stock market in free fall...

[BacktoBasics]

The only logical thing to do at this point is shrink the population and enter into another war.

[DarkReign]

Jobs report came out. 533,000 jobs cut last month, (most in 34 years) unemployment jumped to 6.7% (worst in 15 years) no end in sight...

mortgage report came out. 10% of the mortgages in the US are approaching foreclosure...up almost another percent in one month. At this point, you can figure that every new job loss is gonna be another foreclosure.

The snowball is getting bigger and still rolling downhill.

I read an interesting article today contrasting the current crisis with the Great Depression. In the Depression, it is said, Keynesian stimulus could have some lasting impact because the U.S. was the largest creditor nation on Earth.

Now the U.S. is the biggest debtor nation on Earth. While trying to flood the economy on the demand end might stop this deflationary cycle in the short term, the effect if the global economy starts turning around will be hyperinflation of the dollar and collapse of the U.S. economy.

So, if the stimulus does not work, the U.S. will collapse into a lasting depression. If the stimulus does work, the U.S. will collapse into a lasting depression a couple of years later.

Either way, we are at the end of the post-World War II era of American economic prosperity.

Wheeeeeee!!

So, the better question...

Who to hang? That was rhetorical. I have at least a rudimentary understanding to know how this happens. Politicians, economists and namely the Fed seemed to think we can just grow and grow forever unimpeded. And they did/do everything in their vast power to capitalize and inflate that projected growth, no matter how weak and shoddy the projection is/was.

I remember reading something in the PF about an ancient even called "Jubilation" or "The Jubilee". IIRC, it was a once-every-seven-years event for debt relief. Basically, instead of trying to grow and grow and grow, a responsible economic policy knows that the books can be cooked anyway the beneficiaries like.

With that in mind, you would forcibly have a 7 year market correction by relieving debt en masse. Obviously, your economy takes a hit as does your currency, but it isnt anything catastrophic and you have 7 years to grow out of it.

Its basically an understanding that there will be debt defaults one way or the other, so instead of ignoring history and thinking all debts will be repaid, you might as well adjust your market manually and as "softly" as possible so that your economy doesnt inflate itself to a point of no return.

Which, I believe, we are at right now.

Then again, thats from memory, and mine isnt reliable.

Thanks baby boomers. Youve been wonderful.

[BacktoBasics]

I don't know enough about all this to make the best calls on what should be done but I do know that this economy would be massively better if they'd figure out a way to get the banks back to lending. Even lending in a more responsible matter would make a massive improvement. I do know that if the banks are lending the auto industry has no need for a bailout.

[2centsworth]

I read an interesting article today contrasting the current crisis with the Great Depression. In the Depression, it is said, Keynesian stimulus could have some lasting impact because the U.S. was the largest creditor nation on Earth.

Now the U.S. is the biggest debtor nation on Earth. While trying to flood the economy on the demand end might stop this deflationary cycle in the short term, the effect if the global economy starts turning around will be hyperinflation of the dollar and collapse of the U.S. economy.

So, if the stimulus does not work, the U.S. will collapse into a lasting depression. If the stimulus does work, the U.S. will collapse into a lasting depression a couple of years later.

Either way, we are at the end of the post-World War II era of American economic prosperity.

think it through. I'm all for being a sour puss, but you're taking it to an extreme and IMO irrational level.

*you have just stated that the federal government can control money supply. So when the economy turns around why can't they shrink money supply
* demand/this recovery isn't going to happen overnight. This will be a gradual recovery. But even if it was a bubble recovery, such as the tech boom of the late 90s, monetary policy was shown to be very effective in controlling inflation.
* for the trillions added by the fed, trillions has been lost.

[DarkReign]

think it through. I'm all for being a sour puss, but you're taking it to an extreme and IMO irrational level.

*you have just stated that the federal government can control money supply. So when the economy turns around why can't they shrink money supply
* demand/this recovery isn't going to happen overnight. This will be a gradual recovery. But even if it was a bubble recovery, such as the tech boom of the late 90s, monetary policy was shown to be very effective in controlling inflation.
* for the trillions added by the fed, trillions has been lost.

You seem to be the absolute lone wolf of optimism. Not that I discount your opinion or anything, but tried and true folks, former SoTs and Fed chairmen are saying the "End is nigh."

As in, total collapse of our economic structure. Worse than the Depression.

What makes you so Happy-Harry about this?

[BacktoBasics]

You seem to be the absolute lone wolf of optimism. Not that I discount your opinion or anything, but tried and true folks, former SoTs and Fed chairmen are saying the "End is nigh."

As in, total collapse of our economic structure. Worse than the Depression.

What makes you so Happy-Harry about this?

What would define "total collapse of our economic structure"

and in your opinion what happens next? How do you restructure?

[Extra Stout]

think it through. I'm all for being a sour puss, but you're taking it to an extreme and IMO irrational level.

*you have just stated that the federal government can control money supply. So when the economy turns around why can't they shrink money supply
* demand/this recovery isn't going to happen overnight. This will be a gradual recovery. But even if it was a bubble recovery, such as the tech boom of the late 90s, monetary policy was shown to be very effective in controlling inflation.
* for the trillions added by the fed, trillions has been lost.

When the global economy starts to turn around, the U.S. will have to pay the piper for its structural debt. Creditors won't buy up U.S. securities forever, and when they start looking elsewhere for better returns, the U.S. will start monetizing its debt. Or else do you think voters will say, "So you want to default on Social Security and Medicare while raising taxes across the board by 10%? Sounds great!" And if the U.S. can't find buyers for its securities, how is it going to control the money supply?

Once the U.S. starts monetizing its debt, hyperinflation will take hold.

Long-term, I do not expect the United States to turn into Zimbabwe, but I definitely see something like an L-shaped downturn where the economy shrinks 15% and remains stagnant thereafter.

[CosmicCowboy]

And to prove just how ed up the "professional" money guys are the market jumped 200 points today on the news that 1.6 million people have lost their jobs in the last 6 months and that 10% of the existing mortgages are about to be foreclosed on...remember...all this bailout to date has been to fix the problems caused by the ones that have ALREADY been foreclosed on...

[RandomGuy]

I read an interesting article today contrasting the current crisis with the Great Depression. In the Depression, it is said, Keynesian stimulus could have some lasting impact because the U.S. was the largest creditor nation on Earth.

Now the U.S. is the biggest debtor nation on Earth. While trying to flood the economy on the demand end might stop this deflationary cycle in the short term, the effect if the global economy starts turning around will be hyperinflation of the dollar and collapse of the U.S. economy.

So, if the stimulus does not work, the U.S. will collapse into a lasting depression. If the stimulus does work, the U.S. will collapse into a lasting depression a couple of years later.

Either way, we are at the end of the post-World War II era of American economic prosperity.

I wuz gonna move to Iceland, because they are relatively insulated from energy shocks, but they are in for an even worse time than the US, and may pretty much become a Russian colonia, if Putin decides to bail their dumb asses out.

With all that global warming, my next stop is Greenland baby. A vast unclaimed continent, and all I gotta do is learn Danish.

[RandomGuy]

When the global economy starts to turn around, the U.S. will have to pay the piper for its structural debt. Creditors won't buy up U.S. securities forever, and when they start looking elsewhere for better returns, the U.S. will start monetizing its debt. Or else do you think voters will say, "So you want to default on Social Security and Medicare while raising taxes across the board by 10%? Sounds great!" And if the U.S. can't find buyers for its securities, how is it going to control the money supply?

Once the U.S. starts monetizing its debt, hyperinflation will take hold.

Long-term, I do not expect the United States to turn into Zimbabwe, but I definitely see something like an L-shaped downturn where the economy shrinks 15% and remains stagnant thereafter.

Yup. Scary part is what happens when/if foreigners quit buying US treasuries.

[Viva Las Espuelas]

Yup. Scary part is what happens when/if foreigners quit buying US treasuries.

i've heard when investors start unloading their hedge funds is when the crap will really hit the fan. i can't understand why these hedge funds aren't regulated at all.

[MannyIsGod]

Krugman was worried that we'd still be losing 450k-500k jobs a month and we came out over the high end of that prediction so that cannot be good.

[2centsworth]

You seem to be the absolute lone wolf of optimism. Not that I discount your opinion or anything, but tried and true folks, former SoTs and Fed chairmen are saying the "End is nigh."

As in, total collapse of our economic structure. Worse than the Depression.

What makes you so Happy-Harry about this?

I can point to others who also paint a rosier picture, such as Ben Bernanke.

I'm starting to think the deleveraging that we're going through may be the wake-up call we needed.

[DarkReign]

What would define "total collapse of our economic structure"

Honestly, I am no economist and my understanding of such things is rudimentary at best.

With that said, what would I define as economic collapse?

The very path we are walking right now, not to put to fine a point on it. The conglomeration of what seem unrelated events will be the downfall of our way of life.

The Fed printing more money, pumping it into a failing economy hoping to stave off a recession/depression.
The Fed buying foreign held T-Bills.
A failing job market thats about to layoff 1 in 4 working adults.
A government capitulant to the money-men in the Fed.
A government using even more promised, make-believe money to bail out a terminal financial sector.
A deplorable savings rate of American citizens.
A national debt based on even more promised money to an entire generation that isnt even eligibile yet.

These are just a few situations I believe to be increasingly important. I believe what we are seeing is the elimination of the middle class. No more 401k money, savings money, money for education, money for anything.

There will be "haves" and "have nots". I believe no one person in this world truly understands what is happening before their very eyes. You have some who think that everything is going to be fine, just a bad recession. Then you have others who think the sky is falling.

Both sides of the argument have their experts and reputable sources, but the bottom line is...it isnt good. Its all very bad. Our very way of life in America is going to be challenged at best and crushed at worst.

and in your opinion what happens next?

You'll work 60+ hours a week for menial pay that will cover the cost of leasing the property you supposedly own, paying an exorbiant amount for food and heat, owning one car per family with no health insurance or retirement account.

Personally, I feel bad for people having children right now.

If youre already in this situation, get used to it, because it has no end until the day you die.

BTW, what I just wrote is the best case scenario, IMO.

How do you restructure?

You dont. If you use the official national debt number ($10+ trillion) Every family in America right now, rich or poor, owes some number below $250k not including their own debt.

If you use the national debt number others use, that factors in the promised en lements like SS and Medicare/aid, every American family owes some number less than $1.5 million.

Dont know about you, but I dont have either of those numbers. Nor does our government. We owe. A lot. In less than 10 years, our economy wont even be able to pay the interest on our debt, much less for roads, SS, medicare, military, etc.

There is no "out from under" this. Its a collapse. Maybe anarchy. Maybe revolution. Maybe capitulation. Maybe sovereignty. Maybe anything. This be uncharted territory.

[MannyIsGod]

At this point - I'm mostly worried about how I will be able to go to school over the next few years. I'm not in the same job market as everyone else, so I'm not worried in that regard but everytime I hear news about how credit is retracting I really fear for my ability to finance my education. I am happy we have Obama in office and a Democratic congress because if nothing else I believe they will put forth initiatives to keep people pursing degrees but I do think about it constantly now.

I think with unemployment approaching double digits in the coming year its going to be hard for people to work and go to school since those jobs are some of the hardest hit. I mused a while back about wondering if this would supplant 9/11 as the major event of my lifetime and I believe more and more each day that it might. We live in truly historic times.

[CosmicCowboy]

You can always borrow tuition money from JimCS...

[MannyIsGod]

I can point to others who also paint a rosier picture, such as Ben Bernanke.

I'm starting to think the deleveraging that we're going through may be the wake-up call we needed.

I think this country will have to feel harsh pain on the level of the general public before that wake up call is realized. I know there is going to be a good deal of that next year, but I'm not sure how harsh its going to be and how long it will stick. We've had it to easy, but every bill must be paid in the long run and you bet your ass no one gets a free ride.

[MannyIsGod]

You can always borrow tuition money from JimCS...

LOL

The funny thing is I'll likely be in CS!!!

I could just go to his poker game and have him finance my education in that manner.

[BacktoBasics]

I think this country will have to feel harsh pain on the level of the general public before that wake up call is realized.

Well its going to have to get a lot worse for that to happen. I've spent a lot of time talking to my peers in the auto, boating and motorcycle industry and the more I talk to these guys the more confused I am. Its supposed to be bad real bad right now but everyone is singing the same song..."there are no shortages of buyers, no shortage of people who want to buy". Only common denominator in all of it is that the banks flat aren't lending. I hear it every day. "I took ten applications today and not one got approved". So on and so forth. Same kind of apps that would have flown a year ago. They're going to have to lend at some point. Responsibly yes but they can't cut out the meat of their profit and expect to continue on like this.

To feel the "harsh pain" of reality this situation is going to have to grow ten fold because people either don't care or don't have a clue as to whats going on. Most are continuing to live life at the same old beat.

[2centsworth]

When the global economy starts to turn around, the U.S. will have to pay the piper for its structural debt. Creditors won't buy up U.S. securities forever

Suppyling your biggest customer credit makes sense to me. China loves them some USA.

, and when they start looking elsewhere for better returns, the U.S. will start monetizing its debt.

Interest payments are still reasonable. looking elsewhere for better returns contradicts your premise of a deteriorating US.

Or else do you think voters will say, "So you want to default on Social Security and Medicare while raising taxes across the board by 10%? Sounds great!" And if the U.S. can't find buyers for its securities, how is it going to control the money supply?

we just sucked out trillions of dollars in consumer credit. This economy isn't overheating anytime soon. If you want to talk about the en lements timebomb as the end, well I'm with you if we don't do something about it first.

Once the U.S. starts monetizing its debt, hyperinflation will take hold.

when do you expect that to happen? huge market for our securities and we have had zero problems marketing them that I know of.

Long-term, I do not expect the United States to turn into Zimbabwe, but I definitely see something like an L-shaped downturn where the economy shrinks 15% and remains stagnant thereafter.

capitalism can't remain in one stage of the business cycle indefinitely.

[MannyIsGod]

And while I think 2cents was talking about the people in charge more than anything, I simply feel that the public's will and wants will overcome that unless they change fundementally.

[DarkReign]

To feel the "harsh pain" of reality this situation is going to have to grow ten fold because people either don't care or don't have a clue as to whats going on. Most are continuing to live life at the same old beat.

And while I think 2cents was talking about the people in charge more than anything, I simply feel that the public's will and wants will overcome that unless they change fundementally.

Sadly, my faith in other Americans has diminished every year since birth. We are a fat, lazy, en led people (in general) with no interest in the real world, but have an adept knowledge of celebrity birthdays.

People I know, respect and love absolutely refuse to see this situation as nothing more than a bump in the road.

It may be a bump, maybe theyre right. But I guess with a telescope in space, the Grand Canyon looks like a bump, too.

[BacktoBasics]

Sadly, my faith in other Americans has diminished every year since birth. We are a fat, lazy, en led people (in general) with no interest in the real world, but have an adept knowledge of celebrity birthdays.

People I know, respect and love absolutely refuse to see this situation as nothing more than a bump in the road.

It may be a bump, maybe theyre right. But I guess with a telescope in space, the Grand Canyon looks like a bump, too.

I'll echo that point to the millionth degree. I'm in full blown panic mode and everyone around me is like "chill dude it'll be better after the new year"..."what goes around comes around it'll pick up"..."just an abnormally slow season". I guess for now thats good for me because people are still buying. Otherwise I'd be totally ed.

I just don't see how or what could right the ship.

[DarkReign]

I just don't see how or what could right the ship.

Nor do I. I mean, I have my ideas. But those dont include our current leadership and would require some temporary suspensions of government.

[BacktoBasics]

Nor do I. I mean, I have my ideas. But those dont include our current leadership and would require some temporary suspensions of government.

The scope of the downfall is entirely too big to pinpoint on one thing or even a few things. So much is wrong and so much is unfixable. Its like a women whose had 12 kids...no matter what she does the tennis figure isn't coming back.

I have to believe that fixing the banking sector would be the right place to start.