Sunday, May 07, 2006

The Beginning of a Great Depression

I found a book in the library 20 years ago that so impressed me, that I made a copy of it. Its called The Great Depression by David A. Shannon. What really amazed me about the book was its style, it was more or less presented as a blog. Using that as a focus point, I decided to create my own blog instead of trying to add to someone else's. So here we go.

A depression is an economical state where things that worked real good, now don't work or are doing the opposite. There is also a general confusion as to cause and effect for given situations.

The first clue that something was amiss was the dot com bubble collapse. This showed us that when things were in play, money could be made.

Then after that, the spread between long bonds and T-bills got very small, then the spread between Treasury's and Junk bonds narrowed. You use to get a good laugh over asking if anybody had bought any Peruvian Bonds.

From then, carry forward to today. Real estate has been hypothecated to death. Now the Fed has raised interest rates 15 times, and the 30 year loan inched up only 1/2 a point. Hmmmm, are we there yet.

Real estate for sale, the quantity on hand, has gotten up to about 9 months supply. Never mind that there is no one left that can afford to buy a house. Foreclosures are climbing.

The baby boomer's are about to retire. Imagine what will happen when they decide to withdraw money from their retirement accounts because Social Security, just isn't enough.

How about the fund manager, who will notice that more money is leaving the fund than is being deposited. Common sense tells him to sell the dogs in his portfolio and hold on to Google.

Is it my imagination, that the airlines and the auto industry just had a pay cut.

Gasoline and gold doubled in price? Or did we devalue the dollar without telling anyone?

When the depression hit in 1929, it took people 3 years to figure out that they were in one. Are we there yet, or just getting close? More to come.

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