Wednesday, June 01, 2011

A Depression? It's Nice That Someone Finally Noticed

Micro-fractures in the economy give way to larger, harder to repair ones -
"Interest rates are amazingly low and that, thanks to Ben Bernanke, is driving everything," Yastrow said. "We’re on the verge of a great, great depression. The [Federal Reserve] knows it.
The Real Effect
 Almost two years ago, I made the following predictions - 
 So what happens next?

  • The US dollar is going to tank (think Iceland)
It has to. There is massive unemployment already and while the rate is slowing slightly that is hardly comforting. The U.S. bond market is going to implode resulting in the US’s first defaults.
Let's review - Note the red arrow. That was June of 2009 when that prediction was made. The red circle on the right is the recent all time low that was recently achieved.

  • Banks claim ownership of 401ks and the government moves to “protect” them by seizing them.
I would assume they would be placed in a new 'secure conservatorship’.

We see evidence of that here.

  • Obama loosens the unemployment restrictions so more can draw from the government and then moves the unemployed to the government ranks. At the same time, States cut off the most poor creating a "humanitarian crisis". (Think California) 
What was it, 99 weeks of unemployment? Further, Congress is eying up SNAP.
  • Commercial Market collapse continues
  • The second wave of the housing market collapse hits (The less risky loans start to default)
SFGate states -
“On the supply side, an assortment of factors seems poised to trigger new waves of foreclosures that will continue to bloat inventory. They include the expiration of foreclosure moratoriums, more underwater "walk-away" homeowners, pending recasts of option ARM loans, rising delinquencies in prime and Alt-A loans, and soft sales of high-end homes.”
Another chart for you, note the black arrow. (Everyone at the time was calling for an upswing in prices)
  • Commodities surge (Massive inflation)
Gold, silver, food are surging – big banks, investment houses are purchasing now. We are now in the Inflation/Deflation death spiral.
  • Unemployment highs
After the next 'wave' hits, employers will cut even deeper in an attempt to staunch the flow of red ink that will inundate most companies.

Now, I will concede that my thinking at the time was anticipating a 9 month - 1 year "upturn" and that has clocked in at about double that length.  Of course, we all know the Fed is papering over everything they can to make things appear better. What is occurring at this moment is the thin veil of scams is tearing away and people are getting wise. Once again, the question becomes exactly what is the government going to do this time? Are they going to print more or invade those to whom we owe money?

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