The Coming Great Depression?

As an amateur economist who gets the price of Oil right as well as other commodities more often than not, I want to offer some sound opinions on that has happened and what will happen in the economy over the next few years. As well as what has happened.

Some of this comes from books, some comes from a few decades of trading and chart study and some comes from a pretty good sense of the market.

HANG ON TO YOUR HATS. This is a public service.

First How did we get here. I just read a pretty good explanation of the whole process that lead us to this point. I would love to blame Liberals, really I would, but this is due to decades of false response to economic cycles.

WE GOT HERE THRU THIS SERIES OF EVENTS:

1. Banks grant new loans on a massive scale and the interest rate drops.
2. Credit expansion drives malinvestments in projects far from consumption which were not profitable before the credit expansion..
3. Capital goods rise in price.
4. Prices climb on the stock market.
5. The capital structure is artificially lengthened.
6. Large accounting profits appear in the capital-goods sector.
7. The capital-goods sector demands more workers.
8. At some point the rate of growth in credit expansion ceases. The interest rate climbs. The stock market crashes.
9. Consumer goods prices grow faster than wages, in relative terms.
10. Accounting profits appear in the consumer sector (demand increases).
11. The capital-goods sector sustains heavy accounting losses.
12. Workers are laid off in capital-goods industries.
13. Bank defaults mount. Marginally less solvent banks face serious difficulties. Credit crunch.

The current situation is precisely this: we face a credit crunch stemming from the creation of bad debt by the banking system (based on hyperabundant money) and the central banks. The recession seems to be inevitable: malinvested assets will undergo a severe adjustment due to the sale or the repossession of assets on a massive scale, which is necessary to repay the debt. Read the source article for this.

So, we know we are about to go into serious economic waters. Here are the hard truths we all need to understand. I will make a swipe at my liberal friends, Obama can’t solve this. Neither could George Bush. Reagan might have if he had been allowed to. Now the economy will right itself but it will take a long time.

Here’s what’s about to happen:
Money that has been poured in will splash around, by the first of April things will look pretty good. Then, while optimism reigns supream, things will turn south again, in September or October.

We will go into a long painful depression. It will last thru 2010 and most of 2011. Inflation will hit in commodities but not Gold. Oil will be expensive. Our currency will collapse. The dow is headed for 4-5000. This will seem like the end of the world. Most or all of the bailout money will have been lost. It will only have served to destroy our currency.

Then, a brief rebound because new opportunities will emerge in 2015-2017. Money will be made, markets recover. Mostly however on cheap money and natural resource sales. We will as a country be poorer, but not all. Great fortunes will be made during this time. Tremendous fortunes. They will not be in conventional ways.

After that last retraction of the economy that will last from the end of 2017-2021 then a new healthy and vibrant economy will emerge. It will not be US based. Europe will decline to an insular isolated enclave.

From 2022-2035 there will be a great global boom. We just won’t be driving it.

And, this is the economic reality that we must and will endure.

In 1994 I read a book called, “The Great Boom ahead” Harry S Dent. He described the following 20 years in that book exactly using demographics.

Now in his new book, The Great Depression Ahead, he describes in detail the why’s and wherefores of the economic probabilities for the NEXT 20 years. I wish I had paid attention to him the first time. I didn’t.

I may not be alive thru this next 20 or 30 years. I just thought you might want to know what’s about to happen.

OBAMA CAN’T FIX IT. He can make it worse. I hope he doesn’t. He can prolong it. I fear he will.

All these predictions may not hit the numbers, but they are indicators of the probable Cycle performance of the economy.

If I had paid attention, I would have been pretty wealthy. If I pay attention now, I might be less poor. There is one other caution. Lawlessness and government oppression will become much more rampant and intense as this goes on. Evil will be exposed and much of it will come from governance. Remember I live in IL.

You have been warned…. NOW WHAT?