THE Second Great Depression Thread (merged)

[EnergyUnlimited]

I don't see how you can have fiscal austerity in a Great Depression, the only thing that got us out of the last GD was the massive spending and full employment of WWII.

Nope.
What got you out of Great Depression was an ability to grow your economy (GDP) and in particular ability to grow oil supply.

Now you have none of these.

[Pops]

I think GD-1 went like this:
no stimulus
then a bunch
then about the time things were getting some better ('37?) they decided to get all austere
then gdp dropped and UE went back up
until '39 or 40 when the war ramp-up grew gdp on borrowed money

[quadzillajim]

Another big leg down into the recognition that i) the recession was really a depression all along and ii) we are smack back in it. The ISM Manufacturing index came at 56.2 on expectations of 59, previous was 59.7. And the stunner - the prices paid index came in at 57 on expectations of 70, with a previous read of 77.5. The crash in margins will be surreal and companies will have no choice but to raise prices.

And just so there are no mistakes that the Great Depression 2.0 is here, pending homes sales plunged a massive 30% on expectations of -14.2, and a previous read of 6%.

This was the biggest MoM drop on record. Deflation is here, as is a full blown economic contraction, coupled with the complete pull out of the US consumer, who, absent government subsidies, will contain purchases solely to the iPad. Ben Bernanke has no choice but to print money now, or it is game over.
http://www.zerohedge.com/article/bigges ... misses-big

That home sales number is stunning, worst on record EVER.

Hm.. so I wonder, will we continue with "austerity" or will it be Stimulus 2.0? I don't see how you can have fiscal austerity in a Great Depression, the only thing that got us out of the last GD was the massive spending and full employment of WWII.

What we need to do to get out of GDII is start WWIII. I predict WWIII will start early in 2012 cause Obama knows a sure fired way to get re-elected is to get a war going (not old war but new and improved war). Get the Isrealis to start it then take over. It will also give us the initiative to break free from oil. What I would call a win win.

[rangerone314]

Sweet, I vote for dropping a Tsar-bomb on Mecca as the opening gambit.

[Repent]

I recently thought of opening my own small business, given that I'm unemployed and my prospects are bleak. I helped my wife start her own small business as a housecleaner. She's self employed full time but only makes $11,000 a year. I have dust and pet allergies so I can't work with her.

I was researching how much it would cost to open a small franchise. My grandparents had their own small take-out only chicken/ pizza place in the early 1970's and I thought this might be a good idea for me as well. The only question I thought would be 'How much capital is required to start?'.

I researched the 'Little Caesar's' pizza chain. They have a simple operation of pickup pizza's at $5- $7 dollars each and they see a good deal of business from me. I was shocked by the capital requirements:

http://talkto.littlecaesars.ca/form2/fran_opps.asp

Minimum liquid assets on hand (cash), $75,000. Mininum net worth $200,000. Ablity to get financing for an additional $150,000.

If I had $400,000 dollars sitting around I wouldn't be looking to start a small pizza place; I'd be sitting on a beach somewhere sipping tequila's all day, every day.

I can't imagine anyone working their way up anymore. Who has access to that kind of capital requirement? The rich can get richer, but fat chance in anybody else joining the party!

[Plantagenet]

Ever wonder where those millions of jobs are that Obama promised to create? Turns out some democrats think that people losing their jobs and getting an unemployment check is actually a great way to create jobs.

just lose your job, get an unemployment check and you too can create jobs

Since millions of people have lost their jobs on Obama's watch and are now getting unemployment checks, the democrats have turned the economy into a powerful job creation machine ---9.7-9.9% unemployment means millions of new unemployed people added to those already getting unemployment checks so they too can help create jobs ......

[efarmer]

Hey Plant, take a look under the TARP, the Bailout Banksters and the Wall Street Wonders have invited the Hoover Boys to put on their Tea Party outfits and come to a big austerity ball. This years theme is "Government dole by going in the hole is bad for you so we're on patrol."
Hey this ain't no theory thing, these guys have lived it and they know how it makes a person.

I know the tea will be superb, I just hope the armadillo has a lot of white meat on it.
I hope we get to play the "read my lips" game too, my phrase is going to be "just say no".

[jbrovont]

I think a great way to stimulate the economy would be to pay me to go on vacation. I could get paid say, $350,000 a year to not have a job and travel around spending money which would in turn stimulate the economies of the places I visit, and create service jobs.

...Or even better have a "Bruster's Trillions" event and I could try to spend $1 Trillion dollars in a month. That would do it for sure.

</end sarcasm>

Ever wonder where those millions of jobs are that Obama promised to create? Turns out some democrats think that people losing their jobs and getting an unemployment check is actually a great way to create jobs.

just lose your job, get an unemployment check and you too can create jobs

Since millions of people have lost their jobs on Obama's watch and are now getting unemployment checks, the democrats have turned the economy into a powerful job creation machine ---9.7-9.9% unemployment means millions of new unemployed people added to those already getting unemployment checks so they too can help create jobs ......

[efarmer]

Well the economy is as fragile as Mom's busted vase you broke when you were a kid and used Elmer's to tack it back together. It looks intact and is on the shelf, but if someone handles it, they're going to have a big sharp chunk come off in their hands and big chunks falling on their tootsies. I believe the Republicans have decided there is enough margin to step on it for political gain in the fall and then have their BFF stimulate it when they get into position and make it look like they are "all of that". I believe that while they are tinkering around the damage will rack up and spoil the gambit. The two top gangs in Washington are revving up their engines to play "chicken" for titles. I am betting on the tow truck with a hedge on the ambulance company.


The Chinese know they are heading towards the Not OK Corral as well. If they have the notion to, once the Wall Street and Broad Street boys take another big wealth transfer lick from America and stuff it into the Asian market perhaps they will take a few big licks and run the wealth transfer pump a couple of times to offset all the bad paper they are sitting on. If you think you have seen the money transfer pump handle go up and down, wait until you see state controlled capitalism with one mind and a big strong arm on the handle.

[Sixstrings]

What we need to do to get out of GDII is start WWIII. I predict WWIII will start early in 2012 cause Obama knows a sure fired way to get re-elected is to get a war going (not old war but new and improved war). Get the Isrealis to start it then take over. It will also give us the initiative to break free from oil. What I would call a win win.

It would take much more than a regional war.. WWII put us on top only because the rest of the industrialized world was obliterated, with the domestic US left unscathed. I don't see that in the cards again, since Europe won't be going to war with itself anytime soon.

And besides, world war isn't worth it even if it does employ everyone. What American voters, the "small people" as BP says, need to do is forget about globalism and get a little nationalistic about their own economy. We need protectionism, we need to compete on behalf of our country, not the bankers.

[Plantagenet]

What American voters, the "small people" as BP says, need to do is forget about globalism and get a little nationalistic about their own economy. We need protectionism, we need to compete on behalf of our country.

1. If we adopt "protectionism" then other countries will too, and that will hurt exports by Boeing, Apple, Microsoft, Caterpillar, etc. etc. and hurt overseas sales by the entire US agricultural sector and so will destroy US jobs.

2. The last time we adopted "protectionism" it helped start the 1930s great depression (see #1 above).

[Pops]

I had been looking for this site to post in this thread and I finally stumbled on it!

These guys do a daily poll of businesses and have pretty accurately anticipated the GDP number by 90 days!

[Pops]

And another graph (I am a graphics guy after all)

The red line is the three month average change in temporary help services (left axis). This is shifted four months into the future.

The blue line (right axis) is the three month average change in total employment (excluding temporary help services).

Unfortunately the data on temporary help services only goes back to 1990, but it does appear that temporary help leads employment by about four months.

The thinking is that before companies hire permanent employees following a recession, employers will first increase the hours worked of current employees (hours worked decreased slightly in June) and also hire temporary employees. After the number of temporary workers increased sharply late last year, some people thought this might be signaling the beginning of a strong employment recovery.

I was skeptical and joked that "We're all temporary now!" - and now temporary hiring is growing at a slower pace and it appears the hoped for surge in overall hiring didn't happen.

Calculated Risk {+10!}

[Heineken]

There is only one way out of our spectacular mess, and that is to inflate. And that is exactly what they have started to do and will keep doing.

Inflation is the ONLY way to get rid of or at least downsize the debt that has begun to perforate America's already weakened heart.

Inflation will destroy what's left of the currency, of course, and wipe out personal savings, and cause calamitous social changes (including, indeed Great Depression 2). Then the system starts over again in some unpredictable, bizarre way. Right now cash is the place to be, but that won't last. Cash will become a poisonous, increasingly worthless position.

[Pops]

Ya know Heinie I keep hearing that but the dollar keeps not collapsing.

The Mark and the argentine dollar (or whatever) weren't the international go-to-when-you're-skeered currency like the US dollar. The worse things get in the US, the worse they get internationally, the more investors want the safety of the dollar and the stronger the dollar gets.

Not that that's a good thing jobs wise...

Or isn't that right?

[Heineken]

Pops, it's true that investors still turn to the dollar for safety. It's an old habit going back many decades, and old habits do die hard.

But the dollar has been seriously uglified, and the fact the investors have to hold their noses and turn to it as a lesser of evils is a sign of how bad things have gotten. There aren't many refuges left.

Gold and other precious metals have, as we know, begun to compete with the dollar and will in the end best it as a refuge, because gold is real and fiat currencies aren't and therefore always fail, sooner or later, because modern governments by their nature don't have much fiscal restraint. But all assets are probably due for a tumble at some point, including gold, as part of the current spiral of collapse. That would be the best time to buy gold and get rid of dollars, as the true inflation sets in viciously (right now we have sort of a strange combination of inflation and deflation). When that happens the dollar will get flushed.

The process of fiscal decay that has begun could have a long way to run---years. That's because the system will do everything possible to perpetuate itself. It still has lots of strings to pull, a lot of juice. But not enough to save itself. It shot its wad in the last big boom of greediness and graft. Bush took on more debt than all presidents before him combined!

My feeling is that our problems have become such that governments aren't even trying to solve them anymore. Not seriously. It's all play-acting. Afghanistan, for example, is an attempt to distract the populace from the real, scarier issues.

[Sixstrings]

There is only one way out of our spectacular mess, and that is to inflate. And that is exactly what they have started to do and will keep doing.

Inflation is the ONLY way to get rid of or at least downsize the debt that has begun to perforate America's already weakened heart.

Inflation will destroy what's left of the currency, of course, and wipe out personal savings, and cause calamitous social changes (including, indeed Great Depression 2). Then the system starts over again in some unpredictable, bizarre way. Right now cash is the place to be, but that won't last. Cash will become a poisonous, increasingly worthless position.

I would tend to agree, except for the fact that the rich would never support inflationary policy. Inflation destroys everyone, whereas in deflation the rich can swoop in and pick assets for pennies on the dollar. With inflation, everyone suffers, whereas with deflation the super rich come out ahead.

But I do get your point, seems like the only way out of our mess is to somehow purge our massive debts.

[Cloud9]

Goldman Sachs will buy all the tungsten in Fort Knox three days before the currency collapses. The middle class is being stripped of their wealth in the collapse of pension funds, the stock market and real estate. This is inherently deflationary. On the other hand you have the fed dumping trillions to shore up Wall Street and the international banking community. That is inherently inflationary.

The super rich have a problem. While they enjoy the appreciation of their assets during a deflationary spiral, they are well aware that the system is unstable. This presents as big a problem for them as it does for the rest of us. They have no problem allowing the majority of us to slip off into abject poverty. As the poor get poorer, their power and prestige grows. They know that if the slip becomes an avalanche, they will lose control. We Americans have a nasty habit of redressing perceived social injustices with either the ballot or the bullet.

They must inflate to keep the system afloat. Inflation destroys their monetary assets. They will attempt to inflate just enough to appease the masses while giving themselves time to convert their monetary assets to commodities. In this manner they are attempting to preserve their real wealth. The problem is that there are so many super rich and only so many commodities.

Some pretty smart guys tried to control inflation in Weimar Germany. The ball got away from them. It took only one year in Zimbabwe for the government to stop printing one dollar notes and start printing fifty trillion dollar notes.

[Gerben]

The problems in Weimar Germany and Zimbabwe were interely different than those currently in the US. The US government can prevent high inflation if they really want to. They don't want to. They have to take the money from the people that have it and inflation is the easiest way to do it. It's easier to have 10% more inflation than 10% higher taxes.

[patience]

I'm with Gerben on this one, as to the intent of TPTB. But I think it will get away from them eventually. It aways has when a fiat currency the mathematical wall of overblown bubbles and the debts associated with them.

I have come to think that we will have the deflationary forces for some time, as the system tries to deleverage. High, or hyper inflation is a govts. reaction to the situation of deflation as a bubble implodes. As Mises said:

"There is no means of avoiding a final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved." -Ludwig Von Mises

We are choosing the latter path, and it is gonna suck, big time.