30 Reasons Why Next Great Depression Is On Its Way
Corporate greed and excessive spending coupled with the neglect to deal with problems before they turn into something much bigger has fueled a bear market not seen since the 1930s. Can the government’s myopic views really lead us into the next great depression?
How bad can things really get?
Very bad according to Paul Farrell. Paul called the dot-com crash at its peak with an article he released March 20th, 2000 titled, “Next crash? Sorry, you won’t see it coming.” Now he predicts that with excessive government spending and through the unwinding of the credit crisis matters will get much worse.
The major theme is a combination of rising debt for the United States, continuous jumps in unemployment, and the possible failure of not only many companies but hedge funds, states, cities, and the like.
Below are some of Paul’s “leading indicators”. Each problem has one or more possible solutions, but lacks unified political support.
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America’s credit rating may soon be downgraded below AAA
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Fed refusal to disclose $2 trillion loans, now the new “shadow banking system”
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Congress has no oversight of $700 billion, and Paulson’s Wall Street Trojan Horse
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King Henry Paulson flip-flops on plan to buy toxic bank assets, confusing markets
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Goldman, Morgan lost tens of billions, but planning over $13 billion in bonuses this year
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AIG bails big banks out of $150 billion in credit swaps, protects shareholders before taxpayers
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American Express joins Goldman, Morgan as bank holding firms, looking for Fed money
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Treasury sneaks corporate tax credits into bailout giveaway, shifts costs to states
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State revenues down, taxes and debt up; hiring, spending, borrowing add even more debt
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State, municipal, corporate pensions lost hundreds of billions on derivative swaps
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Hedge funds: 610 in 1990, almost 10,000 now. Returns down 15%, liquidations up
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Consumer debt way up, now at $2.5 trillion; next area for credit meltdowns
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Fed also plans to provide billions to $3.6 trillion money-market fund industry
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Freddie Mac and Fannie Mae are bleeding cash, want to tap taxpayer dollars
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Washington manipulating data: War not $600 billion but estimates actually $3 trillion
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Hidden costs of $700 billion bailout are likely $5 trillion; plus $1 trillion Street write-offs
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Commodities down, resource exporters and currencies dropping, triggering a global meltdown
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Big three automakers near bankruptcy; unions, workers, retirees will suffer
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Corporate bond market, both junk and top-rated, slumps more than 25%
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Retailers bankrupt: Circuit City, Sharper Image, Mervyns; mall sales in free fall
Read the rest of Paul’s concerns here.
With the consumer ultimately in control of our country’s destiny the lack of credit to fuel spending has become a big issue. Falling gas prices are of no help when credit card limits are being cut in half by issuers. The lack of the ability to borrow to spend is spreading to even auto and personal loans as well. Credit ratings of a minimum 700 are becoming standard across the nation.
The days of refinancing your home to buy that new truck or simply pay off bills is no longer here. A major restructuring of the US financial system is officially underway and has no foreseeable end in site. Whether or not Paul’s predicted calamity is looming just around the corner is up for debate. One undeniable reality though is simply understanding that our country still has a very long way to go.
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Source:
30 Reasons for Great Depression 2 by 2011
Paul B. Farrell
MarketWatch.com, Nov. 17th, 2008
