JimQ and I have been having a wee bit of a dispute regarding just how much Real Estate values are going to fall as we progress forward with the economic collapse. Like many Optimistic Pundits here on the net, he holds the belief that if Goobermint support was removed from the RE market and real Price Discovery was allowed, the market would experience perhaps another 20% drop before stabilizing, at which point prudent local savers and international investors would jump back in and buy up the properties in foreclosure. In Counterpoint to this view, along with a few other Collapse observers like Nicole Foss and Charles Hugh Smith, I consider a much larger drop to be likely, on the order of 80% down from the Peak Mania period prior to the initial 2008 crash. The reason for this is the parallel we are following with the timeline of the Great Depression, beginning actually prior to that with the Mania period of the 1920s. In this article, I will highlight some of the similarities and differences between your Grandfather’s Depression and this one, and why for the most part I expect it will be an order of magnitude worse in this go round, including the massive collapse of Real Estate values on the order of –80% or more.
Following at the end of this post is a Timeline of significant events and milestones from the period beginning in 1920 through to the 1940s. I will in the course of this article highlight a few of those numbers and events for comparative purposes and show why they are likely to be even worse this time around. Those numbers and events are presented here in [Brackets and Bolded.] For those of you unfamiliar with this Timeline, reviewing it prior to reading this post could be worthwhile.
Let’s begin with Real Estate prices which are the driving force in a deflationary depression, and provided the grist for the mill beginning this Point-Counterpoint Debate. The reason for this is that whether the economy is agrarian based or industrial based, during the mania period RE asset prices get inflated by the expanding credit based money in the economy. In the mostly agrarian economy prior to the 1920s, farmland rose in speculative value as the FSofA provided food for Europe recovering from WWI. However, with Europe mostly recovered by the mid 1920s, the amount of export food dropped and increasing productivity due to mechanization meant less ag land was necessary for food production. As the 1920s progressed, Ag Land lost 30%-40% of its value.
[* The value of farmland falls 30 to 40 percent between 1920 and 1929.]
Areas of our country which expanded rapidly with the McMansion Bubble here have experienced a similar decline already, in places like Las Vegas and Florida and California. Nationally, the average decline is less but a massive inventory of homes are held in shadow inventory which will further depress the market as it becomes necessary to liquidate this inventory.
As the Great Depression progressed onward, the early collapse in RE prices made many Banks insolvent, which then precipitated the Stock Market Crash of 1929. This is an analogue of the sub-prime collapse precipitating the October 2008 collapse of the current market. This creates another feedback loop with RE and commodity prices, and so in Granddad’s Depression by 1932 Farm Prices take a further nosedive losing another 53% in value.
[* Farm prices have fallen 53 percent since 1929.]
This reflects the period of the “Grapes of Wrath”, when for all intents and purposes, farmland was basically worthless and many J6P Family farmers lost their farms just for the Taxes owed on them.
We are not at this period yet in Today’s Depression. We are right now rhyming with around 1930, when Da Fed was artificially depressing interest rates and providing liquidity to the market.
[* By February, the Federal Reserve has cut the prime interest rate from 6 to 4 percent. Expands the money supply with a major purchase of U.S. securities.]
In the period directly following this (hasn’t happenned yet, but likely will for numerous reasons foreign and domestic), Da Fed finally does pull the liquidity from the market, as then Treasury Secretary Andrew Mellon advocates for Debt Liquidation.
[*Treasury Secretary Andrew Mellon announces that the Fed will stand by as the market works itself out: “Liquidate labor, liquidate stocks, liquidate real estate… values will be adjusted, and enterprising people will pick up the wreck from less-competent people.]
As we know now, letting the system fail and liquidating all the malinvestment of that era did not usher in a new era of Prosperity, in fact things got a whole lot worse after that, and remained so up until massive amounts of new Debt was issued leading into WWII.
We still haven’t even approached the real Crisis Year of 1933 when FDR started making some Socialist Reforms, and the Illuminati of the time attempted to stop the Wealth redistribution with a Military Coup d’Etat
[* Alarmed by Roosevelt’s plan to redistribute wealth from the rich to the poor, a group of millionaire businessmen, led by the Du Pont and J.P. Morgan empires, plans to overthrow Roosevelt with a military coup and install a fascist government. The businessmen try to recruit General Smedley Butler, promising him an army of 500,000, unlimited financial backing and generous media spin control. The plot is foiled when Butler reports it to Congress.]
A good question for Today’s Depression is whether 2-3 years from now, if an attempt like FDRs is made to do a Socialist Wealth redistribution, whether today’s Illuminati will fail in the effort as DuPont and Morgan did, and whether there is somebody with the kind of Integrity General Smedley Butler had to report it, and whether the CONgress Critters would stop such a Coup d’Etat or passively go along with it. If they don’t, our Timeline will diverge at this point and we will pursue a further deepening Fascist paradigm.
Despite the fact we have what already amounts to Depressionary numbers when you look at statistics like the U-6 UE, the increasing number of people on Food Stamps and the massive number of Foreclosures, for the most part unless you are currently living the nightmare, today’s Depression just doesn’t seem quite as bad as Granddad’s Depression, at least not from how you remember it from the Newsreels and Photos of the era.
Even on the international level, the rioting in Greece and the Strikes in France don’t seem to live up to the expectation you have when you look at those old newreels of 1930s era Nazi Rallies. We don’t have the Japanese invading China, we don’t have huge Hoovervilles on the Potomac like the Bonus Army with Vietnam Vets demanding their Bennies.
So how come? Is this Depression just not as bad as the last one? Have we figured out the secret for keeping everything looking good on the surface level while the monetary system disintegrates? Or are we just experiencing the Calm Before the Storm? The answer is both.
First, the worst pictures in your mind of Granddad’s Depression are of gaunt Hobos with the “Brother,Can you Spare a Dime” look on their faces. There are quite a few Bums out there in the Big Shitties these days of course, but at least for the moment the Bum shelter system has been keeping up with the problem. They get swept off the streets on those really cold nights, and though the shelter may be out of beds, they get a place on the floor. During Granddad’s Depression, such a shelter system for those who were on Skid Row wasn’t nearly as developed as it is today.
Even more important is the Hunger problem. In your Granddad’s Depression, the distribution of food to the starving came through Soup Kitchens, so you have the Photos of the lines outside the Kitchen and the sad faces of families sitting around a cafeteria style table eating whatever it was they got served up. Today, we issue SNAP cards which function just like your ATM Card at the checkout, and with the money Da Goobermint drops on the card each month, you can pretty much buy whatever you would like in the grocery store. Exception being anything from the Hot Food counter. I only know this because recently in the checkout line a SNAP card user directly in front of me did not know this, and couldn’t buy the Chinese Buffet special of the day he had scooped up.
In your Granddad’s Depression, you have pictures of the Dustbowl in your head, and the Joad family heading for CA in their rusty old Jalopy on Route 66. Today’s almost nobody lives on Farms on a statistical basis anymore, and if they do they aren’t heading for California. The Jalopies they own are still pretty nice looking cars they bought on Credit, which the Bank isn’t bothering to Repo because then they would have to admit the GMAC Auto Loan had gone south.
Similarly, instead of foreclosing on everybody and pushing them all into Hoovervilles, the McMansions themselves are turning into Hoovervilles. Foreclosures are indefinitely delayed, the residents stop paying the mortgage and squat on the housing until the power and water get turned off, and sometimes even after that. About the only thing that will drive them out now is when they finally run out of money to buy Gas, and become unable to drive to the Walmart 10 miles down the road to buy food with the SNAP card.
That hasn’t happened yet for the most part because in Today’s Depression, UE Bennies have been extended for 2 years. So really at the moment only the very first folks to start taking the hit in 2008 are completely out of Bennies, which will make it interesting to see how it progresses from here with these people. In Europe though, you pretty much can never fall off the UE Dole, there are no expiration dates on the Dole there. In your Granddad’s Depression, though there was some Goobermint Dole, it was very limited.
The existence of most of the social safety nets that have evolved since your Granddad’s depression are the primary reason that so far this one doesn’t LOOK as bad as the old one did in the pictures and the newsreels. Over in Europe, though the population is mighty unhappy over the Austerity measures and gradual evisceration of their Pension system, current pensioners are still getting their checks, and like here, across the Pond as of yet very few people are actually STARVING. That condition is reserved for the truly poor of the world who don’t live in ANY of these countries anymore. In the real 3rd World countries though as the price of a cup of rice or bag of flour goes up here, where there are no SNAP cards, these folks are on the verge of starvation level conditions, if they are not already there.
In your Granddad’s Depression, as the Jobs disappeared, so also disappeared the Food off the shelves. Farmers couldn’t make a profit on their food as the ability of the people to buy it disappeared. In today’s depression, food keeps moving off the shelves via the SNAP cards, and most Food Production comes not from Family Farms, but from Agribiz, who if they are losing money due to Margin Compression as their Input Prices go up have access to the ZIRP money Helicopter Ben issues out to all TBTF companies. While wholesale prices on the COMEX have recently EXPLODED in upward Volatility, at least my Grocery bill hasn’t changed much. Canned Napa Chili con Carne is still 99 cents a can, even a Ribeye Steak is still coming in at around $7 a pound. That IS around 18% up from as cheap as I could buy it before COMEX prices went up so fast in this cycle, but since food for me only represents about at most 20% of my budget, an increase like this doesn’t affect me much. It can affect very poor people much more of course, but then only if they buy Rib Eye steaks. They can of course substitute cheaper cuts of meat for quite some time, and then start eating Chicken.
Here finally is why at least to date in most of the 1st World countries, Today’s Depression hasn’t yet seen the kind of social dislocation of your Granddad’s Depression. By this stage of the game in the 1930s, Da Fed had quit on the idea of perpetually pushing new money into the system and Liquidation was Andrew Mellon’s Game. They couldn’t physically even GET money out to all the Failing Banks fast enough in those days to cover the Bank Runs. Today, to keep enough money in your local Branch Office of your Bank, all Helicopter Ben has to do is click the Free Money function button on his Laptop and direct enough to your bank so when you slide your ATM card through the checkout register and type in your PIN, the Digimoney still appears to be there. A bunch of Regulators may show up on the weekend to “close” your Bank, but by Monday morning its “owned” by a bigger bank in the neighborhood, and Da Goobermint is backstopping all the bad assets on their books. Its still BAU on Monday morning, although a few Branch offices might have closed and a few Tellers are now on the UE line.
As much as you might know that the perpetual money printing game cannot continue in perpetuity, for the time being the additional grease being pushed through the engine has kept the wheels of commerce moving for the last couple of years. Without this Funny Money, Da Goobermint wouldn’t be able to keep the UE Bennies flowing, they wouldn’t be able to keep the money flowing to the Military paying all those soldiers, and keeping people employed in the biznesses that supply the military with all the stuff they need to run a good War. Without the Funny Money, the Social Security checks would stop or at least be seriously cut in size. Worst of all, without the Funny Money, the Bankster Pigmen would not be taking home those Big Bonuses and the parties in the Hamptons would come to a grinding halt.
For anyone who has at least a passing knowledge of history and basic math is concerned watching all this, you know in your Gut that it cannot last in perpetuity. You can’t make Something from Nothing, so you wait for some portion of this vast machine to seize up, and for the ever greater quantities of debt money being issued to simply stop working. For most of us observing this, it already has gone on far longer than I think anyone thought possible. How much longer CAN it go on? Will Jacking Up the Deficit Ceiling by another $2T in March allow the game to be continued onward for another full year? My guess right now is that Yes it Can. Of course, given my track record on short term predictions, this probably means the Sky Will Fall this year. If RE predicts the Sky Will NOT Fall this year, we could be in big trouble. LOL.
In any event, whatever the cause will be of this perpetual motion machine seizing up is, right now it doesn’t look like it will happen first here on these shores. There are many indicators now that the Chinese economy is moving toward a Hyperinflationary endgame, resulting from years of exporting Deflation to the First World countries in the form of depressed labor costs. The systemic problems of the structure of the Euro distributed among states with vastly different economies and political structures are making the instabilities there far greater than they are here, where for the most part our Political system is owned lock stock and barrel by the TBTF Banks. So the Big Black Swan, when it does inevitably come in for a landing looks more likely to touch down first in China or Euroland than it does in the FSofA. Not that we will be far behind of course, because then the cascade failure of the Shadow Banking system will begin in earnest.
When it finally does occur of course, then Today’s Depression will make your Granddad’s Depression look like a Sunday Picnic. The various systems developed to maintain order and continuity in the First World countries will seize up. Social Security, SNAP Cards and funding the vast Military will become impossible. Trade will come to a grinding halt, and the lifeblood of our industrial civilization will be unavailable to buy at any price, in any currency including Gold.
The differences that exist now between your Granddad’s Depression and Today’s Depression are not that great really, and if you go down the list point by point some of the similarities are positively frightening of course. The most important thing to realize here is that in the current timeline, we are only at the very beginning stages, and as Debt Liquidation finally takes hold, all asset classes from Stocks, to Bonds to Real Estate are all destined for massive losses, likely exceeding the 80% loss in the value of Industrial Stocks by 1932.
[* Industrial stocks have lost 80 percent of their value since 1930.]
Let me leave you with this final thought. In your Grandfather’s Depression, both Farmland and Industrial Stocks took a MASSIVE hit in asset value. However, in both those cases, they still held SOME intrinsic value. Industry was in its infancy really, and in the 1930s there was plenty of easily accessible Oil right here in the FSofA to grow industry with, once of course more debt was issued to fight WWII. As far as Farmland goes, it always has SOME intrinsic value, even just for Subsistence Farming purposes. What Intrinsic Value do McMansions have? They are totally dependent on the presence of cheap Oil to run, and themselves are not productive as Farmland. They depend on the ability of the Owner to go out and make a living in some other facet of the economy, and to use his SUV to get there. As the Jobs disappear and the Oil to run the Cars becomes more scarce and expensive, these White Elephants lose ALL the value they once held. Even if the price on one of them dropped down to 10% of its value, I would not buy one. The model is not sustainable. Good Ag Land should hold some value here, but even there you have to weigh the Tax Liabilities you will incur with Ownership against what you might be able to sell produce for to an increasingly impoverished general population. The collapse of Credit in a deflationary depression renders the monetary value of all assets questionable, and just Printing Money does not resolve that problem. It just drives a hyperinflationary spiral for a while before it collapses, but it collapses either way. The underlying problem here is a collapse of Asset Value that depends on the availability of Cheap Oil. As that disappears, all those assets are rendered WORTHLESS. Not even 20 cents on the Dollar really, that is just an intermediary level here. The model no longer works, because Peak Oil is REAL, and its effects are beginning here. Just BEGINNING friends, by no means are we yet into the real consequences. We will begin to see them though as the Real Estate market collapses entirely.
Will it happen this year? Probably not. Nevertheless, its Coming Soon to a Theatre Near You.
RE
TIMELINE OF GENERAL EVENTS OF THE GREAT DEPRESSION
1920s (Decade)
* During World War I, federal spending grows three times larger than tax collections. When the government cuts back spending to balance the budget in 1920, a severe recession results. However, the war economy invested heavily in the manufacturing sector, and the next decade will see an explosion of productivity… although only for certain sectors of the economy.
* An average of 600 banks fail each year.
* Agricultural, energy and coal mining sectors are continually depressed. Textiles, shoes, shipbuilding and railroads continually decline.
* The value of farmland falls 30 to 40 percent between 1920 and 1929.
* Organized labor declines throughout the decade. The United Mine Workers Union will see its membership fall from 500,000 in 1920 to 75,000 in 1928. The American Federation of Labor would fall from 5.1 million in 1920 to 3.4 million in 1929.
* “Technological unemployment” enters the nation’s vocabulary; as many as 200,000 workers a year are replaced by automatic or semi-automatic machinery.
* Over the decade, about 1,200 mergers will swallow up more than 6,000 previously independent companies; by 1929, only 200 corporations will control over half of all American industry.
* By the end of the decade, the bottom 80 percent of all income-earners will be removed from the tax rolls completely. Taxes on the rich will fall throughout the decade.
* By 1929, the richest 1 percent will own 40 percent of the nation’s wealth. The bottom 93 percent will have experienced a 4 percent drop in real disposable per-capita income between 1923 and 1929.
* The middle class comprises only 15 to 20 percent of all Americans.
* Individual worker productivity rises an astonishing 43 percent from 1919 to 1929. But the rewards are being funneled to the top: the number of people reporting half-million dollar incomes grows from 156 to 1,489 between 1920 and 1929, a phenomenal rise compared to other decades. But that is still less than 1 percent of all income-earners.
1922
* The conservative Supreme Court strikes down federal child labor legislation.
1923
* President Warren Harding dies in office; his administration was easily one of the most corrupt in American history. Calvin Coolidge, who is squeaky clean by comparison, becomes president. Coolidge is no less committed to laissez-faire and a non-interventionist government. He announces to the American people: “The business of America is business.”
* Supreme Court nullifies minimum wage for women in District of Columbia.
1924
* The Ku Klux Klan reaches the height of its influence in America: by the end of the year it will claim 9 million members. It will decline drastically in 1925, however, after financial and moral scandals rock its leadership.
* The stock market begins its spectacular rise. Bears little relation to the rest of the economy.
1925
* The top tax rate is lowered to 25 percent – the lowest top rate in the eight decades since World War I.
* Supreme Court rules that trade organizations do not violate anti-trust laws as long as some competition survives.
1928
* The construction boom is over.
* Farmers’ share of the national income has dropped from 15 to 9 percent since 1920.
* Between May 1928 and September 1929, the average prices of stocks will rise 40 percent. Trading will mushroom from 2-3 million shares per day to over 5 million. The boom is largely artificial.
1929
* Herbert Hoover becomes President. Hoover is a staunch individualist but not as committed to laissez-faire ideology as Coolidge.
* More than half of all Americans are living below a minimum subsistence level.
* Annual per-capita income is $750; for farm people, it is only $273.
* Backlog of business inventories grows three times larger than the year before. Public consumption markedly down.
* Freight carloads and manufacturing fall.
* Automobile sales decline by a third in the nine months before the crash.
* Construction down $2 billion since 1926.
* Recession begins in August, two months before the stock market crash. During this two month period, production will decline at an annual rate of 20 percent, wholesale prices at 7.5 percent, and personal income at 5 percent.
* Stock market crash begins October 24. Investors call October 29 “Black Tuesday.” Losses for the month will total $16 billion, an astronomical sum in those days.
* Congress passes Agricultural Marketing Act to support farmers until they can get back on their feet.
1930
* By February, the Federal Reserve has cut the prime interest rate from 6 to 4 percent. Expands the money supply with a major purchase of U.S. securities. However, for the next year and a half, the Fed will add very little money to the shrinking economy. (At no time will it actually pull money out of the system.) Treasury Secretary Andrew Mellon announces that the Fed will stand by as the market works itself out: “Liquidate labor, liquidate stocks, liquidate real estate… values will be adjusted, and enterprising people will pick up the wreck from less-competent people.” (More)
* The Smoot-Hawley Tariff passes on June 17. With imports forming only 6 percent of the GNP, the 40 percent tariffs work out to an effective tax of only 2.4 percent per citizen. Even this is compensated for by the fact that American businesses are no longer investing in Europe, but keeping their money stateside. The consensus of modern economists is that the tariff made only a minor contribution to the Great Depression in the U.S., but a major one in Europe. (More)
* The first bank panic occurs later this year; a public run on banks results in a wave of bankruptcies. Bank failures and deposit losses are responsible for the contracting money supply.
* Supreme Court rules that the monopoly U.S. Steel does not violate anti-trust laws as long as competition exists, no matter how negligible.
* Democrats gain in Congressional elections, but still do not have a majority.
* The GNP falls 9.4 percent from the year before. The unemployment rate climbs from 3.2 to 8.7 percent.
1931
* No major legislation is passed addressing the Depression.
* A second banking panic occurs in the spring.
* The GNP falls another 8.5 percent; unemployment rises to 15.9 percent.
1932
* This and the next year are the worst years of the Great Depression. For 1932, GNP falls a record 13.4 percent; unemployment rises to 23.6 percent.
* Industrial stocks have lost 80 percent of their value since 1930.
* 10,000 banks have failed since 1929, or 40 percent of the 1929 total.
* About $2 billion in deposits have been lost since 1929.
* Money supply has contracted 31 percent since 1929.
* GNP has also fallen 31 percent since 1929.
* Over 13 million Americans have lost their jobs since 1929.
* Capital growth investments have dropped from $16.2 billion to 1/3 of one billion since 1929.
* Farm prices have fallen 53 percent since 1929.
* International trade has fallen by two-thirds since 1929.
* The Fed makes its first major expansion of the money supply since February 1930.
* Congress creates the Reconstruction Finance Corporation. (More)
* Congress passes the Federal Home Loan Bank Act and the Glass-Steagall Act of 1932. (More)
* Top tax rate is raised from 25 to 63 percent.
* Popular opinion considers Hoover’s measures too little too late. Franklin Roosevelt easily defeats Hoover in the fall election. Democrats win control of Congress.
* At his Democratic presidential nomination, Roosevelt says: “I pledge you, I pledge myself, to a new deal for the American people.”
1933
* Roosevelt inaugurated; begins “First 100 Days” of intensive legislative activity. (More)
* A third banking panic occurs in March. Roosevelt declares a Bank Holiday; closes financial institutions to stop a run on banks.
* Alarmed by Roosevelt’s plan to redistribute wealth from the rich to the poor, a group of millionaire businessmen, led by the Du Pont and J.P. Morgan empires, plans to overthrow Roosevelt with a military coup and install a fascist government. The businessmen try to recruit General Smedley Butler, promising him an army of 500,000, unlimited financial backing and generous media spin control. The plot is foiled when Butler reports it to Congress. (More)
* Congress authorizes creation of the Agricultural Adjustment Administration, the Civilian Conservation Corps, the Farm Credit Administration, the Federal Deposit Insurance Corporation, the Federal Emergency Relief Administration, the National Recovery Administration, the Public Works Administration and the Tennessee Valley Authority. (More)
* Congress passes the Emergency Banking Bill, the Glass-Steagall Act of 1933, the Farm Credit Act, the National Industrial Recovery Act and the Truth-in-Securities Act. (More)
* U.S. goes off the gold standard.
* Roosevelt does much to redistribute wealth from the rich to the poor, but is obsessed with a balanced budget. He later rejects Keynes’ advice to begin heavy deficit spending.
* The free fall of the GNP is significantly slowed; it dips only 2.1 percent this year. Unemployment rises slightly, to 24.9 percent.
1934
* Congress authorizes creation of the Federal Communications Commission, the National Mediation Board and the Securities and Exchange Commission. (More)
* Congress passes the Securities and Exchange Act and the Trade Agreement Act. (More)
* The economy turns around: GNP rises 7.7 percent, and unemployment falls to 21.7 percent. A long road to recovery begins.
* Sweden becomes the first nation to recover fully from the Great Depression. It has followed a policy of Keynesian deficit spending. (More)
1935
* The Supreme Court declares the National Recovery Administration to be unconstitutional.
* Congress authorizes creation of the Works Progress Administration, the National Labor Relations Board and the Rural Electrification Administration. (More)
* Congress passes the Banking Act of 1935, the Emergency Relief Appropriation Act, the National Labor Relations Act, and the Social Security Act. (More)
* Economic recovery continues: the GNP grows another 8.1 percent, and unemployment falls to 20.1 percent.
1936
* The Supreme Court declares part of the Agricultural Adjustment Act to be unconstitutional.
* In response, Congress passes the Soil Conservation and Domestic Allotment Act. (More)
* Top tax rate raised to 79 percent.
* Economic recovery continues: GNP grows a record 14.1 percent; unemployment falls to 16.9 percent.
* Germany becomes the second nation to recover fully from the Great Depression, through heavy deficit spending in preparation for war.
1937
* The Supreme Court declares the National Labor Relations Board to be unconstitutional.
* Roosevelt seeks to enlarge and therefore liberalize the Supreme Court. This attempt not only fails, but outrages the public.
* Economists attribute economic growth so far to heavy government spending that is somewhat deficit. Roosevelt, however, fears an unbalanced budget and cuts spending for 1937. That summer, the nation plunges into another recession. Despite this, the yearly GNP rises 5.0 percent, and unemployment falls to 14.3 percent.
1938
* Congress passes the Agricultural Adjustment Act of 1938 and the Fair Labor Standards Act. (More)
* No major New Deal legislation is passed after this date, due to Roosevelt’s weakened political power.
* The year-long recession makes itself felt: the GNP falls 4.5 percent, and unemployment rises to 19.0 percent.
* Britain becomes the third nation to recover as it begins deficit spending in preparation for war.
1939
* GNP rises 7.9 percent; unemployment falls to 17.2 percent.
* The United States will begin emerging from the Depression as it borrows and spends $1 billion to build its armed forces. From 1939 to 1941, when the Japanese attack Pearl Harbor, U.S. manufacturing will have shot up a phenomenal 50 percent!
* The Depression is ending worldwide as nations prepare for the coming hostilities.
* World War II starts with Hitler’s invasion of Poland.
1945
* Although the war is the largest tragedy in human history, the United States emerges as the world’s only economic superpower. Deficit spending has resulted in a national debt 123 percent the size of the GDP. By contrast, in 1994, the $4.7 trillion national debt will be only 70 percent of the GDP!
* The top tax rate is 91 percent. It will stay at least 88 percent until 1963, when it is lowered to 70 percent. During this time, America will experience the greatest economic boom it has ever known.
mikeinaz says:
“For anyone who has at least a passing knowledge of history and basic math is concerned watching all this, you know in your Gut that it cannot last in perpetuity.” There is your problem, 99% of enconomists and financial types are just morons with useless pieces of paper on the wall. They follow their masters and don’t think for themselves.
Well-loved. Like or Dislike:
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6th January 2011 at 1:58 pm
mikeinaz says:
Typo noted.
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6th January 2011 at 2:00 pm
Smokey says:
And now, another encyclopedia volume of stupid, meaningless, boring ass shit from you-know-who……..
Hot debate. What do you think?
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6th January 2011 at 2:43 pm
Jmarz says:
RE
Thanks for some interesting factoids. How in the world do you have the time to write such long and in depth posts each day? Your schedule must be nice.
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6th January 2011 at 2:45 pm
Jmarz says:
smokey
I seem to always lmao when I read your shit. I must confess that I never fully read RE’s posts. I skim them from time to time since they are so damn long. I don’t often agree with his views but I always give him an A for effort.
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6th January 2011 at 2:48 pm
johnbmac says:
This site has some excellent articles. I wonder how long it will take to attract a broader spectrum of commentators.
Hot debate. What do you think?
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6th January 2011 at 3:13 pm
eugend66 says:
Ummm, …. Thumbs UP, Jmarz.
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6th January 2011 at 3:14 pm
Administrator says:
As soon as fuckwads stop posting inane comments.
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6th January 2011 at 3:17 pm
newsjunkie says:
This is completely off the subject, RE, but have you ever read Peter Dale Scott’s book, The Road to 9/11?
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6th January 2011 at 3:21 pm
Welshman says:
Nassim Taleb was asked what makes a man rich. Well money is not always what makes a man rich, as some people don’t need a lot of money to feel rich. He thought that a person is rich by the amount of time he has to kill in the things a person likes to do.
If we take this “time to kill” formula into RE’s life, he is a very RICH man.
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6th January 2011 at 3:45 pm
Whippet says:
Nice piece, RE. We need to talk REAL vs. NOMINAL price drops in real estate. If we’re talking REAL prices, I’m in your camp. Hyperinflations offer the cheapest REAL real estate values, historically (when my neighbor needs wheelbarrows of FRNs to buy bread, I’ll flip him a few Kruggerands for his deed.) Problem is, I don’t buy the deflationista arguments, especially when compared to the first Great Depression. Everyone seems to ignore the fact that there was no QE, there was relatively little socialization of debt, and we were on a gold standard- even if it wasn’t an exchange standard after 1933. We are on a parallel path that is beginning to diverge.
Bottom line- housing prices are inelastic, especially at this juncture. Banks would rather hold REO than realize losses. There isn’t enough equity left to enable price drops, except through short sales (see above). But- the real inflation of food and commodities has already begun. It will accelerate. This didn’t happen AT ALL in the 1930s. The reason why farmland prices collapsed? Not debt implosion- PRICE IMPLOSION of the end products (meat, grain, etc.)
RE values will stagnate, and won’t go up in nominal terms, which means a real price drop. Of course, in regards to income- it will still be a price increase. Life sucks for the proletariat…
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6th January 2011 at 3:47 pm
StuckInNJ says:
Fascinating and interesting data/comparisons. I love the pictures comparing Grandad’s Depression to today. Two thumbs waaaay up RE.
You gotta hand it to RE, he comes out with both guns blazing when his opinion is questioned. No copy and paste stuff. All original stuff.
Now it’s up to those who disagree (harumph … Jim?) to respond … hopefully with something more substantive than insulting the size of RE’s reproductive organ.
And for all you chumps who may (or, will) flame me for “defending” RE … well, you can just lick my very hairy shit stained asshole. Save your breath and write something better …. if you can.
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6th January 2011 at 4:06 pm
StuckInNJ says:
Now that I got that out of the way ……………
RE — I still don’t see HOW you get to an 80% drop. Where’s the math? Maybe SOME very isolated communities will experience such a decline … but clearly not across the board.
I still think that across the board prices will drop until the median price of a home mortgage is about 31% of monthly gross income. The “experts” say this means about another drop of around 23%. I disagree. If I had to pick a number out of thin air, I would say around 40% max.
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6th January 2011 at 4:11 pm
Barbarossa says:
Excellent article. This depression will only end when the elite of this country are hanging from lamp posts or have fled the country and a new government of the people, by the people, and for the people has been established. When the last depression occured, the U. S. was a rising world power. Today it is a declining power with none of the advantages it had 80 years ago.
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6th January 2011 at 4:13 pm
Wynter says:
Throughout history real estate cycles as does everything else. We reached the peak of the cycle in 2007, the height of the securitization movement, and we are now in the beginning stages of its decline. The decline typically lasts approx 26 years. Within those 26 yrs there are periods of stabilization and even possibly a year or two with slight increases, but in general the trend is downward. Hang on baby, we have just begun the decent. Interestingly enough when you line up the real estate cycles with the cycles of time according to Strauss and Howe, 4th Turnings occur during the downward cycle in real estate. I doubt this is coincidence. Suburbia arose from the last major cyclical downturn in real estate with the rise in public confidence. Today we are faced with a decline in public confidence. Suburbia will not rescue us, nor will more debt. When a decline in public confidence, 4th Turnings and Real Estate downward cycles line up, hold on to your seats because the ride is not pretty. Looking back at history, the last time those cycles line up was right before the American Revolution.
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6th January 2011 at 4:15 pm
StuckInNJ says:
To RE and/or others …
WWII got us out of the Great Depression.
Therefore, will another global or major military conflagration do the same for us this time around?
.
FWIW, it’s a sincere question. I don’t know the answer.
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6th January 2011 at 4:20 pm
johnbmac says:
HOW did i get 4 dislikes? What kind of place is this?
Hot debate. What do you think?
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6th January 2011 at 4:29 pm
Robmu1 says:
Johnbmac – I tried to give you another dislike for whining about getting 4 dislikes but for some reason I couldn’t.
So this will have to do – shut the fuck up about it and move on.
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6th January 2011 at 4:41 pm
Administrator says:
Nice story. Too bad RE is full of shit as usual. Here is Robert Shiller’s chart of home values over time. Home prices were higher at the end of the Great Depression than they were at the beginning. Try, try again.
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6th January 2011 at 4:49 pm
Barbarossa says:
@ StuckInNJ:
If and when World War III occurs, the U. S. will fold like a paper cup because we are already overextended. The last time, we were the largest industrial power in the world and our military forces were restricted to within our (and our possessions’) borders – neither of these points are valid any more. Then the president could ride in a convertible whithout fear of assination – now even the president’s honor guards’ weapons have had their firing pins and ammunition removed for fear that they will kill him. America is not even close to being the country it was 70 years ago.
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6th January 2011 at 4:52 pm
StuckInNJ says:
johnbmac — you got thumbs down because you said the article — WRITTEN BY RE (ReverseEngineer) — was good. There are people here who dislike RE, dislike anyone complimenting RE …. so much so they won’t even use the abbreviation RE: when typing a standard letter.
The reason I didn’t get thumbs down is because people Fear Me. You have not yet earned that right. And if you keep being a pussy about it you will not last here very long.
Maybe you need to get out of namby-pambyland and gain some confidence, you jackwagon!
Hot debate. What do you think?
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6th January 2011 at 4:53 pm
Jmarz says:
Stuck
Lower taxes and decreased spending ended the GD. WW2 did play a role in speeding up the process. Government intervention always makes matters worse. When will we learn this?
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6th January 2011 at 5:02 pm
Administrator says:
The Great Depression ended in the US because we were the only country left standing untouched by the devastation of WW2.
Hot debate. What do you think?
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6th January 2011 at 5:05 pm
Reverse Engineer says:
To answer the question, “How does he find the time to write so much?”, the truth is it doesn’t take me all that long to write something like the above piece. Far as the original prose was concerned, its around 3600 words. I keyboard at very close to 100 WPM, so the physical act of putting it on the disk takes maybe 45 minutes including the time it takes to quaff a Sam Adams. Thinking it up? This is stuff I already know, it doesn’t take me any time to think it up anymore. I can write it in a single draft, or if I was speaking I could just recite it.
To add the pictures to this one added some time Googling, but all totalled I don’t think I spent more than an hour and a half getting it all tidied up for publication. That is a lot for me, but as Stuck indicated, I get a little more motivated when I am directly challenged on my opinion, particularly if I get accussations like “RE just makes the shit up”. This is clearly not true, and I feel obligated to prove that it is not so. So an hour and a half to do that after I get home at night isn’t a big deal for me.
As far as where I get 80% from, same general reasons Ilargi mentioned. Organic market reasons by themselves, including the shadow inventory and depressed employment picture for the forseeable future will account for the 20-%-40% that is the accepted wisdom. Mish comes in on the high side of that with the 40% estimate. However, after you consider the supply-demand problem, you have to realize what this hit does to the TBTF Banks. The insolvency can’t be papered over at that point, the infusion of new funny money would be double or triple what has already gone out the door. If Helicopter Ben attempts that, the Bond Market which is already trembling will send interest rates through the roof, which then collapses the economy that way. This is what accounts for another 20-30 percent further drop in prices. Financing will not be available from any source, and the only transactions that do happen will have to be in Cash. Or as our Gold Bugs hope, a beautiful Doomstead will sell for a few Gold Maple Leafs.
Now, as far as a WW getting us out of the problem, no I don’t think that works this time round. What paid off the debt we incurred in revving up to fight WWII was the post war period of Growth that was financed by cheap Oil. Any debt incurred to fight a war now won’t be followed by a period of prosperity financed with cheap energy. The parameters are way different.
We can’t finance our way out of this problem with further debt, nor will we grow out of the problem. As Andrew Mellon said, the only way out is to Liquidate, Liquidate, Liquidate. Just that this liquidation will not bring with it any kind of prosperity, and the political consequences of it are mind boggling to say the least. Our current form of Goobermint is unlikely to survive the liquidation.
RE
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6th January 2011 at 5:24 pm
Reverse Engineer says:
@JimQ
What Schiller’s graph clearly shows is that the depression in land prices began before the Stock Market depression came in following the crash of 1929. As a I mentioned in my article, land prices were collapsing in the aftermath of WWI. Quite a bit of land was taken out of production as a result of falling demand and introduction of mechanized farming which increased yields.
The RE Bubble preceeding this collapse is WAY off the mean of Housing prices, and a downward oscillation of similar magnitude below the mean is what is likely to occur. There will likely be other factors involved, such as the possibility a new currency gets introduced before a complete collapse occurs, but in constant dollars I still think the evidence points to a decrease down into the -80% range. Only time will tell of course.
RE
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6th January 2011 at 5:37 pm
johnbmac says:
you guys are hilarious
RE – nice work, I’ll have to look back through for some more of your postings
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6th January 2011 at 7:24 pm
newsjunkie says:
Stuck-
“Maybe you need to get out of namby-pambyland and gain some confidence, you jackwagon!”
That’s my favorite commercial. I laugh every single time its on.
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6th January 2011 at 7:30 pm
llpoh says:
Stuck – fear you? Those days are over my friend, since you have found a kinder and gentler nature. . You are slowly creeping toward the dark side. You still can come out blazing but have shown some weakness, especially towards thumbs up and RE. And there are folks here that can smell weakness like it is Christmas dinner. My advice is to put a few bodies down as soon as possible and maybe you can regain your fear factor.
You said two thumbs up for RE. I hope you meant up his ass. Alas, ii doubt it.
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6th January 2011 at 7:33 pm
llpoh says:
Johnbmac – you have been warned re RE. Side with the devil and you will cop a shitstorm everytime you post. No exceptions. And the stench will linger forever. It simply will not come off. You don’t want to be called Stinky now do you?
Sit back and read a few articles and posts before you jump into RE’s pit. He is one deluded, albeit smart, mother.
I will let you slide this once but watch out for Smokey – he isn’t prone to let anything pass unscathed.
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6th January 2011 at 7:41 pm
Administrator says:
RE
How do explain the decline in home prices of 30% from 1895 to 1915? The decline from WWI until 1922 had nothing to do with mass production techniques that allowed homes to be built cheaper?
We increased mechanization of farming after WWII. Why did prices rise 57% from 1942 until 1947 and then remain high for decades?
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6th January 2011 at 7:51 pm
Kill Bill says:
~~ Government intervention always makes matters worse. When will we learn this? ~~
But who generally controls the government isnt really the masses as would be in a true democracy. Surely someone is profiting from all this intervention. Who could that be?
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6th January 2011 at 7:53 pm
Kill Bill says:
JimQ and I have been having a wee bit of a dispute regarding just how much Real Estate values are going to fall as we progress forward with the economic collapse. Like many Optimistic Pundits here on the net, he holds the belief that if Goobermint support was removed from the RE market and real Price Discovery was allowed, the market would experience perhaps another 20% drop before stabilizing -RE
Why sell a toxic MBS asset when its a golden goose?
I dont think RE value, given the continual bailouts, is an indicator of when things will reverse, personally.
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6th January 2011 at 8:04 pm
Reverse Engineer says:
@JohnMac
This board is dominated by a few very vocal Napalm artists who since they have nothing constructive to add to a debate will instead dispense a steady stream of homophobic insults and scatological imagery instead. The Three Stooges are LLPOH, Smokey and SSS, and they hate my guts because I make it my business to deconstruct the capitalist system and demonstrate that they are
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6th January 2011 at 8:19 pm
Reverse Engineer says:
a bunch of parasitic leechfucks on society in need of extermination, after which they will all Burn in Everlasting Torment in the Fire and Brimstone of HELL.
Otherwise, this is a very friendly board and often a source of good information and debate
RE
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6th January 2011 at 8:22 pm
Jmarz says:
Government and Wall Street benefit from intervention. Big government is hazardous to society. How can it possibly be moral for Goldman Sachs to borrow from the Fed for essentially zero cost and then invest in US bonds for a risk free return? Is this fair? Government has created a moral hazard among Wall Street. They are allowed to speculate at the expense of hard working taxpayers. This is fascism. We need to restore the Republic. What the fuck happened to swearing to uphold and defend the Constitution under oath? These greedy snakes should be in jail for breaking an oath. I’m sick and tired of people coming to the government for solutions to a mess they have created. Wall Street doesn’t need more regulations. They need a free market to function. More regulations will create more government. A free market would bankrupt these supposedly TBTF banks and allow the sound businesses to buy up pieces of these bankrupt businesses at a discount. I can’t wait for the day the Fed becomes abolished and the American people revolt against big government. It’s time to seek the Constitution for answers. We have the right to life, liberty, and the pursuit of happiness. We don’t have a right to healthcare. We don’t have a right to a house. We don’t have a right to a college education. I’m sick and tired of these hypocrites in Washington. This isn’t about Republicans or Democrats because neither party has their head on their shoulders. This is about principles and building a sound foundation for our future generations. Who has the balls to create real change for our country? Ron Paul does but the real change will come from middle class Americans fed up with the system and willing to voice their opinion. Alright I let my rant out. I feel better now.
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6th January 2011 at 8:31 pm
llpoh says:
RE – you and your bullshit couldn’t deconstruct my left nut. We have crapped all over your anti-capitalist rants time and again and it doesn’t take us 100000 words to do it. Whenever we back your sorry ass in a corner you resort to bullshit like 10000 years ago there wasn’t capitalism so there is your proof it doesn’t work. It is laughable. And your predictions have been oh so accurate, haven’t they. Not to mention how you deem yourself an expert in all things. And when things go against you you damn us to hell. You are one deluded, anti-social, warped, bitter motherfucker. And I am being nice in my analysis. .
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6th January 2011 at 8:35 pm
llpoh says:
Johnbmac – I have told you how it is re RE. Ggod luck.
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6th January 2011 at 8:37 pm
Buckhed says:
RE…in this country I don’t think we’ve ever had a truly capitalist format. I don’t believe most of us, including myself, would like the true model of capitalism.
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6th January 2011 at 8:40 pm
llpoh says:
Johnbmac – by the way, the three “stooges” he talks about have all been very successful in their careers. Old RE is a hermit in Alaska having abandoned the real world.
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6th January 2011 at 8:43 pm
Reverse Engineer says:
@Admin
What do the prices of housing from 1895 to 1915 have to do with the Great Depression? I don’t see the connection between the two, that period preceeded both WWI and the Federal Reserve. 1920s era housing prices probably had a few factors impacting, but the data was for farm property, not the residential housing market around the cities of the time. Do you have data for that, I’d be interested to see it.
Post WWII commodity prices have been very much Goobermint controlled through farm subsidies, so its difficult to draw many conclusions from the price rise between 1942 -1947 you are looking at. Again though, I am not sure how the post WWII Ag prices are related to either the Great Depression or the one we are in now. This depression as I see it has its proximal roots in the Industrialized countries led by the FSofA becoming net energy importers followed by an ever upward spiralling of debt at both Goobermint and Private levels. Deeper reasons of course go back at least 300 years to the founding of the Bank of England, but I covered that in a prior post on Musings on Money III I think. You can reference that one if you like, and we can work from there.
RE
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6th January 2011 at 8:48 pm
Reverse Engineer says:
@Buckhed
I would agree we have never had what I would call “Fantasy Capitalism”, but I also don’t think such a thing is any more possible than fantasy Communism is. If you want a further explanation, read my “Musings on Money” series
Christmas Musings on Money: http://www.theburningplatform.com/?p=8833
New Year’s Musings on Money: http://www.theburningplatform.com/?p=9048
Musings on Money III: http://www.theburningplatform.com/?p=9120
RE
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6th January 2011 at 8:56 pm
Thinker says:
Admin, just a point… farming mechanization started earlier in the early 1900s and was used widely by farmers who took advantage of homesteading policies in Texas, Nebraska, Oklahoma, etc. WWI encouraged wheat production, particularly after prices spiked when the Turkish navy kept Russian wheat from supplying Europe. Just between 1917 and 1919, wheat acreage in the US increased 70%. Unfortunately, prices returned to market value after the war, so farmers utilized their new tractors to plow up even more land in an attempt to make the same amount of money. That didn’t happen; instead, piles of wheat rotted in the sun next to railroad tracks. In the meantime, the overly-worked land started to blow away. It’s documented pretty well in Tim Egan’s book, The Worst Hard Time.
It wasn’t a matter of land being taken out of production due to mechanization at all. It was taken out of production because it was literally blowing away. Demand was also lower because of hard times.
Oh, and you’re right. The Depression lasted until WWII was over. We grew and paid off our debt because we were the only country with manufacturing left standing. Much of it went to rebuild Europe.
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6th January 2011 at 9:04 pm
Reverse Engineer says:
@JohnBMac
Just to let you know, SSS was a CIA Spook who ran Heroin out of Cambodia back in the 70s, LLPOH was an abusive boss who revels in the fact he paid his employees the lowest wages possible, and Smokey is a Ph.D. Engineer who has the emotional maturity of a pimple faced Junior High closet homosexual.
I am not a “hermit”, I do live in Alaska though, where there are still a few unpolluted streams to fish and Moose to hunt.
RE
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6th January 2011 at 9:07 pm
llpoh says:
Johnbmac – RE is the guy who when faced with pro-capitalist arguments like extended life expectency under capitalism responds by saying that extend life is a crime and people should die by 50. He advocates, dare I say prays, for a 90 percent reduction in the human population. He advocates extermination of the rich – he has said those in the top 20 percent of income (hope you don’t fall in that category). He is against anyone who employees people and seems to view it as slavery.
I couldn’t make this shit up.
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6th January 2011 at 9:19 pm
hugh betcha says:
i’m in complete agreement with the 80% drop in housing and maybe not from the peak but from here. i think most of this will be xrbs and outer subburbs with closer in town (shitties are just plain doomed to mad max living) housing holding some value.
i think farm land might fair better this time as compared to the 30′s but they will need to be close to the towns they’ll serve. the mid west mega farms may endup completely worthless as oil dries up.
as a small farmer in nj i expect we’ll be annexed by dix/mcguire for as long as they like. but otherwise i hope we’ll be able to get food to locals, as far as i know there are no more then a dozen or so farms in nj focused on raising food all of them currently raise monsanto corn and soy. year after year… chemical fertilizer and roundup.
a cow calves once a year, a pig has 2 litters a year (20+ babies a year). you dare not eat the girls and steer take 18 months and pigs 10-12 months to get full size.
factory chickens in 3 months but they can’t fend for themselves and must be kept and fed. old fashioned chickens take 6-8 months and can fend for themselves somewhat but if you want meat on those bones they must be fed. cows are the best (horses too) if you have the pasture to carry them, plus pasture to allow you to put hay in the loft. one 50lb bail per day per cow from november thru march about 200 bales per cow.
should food stop flowing the corn and soy farmers will need several years to retool to vegatables or meats. if veggies they’ll need tons of weed killer as their fields are in terrible shape and roundup has created super weeds. also their soils are poor and need chemicals to grow “good” crops. planting grass and moving to pastuire is a solution to fertiizer but requires several years to establish well enough to sustain grazing.
getting to a point where one can rotate crops and animals on healthy soil is at minimum 5 years, probably more.
i think if you want to worry about something in the coming years it should be food. go out and find a local farmer, buy from them, get to know them. we can only support so many families and we have strong loyalty to our existing customers first.
after all, will you want to eat or pay rent? and if you know a farmer you’ll find they will offer you a corner of the loft and meals for your labor on the farm.
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6th January 2011 at 9:48 pm
johnbmac says:
i don’t know what to make of all this.
1/2 the comments here are like a running stand up comedian – or better yet something like who’s line is it anyway
the other 1/2 are insightful, thought provoking gems of wisdom
i only visited for the first time a week or so ago and keep revisiting because the list of favorite blogs is nearly identical to mine.
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6th January 2011 at 9:55 pm
Smokey says:
llpoh——” ….,albeit smart,…” Have you lost your mind? RE, smart ? That fucking brain dead mongoloid belongs in a psych ward. The fucking insane garbage he shits on this board with is enough to drive a shrink to suicide. RE, in his warped mind, is a goddamn authority on every subject there is. Have you EVER seen that fucker say he may need to do more research on a subject, or say that he was unfamiliar with an issue ? Fuck no. The asshole makes shit up as he goes, and always with the tone of an authority. You can get better information from any public restroom toilet partition than RE provides. RE eats shit.
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6th January 2011 at 10:00 pm
llpoh says:
Johnbmac – this site goes any and everywhere at no notice. We get posts on guano mining to dead birds. Welcome.
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6th January 2011 at 10:03 pm
hugh betcha says:
smokey is jelous. too funny smokey, you poor sorry sack of shit.
smokey and re sittin in a tree … k. i. s. s. i. n. g.
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6th January 2011 at 10:05 pm
llpoh says:
Smokey – sorry. By smart I mean his IQ is above 100. I think I made all of your other points, tho. He isn’t a run of the mill ignoramus. He is an extraordinary ignoramus.
Again everyone please forgive bberry typos. I is usuly able to spel.
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6th January 2011 at 10:07 pm
llpoh says:
Hugh – oh boy. This should get nasty. I think Smokey would rather ass fuck an HIV positive chimp than kiss RE.
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6th January 2011 at 10:11 pm
Smokey says:
hugh betcha—-You like living out on the farm where you can fuck those goats, don’t you ? I bet your old lady gets jealous, doesn’t she ? Notice that the word “jealous ” has an A in it, asshole. Learn how to spell, you illiterate douchebag. On second thought, I bet your old lady has a threesome with you and the goat. Get back to gobbling that billy dick now,
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6th January 2011 at 10:12 pm
johnbmac says:
llpoh – thanks for the welcome
i’ll be back
even if it’s only to try and figure out if I can keep up
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6th January 2011 at 10:12 pm
Anonymous says:
hugh betcha —-If you want to rock and roll, asshole, I’ve got the guitar.
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6th January 2011 at 10:26 pm
johnbmac says:
Well, it is easy to see that RE eats shit. I’ll continue to visit this blog to watch that cocksucker make a fool out of himself.
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6th January 2011 at 10:28 pm
Smokey says:
Wise decision johnbmac
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6th January 2011 at 10:30 pm
llpoh says:
Johnbmack – the quickest way to get up to spee around here will be to pick a fight with Smokey (just keep agreeing with RE and it will happen)n or tell SSS that you would like to see drugs legalized and he will give you a warm welcome indeed. Also, if you want to see all of Admin’s charms, side with the Israelis on just about anything. You will catch on. Also be careful with Cynical30 and me, as we are short-tempered as well. Sometimes it is good fun. Sometimes it is meant as harsh as it sounds.
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6th January 2011 at 10:34 pm
llpoh says:
Hugh – no offence but you are getting punked. If you are gonna prod him you need to bring a bigger stick cause right now yours isn’t getting it done.
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6th January 2011 at 10:37 pm
Administrator says:
RE
If you go from the peak in home prices prior to 1920 to the end of the Depression in 1939, home prices declined 13%. Your entire article is to show how prices collapsed during the Great Depression and will crash again. Your entire premise is false. The home price graph proves that. Your 80% collapse prediction is based on no facts or any similar crash in history. It is just your hope.
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6th January 2011 at 10:48 pm
Smokey says:
johnbmack Eats Shit
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6th January 2011 at 10:52 pm
hugh betcha says:
johnbmac, since your new here maybe we can get together for some hot action. I will smoke your pole if you promise to pork my hiney after I’m done.
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6th January 2011 at 10:52 pm
Smokey says:
llpoh — you are a fucking traitor cocksucker just like Stuck. At least he sold out for 30 pieces of silver. You sold out to get a blow job from RE. I am forever more your enemy.
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6th January 2011 at 10:54 pm
Smokey says:
llpoh—-Someone is scamming me. An impostor. Don’t buy it.
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6th January 2011 at 10:55 pm
Snake says:
Smokey and RE sittin in a tree not k.i.s.s.i.n.g. Instead they are doing the Reverse Cowboy.
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6th January 2011 at 11:14 pm
Administrator says:
Johnbmac
If you can survive the first day of making comments, you have a chance. Very few even venture to make a comment. We have 4,500 members and only 30 or 40 regularly make a comment.
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6th January 2011 at 11:19 pm
llpoh says:
Smokey – I figure mr Punk is lurking. I knew it wasn’t you ’cause you know it takes more than that to buy me off.
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6th January 2011 at 11:33 pm
Reverse Engineer says:
@Admin
You seem to be working with a different data set than the folks who wrote the timeine. They got a 30-40% reduction in the price of farmland. In any event, the point here is that due to the ancillary effects of Peak Oil and decreasing ability to keep the suburban house model working, this particular crash wil be worse than the price crash in RE during the Great Depression. You aso have a much larger debt overhang here, which when it all finally does get liquidated is a sustantialy bigger drag on the economy than the chump change around in 1929. Bigger numbers make for bigger crashes. The bigger they are, the harder they fall, etc.
RE
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6th January 2011 at 11:47 pm
ZZZZZZZZZ says:
SWEET FANCY MOSES this douchebag can ramble on! Where the hell does this guy come up with this shit??Quick RE I need a 5000 word piece on diminshing marginal utility by 9 am. GO GO GO!!!!
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6th January 2011 at 11:52 pm
Reverse Engineer says:
@ JBM
You can I think get a good idea about the dynamics here based on just this thread. I’m not a Juvenile Clown Closet Queer who makes up for a lack of reading and an Infant Sized lil’ Smokey Sausage by hurling Homophobic Insults across the net like the Three Stooges, I try to get some debate going about the various econmic problems we are faced with. However, every thread where the Stooges troll ends up with this sort of stuff in the background like white noise on a poorly tuned TV set circa 1950. For the most part, they are pretty easy to ignore once you get used to the buzz.
RE
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6th January 2011 at 11:55 pm
Reverse Engineer says:
@ZZZZ
No problemo. I charge $10/word. I’l have it for you in an hour, then you can pony up the $50K.
RE
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6th January 2011 at 11:59 pm
Administrator says:
RE
I’m simply using Shiller’s chart, that eliminates the impact of inflation and deflation. It provides the real home price decreases and increases. The real home prices dropped 13% from 1920 through 1939.
Based on your 80% prediction, you are strongly in the deflationary collapse camp. Is that correct?
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6th January 2011 at 11:59 pm
llpoh says:
ZZZZZ – nice post.
RE, despite your denials you are in fact an ignorant fuckshit. Please at least own up to what you are. Self-denial is just so pitiful.
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6th January 2011 at 12:01 am
Reverse Engineer says:
Yah, I am a Deflationato.
RE
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6th January 2011 at 12:03 am
llpoh says:
80 per cent drop my ass. Foreign money would pour in way before that. Don’t be such an idiot.
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6th January 2011 at 12:08 am
Administrator says:
RE
You don’t think Bernanke will succeed in generating inflation with his money printing?
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6th January 2011 at 12:08 am
Smokey says:
Quit asking RE such penetrating questions. RE is a fool. He probably does not know that the Bernanke is printing.
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6th January 2011 at 12:23 am
llpoh says:
It really is as simple as this – if property falls 80 percent, local and foreign money will snap up property at a rate of knots (me too – I will be a fucking slum lord for sure – in nice middle class neighborhoods throughout the country).
No other argument needs to be made. It fucking aint gonna happen.
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6th January 2011 at 12:32 am
The Meek says:
This is relevant to the discussion.
http://www.latimes.com/business/la-fi-ghost-towns.eps-20110106,0,4631232.graphic?source=patrick.net#content
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6th January 2011 at 3:16 am
eugend66 says:
RE, good work. Everything known as property will be taxed into oblivion and debtors prison
will come alive in the near future.
Work until you drop will be the new norm. For everybody.
Soylent Green not Mad Max outcome.
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6th January 2011 at 4:30 am
Reverse Engineer says:
Considering the behavior of Helicopter Ben so far, producing an Alphabet Soup of liquidity programs designed to keep the TBTF banks from collapsing, the general Group Think has it that we are destined for a hyperinflationary end game. Those Weimar pictures of people pushing Wheelbarrows full of Toilet Paper to buy a loaf of bread are a powerful image these days in the minds of many people.
The general concept is that Helicopter Ben will follow up QE1 &QE2 with QE3,4,5…n iterations in perpetuity to “Inflate away the Debt”. Except it doesn’t get rid of the debt, it just transfers it, and since there are no suckers out there anymore who wil buy this debt in the quantities necessary, Da Fed has to buy the debt themselves. This then becomes an increasing liability the Taxpayer is supposed to pay off.
The problem here of course is that the taxpayer cannot pay it off even at current productivity levels, and the more debt you assume, the less productivity there is. More Biz goes outta Biz, more J6P become UE, followed by decreasing tax revenue. In order to work, the inflated money supply has to get into the hands of the taxpayer, but that isn’t happening, and short of some kind of forced lending internally in the FSofA by Da Goobermint to get some kind of commerce going its not going to happen.
Where the Hot Money is flowing these days is into Commodities, Oil and Food perceived quite rightly as necessary and therefore a “safe” investment. So on the Comex, these prices are going up now pretty rapidly, which is perceived as confirmation of Inflation. However, this is only one part of the economic mix here, and for Price Inflation to continue spiraling up, you have to have Wage Inflation also. We don’t have Wage Inflation, we have Wage Deflation. More people UE, and those that do get new jobs are taking them at lower salaries and part time employment. Besides the Wage Deflation, we also have Asset Deflation, as the primary Asset of most people, their homes, are losing value. Even if its “only” 20%, its still a massive deflation, which the inflation of prices in commodities does not make up for.
So on balance, despite the fact that more debt money is pushed into the economy in commodities, more money disappears through the rest of the economy in lost wages and lost asset values. This hasn’t been “recognized” because the TBTF Banks and Da Fed still mark to make believe these assets, but they still are in fact losing value and are non-performing. They will eventually have to be marked to market, and when they are this is like a black hole that will suck down all the freshly printed money like a Hoover on Steroids.
Far as the Commodities go, there will be warehouses full of Grain and Tankers full of Oil priced a $120/bl, but not enough buyers to consume that oil at those prices. So those warehouses will have to be liquidated at whatever the market will bear. More freshly printed Toilet Paper gets burned up this way.
The Debt accrued in printing up the new Toilet Paper hasn’t disappeared though, nor will it until there is a general recognition that it can’t be paid and has to be discharged through bankruptcy. No matter how much money Helicopter Ben prints, it cannot be used to pay off the debt because the debt increases faster than the money supply does, due to the interest on the debt, even if its close to Zero. At ZIRP, the debt and the money supply increase at the same rate, but you still can’t pay off the debt overhang, and even if Da Fed is charging Zero Interest, further loans made down the line with that money are NOT Zero Interest. TBTF Banks don’t hand out Zero Interest loans to J6P, except as short term teasers when a company like GM needs to get cars off the lot. So overall, perpetually printing money never pays off the debts accrued, and there is always a shortfall, which grows all the time.
If the FSofA was a small country like Zimbabwe, just the Dollars already printed would have sparked a Hyperinflationary event as FAITH in the currency was lost and the international market would not recognize its value. Thing is, the FSofA is not a small country, it runs the Big Ass Military Protection Racket of the WORLD, and the Dollar is its transaction medium. Every other country in the world has currency problems with their Fiat also, so massively unloading your Dollars because you have lost faith in them and buying some other currency with them is a dicey trade these days. There is a flight into Gold as a result, but Gold isn’t a currency medium anymore, it just functions as a store of Wealth. If/When all the Fiat goes under Gold might function as a currency medium in some places, but not generally. You most likely will have to convert it back into whatever substitute currency emerges down the line to get it to function in commerce.
Anyhow, the position of the Dollar as world reserve currency and the lack of a perceived “safe” alternative currency serves to prevent the loss of faith that would drive a hyperinflationary unloading of dollars into the market. People who have access to Dollars aren’t unloading them, they are HOARDING them, at least here in the FSofA. Over in China, it’s a different story as dollars are being willy nilly invested in that economy on all sorts of projects that are just liquidity traps and asset class sinkholes. However, until that Bubble collapses, its driving a wage-price spiral, because unless the Chinese Goobermint keeps enough Renminby in Chen Rice Wine’s hands to buy rice, they will be in a world of shit.
At the very end of this game, the Dollar will collapse, but you still have games being played over in Euro land and Asia, and smaller currencies and economies will go under the Bus first. In the meantime, for the most part we are experiencing a deflationary event as credit collapses across the board in the private sector. Goobermint is making up for that by taking on more debt, but it is debt that cannot be serviced. It will eventually collapse on itself also.
In CONgress, the recently elected Republocrats hve already admitted they are going to be hiking up the “Debt Ceiling”. There’s Fiscal Responsibility for you! LOL. Geithner once again is warning of Tanks in the Streets if we don’t hike up the debt ceiling. Nobody in Goobermint has the Cojones to stop this Merry-Go-Round, and for good reason because once it STOPS, pretty much all hell WILL break loose. Think about it.
First off, this will prevent Helicopter Ben from further supporting the IMF, which means no Euro Economies get bailed out through this gimmick. Second, here in the FSofA, Social Security and Medicare will go into Cardiac Arrest mode. Third, funding the Pentagon and the Perpetual War Machine will become impossible. The minute the Funny Money supports are removed from these fundamentally insolvent entities, you get a worldwide crash of the monetary system. So it is being Extended and Pretended away for as long as possible, but the credit collapse cannot be stopped indefinitely even with money printing, so it is deflation that rules here. When/if we get Hyperinflation, what is left of the real economy will already be toast.
I figure QE3 is pretty likely, and QE4 also, but because of the general problems with Fiat currencies across the globe, I don’t think this will initiate a general panic to flood the market with dollars. Meanwhile, in the REAL economy we will see further problems in many nations, which will lead to political instability. I don’t see QEn, because eventually the problems it creates in the general economy will create enough political instability here for an Andrew Mellon style debt liquidation to be undertaken. This is what Ron Paul is after, and eventually he will get it. We are not there yet, but this is the kind of behavior the Fed and the Illuminati have engaged in before, just never on such a big scale as this. Hyperinflation does not serve the interest of the Illuminati. Debt Liquidation does. What was it that Thomas Jefferson wrote?
“I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs.”
Notice he does not say “Inflation followed by Hyperinflation”, but by DEFLATION. Jefferson knew what he was talking about. This period is one where they are securing their assets by transferring the wealth and shifting the debt burden to the taxpayer. It is not the end game however.
RE
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6th January 2011 at 12:35 pm