Will the US Economy collapse?
 

International experts foresee collapse of U.S. economy

Posted By Hielema, Bert

Posted 11 days ago

And you thought that I had a gloomy outlook on the economy. Now the bad news pops up everywhere.
Harry Koza in the Globe and Mail quotes Bernard Connelly, the global strategist at Banque AIG in London, who claims that the likelihood of a Great Depression is growing by the day.

Martin Wolf, celebrated columnist of the U.K.-based Financial Times, cites Dr. Nouriel Roubini of the New York University's Stern School of Business, who, in 12 steps, outlines how the losses of the American financial system will grow to more than $1 trillion - that's one million times $1 million. That amount is equal to all the assets of all American banks.

Every day now, thousands of people all over the U.S. and Great Britain are walking away from their homes - simply mailing their house keys to the banks - as housing bailout plans fail.

With unemployment growing, the next phase will hit commercial real estate making the financial institutions the unwilling owners not only of quickly depreciating houses, but also of empty strip malls and even larger shopping centres.

The next domino to fall will be credit card defaults, and after that... who knows? There are so many exotic funds out there, with trillions of dollars in paper - or rather computer-screen money - all carrying assorted acronyms, and all about to disintegrate into nothingness.

Over the next couple of years, scores of banks that have thrived on these devices, based on quickly disappearing equities, will fail.

The most frightening forecast so far comes from the Global Europe Anticipation Bulletin (GEAB), available for 200 euros - about $300 - for 16 issues annually. Its prediction is quite specific.

Where my warnings never spelled out an exact date, this think tank has it pegged precisely. Here are its very words:
"The end of the third quarter of 2008 (thus late September, a mere seven months from now) will be marked by a new tipping point in the unfolding of the global systemic crisis.

"At that time indeed, the cumulated impact of the various sequences of the crisis will reach its maximum strength and affect decisively the very heart of the systems concerned, on the front line of which (is) the United States, epicentre of the current crisis.

"In the United States, this new tipping point will translate into - get this - a collapse of the real economy, (the) final socio-economic stage of the serial bursting of the housing and financial bubbles and of the pursuance of the U.S. dollar fall.
The collapse of U.S. real economy means the virtual freeze of the American economic machinery: private and public bankruptcies in large numbers, companies and public services closing down."

Goes on to say that we are entering a period for which there is no historic precedent. Any comparisons with previous situations in our modern economy are invalid.

We are not experiencing a "remake" of the 1929 crisis nor a repetition of the 1970s oil crises or 1987 stock market crisis.

What we will have, instead, is truly a global momentous threat - a true turning point affecting the entire planet and questioning the very foundations of the international system upon which the world was organized in the last decades.

The report emphasizes that it is, first and foremost, in the United States where this historic happening is taking an unprecedented shape (the authors call it "Very Great U.S. Depression").

It continues to predict that, although this crucial event is global, it will be the beginning of an economic 'decoupling' between the U.S. and the rest of the world. However, non 'decoupled' economies will be dragged down the U.S. negative spiral.

Concerning stock markets, the GEAB anticipates that international stocks would plummet by 40 to 80 per cent depending where in the world they are located, all affected in the course of the year 2008 by the collapse of the real economy in the U.S. by the end of summer.

The European authors of this report - it appears simultaneously in French, German and English - state that they simply and without prejudice try to describe in advance the consequences of the ominous trends at play in this 21st-century world, and to share these with their readers, so that they can take the proper means to protect themselves from the most negative effects.

So there you have it. Three reports from three different sources, all well regarded, and all pointing to a disastrous fall-out from our monetary moves.

This and earlier columns can be seen at hielema.ca. Comments to hielema@allstream.net.

Ouch. I'm hoping that prediction is wrong.

OTOH, I'm trying to get a nearly layoff-proof federal job, and in the mean time, it looks like I'll be working at a junkyard. This could be somewhat insulated from recession, since used auto parts are an inferior good.

"Will the US Economy collapse?"
 

Only if I can buy a lot more stock on sale.:D

I guess it depends on the meaning of collapse.

Tom W

The sky is falling! The sky is falling!:eek:


I don't have even a slight bit of pity on people losing their homes over this ARM crap, ect. If you were stupid enough to get yourself so upside down buying a home you realistically can't afford, tough. I'm quite tired of hearing about it. Boo hoo. Try something new and different, like living within your means.

I'm glad I made a big paydown on my mortgage instead of buying stocks.

I dont think I'd loose my job.. nor my parents since we all work in the grocery retail biz... my stepdad is a wonderbread vendor.. everyone needs bread

You mean I can't have everything I want right now? Oh waaah!

and when the **** hits the fan, everyone runs to the grocery store for bread. You are safe.

Maybe they will arm me with something deadlier than a box cutter

Perfectly said!

But in todays times, you wouldn't actually expect people to take responsibility for their own actions, do you?

I think sectors of the economy may decline or collapse, but other areas will stay afloat. The economy is so vast, and there is so much restless money around that needs a home, that any downward spiral will be buffered by investments in other areas. The cheap dollar, although hindering our spending power, turns US goods into irrestible bargains for overseas consumers.

The credit meltdown is probably overblown. House prices went up for only one reason - supply vs demand. The demand is still there. The population is still growing and people still need places to live. Those abandoned houses won't be empty for long.

There will be some great buying opportunities available soon, if you can look past the panic.

This is the end... beautiful friend
 

It is time we scrapped the outmoded inherently unfair capitalist system and turned to a scientifically derived method of ensuring that goods and services are distributed evenly from each according to his abilities to each according to his needs...


Yeah right :rolleyes:

I think the chicken little quote summed it all up... There are not THOUSANDS of people walking away from their houses EACH DAY. the Sub-Prime market was only a small sector of the housing market and only something like 6 to 8 percent of those have defaulted. What has happened is that a lot of people who had to get a sub-prime ARM were able to refinance their loan to a new fixed rate mortgage thus depriving lenders of the profits that they had already booked via mark-to market accounting. This had led to earnings not being what they should have been, but should not lead to a real estate panic or the collapse of the economy. Now if people start BELIEVEING Chicken Little- all bets are off...

Idiots. I'm already trying to figure out when RE will come back. I'm thinking 2011-2013.