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

January 3, 2009

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

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

July 29, 2008

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

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

March 3, 2008

David WalkerDavid 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!

February 2, 2008

Some News Links From Contributing Editor RH:

NY TimesChina’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

money.cnn.com‘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

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

CountrywideCountrywide 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 DepotHome 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

bloombergSay 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)

January 31, 2008

Chicken Smith View:

Stocks DownOne 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.

Great Depression ChartMy 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.


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

September 8, 2007

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

August 20, 2007

New York MagazineNow 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.