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!

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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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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.


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

December 31, 2007

Chicken Smith View:

Market CorrectionAs 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.

DJIA Jul. to Dec. 2007

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?


Our Scary Economy – Spoiled Brat or Dope Junkie?

October 31, 2007

Chicken Smith View:

Spoiled Brat“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.

JunkieNow, 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.

Business CycleFor 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.

InflationWe 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.

Dollar IndexInflation, 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.

BernankeInstead, 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.

EconomySo 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

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.