Beginning Now: The Panic Phase of the Collapse (Please read)

[Pale Blue Dot]

I'm posting this in it's entirety from the Money and Markets website (which they allow, with proper attribution) because this article sums up neatly all of the reasons why "doom and gloomers" are so pessimistic. By and large I see very few people on DU talking about these arguments, even though they are all factually based. Reality hurts, but we need to face it.

Beginning Now: The Panic Phase of the Collapse

Just as the Obama Administration launches a triple tirade of new initiatives — a record stimulus package, a bigger round of rescues, and the largest deficit financing of all time …

Just as the Treasury Department doubles down on its bailouts for sinking giants — Fannie Mae, Freddie Mac, AIG, General Motors, Chrysler, and Citigroup …

And precisely when the government has raised hopes for a recovery in 2010 …

The panic phase of this collapse is about to begin.

The panic phase is an acceleration in the economic decline … a chain reaction of debt explosions … a free-fall in the financial markets … and a series of rude awakenings that will accelerate the decline even further:

Rude Awakening #1
In a Collapse, Washington’s Economic
Forecasting Models Are Worthless.

Economists rely on computer models designed to forecast gradual, continuous, linear changes, such as economic growth.

But these models are incapable of handling sudden, discontinuous, structural changes, such as housing market collapses, mortgage meltdowns, megabank failures, credit market shutdowns, or stock market crashes.

Already, as explained by the New York Times on Saturday,

“The fortunes of the American economy have grown so alarming and the pace of the decline so swift that economists are now straining to describe where events are headed, dusting off a word that has not been indulged since the 1940s: depression.”

They’re a bit late. Three months ago, in “Depression, Deflation and Your Survival,” we warned you that we were sinking into America’s Second Great Depression. And today, that’s precisely what’s happening.

But with no other model to turn to, most economists continue to forecast the future in terms of moderate, incremental changes.

In the panic phase now unfolding, a growing number will begin to realize how wrong they’ve been. They’ll see that this crisis represents a clean break with the past, rendering their forecasting models worthless.

Some already see the light. It’s only a matter of time before they admit it in public.

Rude Awakening #2
The Economy Is Sinking Three to
Five Times Faster Than Expected.

Every single step taken by the Bush and Obama administrations has been based on the flawed assumptions embedded in their economic models. They assume that:

* the world economy is not collapsing …

* the banking system is not broken …

* corporations, investors, consumers and entire nations will not take drastic action to protect their own interests, and, therefore …

* we will not see widespread factory shutdowns, wholesale layoffs, mass dumping of assets, or major new trade barriers.

They assume that none of this is happening or will continue to happen. They assume that the six-decade growth cycle that began after World War II remains largely intact. They think, talk and act as though we were still living in an era that’s now over.

Each of these assumptions is, on the face of it, patently false. And yet, it’s based on these assumptions that our government continues to spend, lend or guarantee TRILLIONS of dollars.

Starting right now, however, we can begin to see the first signs of a rude awakening in that realm as well:

* The New York Times reports “a sense of disconnect between the projections of the White House and the grim realities of everyday American life.”

* Economist Allen Sinai calls the White House’s economic forecasts “a hope, a wing and prayer.”

* Even Obama advisor Paul Volcker admits this crisis is swifter and broader than that of the Great Depression — something that, at this juncture, most Obama advisers refuse to admit.

Despite all these doubts, however, the average GDP forecast of most private economists differs only marginally from the rosy forecasts of the White House. Specifically …

In 2009, the White House predicts the economy will contract by a meager 1.2 percent, while private economists predict a decline of only 2.0 percent.

The grim reality:

* The 6.2 percent plunge in the fourth quarter — plus a similar decline estimated for the current quarter — shows the economy is now sinking three to five times faster than they’re forecasting for the year.

* There is absolutely no sign that the decline is ending and every sign that it’s accelerating.

* Thus, to contain this year’s decline to the meager 1 or 2 percent that the government and private economists are projecting would require a comeback in the second half that’s nothing short of a miracle.

In 2010, the White House says the economy will grow 3.2 percent, while private economists say it will grow 2.1 percent.

The grim reality:
Out of synch with history

* In America’s First Great Depression, the financial collapses beginning in 1929 led to GDP declines of 8.6 percent in 1930, 6.4 percent in 1931 and 13 percent in 1932.

* But in this cycle — America’s Second Great Depression — the financial collapses that we saw in 2008, such as Bear Stearns, Lehman Brothers, Fannie and Freddie, Washington Mutual, Wachovia, AIG, Citigroup and many others, were markedly worse than those of 1929.

That doesn’t necessarily mean that the GDP declines in 2009, 2010 and 2011 will be worse than those of the early 1930s. But it does mean that the 2 or 3 percent growth now forecast by private and government economists for 2010 is clearly a pipedream.

In the panic phase now unfolding, some prominent economists are now beginning to recognize their forecasts may be full of holes. It’s only a matter of time before they admit it in public.

Rude Awakening #3
The Dangerous, Unintended Consequences of the
Government’s Rescue Efforts Can Only Deepen,
Broaden and Prolong the Economic Decline.

These include:

* The dangerous and inevitable surge in government borrowing. Even with its fairy-tale forecast of a meager 1.2 percent decline in the economy this year, the White House projects a 2009 federal budget deficit of $1.75 trillion. If you assume the average private forecast of a 2 percent GDP decline, the deficit automatically grows beyond $2 trillion. And the only neutral assumption for GDP — no deceleration or acceleration in the 6.2 percent rate of decline now underway — leads you to a deficit that makes the above projections look puny by comparison.

* The dangerous and inevitable surge in borrowing costs. Even in the government’s unrealistic rosy scenario, the explosion in government borrowing must drive real rates of interest sharply higher. There is simply no other conceivable scenario.

* The dangerous and inevitable damage caused by higher interest rates. When interest rates go up, they go up for nearly everyone, sweeping across the economic landscape into every home, business, or government. Result: Even a rate rise of just a few percentage points can quickly neutralize and overwhelm any benefits derived from the government’s stimulus spending, banking bailouts or expansive budget plans.

* A dangerous and inescapable two-tiered market for credit. What happens when the government pumps money into defaulting households or failing banks even while nearly all other interest rates are rising? The answer is simple: The lucky few who get government aid are able to borrow at lower interest rates. But the vast majority, not eligible for government money, must pay much higher rates than they’d pay otherwise.

* A dangerous diversion of precious capital from strong hands to weak hands. With government money pouring into the weakest households and companies, precious resources are diverted from strong hands — those who could best help bring about a recovery — to weak hands, including those who were most responsible for the bust. Already, companies like Berkshire Hathaway, despite triple-A ratings, are paying record high spreads to borrow … while banks and others which get government guarantees can borrow far more cheaply, despite abysmal credit ratings and balance sheets.

In the panic phase of the crisis now unfolding, a minority of Washington and Wall Street experts is beginning to fear these dangerous consequences. It’s only a matter of time before they openly confess their real concerns.

Sadly, though, confession is one thing; action is another. And sadly, each of these unintended consequences deepens the depression, spreads the pain, prolongs the crisis, and weakens the eventual recovery.

Rude Awakening #4
Investors Who Fail to Take Protective
Action Could Lose as Much as 90 Percent
In Virtually Every Asset Imaginable.

In an economic collapse of this magnitude, the only predictable bottom in the value of most assets is zero. In that context, any value investors can squeeze out of their assets that’s significantly above zero must be counted as a blessing.

Here are my forecasts for each major investment sector …

Stocks:

Safe Money Report

Eight months ago, in our July 2008 Safe Money Report headlined “Major U.S. Bear Market Just Beginning to Unfold,” we set our medium-term target for the Dow Jones Industrials at 7200. Now, that target has been reached.

Then, three months ago, in our December 2008 Safe Money headlined “Starting Now: America’s Second Great Depression,” we set a new target at 5500 on the Dow.

And three weeks ago, based on the fundamental measures provided by Claus Vogt, editor of the German edition of our Safe Money Report, we have further revised that forecast to

* 5000 on the Dow

* 500 on the S&P 500, and

* 900 on the Nasdaq.

Today, Dow 5000 may seem far away. But with the Industrials closing at 7063 on Friday, it’s actually relatively close: All that’s needed to reach 5000 is another 29 percent decline — a modest move in contrast to the massive wipeouts already witnessed in the shares of our nation’s largest banks.

And in America’s Second Great Depression, the averages could easily fall to even lower levels.

Real Estate:

Chief economist Mark Zandi of Moody’s Economy.com forecasts a possible “mild depression” scenario, in which the average price of a home — already down 27 percent from its peak — could fall another 20 percent. What he does not tell us how far home prices could fall in a worst-case, 1930s-type depression scenario. But I will: As much as 80 or even 90 percent from peak to trough.

Meanwhile, commercial real estate prices could fall with equal speed. As Mike Larson reported this week, the issuance of commercial mortgage-backed securities plunged 95 percent last year … S&P expects their delinquency rates to triple this year … and the resulting credit shutdown is already driving prices into a tailspin.

Bonds:

While Zandi forecasts a possible mild depression, his own colleagues at Moody’s Bond Rating division are forecasting bond default rates that denote an inevitable severe depression.

Indeed, Moody’s announced last week that

* It expects the number of defaults on high-yield bonds to triple this year to about 300, the worst since the early 1980s when the high-yield bond market first emerged …

* The default rates on those bonds could reach 15 percent, higher than that registered during the Great Depression …

* And default rates could rise even further — to 20 percent — if the economy deteriorates more than currently expected.

Even assuming Moody’s less pessimistic forecast, a 15-percent default rate will gut the price of nearly all corporate bonds, regardless of rating.

Add the inevitable surge in interest rates driven by massive government borrowing, and you can see how most corporate bonds could lose anywhere from half to 90 percent of their current market value.

Banks:

Last week, the Federal Deposit Insurance Corporation (FDIC) announced that

* The number of troubled banks jumped from 76 at year-end 2007 to 252 at year-end 2008.

* The assets held by problem banks jumped to $159 billion, up more than seven-fold from $22 billion a year earlier.

But it appears that most of the large banks that have already failed or been bailed out by the government — IndyMac, Washington Mutual, Citigroup and Bank of America — were never on their list to begin with.

And based on our own lists of weak banks, the number in jeopardy is many times larger than the FDIC indicates.

This raises immediate questions about the FDIC’s ability to flag problem banks. And it raises fundamental questions regarding the government’s future ability to guarantee the deposits of millions of Americans.

My forecast: Expect to lose at least half and possibly up to 90% of your money in uninsured deposits of failing banks. And although it is not an immediate concern, in America’s Second Great Depression, even insured depositors could lose money.

http://www.moneyandmarkets.com/beginning-now-the-panic-phase-of-the-collapse-29932

This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com.

[seemslikeadream]

1. Rude Awakening - 4800

maybe then someone will WakeUp

[Gman]

9. I had been saying 5500 - 5750 but that may have been generous

4800 - 5200 seems more likely now.

[Subdivisions]

57. It may be worse than that, SLAD.

What if the markets were to reset back to where they were when all the corruption and criminality that inflated the bubble started? How about something like this?



If the DOW were to go back to the trend line that traces what a normal growth would indicate, we could perhaps not reach a bottom until DOW 3000 or 2800.

YIKES!

[conscious evolution]

62. Have you ever compared

the DJIA graph with a graph of how many people retire each year?
You would be surprised,I think.

[Subdivisions]

63. No, I haven't. Since you have, please share. n/t

[conscious evolution]

65. I wish I could locate the graphic

that compares the two.Unfortunately I have searched and searched for it the last couple of years and have been unable to locate it.I have tried to recreate it but I have been unable to locate the census data to recreate it.
I saw it many years ago in a book on Chaos Theory.It was being used as an example of merging two seperate fields of study and seeing what comes up.
In this example someone graphed out retirement rates with the DJIA and compared the two.What they found was that there was an inverse relationship between how many people retire each year and how the DJ does.Basicly,the more people retiring the lower the stock markets go and when fewer people retire the higher it goes.
What was interesting is that while the DJ part of the curve ended right before the book was published due to obvious reasons.However,the census data did not end due to the Census Bureua's ability to use their data to predict retirement rates for the next fifty years or so.
With this ability to project future retirement rates one can then fairly well predict the DJ and how it does.
What the retirement rates show is thatfor the last couple of years the retirement rates have gone up.A lot.Mainly due to the baby boomer generation is starting to hit retirement age.And this rate keeps going up until it peaks around 2012-2015 followed by a ten year or so period where the rates stay about the same.
Basicly,what the combined data showed was,to put it simply,we are in for a rough go of it for the next 10 to 20 years..

[luvspeas]

2. a word of caution

Keep in mind that after they scare your panties off, they want to sell you all kinds of great advise that will fix everything and allow you to make money.

[Pale Blue Dot]

4. Fair enough.

So are there factual errors in this piece?

[luvspeas]

5. I just find it suspicious

That they predict the stock market will lose 90 percent of its value, yet they are selling a publication titled "How to make money in a Bear Market". If it goes to 90 percent, taint no one makin nuthin.

[Pale Blue Dot]

11. I agree with that, but what frustrates me

is that people (including me) have been making these very same arguments on DU for months, if not years, and no one ever responds to the substance of the arguments. They change the subject or ignore the facts entirely.

[luvspeas]

20. the great depression lasted 12-15 years...we've only just begun

falling farther faster than ever before and we have barely been in this a year. the worst is yet to come and no one can predict how bad it will get before it gets better.

No ones not paying attention. the facts are pretty clear. no need for debate or discussion.

[Warpy]

34. There's also no real way to know what will work

when it comes to preserving assets. I can easily see a scenario in which T-bills are redeemed for far less than their face value after a strong deflationary cycle. They're earning 0% now, it won't take much to push them into negativity.

Nobody knew what would work in the last crash, either, although the government was in much better shape than it is today.

The only good news I can see is that Stupid's reckless tax cuts will all expire in December, 2010. The revenue stream won't improve much since it takes income to tax to produce it, but at least the government won't be saddled with a plutocracy that doesn't pay its way.

It's going to have to get incredibly bad before this country is pushed to do what it must do: reinstate a progressive tax that discourages plutocracy and pare the Pentagon down to a defensive force instead of an imperial one we the people can't afford and the wealthy, who benefit the most, think they're above paying for.

Only when their backs are against the wall and the mobs are at the gates will Congress get off its overstuffed collective ass and do what is absolutely vital if this country is to survive.

[femrap]

48. Anyone with a brain

could have seen this Depression coming. The Derivatives, in particular. The overwhelming debt. The Greed everywhere....the Hummers, the McMansions? Who thought this could go on forever? We are facing one big comeuppance.

I just hate to see those who didn't have a McMansion suffer more than they deserve. Maybe we'll finally get to see some JUSTICE. It certainly has been a long time.

[Grinchie]

54. I lived in a Mc Mansion once, thankfully, I only rented it for a while

It was fun for the 2 years we lived there, but it was even more fun to move to the aging, 1700 Square foot farmhouse on 20 acres with 10 acres planted in fruit trees.

Unfortunately, Enron showed up alongside the DOT.CON bust and caused enough instability to lose it through bankruptcy. As soon as Bush started his war, I left the system and became defensive. My wife and I have a 6 year head start after waking up to this sham of an economy to prepare for the big fall. The Dot.Com bust was only a dress rehersal.

The people in this downturn are the same ones that devoured us years ago, and not it's our turn for some payback. The trouble is, they have nothing I would want to buy, even if it is only pennies on the dollar!

Since we left the fake economy and learned the barter economy, we spend a lot of time understanding the mechanics of the crisis, and I see a lot of people beginning to think the same way we do. Their is very little trust left in the fractional reserve system that caters to the wealthy and connected. As more and more people Opt out of that system, the more frantic the staus quo becomes, to the point of starting to devour the remaining suckers in the failing system.

The only thing I believe in these days are skills, real goods, and verifiable productivity. These paper millionaires are a dime a dozen, and they are going to be in for a shock in the coming months and years.

As far as the stimulus package goes... It will fail, and prolong the agony, but at least we will get so projects started that may provide a foundation to build on when the system totally collapse and they wipe the slate clean, worldwide. I don't see any other way out of it other than a do over with a new system. I like the barter system, because I control the currency for product I create.

[femrap]

68. I rented a big house for one year....

never wanted another. Give me small, simple, and easy comfort. There's nothing I want to buy from them either.

Maybe people will finally learn that 'You are NOT what you drive nor where you live.'

I used to drive a beat-up old Ford Pinto in Marin Cty CA and all of the BMWs and Merc-Benz got the hell out of my way. I loved that car.

I'm trying to get off the grid...build something small, have a veggie garden, and maybe some goats....and enjoy Mother Nature's beauty and peace.

Bartering is good.

[Subdivisions]

59. YOU ARE SO RIGHT! Back shortly before this crisis began, people

were dubious to the warnings posted by me and others that trouble was coming. Those of us who followed closely what was going on at the time tried and tried to warn DU were treated like...well, like poster #39 below is treating this piece.

Yet, here we are with a significant number of DUers who have been laid off and have lost their homes or in the process of losing their homes. Not to metion all the other associated hardships suffered by our own membership, much less the rest of the population.

[TheCoxwain]

25. you can .. by short selling.

If you know for sure that a stock is going to go down for sure - you can make just as much money on it ( if it turns out to be true) as you would betting in the opposite direction... Well almost!



http://en.wikipedia.org/wiki/Short_(finance)

[nadinbrzezinski]

52. hmm during the depression it lost 70%

if this is as bad as this article suggests, and I have been known to be in the cassandra club, 90% is not that far off..

We are talking though of a collapse that makes the great depression look like a walk in the proverbial park

[Common Sense Party]

69. You can have ALL the facts right and STILL not have a freakin' clue

which way the market is going. The market is more than the sum of all economic indicators. It's about perception. It's about moods. It's about alternatives. It's extremely fickle and capricious.

Bottom line, this guy has no crystal ball. No one does.

All I know is, over the last 83 years, stocks have done pretty well. I see no reason to think they won't do well over the next 40 years.

[Bread and Circus]

3. Wow, all that and not one mention of peak oil and oil price volatility that probably caused

all this.

[DemReadingDU]

7. Peak Oil may have been a factor

But the financial weapons of mass destruction is bringing down the market - CDOs, CDSs, derivatives, huge leverage, etc.

National debt that is extremely too high, as well as high personal debt are also contributing factors

[Bread and Circus]

15. debt is not a problem as long as you can make the payments, at an individual and at

a federal level. In fact, we have used debt to keep our economy ever expanding. But this has always relied on cheap, easy oil. The runup to this crisis was the largest spike of oil prices ever. It affected everything from fertilizer, commuting, and shipping to construction, plastic production, and food prices. This had the cumulutive effect of making life unaffordable for a lot of people and started the dominoes tumbling. Yes, people say the first domino was people not being able to afford mortgages, but they didn't just wake up one day and decided not to pay. The machine broke down because oil prices got insane. Now, everything crashed and demand is way off, so oil prices have precipitously dropped. This is exactly what is predicted by peak oil models and a now inelastic ability to make supply meet demand.

I'm a little obsessive about this but if this is really the advent of the age of peak oil, all life on earth is in for dramatic and permanent change.

This would be the point when the yeast in the mixture overpopulates itself to the point of die-off.

[Pale Blue Dot]

19. I strongly urge you to watch Chris Martenson's Crash Course.

http://www.youtube.com/watch?v=eidQTDjQ5gw&feature=channel

Like you, he sees peak oil as a major problem. But you seriously underestimate the problems caused by debt.

It's common sense stuff. Get back to me if you watch the video.

[Bread and Circus]

26. I don't underestimate problems caused by debt, it's part of the perfect storm.

But all we hear is debt, debt, debt and I think there's more to it than that.

Honestly, I hope I'm dead wrong. If it's all about bad paper, we can fix that. Paper is just paper. However, if this is warning of what's yet to come, it will be worse. You can't negotiate with mother nature and the sheer laws of physics.

Now, as much as I may underestimate the debt and banking factors here, people from DU to Wall Street grossly underestimate the effects of energy on absolutely everything we do. Energy is not part of the economy, IT IS the economy.

ps I'm watching that video now, thanks.

[northernlights]

35. no, the runup to the crisis was balloon payments

on subprime mortgages. A slew of people suddenly had their mortgage payments skyrocket, all at the same time. Some people assumed that housing prices would rise forever, but housing reached its own peak price where it simply became unaffordable, so the flippers got caught in the trap. And many people were outright defrauded -- I saw one woman interviewed who had a letter from the bank that stated outright she had a 30 year fixed mortgage. Her mortgage was sold several times over, and suddenly she found she had a "subprime" she'd never signed on to and her mortgage payments skyrocketed. The person responsible was long gone. Other people had agreements where their mortgages were supposed to balloon in 5 years. Instead, they ballooned in 2 months. They couldn't even figure out who held their mortgage any more. The t.v. station had to track down the mortgage holder, since it had been sold several times over. The holding bank told the t.v. station, "We don't talk to homeowners." There was massive, massive fraud.

Each new round of budding foreclosures was forecast by the finance people here because the rates were due to rise on a schedule.

Once the subprimes were gone, the same people here warned us about the Alt-A's.

And those same finance people here told us that credit cards would be next. Too many people maxed out, who were using credit for basic living expenses to survive.

[Bread and Circus]

44. It just doesn't stand to reason that the entire world economy has come to a grinding halt because

some people in one country couldn't make their mortgage payments.

I'll grant you it was one of the dominoes but the lead-up to financial catastrophe is long and multi-factorial.

I want to be wrong on this. I'd love for it all to be a paper illusion.

[dysfunctional press]

53. credit-default swaps have nothing to do with peak oil.

if anything, the whole economic meltdown will put 'peak oil' back a bit- as the models were based on economies and consumption continuing to rise. a contraction in world economies will cause a decrease in the level of demand and slow the rise of that level.

[Subdivisions]

61. BINGO! I can't tell you how many time I've tried to explain this on DU. I was

panned so serverly that I simply gave up. If people don't want to know, fuck 'em.

[cliffordu]

8. yep

[dysfunctional press]

49. doubtful.

and extremely so.

last summer's oil price hikes had absolutely ZERO to do with 'peak oil'...it was about rampant speculation.

[Bread and Circus]

51. you might be right. we'll see.

[Subdivisions]

60. MAN! I am so glad to see someone say this! You mention oil around

here, and more specifically peak oil, which is really just the beginning of declining oil producition, and you thought of as nutso by the majority of the DU population. But the simple and underlying factor in all of this is peak oil.

Yes, there was a housing bubble. But the bubble was burst by the increase in oil prices due to demand from the growing economies of China and India, whose populations far outstrip ours. And, as there always is, there has been a fair amount of manipulation and criminality involved in bringing us to where we are now. But the one common thread running through all of this is the inability of oil producers to keep up with the demand of oil in a growth boom. And, in the process, oil was produced at an accelerated pace that has brought us now over the peak and into an irreversible and relentless decline in production. Even our own government has acknowledged the problem with oil with the Hirsch Report (which is now seriously outdated, though prescient nontheless) and with both the bush and Obama administrations push (remember bush's 'We are addicted to oil.' line at the SOTU?) to develop alternative energy technologies.

Anyway, it's a complicated issue and dynamic phenomenon that can effect our lives in profound ways and is able to hide amongst all the problems it causes.

[PetrusMonsFormicarum]

6. All well and good, but . . .

creating a laundry list of our economic woes without the suggestion of alternatives does nothing but blow cold air up our skirts. Say (or cut and paste) what you want about this situation, but at least the new Administration is *trying* to do something.

[Pale Blue Dot]

12. If what the administration is trying to do is in direct conflict with reality,

how can that help?

[Tierra_y_Libertad]

10. FUBAR seems an appropriate description of the economy.

[TygrBright]

13. This is a peephole into the investors-eye view of the economy.

And, as such, it is probably somewhat accurate. For people whose wealth is based in capital assets, who see the economy in terms of macro movements by sectors, money as a manipulable concept, and comprehensible based on an understanding of economics as a meta-reality, it's probably accurate enough.

But I don't think it reflects a meat-world reality for the day-to-day life of people who base their economic reality in a paycheck(s), the bills they pay, the cost of goods they need to survive, the amount of cash they can access immediately, and the value of real assets such as house and car. For those of us who live in that world, the forecasting done by people who live in the "investor's economy" world is neither reflective of the reality we currently experience, nor of the conditions we can expect as the economy continues to churn and change.

From OUR standpoint, I think Obama is doing exactly the right stuff-- focusing on our access to paycheck(s), our ability to pay bills, keeping the costs of goods we need to survive in line, and protecting or shoring up the value of OUR real assets in a meat-world market.

This kind of doom-and-gloomism is entirely appropriate for those whose prosperity is based entirely on the old "investor's economy" world-- their reality will never be the same again, and they will have to learn an entirely new set of skills and ways of perceiving reality in order to recover any of their losses. Some may not be able to do so at all.

But it is not helpful or realistic for the rest of us. Our challenges will be great, indeed. We are going to have to adjust in many, many ways and some will be uncomfortable. But the government can, (and WILL, under this Administration's policies) be able to ensure some of the basics we need in terms of paychecks and meeting our day-to-day needs and protecting our homes, etc. This will indeed come at the cost of having to completely remake and transform the economy, and probably in ways that will leave a lot of the old "investor's economy" players high and dry.

I have other things to worry and weep over, in the mean time.

diffidently,
Bright

[DFW]

14. They were right, but "brought to you by...?" read the fine print

Gold and oil investing? And just who might help us do that for a fee?
Even when they're right, they are still in this for their own good. I
got zapped a week ago for not praising sites that did in depth analysis
on gold, but many of them turn out to be disguised retailers of gold coins
or bars, or newsletters promoting the purchase of same. They MIGHT be right,
but if the site promotes its own business on the same page, their credibility
is at least partially compromised.

Eventually, most financial predictions come to pass. We heard gold would
hit $1000--back in 1980. We heard the Dow would break under 7000--back
in the first part of Bush Lite's first term. The guys who impress me are
the ones who predict things accurately far in advance, not the ones who
tell me how horrible things are now and will get next week. I can figure
that one out by myself.

[Dr.Phool]

41. Try Roubini's RGE Monitor site.

He's been accurate for a long time, and he ain't sellin' nothin.

Full access for registration (free).

http://www.rgemonitor.com/

[Astrad]

16. Trying to create panic

to drive up the price of gold. Weiss is a big promoter of gold and presumably has substantial holdings of it. He's had a negative outlook since the nineties. If you're negative all the time you're going to be right once in awhile. Just like if your bullish all the time. Beware the self interest in his desire predictions.

[Are_grits_groceries]

58. I'M EFFING AWAKE!!

I have been. What in the hell do you want me to do????? I panicked for 15 minutes a while back. That's my limit in a crisis. I get it out, and then I move on and try to do something.

What is your end game?? Are you not going to be satisfied until everyfreakingbody is out running in the streets or posting all the dire news that can be found?

MEH!!

(I meant to answer the OP, not your post.)

[The Stranger]

17. I think "Rude Awakening #3" is demonstrably false.

The "dangerous and inevitable surge in government borrowing" is necessitated by the very dire economic situation the author paints in "Rude Awakening #1" and "Rude Awakening #2."

Without government spending trying to prop up GDP, then the freefall continues. As the Japanese discovered in the 1990's, this is a balance sheet recession/depression. Look at the explosion in the savings rate in news just released today. Businesses and people are trying to pay off the debt they have accumulated on their balance sheets. They have stopped spending to do so.

In this vacuum, the government must step and prop up the GDP until the private sector has paid off its debt. The government must do this for at least 2 years. As the Japanese discovered in the 1990's, vacillating between stimulus, then pull-back-and-tax-cut, sends the economy further into failure.

After this 2-year period, then private enterprise begins to spend again, and it switches places with government. The government then has an economy going forward that it may use to pay off its debt with taxes over the long term.

This is the only way.

[Pale Blue Dot]

22. Please refer to my post #19. nt

[The Stranger]

30. Why don't you instead articulate what it is you want to say?

I don't have time to follow links, watch videos, and then "get back to you."

[madrchsod]

18. i`m getting tired of these "the sky is falling" experts.....

that have no answers to the problems we face.

go sell your crap somewhere else dr weiss... we have heard the same crap before

[Pale Blue Dot]

21. But where is it WRONG?

I tired of people dismissing bad news, without responding to the facts, simply because they don't want to hear it.

[Turbineguy]

23. Perhaps, this would be a good time

to announce Turbineguy's new economic fishwrapper called: "FEAR AND GREED"

Call now and for a mere $1995 per year, that's a 75% savings, I will show you how you can keep from having everything you own be revalued at $0.00.

Call within the next 10 minutes an I will include 2 secret reports. These reports are so secret, that I don't even know they exist.

Operators are standing by. And if you hear a hissing sound in the background, those are the steam atomizers as they work in a real boiler room.

[Pale Blue Dot]

27. Once again, I understand attacking the messenger.

But where is the factual information wrong?

[Turbineguy]

36. So sorry, did not mean to attack the messenger

I do not do that on principle. I should have made that clear in my post. The fact is the views are interesting.

Martin Weiss has been around a long time with essentially the same message. According to author Alexander Elder, people don't change but markets do. The market seems to finally have caught up with Weiss. But that doesn't mean he's right. People are not linear whereas extrapolating from a few points is.

And that is usually the way these reports work. The conclusions come first and then the relevant facts are inserted to prove the conclusion. Those facts that do not support the desired conclusion are left out.

The Dow may very well reach whatever low number you like. But that's because the market has been ruined, and not entirely due to some economic imperative.

[Waiting For Everyman]

24. "Weak hands"? Empowering those weak hands may yet surprise some forecasters.

If it isn't neutralized with too many R limitations, and if it isn't too little and too late. Those "weak hands" are the only thing that can save us.

Not the corporations of course, but the people.

I predict this prediction will be just as wrong as the others.

[Le Taz Hot]

28. Oh, goodie!

More doom-and-gloom forecasts. We've had SO few of these and they are SUCH a help! :sarcasm:

[Pale Blue Dot]

32. How is not facing reality helping anyone?

Where is the information wrong?

For your information, I'm trying to help. I'm a teacher, and I've formed a committee at my school to attempt to find solutions to the problems that our parents, students and teachers will be facing. We can confront those problems because we are facing the truth about how things are, not basing our judgments on what we want to be true.

[Warren DeMontague]

40. Telling people to Sell! Sell! Sell! when the market has already tanked this significantly...

Well, honestly, I doubt too many people are going to be dumb enough to listen.

[mmonk]

29. Stimulus plus government nationalization of the zombie banks

could turn the outlook especially if the troubled assets are transferred to one taken over bank and a credible workout begins. The problem with panic is it isn't clear thinking.

[pnwmom]

31. This person opposes Obama's stimulus plan on conservative grounds:

that it increases the deficit.

And he stands to benefit financially from increasing panic.

I don't think we should be giving him a platform.

[Pale Blue Dot]

33. Once again, where is he wrong? nt

[pnwmom]

38. He is completely wrong, according to Krugman, the Nobel-winning

economist, in opposing the stimulus package on the grounds that it will increase the deficit.

Krugman's only concern is the opposite: he thinks the stimulus needs to be even bigger.

[Warren DeMontague]

42. How about "A dangerous diversion of precious capital from strong hands to weak hands.", for starts?

Allow me to translate that sentence: He is advocating the same, tired, trickle-down bullshit that got us into this mess in the first place.

If I had to guess, he's an FDR revisionist, too.

[undergroundpanther]

37. Economists are mostly fantasy based thinkers

They do not tally in their "projections" of "growth the REAL costs of their over done ambitions.
First of all they don't add in the cost of robbing human happiness,they don't add in environmental damage,they don't factor in the real costs..because fiat money is not really wealth it is largely symbolic 'wealth'worth something because we BELIEVE it is worth something..That IS what "consumer confidence" means.
http://journals.democraticunderground.com/undergroundpanther

We as a country have been snookered by the snakes in suits.Painting rosy pictures we wanted to hear and believe as if it was truth.
http://federalism.typepad.com/crime_federalism/2008/12/snakes-in-suits-when-psychopaths-go-to-work.html

And the shock doctrine will sweep us down the drain."De-modernizing us"
http://www.naomiklein.org/main

Here we have now, the greedy devouring it's own as Karl Marks said..
http://www.associatedcontent.com/article/66575/cannibal_capitalism_the_rich_must_eat.html

"Capitalism has only existed for the last 200 years. It is a relatively recent phenomenon, which has now outlived its historical usefulness."
http://www.marxist.com/editor-marxist.com-at-eton.htm

Capitalism and the pronoia...
John Perry Barlow defined pronoia as the suspicion the Universe is a conspiracy on your behalf. Here is how pronoia was exploited to create feudal systems.
http://cbs.nku.cn/info/en/37.htm

The Pronoia surrounding capitalism has been very costly,to US,and we STILL deny it.It has cost US, not those ever so fucking blindly optimistic over-wealthy,manipulating,powerful,heartless con men.Fantasy based beliefs on issues that concern life or death,are dangerous to our collective survival,dangerous as any psychopath or fascist regime..

[Warren DeMontague]

39. WUR DOOOOOMED!!!!!!!!!!!!!!!!! DOOOOOOOOMED!!!! DOOOOOOOOOMED!!!!

WUR DOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOMED!

[Viva_La_Revolution]

67. ...

I do believe that this is the biggest shitstorm that most of us will ever have to deal with in our lifetimes.

a little humor helps.

[Thickasabrick]

71. Awesome pic!!

[Thickasabrick]

70. LOL.....good response.

[Odin2005]

43. More Right-Wing "Obama's spending is part of the problem" BS.

Trying to balance the budget at a time like this is suicidal.

This guy sounds like one of those shills pimping gold by scaring people.

[anigbrowl]

45. This is wrong in many ways (detail inside)

Of course the writer of the original article makes many valid points. This is a dreadful situation. But bear in mind that just as a bull market sees a lot of people selling bullshit, so does a bear market see people selling bear grease.

Rude awakening #1: yes, current economic models have proved unreliable because they assumed Gaussian probability curves and severely underestimated volatility. That does not mean that Obama or his economic team are floating along in a bubble of ignorance, believing it's just a statistical anomaly. The administration's economic policy represents a radically different approach.

Rude Awakening #2: yes, it's worse than expected. but it makes no sense to say the administration is hiding from this fact, while quoting Paul Volvker on how bad it is. If Paul Volcker is saying that the economy sucks (as he is), then it's reasonable to assume Obama is paying attention to this as well - after all, this is why he recruited Volcker to begin with.

Rude Awakening #3: Oh noes, stimulating and repairing the economy is going to be very expensive. Well yeah, of course it is. The authors solution is to go ahead and let the payments system collapse and basically allow the economy to implode so we can construct a new one out of the ashes of the old...wait, what? This is kind of like suggesting that the crew and passengers of the Titanic should have tried colonizing the iceberg instead of trying to contain the leak and/or deploy the lifeboats.

Rude Awakening #4: 'Um, we got it wrong repeatedly and it's worse than even we expected. So now, we'll predict it's going to get worse again - the only wise thing to do is trust us with your money because we can't possibly be wrong this time.'

Personally, I think the market is going to go lower than even they predict. Last summer/fall, I guessed 6500 as a market bottom (somewhere on DU if you can be bothered to look it up). Now I'm thinking that 4800 is more like it, which is, of course, bad. However, I don't take this to mean we're going to turn into 1990s Russia or some Mad Max scenario. I do envision some kinds of worst-case scenarios, but none of them involve the collapse of modern society. I only think these worst-case scenarios will come to pass if obstructionist doomers like the writers at Money and Markets have their way and seek to accelerate rather than brake the downward economic slide.

[nbsmom]

75. Why do posters on DU continue to conflate Dow with the economy?

Bad enough to see the putzes on CNBC doing it. But to see this garbage spouted here (from goldbugs like Weiss no less), is rather disheartening.

Don't like what the Dow is doing? Don't get in.

But don't confuse Wall St. with the general economy because it is completely manipulated at this point. S-heads are all over these boards and others, spreading this 'panic' crap far and wide. What do they stand to gain? I don't know, do we ask them what they're shorting these days? There's another thread about how the same crowd that was behind much of the tech bomb is back and has their sights on companies like GE.

If you're already in the market and not retiring for another 20 years, chill.

If they would suspend (or eliminate) shorting and derivatives (as they did last fall and over the summer), then the hedge funds and idiots like Weiss would have nothing to sell and have to patiently and slowly build their investments like the rest of us shlubs.

[B Calm]

46. I trust Obama, the time to buy is right now!

[Pale Blue Dot]

47. Well then, you do that.

Good luck!

[B Calm]

55. Thanks!

[Deja Q]

74. I'm looking into bonds and taking advantage of my student status...

I'll wait for the stock market to even out a tad before going back into it. I'll be seeing a financial adviser too...

[slipslidingaway]

50. FWIW...

9 page pdf...found on another site
http://www.sec.gov/litigation/admin/2006/ia-2525.pdf

[sarcasmo]

56. Kick and nom. Many on this site are still not in tune with the Reality and size of the whole

Collapse.

[B Calm]

64. I believe in the United States of America and the the working class

that makes this country the greatest in the world!

[Deja Q]

73. I'm with you!

:pals:

[Deja Q]

72. Well, some of us want to be optimists instead of sniveling wanky pessimistic doom'n'gloomers.

So if you think it's going to collapse, go out and riot for all I care. I'm not going to stop you; I'm working on my own problems -- and this maudlin garbage serves nobody except fools who just want to wallow in it.

[jazzjunkysue]

66. Savings were up last month, as was spending. We're re-capitalizing the banks, fast.

This is the ebb and flow. There is alot of money in america. When enough savings have re-balanced the debt, things will start growing again.

Everyone has known that we were mortgaging our houses to pay off our credit cards. The fools who have been living on credit will now be living on their parents. Lesson learned.

We're all going to live within our means.

I'd just like to see fewer foreigners taking tech jobs and see more americans in them. I'd also like to see a freeze on new building until we fill what we have.

Things can rebalance.

[KakistocracyHater]

76. what gets me is the interest rates-

how long before nations discover that unchecked interest rates have the power to topple governments? How long until China locks down interest rates-are they already doing that?

The hundreds of billions of Euros & Dollars going into banks with no effect? It looks like the Banks-or those behind them-feel they have outgrown nations & no longer need them & are systemically dismantling govs. at multiple levels simultaneously.

At its' heart most of these viewed from a different angle are paper problems-$7,500 for a house in Detroit? What is being used to measure the value here, something real or something on paper?