Well, had a chance to mull this over.
I don’t think I’m buyin’. Some of the things Orlov says are stages of collapse — and he cites the Soviet Union — never happened in the Soviet Union. There were, for example, never gangs of roving wastelanders. There was not a cultural breakdown.
Southack made a convincing argument that we are in a deflationary phase due to overproduction. I can kinda buy that. Look around — we simply have way too much stuff. We don’t need any more. Even a cheap apartment has in it, several TV’s, lots of furniture, one and maybe two cars outside....
So when the real estate bubble popped, the fear woke people up. “Holy crap!” they exclaimed, “I don’t need a fourth laptop after all!”
And the deleveraging of overconsumption began.
I suspect, like all trends, there will be overcorrection on the other side. We will see shortages, even. But collapse? I’m not seeing it.
Not even Obama can bring a collapse about. Remember the Soviet Union: They were ingrained to be communist and under severe government controls. No amount of prodding could make them change.
The same attains with us. We are deeply capitalistic, and we buck under government control. Obozo will find this out, in time.
I suspect the fact this guy is a Russian also colors his commentary. I don’t expect TEOTWAWKI.
I don't want to nitpick, but I will. There are actually two forces you are talking about there. One is the change in consumption patterns from that fourth laptop to savings which hopefully results in investment (versus speculation) or spending on education, or consumption that will result in more production in our country. The second factor is deleveraging which is what Southack was talking about. We've figured out that borrowing 99 cents to buy a penny's worth of securities is not a good idea even if those securities are rated "AAA" and "insured". The Fed is attempting to counteract that develeraging because rapid deleveraging can lead to systematic failure with all of our derivatives and fractional reserves. But that much leverage is bad, everyone knows that, even the Fed.
I would argue that preventing deleveraging by providing government loans in the tens of trillions guarantees collapse of the magnitude suggested in the article. Alternatively letting the big banks get repriced to zero and liquidated is also expensive and will be painful to the rest of the economy, but not catastrophic because alternative financing will quickly spring up for worthwhile businesses. This is basically because the market will know that the government isn't going to ruin their investment by trashing the currency (all of the world's currencies included).
Dammit Laz, now I have to break up my gang of roving wastelanders. Just what in the hell am I supposed to do with all of this fuel, food, and ammunition that I have stockpiled? Nobody knows the hours and years that we invested in developing a genetically superior breeding stock of women.
And all of the sudden YOU turn into little miss economic sunshine.