There is no knowing what will happen. We are all guessing, educated guesses, wild guesses and otherwise. That you are still making up your mind is understandable, since this crisis is so hard to fathom and takes so much reading to appreciate the amount of fake value that is now being destroyed, from home values that were falsely inflated or based on faulty expectations, to bank earnings that were falsely supported by earnings models that have been long since disproved. Things are collapsing, not because our economy is unsound, but because we indulged in an unsupportably huge volume of credit, on every level from personal, to corporate, to financial, to governmental. All of that is collapsing now.
Personally, I have no clue what is going to happen. I have been convinced by those people who simply have accurately predicted what is happening today. I have hitched my wagon to them. I’m listening to those who have been proved right, rather than proved wrong. When Ben Stein or Bob Brinker or Jim Cramer talk, I don’t listen as they have been wrong.
So I listen and read works from Nouriel Roubini, Meredith Whitney, Eric Janzsen, Lee Adler, Peter Schiff, Doug Noland, Mike Shedlock, and others who have been proved right.
I can’t say if this downturn will be as bad as I believe it will be, based on reading the works or those I listed above. But reading what they have said, and reading how far reaching, how massive the credit bubble was, it leads me to believe that the deleveraging that must occur will take years, not months. And those years will involve a constant, irrepressible march of business closures and layoffs. So I can’t see any recovery on the horizon. Not until house values stop falling. Not until all of the faulty, bloated credit is wrung from the system.
Frankly, it is happening very fast. I predicted the stock market crash (too early, as I usually do) but it has come far faster than I expected. I didn’t know we would see a 40% drop in value so soon. But the government is trying to prop everything up, and this is just going to draw the deleveraging out much longer.
As you can see, I believe the recession will be longer and deeper than most people, which I suppose includes your brother. That was the point of my post. Most folks are not going to take the time to study how large and widespread the credit bubble was and so they are not going to understand how long and deep the economic contraction will be for the economy to destroy that massive credit bubble.
Once.
He's always predicted doom.
He is known as Doctor Doom. He had to be right eventually.