United States Heading towards a Depression?

You can burn your bank statements, 401k/IRA account balances, ATM receipts, and debit card printouts. They burn just as well as cash.

It should keep you toasty for a few of those cold winter months.

 

Now that the G20 meetings are over, the stock markets should going down again...

All the G20 nations want to do is print more money and SDRs. Commodities market is the place to be in....

 

In 1979 unemployment was 5.8% and the rate of inflation was in the double digits. The lesson is that as long as the price of oil remains cheap and there is loose credit, the party will continue.

It wasn't until Paul Volcker started to tighten that the US had the double dip recessions of 1980 and 1981-1982.

During the Weimar Republic it was cheaper to burn money than firewood.

 

The ultimate fix to the issues at hand in the economy is to RAISE INTEREST RATES IMMEDIATELY.

Interest rates should be raised to double digits. Doing so will stave off inflation, and bring our monetary system into check by raising the value of our currency. Its gonna hurt, but its the only real way to bring all this shit to a head.

At the same time the government MUST STOP SPENDING MONEY IMMEDIATELY. PERIOD!!!!

Problem solved. You all know where to send the thank yous!

 

When do you think they'll raise them?

 

I was truly convinced it would happen last spring when I locked my barely used line of credit. I was in fear of having a variable on it, especially if I wanted to take out the cash. Stupid me, now it would be low as hell had I left it alone. No matter anyway, the morons at the bank closed the line to make their bottom line look good.

Note to self, next time you have a line, USE IT ALL before it gets shut down.

Any time in the foreseeable future? I don't see it happening as long as there is a moron the White house, and bitch for a speaker and tax cheat as treasurer.

 

The above is nuts. Right now the economy remains in free fall. Unemployment is up to 8.5%. The recorded recession is closing in on the 2nd longest in history. Auto sales in the US are at an annualized rate of less than 10 million. Last year 13.2 million new cars were sold and per Bloomberg...

Right....high interest rates would simply kill auto sales....basically the largest component of durable goods and an employer of millions including direct employees of all auto firms (including foreign and domestic w/in the US) and all parts manufacturers.

Virtually any kind of consumer purchase involving credit would shrivel and die....as if things aren't bad enough. The business folks I know who sell items priced at ranges from the mid to high $100's and up and generally live off of credit sales would all die off. Yup. Good for the economy.

Some of the inventory of excess housing is being absorbed. Want to see that die. Raise interest rates.

Want to really expedite the crash of housing. Make it impossible to buy up houses through dramatically higher interest rates....and the loss in values we have seen to date will seem like nothing as housing prices totally collapse.

You like seeing people out of work? Go ahead and raise interest rates as you suggested and you'll be in 7th heaven watching people lose their jobs.


We do have an absurd amount of excess liquidity. It is scary scary scary. Here are scenarios that can kill the economy far worse than it is already:

Foreign investors stop buying American debt. Ugh....interest rates will have to rise through the roof. That will cause all the negative results described above. It could happen.

Inflation will occur because of incredible excess liquidity in the market in and of its own accord.

This will be mitigated by the following: 1. commodity prices are dramatically lower around the world due to the world wide recession. All mineral commodities except for a few (gold) have had huge price decreases because of demand and supply. 2. Lower wages. High unemployment means lower wages. hmmm You were sitting pretty making $80/hour //$3200/week//$160,000/year. Now you are out of work and can't find anything at all. That guy is going to take cheaper work....any work in a second.

1. I'd get people back working .....

2. I'd emphasize development of non oil energy....every which way possible which makes most sense. The day we seriously cut back on imported oil is the day we see some greater level of American economic freedom. I'd invest in this stuff....and see if it can become an export business. America desperately needs to change its balance of being a buying nation rather than a selling nation.

3. Figure out a way to cut the costs of health care. I don't give a rats @ss if it is called socialized medicine/f*ck the doctors/f*ck the insurers/f*ck the medicine providers or what. Health care sucks dollars out of pockets like it is going out of style. Its a miserable system.

4. Cut govt expenses. Here I agree w/ Mia. None of the pols are really for cutting expenses. I guess the only guy who is for this is Ron Paul.....and he is as likely of being elected as another famous Texan--Anna Nicole Smith (okay his chances are better than hers).

I'd cut defense procurement. Per Pentagon auditors at GAO (written 3 days ago)....

Aggregate cost overruns exceed $1 trillion. That isn't how much the systems cost....that is how much extra they cost over initial budgets. This has been going on unchanged for years. (something is f*cked up in Dodge)

Then I'd beat through the govt....like Obama said he was going to do....not what he did with the $410 budget continuation bill that passed.

I'd cut govt cr@p. I'm not sure where....but I'd cut. (I'd probably try and figure out a way to keep Cheney from getting any kind of govt pension money...--wouldn't be big...but it would be fun--)



Once the economy is moving out of recession....job growth is occurring..not shrinking then I'd attack the excess liquidity w/ slowly higher rates. But I would never touch it now....with things as bad as they are.

 

Could you imagine an environment where credit is drying up (today's situation), then raising interest rates, which removes cash out of the economy?

So no cash AND no credit for the average joe.

I wouldn't be surprised if that led to riots and threats of overthrow of the government.

It would probably begin a complete breakdown of the social fabric.

 

No, no, no.. This the longest recorded doom and gloom fest in history. Raise interest rates, stop spending. Problem solved.

Let's move on.

Things are not that bleak. But they will be if action is not taken with regard to interest rates.

 

That would be correct if the government would let the market work. Their intervention in not allowing certain companies to fail and bad debt to be liquidated is going to exacerbate and prolong the credit correction.

 

Spending is not the solution.

Just like Bush, Obama will use the Federal printing press to basically appropriate the value of every dollar China, Russia, OPEC, and other nations has without invading a single country.

Unfortunately, it also robs every American here of their wealth as the Federal government spends the dollars we've saved.

And, where does all this money go? To the banks to save them from bankruptcy and their own incompetence.

Bailouts & bonuses to the people who got us in this mess. It is not a path to success. Thank you Bush & Obama.

 

I was originally against the banker bailout, but I think that if we didn't save the banks last fall the whole entire financial system would have collapsed cause of all the toxic assets worldwide. Because worldwide people don't have FDIC and there would have been tons of runs on the banks worldwide and since there isn't enough money to backstop it all it would have wiped us all out too.

Supposedly when lehman brothers collapsed there was a "run on the banks" worldwide in the money market funds until the fed reserve put a guarantee up hours later.



Where I draw the line is just handing out the money just for the sake of handing it out to the banks without any strict accounting and also for the stimulus bill, mortgage bill, auto bill, etc from obama. I also think the printing and borrowing of money by the fed and lowering interest rates is the wrong direction to take. Its time we shrink our government instead of expand it and make credit tight so we don't try and reinflate the bubble, unfortunately what we are trying to do now.

 

Let the banks fail.

Why are they so much more important than the average taxpaying citizen?

The worst that would have happened is the government would have to shrink, the national banks would disappear, and wealth would go to the producers (rust belt, farmers, energy) and not the paper-pushers (Wall Street/Washington).

The local banks didn't create this mess. It was the paper-pushers in the national banks.

 

But my point is that it would have created a mass panic and brought down everyone eventually. Like a domino effect. No one can prove it would have, but I sort of see it as have been at least possible. Even though the bailout didn't really "solve" anything, I think the fact it stopped a bank panic was what it was to acheive. With that said the way its been done was a joke. Paulson was giving money left and right. He should have only given it to banks that had major systemic risk and took them over and nationalized them and cleaned them up like a receivorship. Yeah I know its not capitalistic to take something over, but the government does when a major industry is bankrupt. Letting them continue on as business as usual while getting bailed out is the real crime.

 

Banks are not entitled to exist. If they get to break the rules, break the law, and be incompetent, what hope is there that the US can ever recover from this financial mess?

A failed bank is a warning to investors, customers, and society that idiocy (not matter how well compensated) will not be tolerated.

The way it is now, the Federal government is holding the country hostage via the national banks.

Believe it or not, life will go on if Bank of America, AIG, Chase, and Citbank disappear. The US survived quite fine without these failed operations. Just like life went on after 9/11.

It's the Federal government response that makes things infinitely worse (bailouts and war).

 

I've been following this thread for months now.

It is very interesting to watch it evolve.

But at the same time I'm shocked at some of the ignorance and blind stupdity some people express...

The majority opinion doesn't necessarily make it the right one. For anyone who wants to understand better about what is going on - do your research! Open your eyes and don't let yourself be blinded by politicians nice talk or by opinions and viewpoints in mass media.

 

He's promoting his site and a new book, but I understand that his credit ratings are some of the most trustworthy in the business:

JPMorgan Chase, Goldman Sachs, Citibank, Wells Fargo and More Than 1,800 Other Institutions Believed to Be at Risk of Failure Based on Fourth Quarter 2008 Data

 

Part two of Jer's solution to everything.

Less Government = better government.

(if there is such a thing)

 

I don't think the historical record supports this... I've been digging into prior bank panics and 2008 makes 1876 or 1890 or 1907 look like a walk in the park. (These are the pre-FDIC, pre-Federal Reserve panics we're supposed to be afraid of).

Thing is, we do have the FDIC now - and it would have been cheaper to shut down the banks and pay out those guarantees. The movement of deposits to safer local banks and credit unions would have strengthened the already strong banks, and allowed them to expand credit creation.

We have a system designed to deal with panics - and we ignored it while insiders like Paulson & Geithner came on TV to threaten us with doom & gloom. The extraordinary reaction of government has probably contributed to the magnitude of the panic.

No... the planes weren't going to fall from the sky if we didn't pay off the billionaires.