Wednesday, November 19, 2008

Article at Marketwatch says...

...time's running out for our communities to learn the arts, crafts, and skills we need to become self-sufficient.

PAUL B. FARRELL
30 reasons for Great Depression 2 by 2011
New-New Deal, bailouts, trillions in debt, antitax mindset spell disaster
By Paul B. Farrell, MarketWatch
Last update: 11:53 a.m. EST Nov. 19, 2008

ARROYO GRANDE, Calif. (MarketWatch) -- By 2011? No recovery? No new bull? "Hey Paul, why do you keep talking about a bigger crash coming by 2011?" Readers ask that often. So here's a sequel to my predictions of 2000 and 2004, with a look three years ahead...

...Today, over eight years later [since 2000], the market is still roughly 40% below its 2000 peak.Factor in inflation and the average stock has lost well over 50% of its value. Stocks have proven to be a very big loser, a bad investment for Americans, thanks to Wall Street's selfish greed, plus the complicity and naiveté of politicians, press and public...

...Yes, they knew. And still both Paulson, a Wall Street insider, and Greenspan's successor, Ben Bernanke, a Princeton scholar of the Great Depression, stayed trapped in denial and kept happy-talking the public for months after the meltdown began in mid-2007. Get it? While they could have put the brakes on this meltdown years ago, our leaders were prisoners of their distorted, inflexible views of conservative Reaganomics ideology...

... Scan these 30 "leading indicators." Each problem has one or more possible solutions, but lacks unified political support. Time's running out. We're already at the edge. Add up the trillions in debt: Any collective solution will only compound our problems, because the cumulative debt will overwhelm us, make matters worse:

1. America's credit rating may soon be downgraded below AAA

2. Fed refusal to disclose $2 trillion loans, now the new "shadow banking system"

3. Congress has no oversight of $700 billion, and Paulson's Wall Street Trojan Horse

4. King Henry Paulson flip-flops on plan to buy toxic bank assets, confusing markets

5. Goldman, Morgan lost tens of billions, but planning over $13 billion in bonuses this year

6. AIG bails big banks out of $150 billion in credit swaps, protects shareholders before taxpayers

7. American Express joins Goldman, Morgan as bank holding firms, looking for Fed money

8. Treasury sneaks corporate tax credits into bailout giveaway, shifts costs to states

9. State revenues down, taxes and debt up; hiring, spending, borrowing add even more debt

10. State, municipal, corporate pensions lost hundreds of billions on derivative swaps

11. Hedge funds: 610 in 1990, almost 10,000 now. Returns down 15%, liquidations up

12. Consumer debt way up, now at $2.5 trillion; next area for credit meltdowns

13. Fed also plans to provide billions to $3.6 trillion money-market fund industry

14. Freddie Mac and Fannie Mae are bleeding cash, want to tap taxpayer dollars

15. Washington manipulating data: War not $600 billion but estimates actually $3 trillion

16. Hidden costs of $700 billion bailout are likely $5 trillion; plus $1 trillion Street write-offs

17. Commodities down, resource exporters and currencies dropping, triggering a global meltdown

18. Big three automakers near bankruptcy; unions, workers, retirees will suffer

19. Corporate bond market, both junk and top-rated, slumps more than 25%

20. Retailers bankrupt: Circuit City, Sharper Image, Mervyns; mall sales in free fall

21. Unemployment heading toward 8% plus; more 1930's photos of soup lines

22. Government policy is dictated by 42,000 myopic, highly paid, greedy lobbyists

23. China's sees GDP growth drop, crates $586 billion stimulus; deflation is now global, hitting even Dubai

24. Despite global recession, U.S. trade deficit continues, now at $650 billion

25. The 800-pound gorillas: Social Security, Medicare with $60 trillion in unfunded liabilities

26. Now 46 million uninsured as medical, drug costs explode

27. New-New Deal: U.S. planning billions for infrastructure, adding to unsustainable debt

28. Outgoing leaders handicapping new administration with huge liabilities

29. The "antitaxes" message is a new bubble, a new version of the American dream offering a free lunch, no sacrifices, exposing us to more false promises

Will the next meltdown, the third of the 21st Century, trigger a second Great Depression? Or will the 2007-08 crisis simply morph into a painful extension of today's mess to 2011 and beyond, with no new bull market, no economic recovery as our new president hopes?

Perhaps some of the first 29 problems may be solved separately, but collectively, after building on a failed ideology, they spell disaster. So listen closely to "leading indicator" No. 30:

At a recent Reuters Global Finance Summit former Goldman Sachs chairman John Whitehead was interviewed. He was also Ronald Reagan's Deputy Secretary of State and a former chairman of the N.Y. Fed. He says America's problems will take years and will burn trillions.

He sees "nothing but large increases in the deficit ... I think it would be worse than the depression. ... Before I go to sleep at night, I wonder if tomorrow is the day Moody's and S&P will announce a downgrade of U.S. government bonds." It'll get worse because "the public is not prepared to increase taxes. Both parties were for reducing taxes, reducing income to government, and both parties favored a number of new programs, all very costly and all done by the government."

Reuters concludes: "Whitehead said he is speaking out on this topic because he is concerned no lawmakers are against these new spending programs and none will stand up and call for higher taxes. 'I just want to get people thinking about this, and to realize this is a road to disaster,' said Whitehead. 'I've always been a positive person and optimistic, but I don't see a solution here.'"

We see the Great Depression 2. Why? Wall Street's self-interested greed. They are their own worst enemy ... and America's too.


Yep, Paulson and his cronies knew it - but so did you, class. For example, I've been writing about this since 2005, both at my old blog and later at this one. And I put my money where my mouth...er, word processor was. In July 2005 we put our house up for sale - it closed in September, and in October of 2005 we bought our new, energy efficient, townhouse located 2 blocks from mass transit, within walking (and biking distance) of my husband's job and the kid's high school, and it's within biking distance of the university, which worked well for me at the time and will again in the future when I go for my PhD. The older boys ride their bikes or use mass transit to get to work and do the same when they're taking classes. We could reasonably walk to get groceries, too, and have already enjoyed the short stroll to the nearby Walgreens. We used to money we made selling our old house to pay off both cars, pay off most credit card bills and consumer loans, and put a nice 15% down on the new place so we'd have a very affordable mortgage - a nice fixed rate, 30 year mortgage, since I have always paid our bills and watched our credit like a hawk.

No flaky adjustable rate financing for me - I set my budget for a mortgage we could afford that wouldn't go ballistic on us and stuck to it. I've told you before how we had to dump one realtor for refusing to show us homes in the price range I selected (so she could get a commission and her broker buddy could get a higher fee, I presume). I feel sorry for the people who trusted their realtors and mortgage brokers, but then again, they hired these people to act in their best interest - is it too much to expect for people to do their jobs? Maybe it is in this day and age, but I am a very, very stubborn person and I knew what my criteria was and I looked until I found something that worked well for all of us and fit in the budget. If we hadn't found anything I would have rented until we did. That's just me.

And you could have done similarly, class - repositioned yourself before the market started getting rough in 2006 and started tanking in 2007. But most people did not have their ear to the ground and take what they were hearing seriously. Most people never gave a second thought about it - too busy watching Brittany Spears life implode to notice their own situations might not be "all that."

But there may still be time. Maybe. Possibly. Hopefully. You know what you need to do - the question is, will you?

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