(Reading time: 4 – 6 minutes)
Frankly, I didn’t really believe all these horrible economic predictions I have been reading over the last couple of years. I certainly didn’t believe with enough conviction to face my peers and colleagues with a “Hey, you might want to consider retrenching your portfolio. Depression coming.” The few times I did mention it, didn’t go well. So I stopped talking about it.
Unfortunately, too many of these “doom and gloomers” appear to have correctly predicted the sequence and relative timing of everything that has been unfolding from mid-2007. It’s ghastly.
In any case, for various reasons, a couple of years ago I started digging. Here is what I found out:
- Global Economic Analysis
- Calculated Risk
- Irvine Housing Blog
- patrick.net
- Dr. Housing Bubble
- Naked Capitalism
- RGE Monitor
Take a week or two and read through the archives. Judge for yourself the accuracy of the predictions. Evaluate their current predictions for the future. It’s worth it. We need to know, all of us. We delegate this stuff to our elected representatives because it’s complicated, time consuming and, frankly, usually rather boring. But there has been a leadership vacuum, so it’s time to pay attention now.
Capital flight
Most people in the US haven’t yet really figured out we have a problem… a real problem… this ain’t yo daddy’s recession. It’s grampa’s recession. Remember those boring stories? Uphill in the snow? Both ways? When the majority of people do figure out there is a problem, they are going to want what money they have left, in cash. This is called a “bank run” but it won’t be limited to banks, it will be on the entire financial industry (an oxymoron if ever there was one).
Mainstream Media
People employed by the mainstream media are paid to report news favorable to the company that owns the media outlet. For example, GE owns CNBC. GE will benefit from this bailout. CNBC was a major cheerleader for last week’s bailout debacle.
A note from the weekend
I read on Financial times or Bloomberg (I’ll try to find the link) that many banks are reluctant to participate in the “bailout.” Which is fine… except their their lack of participation is because they don’t want to accept limits on executive compensation, and the feel the market is “bottoming out.” These men are dunderheads.
A great idea!
I just read a comment on Calculated Risk: Give returning veterans a free house! It’s not like we don’t have enough empty houses. I think this is a great idea. I think it’s an excellent use of my tax dollars.
The Lunatic Fringe
There’s plenty of room out here in Gold Bug land, the Great State of Deflation, the Territory of Depression. Yeah, we’re all on the lunatic fringe. But life is good overall, people here are prepared.
Parting shot
Almost 1000 of what have been the most important corporations in the USA may not have their stock shorted. This means their stock is free to fall to 0. There won’t be anyone required to cover wagers of decreasing stock prices. That is, no one will be required to buy.
The DOW at 3000. Can’t happen? Ok.
The Dow Jone Industrials, 1920-1940.
Update
More interesting and informative links:
- My kinfolk were in Appalachia during the “real” Great Depression, of 1873. They probably didn’t even notice.
- From Bloomberg U.K. FSA to Create Code on Bankers’ Bonuses and Pay:
“We’ve been insisting in all our dealings that executive remuneration is on the agenda,” said Brown. “Where people devote hard work and are responsible in risk-taking they should be rewarded.”
It violates human nature to be “responsible in risk-taking” when risking is limited to other people’s money! This has been demonstrated over and over again through millenia of boom and busts, caused largely by taking risks with other people’s money.
Banking should be boring.
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{ 6 comments… read them below or add one }
Great wrap up!
I may send this to a few peeps around here who are also watching closely.
Please send it everyone. Really. 2-3 years ago all these people were laughed at. Sadly, no one is laughing any more.
I keep telling people about this, but far too many of them are complacent and completely oblivious to reality. It just baffles me why people can’t open their eyes and pay attention.
Tesh,
If you can get them to look at their retirement account’s performance over the last 18 months, you may be able to get some traction.
From what I understand, every action the government is taking is to compensate for reckless gambling based on an assumption of permanently increasing house prices. If this is true (and I think it is), I cannot see how anything they do will change the long term outcome, that is, home prices are coming down short of price control decrees or legislation. The intervention itself has broken my trust in the system as a whole. If a large number of other people lose this basic trust, that’s far more dangerous than house prices decreasing by 50%.
Why they assume the meddling in the inevitable will increase trust is completely beyond my comprehension.
*shrug*
I’m dealing with people who are basically permabulls with complete trust in the markets and the government. They are in for a rude awakening. The data is there, and I’ve pointed it out repeatedly, but they think it’s just temporary. It’s not that I don’t have data to show them, it’s more a question of them choosing blind faith and intentional ignorance, because the alternative is to admit that they are wrong, and that’s hard for most people. Especially when their livelihood or retirement depends on the happy kool-aid.
You’re right, the housing prices are the core of the gambling, and there is nothing that can keep them high. The fundamentals aren’t there, as Patrick keeps pointing out. The house of cards has to fall, not because of “market sentiment” or temporary cycles, but because of hard cold reality.
I added the feeds to my Google Reader. The mainstream media doesn’t always capture the essence of economic news and can be influenced by their corporate backers/owners.
WSJ, anyone?