It's not a recession it's a bumpy depression. CNN’s latest poll shows an almost even split between Americans who expect a big collapse within a year, and, er, Americans who aren’t quite as worried about it:
The summer slump continues. The market has been down for six straight weeks and it looks like it might tack another week onto the slide.
Where is the recovery?
Remember the “green shoots?”
The only green shoots I see are in the vacant lots where McMansions were supposed to blossom. The economy in contrast looks very red, the color of debt and other things.
The housing swoon that started in 2007 is greater now in percentage terms than what America saw during the Great Depression, and we are not at the bottom. In fact we are likely far from a bottom in housing as new federal rules come online over the next year that will make it more difficult for potential purchasers to get into a home.
The job front?
After a slight decline over the past year the official number of unemployed has ticked up back to 9.1%. This is the official number. The real number counting under employed and discouraged workers is much higher than this.
Thankfully they are off their highs. $3.50 a gallon seems like a bargain from what we thought we might be dealing with.
Though gas is off slightly the cost of other goods is still trending up. Bought coffee lately? It’s way more expensive than a year ago. Same for beer. You can see my priorities.
All of these things add up to a very dismal economic picture, yet the president, Chairman Bernanke, and Treasury Secretary Geithner still speak in terms of “recovery.” Come on, we’ve been through a lot. It’s time to level with the American people.
They can’t do this of course, because at least some part of the population continues to buy the spin. If the president were to say that things were actually going to you know where, and that new ideas needed to be employed the last believers would be lost and the doom and gloomers would throw up their hands and collectively say, “I told you so.”
This would precipitate a bigger slide in the markets than what we have seen. For most people in the investing world, retail investors to institutional traders, there is an acknowledgement that things are very bad indeed, but that they would be even worse if anyone from “officialdom” acknowledged this. So we putter along in a wink and a nod type of economy.
The problem with not acknowledging the severity of the economic challenges that we are presented with as a country is that sooner or later these problems will force us to deal with them. When this happens the pain will be even worse than if we had chosen to face them directly.
So what are we to do? Do we acknowledge officially the black hole we teeter on with the hope that with repentance we will be able to free ourselves from its grip over the long term? Or do we continue to pretend that the black hole is not there, even though we know that it is, until it is too late? The latter will probably give us a few more months without real pain but the former begins the process of renewal. We must begin the process of renewal.
I say this as a relatively young man. I am 35. Hopefully, God willing I will have time to recover from the economic calamity we are embroiled in. Let the market correct. Let housing prices come down even more. In the long run this will be both good for me and for our country.
But again, God willing, I have a “long run.” I can understand the fear that many in retirement and on the edge of retirement have about acknowledging what I think most people know to be true, that we are very near, if not already in the midst of a second Great Depression. Such an acknowledgement will hammer retirement accounts in the short term. But for the sake of the country, and most of its inhabitants, we must let the economy really correct.
It will grow again.
If we are wise (we can be wise about this) we will plant the next economy in the fertile earth of savings and real capital, and not in the shallow dust of credit and speculation.
China, as reported months ago has whole cities that are nothing more than empty apartment buildings. Things are sketchy there and we'll say it again FIND OUT HOW TO SHORT HONG KONG REAL ESTATE. Hong Kong has a history of RE crashes and the one coming looks to be a doosey.
I have to say that I still think the Fed goes for QE 3 before the end of the month. I just can't believe that having gone this far Bernanke is now ready to sober up. The "markets" are already begging for easing as witnessed by the now 6 week swoon we have seen.
Interestingly, when the bet was still solidly with QE 3 last week the big banks sold off ahead of the rest of the market. Perhaps the fix (fix?) really is in. Maybe reality will return to the stock market and the chips are really about to fall where they will. I can't see Bernanke doing this however, even if it's the right thing to do. He knows Keynesianism. He knows how to print. His life's work has been all about pouring "money" into the system.
I will say however that during his speech on Friday he did not look like the same Bernanke. There was a bit of fear in his eyes. At least that's what I thought.
I also find it interesting the financial press refuses to address what seems pretty obvious at this point. QE goes away and things are going to be very nasty, perhaps nastier than 2008. I suppose this is another argument for the end of QE. Perhaps the Fed has communicated to the financial outlets that they should be "responsible" as the Fed tries to end the ongoing infusion of capital into the economy. This is pure conjecture of course, but I could see it happening.
If Bernanke does pull the plug it is a testament to how God awful the situation is. Could the possibility of inflation be so great that even Bernake could see it? Could it be so bad that even this chief minister of the Keynesian religion is forced to repent. I just can't see it happening. Bernanke is not the repentant type. Reality however has an amazing ability to humble even masters of the universe.
Stephen Leep is an interesting guy. He has just written a new book, Red Alert, about China and it's rare earths monopoly. We need to listen to this guy. We need to be developing rare earth mines right now. These minerals are key to a 21st Century economy. At this moment China controls 95% of rare earths.
On silver he makes the point that not only is it real money, it is also a vital industrial commodity. Solar for instance needs silver to work.
"I think silver is heading for $100 [and possibly] much, much higher numbers," he says. "It could become so valuable that like gold in the Depression," the government will confiscate individuals' silver holdings.
China has dropped 97 percent of its holdings in U.S. Treasury bills, decreasing its ownership of the short-term U.S. government securities from a peak of $210.4 billion in May 2009 to $5.69 billion in March 2011, the most recent month reported by the U.S. Treasury.
“We’re going to see more financial shenanigans, we’re going to see more money pushed off balance sheets” as banks seek to mask the extent of their lending to local governments, said Singapore-based Fraser Howie, who co-wrote “Red Capitalism: The Fragile Financial Foundation of China’s Extraordinary Rise,” and has been an investment banker in Asia for almost two decades.
So long the stock market, gold, silver, oil. Short the dollar. You don't need your money to be worth anything anyway America. “That cash injection will have the normal inflationary knock-on impact, driving back up commodities, supporting industrial stocks, dragging the financials up with them… I think it’s all about the monetary injection trade,” Maughn told CNBC.