Recession to Depression
Peter Schiff seems to have reached a degree of cult status with the circulation of the "Peter Schiff Was Right" video on YouTube. In fact, Peter was more precient that even that video shows. I recall an interview he gave in 2002 warning of the upcoming financial implosion. There are also some critics (jealous ones I assume) claiming that because Peter didn't pick exactly when the world economy would implode that somehow he was wrong. It is a laughable notion indeed, driven by the same get-rich-quick day-trader mentality which has proven the scourge of this generation.
Just as the irresponsible monetary expansion of the early part of this decade would ultimately lead to our current financial disaster, so to will the attempted remedies and bailouts that the US is currently in the midst of, turn a severe recession, into a US and global depression. I suspect it will be more intense in the US but certainly not confined to its shores. Let me quote a comment from the above linked article:
"... it's not just U.S. stocks and real estate that are going to lose value, but U.S. bonds. This is the last bubble yet to burst. I think we're going to see a collapse of the bond market sometime during Obama's first term, and interest rates are going to spiral out of control, and the dollar is going to just be destroyed."
Read again.....interest rates are going to spiral out of control. A US dollar collapse followed by global currency instability and sharply higher interest rates will make 2008 look like party compared to 2010/11. Unfortunately we are just at the beginning of the downward slope of a multi-generational economic downturn of broadly equivalent length and intensity to the Great Depression.
So if you are out telling people how this Recession will become a Depression ask how the economy would look if overnight everyones' mortage interest rate doubled.
Just as the irresponsible monetary expansion of the early part of this decade would ultimately lead to our current financial disaster, so to will the attempted remedies and bailouts that the US is currently in the midst of, turn a severe recession, into a US and global depression. I suspect it will be more intense in the US but certainly not confined to its shores. Let me quote a comment from the above linked article:
"... it's not just U.S. stocks and real estate that are going to lose value, but U.S. bonds. This is the last bubble yet to burst. I think we're going to see a collapse of the bond market sometime during Obama's first term, and interest rates are going to spiral out of control, and the dollar is going to just be destroyed."
Read again.....interest rates are going to spiral out of control. A US dollar collapse followed by global currency instability and sharply higher interest rates will make 2008 look like party compared to 2010/11. Unfortunately we are just at the beginning of the downward slope of a multi-generational economic downturn of broadly equivalent length and intensity to the Great Depression.
So if you are out telling people how this Recession will become a Depression ask how the economy would look if overnight everyones' mortage interest rate doubled.
posted by Peter at 12:35 pm
2 Comments:
I'd like to Post a CommentThe recession really isn't that bad if you know where to look. The bailout money is spilling over to us believe it or not. I've done research and found that there is more money than what you think...
Bailout Spillover
http://www.businessspectator.com.au/bs.nsf/Article/gottie-link-$pd20081209-M5SQN?OpenDocument&src=kgb
This article from Business Spectator is so good it could have been written here. It covers the key points that this post tries to address. Namely how things will go from bad to horrendous and why 2010 will be far worse than 2008:
1. The US dollar will collapse in value. The bailout is accelerating this process. A collapse in the US dollar is a de facto default on US debt.
2. China's social stability is built on a narrowly constructed social compact of ever improving economic conditions. This compact is now broken.
3. A collapse in the US dollar combined with social instability in China will be key drivers behind the 'D' word.
4. Additionally (not covered) the end sting in the tail is sharply higher interest rates in the midst of severely depressed demand. Leading to deadflation.
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