Tough times ahead – we all need to learn our lesso


When future history books are written, will they
say that this crisis was less severe than the
Great Depression? About the same? Or WORSE?

Of course, anyone who tells you he knows precisely where the Dow will hit rock bottom is pulling your leg. But consider the evidence …

Fact #1: Earnings declines are now worse than in America’s First Great Depression. Average earnings have plunged 61% year-over-year, much more than during the 1930s. In fact, the last time earnings declined more than 61% was 141 long years ago!

Fact #2: Consumer losses are worse as well. Last time around, the losses that triggered the depression were largely limited to stock market investors.

This time, the fact that the average NYSE stock has already wiped out HALF investors’ money is only the tip of the iceberg: The equity most folks count on as their #1 source of retirement savings has also been wiped out as our homes have lost a staggering $2.4 trillion of their value in a single year.

Fact #3: Debts are far larger. Like this crisis, the Great Depression was essentially a debt implosion. But in 1929, total debts represented no more than 170% of GDP. This time around, U.S. consumers are buried under a far larger mountain of mortgage debt, auto loan debt, credit card debt and other consumer debts. Result: Total debts are now close to 350% of GDP – TWO TIMES MORE!

Fact #4: Derivatives! The Office of the Comptroller of the Currency (OCC) reports that U.S. banks now hold a $176-trillion mountain of derivatives, many of which are extremely high risk. In 1929, these derivatives were virtually non-existent.

Fact #5: Giant failures. In the first 18 months of the 1929-32 bear market, there were many small and medium-sized bank failures. However, none were as massive or as dangerous as the giant failures we’ve experienced in the first 18 months of this giant bear market.

This time around, the failures (or bailouts) of giants like Bear Stearns, Lehman Brothers, Fannie and Freddie, Washington Mutual, and Wachovia dwarf anything seen in 1929. And even these large failures will be trumped several times over by the impending demise of Citigroup and AIG.

Fact #6: U.S. is a debtor nation! In 1929, the United States was a creditor nation, with substantial foreign reserves. Today, the U.S. is the world’s largest debtor nation, dependent on foreign lenders to keep it afloat. That means that there’s a definite limit to how much longer the U.S. government can continue to borrow to bail out failing institutions.

Fact #7: The economic collapse and debt crisis are far from over! Just this morning, for example, we learned that:

  • Home prices have plunged 18.5%.

  • Sales of existing homes have fallen to the lowest level in twelve years.

  • Sales of new homes cratered to an all-time record low.

  • 697,000 American families lost a paycheck in February — a 25% increase from January’s abysmal figures.

BOTTOM LINE: This crisis is AT LEAST as severe as the Great Depression, and the decline in stocks could be as well. That means, you could make the case that it could ultimately drive the Dow to as low as 1500.

Martin D. Weiss,

I do agree on all points that this crisis will even be worse than the great depression although the name is misplaced as America had an even worse depression in the midst of the 19th century. It seems every roughly 70-80 years it comes in a cycle. Everyone should prepare for harsh times as we have not seen the ugly part yet unfortunately. In my opinion as I stated earlier this will lead to wars at some places in the world as misery is only bearable to a degree. The people will demand blood and the evil thing of establishment (governments are their executive arms) is that before they get the victims they create outside enemies to distract and as a war gets inevitable they even make huge money on that as they produce the goods and buy assets for pennies. The elite has never got rid of the pattern that the mob is a second class human being. Democracy is a very young and not really settled experiment to handle the people. Democracy as itself has turned into a disgusting event where taxes and the biggest ad-budget decides who makes it – that has nothing to do with democracy. Since they media is controlled by a small group with elite interests basically the manipulation is dramatic and other strings are pulled as well as we saw in the 2Bush elections to make sure the ‘right’ candidate wins.
This economic crisis is also the result of everybody participating not only the bankers as the politicians let them play the way they did although they could have regulated them. Those politician ( lobbyists) were elected by the people and the did not care what they were doing as things looked fine. That’s the exact opposite of how the people should act, they need to utilise democracy in a more prudent way and make sure that lies are not a natural behaviour for politicians. Corruption can not be tolerated and that the government is not a power by it self but by and through the people working for them. That demands constant communication and taking interest in the others. The TV is a lethal communication killer and an excellent distractor as people spend to much with it and without other humans. That’s a habit we all should change as it is also a ideal brainwashing machine (think of the Matrix).

This crisis represents the chance for a new beginning but we should not leave it to others to determine where things are heading but first we might have to deal with survival as things will get harder. So sit tight prepare for tough times and have the focus on the bright side thereby use your own brain and try to discriminate sharply as many phony promises are/will be made.


~ by behindthematrix on March 5, 2009.

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