“The point of all this is to say, that yes we will have ups and downs in markets, that's what markets do. But to sit on your hands for a decade and wait for a depression, and when it doesn't materialize after a decade, not admit flaw in your assumptions, is bullheaded.”The following is not directed at my readers, but to Anonymous Dec 19, 5:21
I’d like to clarify a few things. During the years 2007, 8, 9 and 10 no one referred to those years as “the greatest recession since The Great Depression.” They do now. Janet Yellen in her address the other day stated, the bail out in 2007 was to confront “the greatest recession since the Great Depression.” No government employee is going to wave a flag and say we are currently in a depression. The Federal Reserve and the Treasury confronted the Congress in 2007 and said bluntly, to do a bailout or kiss the economy goodbye. And by the way the bail out failed to accomplish anything except spend money. We have 45.4 million people in the US on food stamps— so the telltale soup line kitchens of the 1930’s are not there.
The 100K, my wife and I have in savings, did not double in value over the last 10 years, it did nothing. We were effectively taxed by the government $100,000; our investment earnings were confiscated.
From 2006 to 20015 people have gone back to school to further their education because they couldn’t find a job. It didn’t do much, other than stimulate the economy and build up debt among young people. Over 60 percent of these loans will never be paid off, and they will linger around and hound the borrower until they die.
The national debt has increased 10 trillion dollars and the size of it means absolutely nothing to anyone. The US government has probably borrowed all of the saving in banks in the US and the entire amount in our retirement funds. They will have no problem paying you back, but will it be in your lifetime? Or will the entire amount paid to you have very little purchasing power?
There was the Great Invisible Displacement of Jobs because of the computer revolution that has been glossed over,(one person now had 10 times the productivity) and they were good paying jobs, gone forever. The largest loss of jobs has been to Asia; cheaper labor and lower corporate taxes. Most of those were minimum wage jobs.
There are absurd levels of unemployment in Europe. When Spain reports 20 percent, is it any more believable than any other government report? We can safely assume that they are not exaggerating. Banks in Europe are now “paying” negative interest rates. So with T-bills paying a quarter of a percent, a lot of foreign savings deposits will be headed to the US. ---Congress will have more money to borrow and spend.
You need a car; the car companies offer the new 8-year loan for those that can’t afford the 5 year one. The neat thing about this, is that it pushes the buyer’s insolvency out an extra 3 years into the future and at the same time stimulates the economy. Let’s face it, if it wasn’t affordable in 5 years, you shouldn’t have bought it in the first place.
Plus, look at what you purchase, everything has shrunk in size. There is no inflation unless you have a tape measure. Bleach and Ammonia used to be about a dollar a gallon. Guess what, they now sell half gallons at a dollar. Kind of looks the same, but there was a switch made you just didn’t catch it.
So from looking at this Great Depression, there is only one conclusion I can make. If you have money in the banks or in retirement funds, the interest on your savings have been confiscated for the last 10 years and prices have doubled. People with no savings thought that they had nothing to lose until they got a student loan, a wide TV and a new SUV. Add to that health insurance premiums cable and a couple of cell phones. They are living paycheck to paycheck. And if they are not working, they have moved home with mom and dad who are in their 80’s.
The real question: “Is the Great Depression over?” The answer is “No, it’s about to get worse.” Starvation in the Middle East. The collapse of the Euro in Europe. The collapse of oil prices could end most wars being fought (which might be a good thing). Stock market values are hypothecated on thin air. Bond prices are so low as to be deemed unreasonable as credible financial investment instruments. Speculative bubbles in rental real estate are rampant.
For people my age, the consensus is,keep working and don’t retire; it can’t be as painful, as retiring to suffer the future financial downfalls of fixed retirement benefits. We know something is about to change. Wall Street and the Federal Reserve have stirred the pot and no one is sure of the results. We do know one thing for sure, it is not going to be something that was planned or expected to happen.
This Great Depression started in 2006 and the end date is still not in sight. The only mistake I made in 1980 was to assume the interest rate would be around 7 percent up through my retirement. The changes over the last 10 years have been so gradual, they have been absorbed without being observed.
Here is hoping that the New Year will be better.
I hope everyone had a Merry Christmas, and here is I my wish to all of you, for a Happy New Year.