04/30/10 Baltimore, Maryland – While the whole nation seems to have bought into the ‘recovery,’ idea, we remain very skeptical. Some of the numbers seem to have bottomed out. But they are still terrible…and will probably begin a new decline soon.
We say that because the underlying causes of the downturn remain unfixed…and because the government is unfixing it even more. From what we can tell, the biggest jolt of stimulus in the history of the human race has stabilized US unemployment at about 10%…nearer to 20%, if you use a broader measure. It seems to have temporarily stabilized the housing market, with housing prices down 20% to 30%. (The first-time buyer credit expiring tomorrow!) And it seems to have slowed the move towards higher savings and less consumer spending.
Stock market investors seem to think that this gives them a great opportunity to make money. But it’s hard to see how stocks could advance very much further, with the winds of de-leveraging blowing in their faces…and icebergs of debt still floating hither and yon.
This week, Greek debt broke free from the icepack and promptly sank. You can now get a higher yield from the Greeks than you can from the Argentines, which shows you how dangerous Greek debt has become.
Spanish unemployment is officially around 20% with huge debt problems of its own. And England is not far behind. In the coming elections, Britain faces the possibility of a deadlock, with no clear winner…at the same time its public finances get hit by another big wave of borrowing and refinancing.
There’s also the situation in China. Real estate in some parts of Beijing is headed down, with some areas off 18%. Chinese stocks have been coming down too, with the index about 20% below its recent peak.
As near as we can tell, the USS Economy is in the middle of a dangerous iceflow…and steaming ahead much too fast.
We reported yesterday that passengers are abandoning ship at a record rate – with citizens and stowaways headed for the life rafts. For the first time ever, more people are said to be leaving the US than entering it.
Bill Bonner
for The Daily Reckoning
Bill Bonner
Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America's most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind The Daily Reckoning. Dice Have No Memory: Big Bets & Bad Economics from Paris to the Pampas, the newest book from Bill Bonner, is the definitive compendium of Bill’s daily reckonings from more than a decade: 1999-2010.
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I think very highly of Mr. Bonner’s analysis and perspective, but I’m sure he appreciates the importance of substantiating his arguments with real data. The facts he cites about emigration statistics are quite a bit overblown: http://www.slate.com/id/2252570/
Anyone with any brains is leaving the US as it makes its terminal descent into Third World status. Meanwhile actual Third World countries are on the rise and becoming quite livable esp. in South America. Luckily most Americans are too stupid to realize they are on the Titanic so nice places like Montevideo will not be too crowded with American refugees.
mr bonner when are you going to laser in on the “great rent holiday”??? that is the droves of people not paying for shelter while they await foreclosure or a mortage adjstment? they pay for food and utilities but not the roof over their heads. it is illegal to evict them until many months have gone by. speculators might put a bit of this money in the bank or in stocks however most of it is being spent, especially if home loss is because of job loss. has anything like this ever happened before? money in the hands of people who have to spend is high powered money, i think the belief that inflation is taking over may be unduly influenced by the liquidity caused by the “rent holiday” are you, addison and the boys going to wait for deflation to pick up and then write about this mind boggling street level liquidity drying up? you guys have the brain power to make a decent estimate of how much the “rent holiday” is impacting the real economy. you owe it to your readers to get it out there. thank you
Lately, this column reminds me of group therapy when the group gangs up on the head shrinker. I won’t participate anymore.
Bill – I was surprised to find statistics at the link
http://www.mapsofworld.com/usa/immigration/immigration-statistics-usa.html
which say that net immigration was negative in the decade 1931-1940. Surprised because I read, enjoy and agree with most of what you say, but have now to take you down from the pedestal I put you on, and admit you may sometimes make mistakes. Incidently, where can I get recent statistics? (PS I’ll put you back on the pedestal ASAP)