Category: Then 1929 and Now 2009-The Great Depression

Now and then//1929, 2009//the coming Depression. Part VI

By , October 7, 2009 7:49 pm

Now and then//1929, 2009//the coming Depression. Part VII had hoped to have the inflation (deflation) rate for September for this writing; they have not yet been published. Read part IV of this series for my thoughts on inflation in comparison with 1929 – 1934. Keep in mind that we have been deflationary since January of this year. Throughout these series I have also discussed our unemployment rate and my feelings on the process the government uses to arrive at their figure. There are a few internet sites (type in-real unemployment rate) where you can be enlightened on the “comical” process involved in determining the national unemployment rate; to lengthy to make it a part of this post; let me simply say that if the government (Bureau of Labor Statistics) used the same formula used 80 years ago (1929-the Great Depression) the actual national unemployment rate at the end of September would be 19.3% and a possible high of 20.10%. I wrote back in April of this year (when unemployment was 8.9%) that between October, 2009 and March 2010 unemployment would be at a low of 13%. Bureau of Labor Statistics is reporting the current unemployment rate at 9.8%. Was I ever off;  and not in a positive manner, I do indeed believe that the actual unemployment rate today is in fact between 17.5% and 19%. I stated also back then that some areas of the nation would be approaching 25% during this time frame. On September 4th a liberal organization wrote that the actual unemployment rate at the end of August was 16.8%. This year alone 9.1 million part-time workers which would prefer full-time jobs were not counted as unemployed and 800,000 who quit looking for jobs that aren’t there are not counted as unemployed. I have stated various times throughout these series that we have not seen the bottom and worst of our economic situation; the bottom will not come until approximately 4-7 months after “commercial real estate” bottoms out. The “commercial real estate” bust will sky rocket bank failures and a surge in the unemployment rate. Here it comes; commercial real estate office space vacancy rate hit a five year high of 16.5%, office space rents fell 8.5% in the third quarter (the steepest fall since 1995) and in New York City office rents are down 18%% over the last 12 months. The Moody/commercial property price index (price index for REITS) fell 5.1% or 39% from its October 2007 high. So far this year bank failures are ten times the average for the last 8 years. If you’ve been watching the stock market over the last six weeks or so, you would be hard pressed to accept the above as anything but “corrections” in our economic downturn and possibly accept that we have seen the bottom. I just don’t see anything coming out of this administration (politically and economically) to support an upturn in the economic state of our nation. In a few weeks I will start another series dealing with the “demise of the Dollar” and eventual degradation of our standing in the world. My current research reveals that this is in the making even as I write this. On Friday I will share some thoughts with you on the word “Stimulus”. I continue to be amazed at the “left-wing” pundits and strong supporters of Barack Obama as I see them all over the “news” and talk shows. They are still blaming Bush for everything wrong and certainly ensure that we are to understand that the current economic situation is his entire fault. Consider this: In 2000 George Bush inherited an unemployment rate of 4.0% from Bill Clinton; at the end of 2002 it had gone up to 6.0%; however, from January 2003 to December 2006 he brought it down to 4.4%. What happened at the end of 2006 was that the liberal Democrats took over the House and the Senate and here are the results: unemployment January 2007-4.6%, December 2007-4.9%, January 2008-4.9%, and December 2008-7.2%. Ten months in office and this administration has taken unemploymentnfrom a January-7.6% to an October-9.8%, I don’t give any consideration to my beliefs on the “actual” rate because the Bush administration also used the same standards for their rate.

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Now and then//1929, 2009//the coming Depression. Part V

By , September 23, 2009 8:08 pm

Now and then//1929, 2009//the coming Depression. Part VThe greatest wealth building generator in America is “Real Estate” ownership, at the personal level and at the corporate level (industrial and retail space). “Foreclosure rates rose in 47 states in March; in Texas, Florida and Colorado the rate was almost double the national average. A mere 17% of California families can afford or could purchase the same house they live in. Foreclosures in middle-class neighborhoods are on the rise. Should the housing bubble deflate, as many economists and federal officials expect, the foreclosures could lead to a national crises”. The above was written as quotes from Howestreet.com and the Washington Post and available on the internet on September 2005. Since 2007, plunging home values and stock prices have wiped out a record $13.9 Trillion of household wealth. If all of this information is available to me and I have been able to acquire these facts from four years back; where in the hell is our Congress, where in the hell is our President, the Secretary of the Treasury and why do we need a FED Chairman. I wrote back in April, May and also in June that things would start looking good and that economists and Federal officials would be talking about a possible end to the bottom; I also stated at that time “be not deceived” that the Real Estate bust would not bottom until major defaults in the commercial real estate sector. Here it is: on 9 September Bloomberg reported that the default rate of office buildings, shopping malls and other commercial properties more than doubled in the second quarter of this year. While Congress, the Administration, the FED and most of our economists deal with fancy explanations, charts, rosy outlooks and projected future growth which is never supported by substance, I deal with reality, the reality of historical data, the real “what got us there” and an uncanny gut feeling for seeing things as they really are. You see, when foreclosures in commercial real estate occur, it’s more than one bad mortgage gone bad; it is the jobs of all the people employed by these retail buildings, shopping malls, professional office space, industrial space and small business owners that support the “big businesses” that occupy these commercial buildings. At one point, and this time around it will be sooner than later, this new round of “unemployed” individuals will have no choice but to also default on their mortgage. Here it is: in the second three months of this year, defaults on home mortgages hit an all time high. One in every 25 properties was in foreclosure-the greatest number ever reported. The two statements above could possibly be called “Bad” and “Worst”; now here is what follows “Worst”: bankruptcy filings among the wealthy exploded 73% from a year earlier, homes listed for sale priced at over one million surged 27.3% over the last year but those that actually sold plunged by 23%. I had wanted to discuss “real unemployment” but I want to look at the methods used by the Bureau of Labor Statistics. Let me simply say at this time that the “real Unemployment rate” at the end of August is NOT 9.7% as reported by the government but actually a minimum of 16.8% and possibly as high as 19.4%. I have to say this; I wrote back on 8 April 2009 that “between October 2009 and March 2010 unemployment would be at 13% National average with some parts of the Nation at 19-25%”, I believe that certain parts of California are in fact at 19% as I write this. Just remembered I was supposed to talk about bank failures in this writing; we will get to that also in part VI and look at some disturbing trends I had not even thought of back in April when I boldly went this route of the coming depression.

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Now and then//1929, 2009//the coming Depression. Part IV

By , September 8, 2009 8:36 pm

Now and then//1929, 2009//the coming Depression. Part IVIn part three of this series I said that I wanted to share with you another element in our current economy that our nation has not seen on this scale since the “Great Depression”. That element is “deflation”; DEFLATION: BUYING POWER OF THE DOLLAR INCREASES. As good as that sounds the actual effect it has is chilling. One of the first things that happens with “deflation” is a drop in interest rates to near or zero, since I’m not a theorist maybe the lowering of interest rates created “deflation”, regardless (isn’t that where we are today), with interest rates at zero banks don’t lend money (the banks hold on to their cash) (isn’t that where we are today), when the credit markets freeze and there is no lending, business activity comes to a halt, then overall economic activity comes to a halt and profits drop/fail. When profits fall or come to a halt, businesses lay off people and people without wages don’t shop; unemployment reduces tax revenues to the treasury, no shopping reduces sales taxes to State and Federal treasury. Other businesses which depend on certain (failed) businesses now also fail and the cycle starts all over again. People that lose jobs don’t pay their mortgages and the first fall-off from that is a reduction in property taxes to local and county governments which now also have to lay off city employees and reduce services. Some of those services are police and firefighters. Why am I saying all this, anybody could have picked any “WORD” (I chose deflation) and applied that word to our current economic situation. Let me take you there with some available statistics. Except for the Carter years (which had double digit interest rates and inflation low of 12.52%/high of 14.73%) the last 6 decades managed to maintain inflation rates of between 1.59% and 5.09%; our economy survived  mild to mildly harsh recessions in the 70’s, 80’s and early 90’s. The last 16 years (8 years of Clinton and 8 years of Bush) were almost identical with Clinton having a couple of months at slightly over 5% and one month of over 6%, most of his 8 years were at 2.85% to 4.25% Bush’s 8 years were at 1.59% to 3.85%. Today as I write this we have the biggest drop in inflation rates since the 1950’s. Let’s backtrack to the “Roaring Twenties” before we compare January-August 2009. Inflation at the end of 1920 was at 15.90%, most of 1921 and 1922 had a mixed bag of low inflation and low deflation. 1923 to June 1926 had low inflation rates; that was probably the beginning of the end for the “Roaring Twenties”. Deflation ruled the “day” from July 1926 to May 1929 and the economy managed to bring back low inflation for about three months when the “Depression “began in October 1929. Big Government intervention to soften the depression provided a mixed bag of low inflation/deflation for most of 1930. Deflation devastated the economy for all of 1931-1933 and most of the country did not see the end of the “Depression until 1941. We have not seen any prolonged deflation since the “Great Depression” until now. Here are the deflation rates for January-August of this year: Jan-.03/Feb-.024/Mar-.038/Apr-.074/May-.0128/Jun-.143/Jul-2.20 and Aug-2.10. I’m a fair person, NO, I couldn’t possibly blame this President for the deflation of the last 8 months, but, I sure can blame him for failing to provide the right leadership to prevent the “soon coming” depression from lasting 10 years instead of 4. In part III of this series I stated some reasons why the government will not be able to stop this depression from occurring. I will be keeping an eye on the deflation/inflation rate and the unemployment rate over the next few months. I will probably make this series a six part series and discuss the “real” unemployment rate with you sometimes early next week. Part of that discussion will be bank failures.

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Now and then//1929, 2009//the coming Depression. Part III

By , August 28, 2009 8:59 pm

Now and then//1929, 2009//the coming Depression. Part III It is not Bush or Obama that got us into the economic situation our Nation is in. It is US, yes, we, ourselves created this chaotic financial mess we are in. It’s true that our government, both parties, did or didn’t do things right on “oversight”, “regulation” and eventually failing to realize where our Nation was headed financially. None of this is new; we saw all this happen before; in 1929, the Great Depression. The very sad part of this is that many financial and economic experts, Wall Street analysts and even some government officials were talking and writing about the direction (south) our nation was headed financially and economically; which always lead to “unemployment”. When were they writing of this, you ask? They started warning us about where America was headed in September 2005; that’s right; in 2005 there were plenty of warnings in print of the coming “real estate” bust and a down turn in the economy and the potential collapse of Wall Street. I said that Obama did not create the financial disaster we are in, but, it is Obama’s policies and vision for America that will make it worst and lengthen the period of the depression, yes, I said “depression”; it’s coming. There are a few authors and economists that have written articles and books of the coming depression, some of these folks having been writing and researching the economy for 30 plus years and at least one has perfected models which he uses to define his predictions. Where I disagree with all of these “contrarian” opinions is that almost all of them predict a mild depression which can and will be controlled by the Government and the Fed; I disagree, I believe that we are facing a depression unlike anything we have seen in 200 years and that it will certainly be a global depression. Here is why I stand by my belief even in the face of the Stock Market having gained almost 40% since March’s low. The “roaring twenties” have so much in common with the “greatest economic boom” (1983-2006); supercharged real estate prices, accumulation of multiple real estate ownership by individuals, interest only real estate loans and Yuppies (the young, 30 years old and under) having control over so much wealth and power. Yet in the midst of those golden years where nothing could possibly go wrong; we came face to face with 1929. While today we may have more government controls to soften problematic financial situations, a doubling of the national deficit in only six months is hardly the right start to head off an extended recession or prevent a depression. More importantly is what we have today that 1929 didn’t have. In the 1930’s our government didn’t have “benefit programs” going broke (social security/Medicare), an automatic tax increase (Bush tax cuts expire), a major housing bubble going bust (20 trillion lost this year), a falling dollar, an extremely large debt to foreign governments, the most unqualified and ill-prepared “White House” in the history of our nation (yes-worst than Carter) and a large percentage of Americans and Businesses that have totally lost all confidence in our Government. Normally in the world of politics and economics there would be enough smart individuals in Government that could provide a solution to alleviate the situation to at least making it like a migraine headache instead of a brain tumor. We can’t restructure the banking system, big auto companies, big insurance companies and provide government assistance to taxpayers (stimulus); we’ve already done that during the last 10 months (started with Bush) and it hasn’t worked, in fact, unemployment just kept creeping up. If the government takes over what it believes is failing while if fact those systems and business were “failed”; then we have a failed government. All of government’s bail-outs and interventions were done on the hope of “future economic progress”; all of Obama’s proposed programs depend on this “future economic progress” or “savings”. We will not see this “future economic progress” for at least 10 years unless this government immediately ends its direction of bail-outs, social programs, spending, taxing and the introduction of “new” entitlements; and even then the next sustained upward trend in economy activity will still not come before 2015. Most politicians every two or four years (time for re-election) remind us of the funding problems in social security and Medicare, budget short falls, deficits and the continued imbalances in our Economic, Social and Political issues which govern our daily lives. Soon after the elections most if not all of these “politicians” and in fact even we the voters collectively go into complete “denial” on these issues or at best put them on the after burner for a future day, why is that? These imbalances have been building for about 70 years; the reason is cost. It is “cost prohibitive” to provide everything to everyone so we all look forward to future economic growth that would provide the means for the government’s entitlement programs.This was going to be a three part series but I have some other thoughts to share with you so there will be a forth part where I will discuss something we have not seen since the 1930’s.

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Now and then//1929, 2009//the coming Depression. Part II

By , August 17, 2009 7:25 pm

Now and then//1929, 2009//the coming Depression. Part IIIn part I if this series I wrote of the optimistic outlook expressed by the white House and the many Wall Street Gurus during the last few weeks and rightly so since the stock market has moved from a low of approximately 8900 to mid 9300’s. I then went on to share with you the expressed statements which were been dished out to the American People just before “black Tuesday”. I ended part I with October 29, 1929: Stock Market Crash. Let’s continue with some of the optimistic headline news from 1929: December 5 1929, “the government’s business is in sound condition”; December 28, 1929, “maintenance of a general high level of business in the United States during December was reviewed today by Robert P. Lamont Secretary of commerce, as an indication that American industry had reached a point where a break in New York stock prices does not necessarily mean a national depression”; January 13 1930, reports to the Department of Commerce indicate that business is in a satisfactory condition. I could go on and list more of these “denials” of the grave economic condition our country was in; they number about two per month all the way to November 1930. On January 20, 1931  Calvin Coolidge said “our country is not in good shape”, however the Assistance Secretary of Commerce said on June 9 1931, “the depression has ended”. Sounds familiar, doesn’t it? This is exactly what we are hearing today on a daily basis, conflicting explanations that are half truths, outright lies and mostly political pandering to appease those that “put you in office”. Throughout the years 1931 and 1932 the headlines that were making front page were from month to month very conflicting and confusing depending on who you were listening to. “August 12, 1931 “Henry Ford has shut down his Detroit automobile factories almost completely, At least 75,000 have been thrown out of work” and on July 21 1932  from a Dow Theorist “I believe July 8 1932 was the end of the great bear market”. Even if this theorist had been only half right, what he failed to realize was that the Stock Market Collapse was only one factor impacting conditions in America;  another factor was the “Economic Collapse”. While popular and accepted reasoning dictated that the Stock Market Collapse had created the Economic Collapse, nothing could be further from the truth; the economy had been on a collision course with disaster for about six years (I will finish that thought in part III of this writing). Let’s consider these two thoughts: “June 9 1931 the depression has ended” and “July 21 1932 the end of the bear market”. With very few areas in the nation exempted, the depression lasted 10 years and the nation as a whole did not start to see relief until 1941. Double digit unemployment prevailed from 1933 to 1941. I stated in an earlier writing that unemployment in 1929 was 3.2% and 23.6% by 1932; here is what Central Trust of Illinois had to say in early 1930,  “from the end of 1929 to early 1930 unemployment improvement and good month to month improvement numbers ahead” you see unemployment had gone from 3.2% in 1929 to 8.7% by 1930. A survey of Illinois manufactures found a “slow” but “sure” recovery in business with profits in 1930 as good as 1928 and upward improvement in 1931. We have looked at two very powerful elements responsible for the living “Hell” Americans went through from 1929 to approximately 1941; the “Stock Market Collapse” and the “Economic Collapse”;  there is yet one other factor and we don’t control it. From 1930 to 1933 “Nature” played havoc on almost a third of the nation; there was a severe drought from Arkansas to the Great Plains and of course most of us my age have some remembrance of the “Dust Bowl” which affected Kansas, Oklahoma, Texas, New Mexico and Colorado. While the “Dust Bowl” only lasted three years, it took over ten years for complete recovery from the effects.I will try to finish this writing in part III sometimes next week and talk about possibly revising some previous thoughts I wrote about in January and then again in May; it deals with inflation and deflation.

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Now and then//1929, 2009//the coming Depression. Part I

By , August 13, 2009 7:55 pm

Now and then//1929, 2009//the coming Depression. Part I  I’ve posted twice on my belief that this recession we are going through is the prelude to a great depression unlike anything we’ve seen in 200 hundred years. I would love to be wrong, but, don’t believe I am. Listening today to a Democratic Representative give his spin and liberal talking points in support of what this Administration is doing for the economy had me crying and asking myself;  why can’t these politicians see things as they really are and not as they want them to be? And it’s not just the Liberals, the Administration, and the left wing pundits who would support anything this President wants;  it is also some of the nation’s most trusted names in the financial news reporting and analysis.  Business CEOs are somewhat upbeat and Wall Street is thinking positive for the months/years ahead. Here is what that Democratic Representative said today on Fox Business with Cavuto: “Everything is looking good, all indicators are that the stimulus is working very well, unemployment is moving in the right direction, President Obama is doing the right thing for the economy and when we spent the remainder 90% of the stimulus the economy will start moving upwards only”. The daily reports on Wall Street numbers and movement of the Stock Market over the last few weeks have been extremely positive and some are saying that the dips will be lower than the increases. Some businesses have reported a favorable increase in revenue in relation to expectations; and the various agencies reporting for the White House have provided numbers which they claim are better than expected. Unemployment numbers this month were not as bad as had been expected. The operative words here are “better than expected”.  Hello, let’s read between the lines of spin and deceit. Some claim that the current recession started last September, some claim that it bottomed last September. For sure we have not yet seen the bottom of this recession; we will not bottom out until the fall of “commercial real estate”, an increase of foreclosures and the failure of more banks. The Sad thing here is that because of our unprecedented National Deficit (the national budget has tripled under Obama) the bottom of this recession will lead to a Great Depression preceded by inflation, hyper-inflation and deflation. Read my previous posts on where I put unemployment at by next fall. Deflation will cut our national GDP. Between 1929 and 1932 the GDP went from 103 Billion to 55 Billion, an almost 50% decline. Unemployment in 1929 was 3.2%,  in 1932 it was 23.6%.  As during the roaring twenties it all started with increased real estate prices, a craze in real estate buying, foreclosures, bank failures and the unemployment that followed. “Interest only loans were very popular during the twenties. They disappeared during the great depression, only to reappear in the last five years or so. The foreclosures today are at the highest level that they have ever been in the history of this country, and growing every day”. This was written in September 2005.All the news I’ve been hearing for the last few weeks has been very positive: Following are some upbeat and positive news just prior and following “Black Tuesday 29 October 1929”  September 1929: Secretary of the Treasury: there is no cause to worry, the high tide of prosperity will continue October 14 1929: Officials of the commerce department deny rumors that a severe depression in business and industrial activity is impending. October 29 1929: Stock Market Crash I will continue this writing in a few days; it will consist of three parts.

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