U.S. Must Be Cut Loose

12-28-08 | gpk9

[gpk9]

Christmas retail sales are confirming what "gloom-and-doomers" have been saying all year: Consumer demand is falling off a cliff. It's in free-fall. The bottom will eventually be hit, but it won't be a trampoline-bounce back up. It will be death on the rocks.

70% of our economy is consumer demand. When consumer demand dries up, the economy crashes.

Why is consumer demand drying up?

1) Massive consumer short-term unsecured debt.

In the 2002 - 2007 credit bubble, consumers collectively pushed credit card balances over the 14 TRILLION dollar mark.

That massive amount of debt simply cannot be paid off. Credit card companies are realizing this, and have kicked interest rates to dizzying heights, and / or simply turned off many people's credit cards.

2) Massive consumer long-term secured debt.

Consumers have bought more home than they can pay for. That was made possible by insanely-loose lending policies of our government, together with insanely-low interest rates set by the Fed. The result has been a 5-year orgy of home buying, bidding up home prices to insanely-high levels.

The 5-year credit bubble has popped ...as smart people knew it would.

Those insanely-loose lending practices have suddenly vanished, leaving consumers in the frightening position of approaching variable rate jumps with no way to re-finance at lower rates. Unprecedented numbers of people are going to find themselves in mortgage default in the months ahead, leading to an unprecedented number of homes being given back to banks, and a near-collapse of home prices.

Those insanely-low interest rates are dropping even lower, but hardly anyone has credit-worthiness to borrow money due to the massive debt-load they're already carrying, along with home prices dropping like a rock.

On top of that, banks are absolutely TERRIFIED! They have stopped lending money for all practical purposes. Even with TRILLIONS of new dollars created out of thin air by the Fed being handed to them on a silver platter, building their cash reserves to all-time highs, banks are STILL terrified, and STILL not lending money.

The T.E.D. spread is down significantly in recent weeks, but that reflects the rate banks charge to each other. With cash reserves built back up to all-time highs in recent weeks, banks feel more comfortable about lending to each other, but they are STILL NOT lending to consumers and businesses.

3) Unprecedented job losses.

One component of credit-worthiness is job stability. The likelihood of having a job long-term. That likelihood is vanishing as hundreds of thousands of jobs are being liquidated by companies seeing terrifying drops in sales and revenue. The automobile market, a classic indicator of consumer demand, is literally collapsing. New car sales across the board are down 35% in November alone, three months into a new model-year. That is near-collapse of new car sales, and will be the last-straw for the big 3. The end. All 3 of the big three are going into bankruptcy, regardless of $15 billion or $34 billion or however many billions are thrown at them by the Fed.

That same story or something close to it is happening to companies in all sectors of the economy, resulting in hundreds of thousands of more jobs being liquidated in the months ahead.

Even utilities, electric, gas, water, etc are liquidating jobs as revenue drops and dis-connects rocket to record highs in the past three months.

Banks know this. They are keenly aware of it. That is one reason they are terrified and not lending money to consumers.

They're also not lending money to businesses, those same businesses seeing terrifying drops in sales. Aside from the collapse of short-term business financing, bank letters of credit, a critical component in movement of goods and commodities within America and between other countries (like China), are simply not being issued now, resulting in a near freeze-up of large-load shipping within America and worldwide.

If collapsing consumer demand was the only problem, all we would have is a depression, a deep depression.

But collapsing consumer demand isn't the only problem. The value of the dollar is collapsing as well.

The trillions of dollars being created out of thin air by the Fed and being thrown at any and everybody in their terrified attempts to prevent an economic collapse are creating hyperinflation of the money supply at a rate unprecedented in history and leading to a soon-coming monetary collapse.

Other nations see it, are becoming terrified themselves, and are moving swiftly to unload their dollar holdings before the dollar becomes worthless.

On top of that the IMF is now proposing plans to cut the dollar loose as the world reserve currency. Once that happens the dollar is finished. It's over. People will literally start using dollars to wipe their butt. Any dollar-denominated holdings and investments will instantly become near-worthless. 401ks. IRAs. Money market accounts. Bonds. You name it. It will happen almost overnight.

We are going into a hyperinflationary depression the scale of which has never occurred in history. It will be the final undoing of America. The mighty America, bastion of liberty and freedom for 250 years, is coming down to it's knees thanks to insane levels of financial greed, something our forefathers never thought would or could happen.

Other nations are seeing it unfold right before their eyes, the huge beautiful Titanic christened "America" with the gaping financial hole in our side, are absolutely terrified, and are making all haste to cut the lines before we drag them under also.

We have been warned, by credible people in the know, one of them being our new vice-president, of a major calamity hitting America in the first few days of Obama's presidency, but no one, not even those making said warning, are saying what it is.

They undoubtedly know what it is because they are giving exact dates.

In a larger sense, '09 is going to be year the Titanic-christened-America sank. Our government-captain and officers are watching their nation-ship sink beneath their feet as they encourage the band to keep playing.

As with the real Titanic, there aren't enough lifeboats to go around.

As with the real Titanic, only the elite will be in them.

Unlike the real Titanic, the captain and officers will be in the lifeboats too, watching along with their elite friends in morbid silence as the rest of us freeze to death in the frigid waters of financial ruin, or go down locked deep in the bowels of the ship as they take one last look at the keys, then toss them overboard.

It's not a perfect analogy. America won't cease to exist. Something will rise out of the depths eventually.

But it very likely won't be America any longer. Maybe in form, but certainly not in substance.

[gpk9]

I believe your responses are moronic, so I guess we’re even. :)

[Toddsterpatriot]

That’s the whole point. Our opinions don’t matter. Every opinion expressed on this site doesn’t matter.

LOL!

[gpk9]

"Are you still breathing? Have a beer and chill."

Oh yes, I'm fine. :)

[longtermmemmory]

actually you are missing one point.

It is not just the fact that these people are going to default.

There is no legal way to collect.

The “bad credit write off” market is not the court juggernaught as before. The standing of a subsequent holder of a debt is no longer certain.

For example, banks have literally LOST HUNDREDS OF THOUSANDS OF PROMISORY NOTES.

poof gone.

They are TRYING to allege state statutes to esablish the lost promisory note and offer absurd indemnifications agains a future holder of the note trying to enforce the note.

Now we have “rocket scientists” (dripping sarcasm there) who are pushing the concept of recourse mortgages on primary residences.

The forget the fact that primary residence homes enjoy HUGE legal preferences for the lenders and borrowers. If the mortgage becomes recourse just like any other investment, then lien stripping and priciple rewrite under the bankruptcy laws should also be allowed on the primary residence.

In the courts these days, nobody seems to be able to establish with certainty who is the proper plaintiff.

(footnote: this does not even begin to tough the 20% BAD INFORMATION ACCOUNTS where the collection agency bought a false account)

(footnote2: many of those bad credit card debts were bought for 7 CENTS or less, yet collection plaintiffs push the illusion they are the same as teh original company)

(footnote3: most of the debt conselor services are just glorified collection agencies in sheeps clothing. They get a percentage of every dollar paid to the other collection agencies on top the money the debtor pays. Also it does not help the credit rating the way advertised. Some credit agencies treat credit consolodator services the same as bankruptcy)

[Freedom_Is_Not_Free]

You have a lot to learn about this economic crisis. You will learn, probably the hard way.

[Mase]

Why even bother responding?

I know, it seems redundant telling you that you're misinformed. However, I wouldn't want others, that know as little as you do about the economy, to believe what you've written. They might start thinking the worst economy since Hoover is here and vote for hope and change.

In that case it wouldn't be a waste of time on my part. It would be an enjoyable hobby.

Not to mention being cathartic. Emotions are easy, facts are hard.

Me wasting your time? How do you figure that?

I have a hard time not responding to gross misinformation like you posted here so I suppose it isn't really wasted time after all. Never mind.

[Mase]

You have a lot to learn about this economic crisis. You will learn, probably the hard way.

Doom. It's what's for breakfast, lunch and dinner apparently.

[edge10]

From 790 Billion to 14 Trillion in less than a year? I think you better source your numbers.

Here is the one I found in mere seconds.:
http://www.voanews.com/english/archive/2008-02/2008-02-26-voa1.cfm

[expat_panama]

these doom and gloom false articles are pissing me off.

Same here, and what really gets me is how they lie about America at the same time they support it Obama's power grab.  The fact is that since the beginning of this so-called recession, our gdp has expanded by a half trillion dollars.  Some recession.

[Freedom_Is_Not_Free]

You sound identical to house buyers during the peak of the housing bubble. They didn’t want to hear from me how they were going to lose their ass after the bubble popped. Now that their California homes are worth 1/2 what they paid for it, they aren’t laughing anymore.

Like them, you only learn the hard way.

[familyop]

"This is nonsense. Productivity is is a measure of the number of hours required to produce the necessities of life. Anything that reduces that number is a plus for society. One man with a bulldozer can do the work of hundreds of lumberjacks with axes. That frees them up do other things. You need a lot of axes or just the one bulldozer. In many ways, if the problem is clearing the forest, it really doesn't matter where you bought the bulldozer."

Alright, let's say hypothetically that bulldozers are produced in China. If we no longer have anything real (beyond money loaned from Chinese) to trade for bulldozers, we'll no longer receive them.

"Our service economy is much less vulnerable to economic collapse than the junk economy of China. We have been buying a lot of stuff not related to our basic needs. We can stop buying this stuff and be no worse off. The Chinese on the other hand will be devastated. That in itself is probably the greatest threat to America and the rest of the world."

China manufactures things and has consumers in China and a few other countries to buy them. Demand for them will drop some, if we stop buying. But it won't stop, unless their government somehow goofs in a way that stops their domestic supply and demand processes.

[Mase]

Booms and busts have been a part of our economy since its inception. We are no more doomed now than we were in the past. Doomers have also been a part of our economy since the beginning. Every now and then their dire predictions come to be realized, to a degree, and then they like to tell us just how good their crystal ball is. Their luck at finding an acorn every now and then notwithstanding, they're still nothing more than doomers who don't realize that this is just a bump in the road on our way to a bigger and better economy.

[expat_panama]

Manufacturing is real work. If you don’t don’t real work, eventually, you don’t eat

That's crazy.  It's just like what people said about farming a hundred years ago: "America needs farmers for food because we can't eat what factories make."  

Since those days we've gone from half the US population on the farm to a half of one percent, and we grow more food than ever thanks to the machines from our factories.  It's the same with the services, a factory that's got say, a better floor layout or a better cost/quality control system, can produce a hell of a lot more products than some old-time factory from the '30's.  

[familyop]

I wrote:
"Manufacturing is real work. If you don’t don’t real work, eventually, you don’t eat."

You replied, but you didn't present any argument against my comment.

Granted, my argument was simplified for most of the audience of readers. But if some of our trading partners do most of the manufacturing, they possess--physically, even if not legally--potential control of the joint economy and the means for their near-future survival.

As for Chinese production efficiency, I doubt that manufacturing there is the paragon of new technologies. And most business moguls here eschew terribly complicated robotics, men in engineering and the like. ;-)

[Mase]

To put it simply, we manufacture more today than at any other time in our history. Your original comment (post #10) suggested that we don't produce much here these days. That's absurd. If that wasn't your point then I apologize. Of course, if that's the case, then I have no idea what your point is/was.

Maybe your point was that we should practice fair trade rather than free trade. If so, then I suppose you should define the word fair because the only true form of fair trade is free trade.

[familyop]

"To put it simply, we manufacture more today than at any other time in our history."

...if we include the foreign manufacturing owned by a very small number of Americans. Thus, statistics for such arguments come from dishonest methods. We're all well aware that most of the products available to us do come from foreign countries.

George Washington, James Madison, Alexander Hamilton, Henry Clay, Abraham Lincoln and many others like them were in favor of fair trade--even by way of tariffs, when necessary..

There's nothing patriotic or "free" about funding military buildups in communist nations and preferring communist slaves as employees while hating your own American neighbors.

[Mase]

...if we include the foreign manufacturing owned by a very small number of Americans.

It's true, American companies don't manufacture in other countries. They only manufacture here. Sheesh.

Thus, statistics for such arguments come from dishonest methods.

Then share your statistics breaking out what's manufactured by American companies vs. foreign companies, oh omniscient one.

George Washington, James Madison, Alexander Hamilton, Henry Clay, Abraham Lincoln and many others like them were in favor of fair trade--even by way of tariffs, when necessary..

Back then they would also bleed people when they were sick. Good thing we've learned more since those times. That said, you still haven't defined fair trade other than, as a conservative, you think it's better for government bureaucrats to pick winners and losers rather than the free(r) market which is guided by billions of individual purchasing decisions. Key word = individual.

There's nothing patriotic or "free" about funding military buildups in communist nations and preferring communist slaves as employees while hating your own American neighbors

Since when do slaves earn wages? Since when should government be telling free individuals whom they can trade with outside the scope of national security? American citizens need higher prices and fewer choices to protect them? Protect them for their own good? Where does your do gooding end?

[Freedom_Is_Not_Free]

You would have me believe that no-one can predict economic changes better than others can? Why was I among the few of my friends and co-workers to see the oncoming collapse of the NASDAQ bubble? Why was I among the few of my friends and co-workers to see the oncoming collapse of the housing bubble? Their predictive powers were non-existent. All they could do was extrapolate a current trend to infinity. Yet I was able to see both bubbles.

Well, how about this for prediction. I SAW the stock market crash and moved all of my equity assets into cash-based assets in December 2006, saving my 401(k) plan from a 40% collapse in value. Did I just get lucky or are you saying I was a perma-bear. If I am a perma-bear, then why did I have my 401(k) savings in aggressive growth funds, small caps, and an S&P 500 Index fund right up until 2007, when I saw this stock market crash coming.

The fact is, you are dead wrong. You are dellusional if you honestly believe that nobody has the ability to predict severed downturns in the economy or in parts of the economy. I take it back. You’ll never learn. Hard or any other way. You only see what you want to see. You can’t even admit that some people CAN see a coming problem. I sheltered my money from a stock market collapse and you call it the blind finding an acorn. The same for my not buying a house at the peak of the bubble. No, you’ll never learn.

[familyop]

"It's true, American companies don't manufacture in other countries. They only manufacture here. Sheesh."

It appears that lack of credibility is getting in the way of arguments.

"Then share your statistics breaking out what's manufactured by American companies vs. foreign companies, oh omniscient one."

...two fallacies in one argument. The trade deficits are common knowledge. We know by our nearly exclusively non-American choices in products, when we buy.

"Since when do slaves earn wages?"

...throughout time, of course. But most slave masters have disregarded the good Law on how to treat slaves. I am only a candidate for work, if I am willing to show up at the "temp" office 7 am (1 1/2 hours over a high pass from here) and wait until 10 am without pay. Then I may work with foreign-language foreign nationals for $10 per hour at picking frozen, rocky clay or the like. ...average about 6 hours or so of pay in the 9-or-so-hour day (plus three for the hazardous drive). The clients don't care as to how much they pay, but they are lazy, rude, insulting, whiny creatures. It's all about the vanities of our business leaders--not so much about money. There's no legal remedy, as we are seeing current labor policy in action.

You can probably see as to how uneducated and uncivil I am by my comments (not to mention my past in metal fabrication, machining, residential construction, electronics, supervision, instruction, software development,...).

On trade, the dollar's going to fall anyway. Oil (freight fuel) will eventually rise again. We'll have to produce. The gig is up. I'm just making sure that guilty merchants, importers, foreign slave buyers and their political puppets don't succeed in turning other American groups against one another again.

It's not the fault of the poor third-worlders. It's the traitorous, organized crime bosses who are paid for cheating America and building their dictators' nations.

[edge10]

Running your numbers, every man woman and child in the USA would owe an average of $46,000 in credit card balances.

Somehow, I don’t think so.