Despite our government intelligentsia insisting that we are in a recession, they are wrong. We are at the beginning of one whopper of a Depression.
In a recession, the economy gets a nose bleed, and possibly a mild fever.
Traditionally Dr Fed will tell us to take a few aspirins, get a good night’s sleep, and get back to business as usual , in the morning.
In a Depression, the economy is in the process of dropping dead, with a cure beyond the miracles of modern economic medicine.
Businesses have failed, with hundreds of thousands still in a death throe.
People have lost their savings, their jobs, and their homes.
New waves of loan defaults are on the way:
1. Prime Adjustable Rate Mortgages(PARM’s) Credit worth people who bought bigger and more expensive than necessary, by using the leverage of clever mortgages, which ballooned in 5 or 6 years(2010-2012) so they could refinance their much move valuable homes, or sell them at a profit prior to the adjusting.
2.Commercial Real Estate mortgages. A. The flood of retail store closings and mall bankrupcies has just begun as consumer spending continues to shrink.
B. There are hundreds of thousands of small and medium commercial companies in construction supply, or commercial maintenance or manufacturing or any other commercial industry, who are literally holding on by their finger nails. I see it every day, and I hear it in the frightened voices of my customers and suppliers.Many of them are failing, and will take the commercial/ industrial real estate market down with them.
3. Home equity loans- Their time is due. Too many people pulled equity out of their homes and now there is less and less collateral in their homes to cover their loans.
4. Credit Card defaults.The banks are squeezing the card holders with shrinking limits and rising interest and penalties. To many who lost their jobs and their savings, credit cards represented a very expensive way to keep afloat. But not for long.
The final death of our economy is being delayed by the misguided attemps by the government to prop up the “old economy” by pumping $ trillions into the dying economy to keep business functioning at artificial OLD levels.
All of this money is not creating anything new except for a massive government funded bubble. And we sadly know what inevitably happens to bubbles. Coupled with the oncoming depression, the bubble burst is appalling to imagine.
Prop up the banks, even though their mismanagement and duplicity helped cause this final mess(We should have let the weak ones fail)
Bail out the auto industry. They are too important and their labor unions deliver a lot of votes.(The unions were the yolk that made US auto makers non competitive. Let them go chapter 11, reorganize, and get rid of the grandfathered union benefits)
Now its insurance companies, then health care companies and widget manufacturers and energy producers. The government will run everything, and bankrupt us all, meanwhile new resources are diverted from new entrepreneurs to prop up the old dinosaurs.
Have I bummed you out yet?
I need a break.
Much more later.
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