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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Paying Uncle Sam First

By , August 12, 2009 7:14 pm

Paying Uncle Sam FirstJust about the time that Bush took office, Americans worked until the middle of April for no pay, everything they earned until then was basically eaten up in the various taxes we pay at all levels of Government. Federal income tax, state income tax, capital gains, sales tax, property taxes, etc., you get the picture.In 2008 this span of time had increased to Jul 16, an increase of 4 months over eight years. WOW’’’’’ George Bush-that is terrible; that is an additional month of work without pay for every two years you were in office.In the short seven and a half months that Barack Obama has been in office the span has increased from July 16 (2008) to August 12 (2009).Do the math: George Bush: additional month work without pay every two yearsBarack Obama: additional TWO months work without pay every year.

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