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How Bad Will It Get?

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posted on Sep, 3 2009 @ 02:43 PM

Kevin Harrington, managing director at Clarium Capital Management LLC, summed up the present economic situation in an interview with Bloomberg News: “If we have a recovery at all, it isn’t sustainable. This is more likely a ski-jump recession, with short-term stimulus creating a bump that will ultimately lead to a more precipitous decline later."

It's not just the banking system that's in trouble either. The stock market is beginning to teeter, as well. Bernanke's quantitative easing (QE) program has provided enough liquidity to push equities higher, but he's also created another bubble that's showing signs of instability. According to Charles Biderman, CEO of TrimTabs Investment Research, the Fed's bear market rally has run out of gas and company insiders are headed for the exits as fast as they can.

The economy cannot recover without a strong consumer. But consumers and households have suffered massive losses and are deeply in debt. Credit lines have been reduced and, for many, the only source of revenue is the weekly paycheck. That means everything must fall within the family budget. The rebuilding of balance sheets will be an ongoing struggle as households try to lower their debt-load through additional cuts to spending. But if wages continue to stagnate and credit dries up, the economy will slip into a semi-permanent state of recession. Washington policymakers--steeped in 30 years of supply side "trickle down" ideology--are not prepared to make the changes required to put the economy on a sound footing. They see the drop in consumption as a temporary blip that can be fixed with low interest rates and fiscal stimulus. They think the economy has just hit a "rough patch" between periods of expansion. But a number of recent surveys indicate that they are mistaken, and that "This time it IS different". Working people have hit-the-wall. Consumers will not be able to lead the way out of the slump.

It no longer makes any sense for people to spend more than they can afford, nor is it possible. US households doubled their debt in the last seven years to nearly $14 trillion. The massive borrowing binge fueled economic growth and pushed assets--particularly housing--steadily higher. But the spending-spree was only possible because of low interest rates, lax lending standards and deep-pocketed trading partners who were only-too-eager to purchase boatloads of US securities, bonds (Fannie and Freddie) and Treasuries. Now conditions have changed; funding has dried up and central banks and foreign investors have limited their purchases to Treasuries. Consumers are left to fend for themselves in a hostile environment where both jobs and credit are scarce.

The US consumer no longer has the capacity to bounce back and generate sufficient demand to produce positive growth. According to McKinsey Global Institute, Homeowners withdrew "$2.3 trillion in home equity loans and cash-out refinancings between 2003 and 2008." Most of the money was spent on personal consumption. Where will the money come from now that home equity has gone negative? The Obama administration will need a second, third and fourth stimulus just to fill the gaping hole left by the collapse of the housing market.

The Fed and its allies in the corporate/financial establishment, have killed the Golden Goose. After Obama's stimulus runs out, consumer spending will again sputter and the economy will slide back into recession. As personal consumption declines, U.S. markets will become less attractive to foreign exporters. There will be no need to continue trading in dollars.

Fantastic summary of the ongoing economic depression.
The days of the dollar reigning supreme are truly near an end after nearly a half century of dominance on the world stage.

Is the Amero the way of the future or will precious metal coinage return in full force?
I can't picture Americans pulling wheelbarrows of worthless dollars to buy groceries.

posted on Sep, 3 2009 @ 02:46 PM
Good find Warren. Most people here on ATS know my stance on the subject of our recession.

All we can do now is get ready for that second decline or false flag.

posted on Sep, 3 2009 @ 02:55 PM
reply to post by Tentickles

with all the news of Israel/Iran and weapons deals I am starting to think they will have a war together but even so I doubt it would be a good enough distraction. They would need something closer to home but it's a double edged sword. If they do pull one, most of us are expecting it so we would revolt in large numbers.


posted on Sep, 3 2009 @ 04:21 PM
reply to post by warrenb

There have been not too many replies to your OP, and I think it's because the assessment is getting uncomfortably close to the truth.

posted on Sep, 17 2009 @ 11:15 AM
While the DOW is up today, I think it may be a sign that it's reaching it's peak

posted on Sep, 17 2009 @ 11:42 AM
warren, on other threads I have postulated that some "event" will happen, either unintentionally or intentionally, and when that event occurs, the wheels of this current union will fall off.

There is no way in hell to continue as we are going.

It's not just our finances that are troubled, but our social fabric is separating and stressing at every seam.

Hate, fear, greed, selfishness, sloth, arrogance, legal extortion and theft by the current tax system, and a desire to dominate every facet of our lives by a small group of idiots have turned up the heat to amplify each of these abominable national traits.

The crying shame is that a significant portion of Americans are good, fair, honest, hard-working, God-fearing folks.

This nation was given everything. Every opportunity for excellence and prosperity.

And look what we've done with it.

Yeah. It's time to hit the reset button, and through the process of natural selection, those with hate, fear, greed, selfishness, especially sloth, arrogance and domination by POSITION only will be culled and buried.

Because these are the traits to self-destruction, and there are many good Americans that once the wheels come off, will assist and accelerate their destruction.

posted on Sep, 17 2009 @ 05:30 PM
How bad will it get.. or what choices does the West and the US really have left?

Do those in power really want the economy to recover? For once you start to recover that will be the time that your going to have to start making repayments on all those loans. That's when your going to have to start talking taxes, and cuts, and I'm guessing that will also be when the negotiations start of what will be the next reserve currency!

So how much of the family jewels will need to be sold off to appease those who hold the debt? and can the US in debt servitude really afford to allow that to happen.

You seem to be in the same position as Britain was at the end of WW2, when Britain had to start repaying all those lend/lease debts and loans, and guess what, that's when the NHS was born in the Britain... lol.. History repeating itself anyone!

If the US managed to usurp the UKs global position via debt servitude, I am sure the US will not allow itself to fall prey to the same situation and be usurped by China.. so for me, I feel sure that something will happen to ensure enough future wealth to repay those pesky loans, while leaving the status quo just the way it is..

But what they will be I guess we will find out soon enough, but I don't think it will be pleasant.

Edit - four Grammer, Grammar, Grandma, d*mm this dyslexia.

[edit on 17/9/09 by thoughtsfull]

posted on Sep, 17 2009 @ 05:38 PM
The key to this, really, is the credit pyramid. Most people in the western world have one, two, or even 5 credit cards, many of them maxed out. Many people live from paycheque to paycheque.

You cannot rely on the consumer to bail out the economy when the consumer is thousands to tens of thousands of dollars in debt. The vast majority of American consumers have no more liquidity than the system around them at this point, and their spending will only exacerbate the problem because they will primarily spend with their lines of credit first and foremost.

The unpaid credit situation is so bad that when I was in mathematics in High School a year or two ago here in Canada, my teacher was actually teaching the class how to avoid paying your credit bill by bouncing the balance between two cards from different companies. That's how bad the situation is, and that is why the situation can't be salvaged.

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