decent credit scores…http://www.nypost.com/seven/09072007/business/lehman_cuts_jobs_in_alt_a.htm

IndyMac to Cut 10 Percent of Jobs; May Post a Loss… http://www.bloomberg.com/apps/news?pid=newsarchive&sid=azgqnpf9trLM

Don’t you just feel real sorry for gold? Look at that poor chart below and weep. …Actually weep for those idiots who cannot recognize a gold bull market when they see one. Hah! Gold will yet go where gold wants to go and perhaps where it has never been before– higher Margarita… http://www.kitco.com/ind/vaughn/sep072007.html

Gold Prices Climb As Stocks, Dollar Fall… http://www.forbes.com/fdc/welcome_mjx.shtml

Debugging Wall Street’s funky math. Big chunks of investment banks’ earnings are from assets that few know how to value. Should investors and regulators be concerned??? http://money.cnn.com/2007/09/06/magazines/fortune/eavis_level3.fortune/index.htm?postversion=2007090710

As Housing Market Cools, Far Fewer Become Agents… http://www.nytimes.com/2007/09/07/business/07agents.html?em&ex=1189310400&en=78ece3289daf0498&ei=5087%0A

America is already in a recession and the U.S. Government is flat broke to the extent of 8.9 trillion dollars. In other words, every man, woman and child in America owes $29,672 dollars in Government debt… http://www.opednews.com/articles/opedne_allen_l__070830_america_broke__2f_aver.htm

US Economy: Drowning in Debt… http://www.opednews.com/maxwrite/link.php?id=21979

American Dream Slashed Along with Home Values… http://www.opednews.com/maxwrite/link.php?id=37915

The Great American Dream still exists — in Iraq! http://www.opednews.com/articles/opedne_jane_sti_070329_the_great_american_d.htm

America’s House of Cards Economy… http://www.opednews.com/articles/opedne_michael__070814_house_of_cards.htm

Economic Armageddon Is Coming… http://www.opednews.com/articles/opedne_joel_s___070423_economic_armageddon_.htm

Bush’s Economy Is Poverty Stricken, Bleeding Jobs and Ready to Crash… http://www.opednews.com/articles/opedne_dan_meri_070524_bush_s_economy_is_po.htm

China’s Passenger Cars Leave US in the Dust… http://www.opednews.com/articles/genera_braden_g_070327_china_s_passenger_ca.htm

Chicken Smith View:

I know what you’re thinking; “how can this great, rich, powerful, generous and glorious country collapse?” Well, starting with the fact that the Egyptians, the Greeks, the Turks, the Ottomans, the Romans, the Mayas, the Spanish, the British and basically anyone that’s ever been in or part of a “great empire” all thought the same thing (even more so right before it collapsed), and then proceeding to the fact that we are facing similar historical events that preceded their demise, I think it’s highly likely that our great nation can see a reversal of fortunes in the near future.

What to do? Save your money! Have some gold and/or silver (no I don’t sell any). Consider the possibility of moving overseas (or across the border, Canada eh?). Get some useful skills such as learning to modify a car to run on cooking oil, building a solar panel, fortifying your home against intruders, digging a well in your back yard, learn another language, and anything else that can prep you for some tough economic times (which in turn can lead to some tough social times). Hey, if nothing else happens, at least you’ve got some good skills that will help you in our new world economy.

It’s Not Just Sub-Prime, It’s Credit And Debt Everywhere

“Now these funds, which were supposed to be brimming with cash—the “liquidity” you hear about all of the time—turn out to have not much at all, and there are virtually no buyers anywhere for these mortgage-backed bonds, because who knows if the mortgages that are in them are worth anything? We only know that each day they are worth less than the day before, because every week, thousands of borrowers are being foreclosed.” –New York Magazine, 08/20/07

Chicken Smith View:
A lot can change in a month, however, if you’ve been following financial news for the past year, you’ll know that the general media has only recently been waking up to our economy’s financial disaster and even so they are still quick to pigeon hole it as a sub-prime problem. The truth, however, is that our forthcoming financial collapse is not limited to just one part of the mortgage industry.

What we’re experiencing is a credit problem on a grander scale. Since 2001, there has been too much easy money going around. Whether it’s sub-prime mortgage loans, re-finance loans, grade A business loans, auto loans, credit card loans, or even student loans, the interest rates (often introductory rates) have been too low not to take advantage of. And that’s just what every Tom, Dick, and Harry did. They made use of their credit, worthy or not, and took on loans through the nose.

Enter debt. Eventually all loans need to be paid, and because many folks have been borrowing from Peter to pay Paul, some of these debts were never, realistically, going to get paid. That’s when defaults, bankruptcies, and foreclosures happen. Enter disaster. It’s almost too surreal to believe, but none of the lenders thought that the day would come when a good portion of these debts would not get paid.

Ok, maybe not none of them, but beside the sub-prime lenders, many lenders thought they were investing in safe and secure lending practices. After all, they’re just following the Fed’s lead (aka Alan Greenspan’s deluded measures to avoid previous “corrections”). And the real money is in the late fees, right? And if customers can’t pay those, the loans can simply be sold off to collection companies or hedge funds? And if the hedge funds lose, well, at least it’s all been chopped up into so many pieces that no one will get hit with the full brunt of the losses, right? Wrong.

None of this will bail anyone out if the majority of borrowers are not paying back their debts. This is yet to be seen, however it can happen. The outsourcing of white collar jobs is expected to increase over the next few years. Yes, accountants, graphic designers, middle-management, etc. Basically, anything that does not require a physical body state-side. That in addition to any blue collar jobs that might be remaining will all but disappear.

Money will be harder to come by as banks and other lenders tighten up their lending practices. There are already 20% down prime loans that are being denied. Some credit card companies are no longer allowing a double-digit minimum payment (ie $15) to carry an over 4-digit balance (thousands). So many who have been using credit cards to help them through the tough times, will not be able to do so anymore.

But wait, there will still be jobs such as construction, entertainment, dining, etc., right? Well, yes and no. While yes there will still be some of those jobs, it will primarily be to cater to the wealthy who will still need such services, however for middle-class America, there won’t be much money to put food on the table, let alone going out for dinner and a movie and renovating the kitchen, so a lot of those jobs will see a decline.

With less jobs, comes less money, comes less consumption, come less corporate profits, comes less jobs, comes a whole new vicious downward spiraling cycle. But wait, I heard that employment is up, corporate profits are up, GDP is up, inflation is moderate, our economy is strong, and you expect me to believe this crap?

As the famous 19th century prime minister of England, Benjamin Disraeli, once said; “There are three kinds of lies: lies, damned lies, and statistics.”

Don’t believe it? Just wait and see. When looking at stats, look at charts, don’t just see what’s up or down today. BTW, core inflation looks dandy, but it’s not reality. Unlike the Fed’s idea that it shows long-term inflation rates, it really just covers up the fact that current inflation is quickly rising. And don’t forget, we’re nowhere near the bottom, we’ve barely just begun.

Media Outlets Taking Notice Of The Pending U.S. Financial Crisis

More Clippings About Our Economy From Contributing Editor RH:

“Its going to get worse before it gets better. How much worse, I don’t know,”
http://www.nypost.com/seven/07122007/business/hedge_horror_business_paul_tharp.htm

The catalyst for this latest dollar weakness is concern that the US consumer, for years the mainstay of the economy, could be flagging. Such worries followed evidence that the US housing market still does not appear to be finding a bottom along with news that retailers are suffering….
http://www.ft.com/cms/s/9d692cde-2fdb-11dc-a68f-0000779fd2ac.html

The Coming Crash — Winners and Losers…
LOSER: People who actually believe that Bear Stearns, Merrill Lynch, Goldman Sachs, Citigroup, Wachovia, JP Morgan Chase, etc. actually give a crap about your retirement account, you personally or your money. If you actually go out and read the news, you will see the numerous stories where companies like these have been “fined” for misusing and abusing your accounts and your money. Churn and burn baby, because if you still think they care, you need a lobotomy. The disaster underway is of their doing and they will have all the help they need from you, the taxpayer to straighten it out.
WINNER: All homeowners who are in secure industries who did not take out an exotic re-finance agreement, have no credit card or other unsecured debt, and are actually able to save money. This means having a financial plan including a retirement program which includes safe investments (precious metals, non-US government bonds, etc.) and having at least three to six months salary socked away safely in case of sudden unemployment….
http://wallstreetbear.com/board/view.php?topic=47743&post=152263

The dollar dropped to a record low against the euro as
troubles in the U.S. mortgage and credit markets continued to dampen the currency’s appeal…
http://www.reuters.com/article/topNews/idUKN1238289820070712?rpc=44

Foreclosure Rates Continue to Climb Around the Nation and Taking Major Jump in California…
http://abclocal.go.com/kfsn/story?section=local&id=5469514

Disappointing results from retailers are renewing concerns that the housing market’s troubles may start weighing more heavily on consumer spending…
http://blogs.wsj.com/economics/2007/07/12/economists-watch-for-housing-to-weigh-on-spending

After the credit binge, markets fear the crunch is on the way…
http://business.timesonline.co.uk/tol/business/economics/article2062073.ece

Chicken Smith View:
The forthcoming economic collapse of our nation is under way. What’s been predicted for so long, with so many media outlets outright denying that we’re in any danger, many of them are now starting to see what’s happening and, actually reporting on it.

Keep reading reports from around the world and do not rely on any one source for all your news. However, do learn to spot trends and market movements. The Dow Jones is obviously not a good indicator, as it is highly illogical and mainly motivated by emotions and ignorance rather than actual market conditions. Otherwise, why would the Dow Jones be doing so well, while the dollar continues to make all-time record lows?

Are companies really doing that well? Look at retail numbers, look at employment numbers. Look at entire industries such as manufacturing. Look at our debt and you’ll know all is not well. Start saving your pennies gold, as financial and, might I add, social devastation the likes none of us, not even our grandfathers who went through the Great Depression have seen, will begin affecting every facet of society.

These are new times. While we have greatly advanced in many areas such as science and technology, we as a society have not advanced in financial literacy, nor have we been as financially prudent as we should have been. Instead, we’ve been taught how to be mindless consumers with absurd levels of debt that shackle us to our jobs, yes, even those who are self-employed are shackled. The victors? Corporations and their shareholders… for the time being, however the collapse will affect many. Some will be better off, most will not.

More Signs of the Times…

From Around the Web (thanks to contributing editor RH):

“It’s a blood bath,” said Mark Kiesel, executive vice president of Newport Beach, California-based Pacific Investment Management Co., the manager of $668 billion in bond funds. “We’re talking about a two- to three-year downturn that will take a whole host of characters with it, from job creation to consumer confidence. Eventually it will take the stock market and corporate profit.’‘
http://www.bloomberg.com/apps/news?pid=20601109&sid=akV2sasSGUY8&refer=home

The Financial Times and CNBC are reporting that J.P. Morgan Chase, Deutsche Bank and Merrill Lynch have been selling more than $1 billion in investments seized as collateral from two troubled hedge funds at Bear Stearns.
http://www.portfolio.com/news-markets/top-5/2007/06/20/Gunning-for-Bear

An investor in Europe, who didn’t want to be identified, says he’s been trying to get his money out of the hedge fund since February…
http://www.businessweek.com/bwdaily/dnflash/content/jun2007/db20070612_748264.htm

“We were restrained by a slowing US economy,” said Fred Smith, FedEx chairman, president and chief executive. “The weakened industrial sector is currently limiting demand for transportation services.”
http://www.ft.com/cms/s/7315b590-1f2a-11dc-ac86-000b5df10621.html

A wealth of conflicting market signals that no one seems able to explain makes it difficult to figure out when the music will stop and the bills will come due. But it’s time to get ready…
http://articles.moneycentral.msn.com/Investing/ContrarianChronicles/TheMarketsGameOfMusicalChairs.aspx

Chicken Smith View:
The articles speak for themselves. There are way too many negative market conditions (not to mention governmental & social ones) that are lining up to form what could be a tremendous collapse to our economy and, in turn, our society. The storm clouds are gathering… will you be prepared for the storm?