(This post appeared at the author's blog.)
Is the United States economy headed for another Great Depression? Well, according to Barack Obama, that is no longer possible. According to Obama, the United States has avoided an economic collapse and is headed for another wonderful era of growth and prosperity.
But is Obama right? Do the economic signs indicate that the U.S. is headed towards recovery or towards even more difficult times? As you shall see below, there is no way in the world that Barack Obama should have ever said that "a second depression is no longer a possibility".
In fact, as the U.S. financial system continues to crumble, it is likely that those words will be exploited by his political adversaries again and again. If you are a politician and you are going to issue a guarantee, you had better be able to deliver the goods. In this case, Obama is making a promise that defies all of the economic data.
Video of Obama making his declaration that "a second depression is no longer a possibility" is posted below....
So why is Obama wrong? Well, if you want a full examination of why the United States is headed for an economic collapse, please read the rest of this blog. In this article we just wanted to highlight
START THE SLIDESHOW
The U.S. housing market is continuing to come apart like a 20 dollar suit. The U.S. government just announced that in January sales of new homes plunged to the lowest level on record. This is not a sign that the U.S. economy is recovering.
In fact, a lot more houses may be on the market soon. The number of U.S. mortgages more than 90 days overdue has climbed to 5.1 percent. An increasing number of Americans find themselves simply unable to keep up with their mortgages. This is another indication that things are getting worse instead of better.
Over 24% of all homes with mortgages in the United States were underwater as of the end of 2009. So in other words, nearly one out of every four U.S. homeowners with a mortgage owe more on their homes than the homes are worth. That is a giant mess, and it is going to be very painful to untangle it.
If all of that wasn't bad enough, a massive "second wave" of adjustable rate mortgages is scheduled to reset beginning in 2010. The "first wave" of mortgage resets from 2006 - 2008 absolutely crippled the U.S. housing market, and this second wave threatens to make things far worse.
Confidence among U.S. consumers fell dramatically in February to the lowest level in 10 months. Consumers that are not confident in the economy tend to hold on to their money. If consumers don't spend their money then the economy is not going to grow.
Many analysts are predicting that the next "shoe to fall" in the ongoing financial crisis will be commercial real estate. U.S. commercial property values are down approximately 40 percent since 2007 and currently 18 percent of all office space in the United States is sitting vacant.
In fact, the commercial real estate sector is just now entering the danger zone. It is projected that the largest commercial real estate loan losses will be experienced in 2011 and the years following. Some analysts are estimating that losses from commercial real estate at U.S. banks alone could range as high as 200 to 300 billion dollars.
All of these bad loans are causing banks to dramatically slow down real estate lending. During the middle of the decade, the number of commercial real estate loans exploded, but now the bubble has burst, and commercial real estate lending has dropped through the floor.
All of these real estate problems are decimating America's small and mid-size banks. The FDIC has announced that the number of banks on its "problem" list climbed to 702 at the end of 2009. This is compared to only 552 banks that were on the problem list at the end of September and only 252 banks that were on the problem list at the end of 2008. As you can see from these figures, the banking crisis in the U.S. is escalating rapidly.
Image: usdebtclock.org
The financial mess in the U.S. is scaring off other nations from buying U.S. government debt. In fact, the Federal Reserve now has to "buy" most U.S. government debt because others are extremely hesitant to purchase the massive amount of bad paper the U.S. is trying to sell. In addition, other countries are now using the massive amounts of U.S. government debt that they already hold as leverage. A major U.K. newspaper is warning that evidence is mounting that recent Chinese sales of U.S. Treasury bonds are intended as a warning to the United States government rather than simply being part of a routine portfolio shift.
Image: AP
The United States should not expect the rest of the world to pick up the economic slack either. The crisis in Greece has made headlines all over the globe recently, and Harvard University Professor Kenneth Rogoff is warning that we could soon see a huge wave of sovereign defaults.
Image: AP
In addition, some of the most prominent investors in the world know what is coming and are issuing their own warnings. For example, Charlie Munger, Warren Buffett's long-time business partner, has warned in a new article for Slate.com that "it’s basically over" for the U.S. economy. Marc Faber is warning that things are going to get so bad that it is time for investors to buy farmland and gold.
Check out The Economic Collapse for more about the coming crash. See also: 50 Depressing Facts About The Healthcare System That Will Make You Beg For Reform What's This? x
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Contact: URL: http://theeconomiccollapseblog.com/ Recent Posts 14 Facts About The Federal D... The Health Care Reform Bill:... Virginia Hands Out 6996 Traf... Advertisement Receive email updates on new comments! Email 29 Comments Marquis Lafayett on Mar 16, 9:00 AM said: 10 17 Flag as Offensive This article is pointess , of course the president is going to say this ... what do you expect him to say "everyone panic ! we're all screwed ahhhhh run run !!!" Reply Marquis Lafayett on Mar 16, 9:57 AM said: 6 7 Flag as Offensive @Marquis Lafayett: I'm going to devote a bit more time to this subject... The DEPRESSION. What we have today is a world of contrasts , a world of dichotomies "¦ By most appearances we have a recovering economy with a semblance of normality returning to our nation "¦ But once you dig deeper , we can find that what seems to be reality is made up of nothing more than illusion "¦Sure the pundits on TV tell us that the stock market can only go up or stay level , that home sales while down will eventually recover , that it will just take time "¦ Their livelihoods depend on your participation in the "game " "¦ If they told you what was really going to happen ( assuming they were competent enough to know ) you and everyone else would withdraw and end your participation in the market "¦ no more pay checks at CNBC or the hedge funds , no more banker bonus holidays "¦ Sometimes it strikes me as odd that people can't see what is so obliviously in front of their faces, but then I recollect that we're all only human, our ability to believe what we want to believe can be strong. We Americans aren't a nation that has ever had to conceive of great economic change on the downside.. Money isn't just a tool in American society , it's part of our culture , we sing about it , write hundreds of books and movies about it , we wear the money symbol around our necks as "bling" "¦ In order for hyper inflation to come, it would require that Americans break our long standing kinship with money and its meaning in our lives "¦ that mental connection between a 20 dollar bill and value is very strong in us , the thought that we would one day walk down the street and not even stop to pick up a twenty is hard to conceive of "¦ That's why personally I feel deflation will rule the day "¦ not HAVING money is something that we are all mentally prepared for , having worthless money is something we are not . By this point you're asking how will the DEPRESSION come about? Or you may even question the assertion that we WILL have a Depression "¦ The DEPRESSION will come; it's a certainty, to understand this you need to understand the role MASSIVE INSANE DEBT plays in crushing a country..if you don't already know the debt levels of the US then it's time you seek out that information ( also look into Argentina in 1999 ) , with a debt ratio of 365% of GDP there's simply no way to pay this down "¦ As individuals we WILL take the easy way out , and as a nation , we will renege on our promises no matter how sacred they were .As more and more people protect themselves by screwing the other guy first , trust will break down in our society , crime will increase , prices will rise ..Default will become a way of life for us, already strategic default is becoming a new norm, trade will falter as other nations ask themselves what the point is of working with someone who will not pay you for the goods that they have provided "¦No trade war will be necessary, and protectionism need never rear its ugly head to break the bonds between nations, no our actions in regards to our creditors will do that job better than any tariffs or economic sanctions "¦ As resources and jobs dry up, so shall money and goods "¦ those goods which remain will be priced much higher than before, so while there will be no hyper inflation, goods will be so expensive that they will be almost unattainable "¦ All of this will take time , how much time I cannot say , our government now controls much of the financial system within our own country , so when the catalyst comes to really move the ball , expect to see it come from without rather than within "¦ Marq Reply bidwhacker (URL) on Mar 16, 10:02 AM said: 3 19 Flag as Offensive @Marquis Lafayett: He could start with the truth. That would be nice for a change. Reply Marquis Lafayett on Mar 16, 10:11 AM said: 15 4 Flag as Offensive @bidwhacker: the truth would not be in our nations best interests ... if telling the truth results in a market crash and a cesation of trade , then no , he should absolutely avoid telling the truth for as long as possiblle . Reply bidwhacker (URL) on Mar 16, 10:15 AM said: 1 17 Flag as Offensive @Marquis Lafayett: Total BS. The truth would not be in the politicians' best interest. Governments cannot stop markets falling or economies contracting. They can only delay the inevitable, at the price of higher costs, deeper drops and more pain. You can't cheat reality. Period. Reply duh on Mar 16, 10:18 AM said: 1 7 Flag as Offensive @Marquis Lafayett: I thought all these conditions were concerned positive indicators like 6 - 8 months ago? Do you have a manifesto posted somewhere? Would like to check it out. Reply Marquis Lafayett on Mar 16, 10:29 AM said: 5 1 Flag as Offensive @duh: sorry , no manifesto ... i do have a video vlog that i rarely work on .... most of the stuff from 2009 is still pretty much in effect ... be warned it's not really for savy investors .. http://www.youtube.com/user/MarquisdeLafayett?feature=mhw4 Reply Marquis Lafayett on Mar 16, 10:30 AM said: 6 1 Flag as Offensive @bidwhacker: Hey if you want to pay 7 bucks for gas and have no avaliblity to credit tomrrow you go for it ... i'l continue to enjoy what we have for as long as i can ... Reply ObaMao on Mar 16, 10:53 AM said: 3 8 Flag as Offensive @Marquis Lafayett: IMHO - STAGFLATION is the next stop in Twilight Zone led by Obozo's WH Economic2 stooges (Tax Cheat Timmy, Helicopter Ben, saved 2 million jobs Romer). Ingredients are high unemployment (16%+ un and underemployed) and inflation (printing USD like there's no tomorrow). Dejavu late 1970's... What Does Stagflation Mean? A condition of slow economic growth and relatively high unemployment - a time of stagnation - accompanied by a rise in prices, or inflation. Stagflation occurs when the economy isn't growing but prices are, which is not a good situation for a country to be in. This happened to a great extent during the 1970s, when world oil prices rose dramatically, fueling sharp inflation in developed countries. For these countries, including the U.S., stagnation increased the inflationary effects. Reply Tim In Tucson on Mar 16, 11:25 AM said: 4 3 Flag as Offensive @bidwhacker: Hey Bidwhacker! Here's a challenge for you. Why don't you spend a few minutes and give us your idea of what will happen in the future. Marquis Lafayett just wrote a well-thought out comment, and even though I may not agree with everything he said, he does make many damn good points to consider. So, show how smart you are Bidwhacker. Do you think we'll have deflation or inflation? What role is the government playing? If you're capable, give us your scenario in three or four well-thought out paragraphs. Or are you just one who has to get his thoughts from some radio talk show drama queen? Marquis Lafayett! Thank you for your comment today. Reply The Dude (URL) on Mar 16, 11:28 AM said: 0 6 Flag as Offensive @Marquis Lafayett: Yes, happy talk always trumps reality. Reply bidwhacker (URL) on Mar 16, 11:29 AM said: 1 4 Flag as Offensive @Tim In Tucson: All my comments are archived. If you'd like a custom commentary, I don't do that for free. Reply Marquis Lafayett on Mar 16, 11:46 AM said: 3 2 Flag as Offensive @Marquis Lafayett: some quick points , after rereading what i wrote it sounds like i'm talking about both deflation and hyper inflation taking place ... 1. i do not expect wages to increase . ( hence no true hyper inflation ) 2. those goods that i see going up high in price will be imports ... so say a car made in japan , that will go up , along with ipods , ipads , computers , tvs etc .... food produced here in the us won't rise more than the unit cost of the gas and energey costs required to produce it ... items that are readily aviable i don't expect to rise , such as chairs , or stuff you can easily find at second hand stores etc .. Reply someguy on Mar 16, 9:24 AM said: 4 8 Flag as Offensive And to think all our officials are talking about is getting subsidized insurance to poor people. Reply kryptic on Mar 16, 10:49 AM said: 14 6 Flag as Offensive @someguy: Really poor people already get free healthcare. The debate is about affordable available healthcare for the people in the middle class and the working poor. The problem in Congress is the Repthugs decided to try to hand the Dems a defeat on this issue instead of agreeing on reasonable legislation and getting it done an out of the way months ago. Reply jpk on Mar 16, 12:40 PM said: 0 6 Flag as Offensive @kryptic: Give me a break. The Dems had a super majority months ago and the Reps couldn't stop them if they wanted to. Been watching MSNBC much? Reply mobeer4don on Mar 16, 9:39 AM said: 1 7 Flag as Offensive You have to do something to keep the masses occupied between superbowl sunday and march madness. A pointless healthcare debate works just fine. Reply Edwin on Mar 16, 10:08 AM said: 0 1 Flag as Offensive Chart 8 is C&I Loans guys, not Real Estate Loans Reply theworldisnotenough (URL) on Mar 16, 10:19 AM said: 0 3 Flag as Offensive The home situation is an anchor to the economy. Below replacement cost housing is going to be trickling into the market for 5-10 years. This is very bad for new home building. Exacerbate the problem with inflation driving up energy prices and nw homes become even more expensive. To balance that out labor costs of homebuilding will have to drop to make up the difference. This money printing is going to hurt for a long, long time. Reply ObaMao on Mar 16, 10:46 AM said: 5 9 Flag as Offensive Anyone still believe OBozo? You can bet esact reverse things will happen whenever you hear these statements from Wall St and WH clowns: - "this time it's different" - "2nd depression is not going to happen" especially from Obozo's PR campaign machine led by ex-reporter Axelrod and asshole Gibbs - "saved 2 millions jobs" of course CANNOT be substantiated and BTW Porklus website show 0.5 million jobs and many are counted 3+ times and include few days of employment. HOAX and change we cannot believe in Reply Marquis Lafayett on Mar 16, 10:57 AM said: 8 4 Flag as Offensive @ObaMao: i'm impressed with the president .... once you consider the fact that our nation is on a path to economic ruin that as far as i know cannot be changed , things aren't so bad .... for now .... he's bought me more time to prepare , and for that i'm gratefull ... Reply kryptic on Mar 16, 10:56 AM said: 11 5 Flag as Offensive A second depression has been averted because the banking system didn't collapse and the safety nets put in during the last depression in the 1930's (Unemployment Insurance, Social Security, Minimum Wage, Food Stamps etc) prevent the extreme social effects of unemployment and reduce the multiplier effects on the economy of a retraction. The Government is just a whole lot better equipped to handle this economic contraction. We have also averted a massive trade war, which ending up scuppering an additional part of the world economy in the 1930's, though at the cost of exporting some of our recovery. The US economy is in recovery, but the real question is how fast will the recovery be? Reply Tim in Tucson on Mar 16, 11:39 AM said: 3 4 Flag as Offensive @kryptic: Wow! Hey Kryptic, did you actually view the slideshow before commenting? I agree that a lot of the pain has been softened by government programs. I also agree that it is good that we have so far avoided a trade war (although I'm beginning to feel different in regards to China). That's where it ends. I disagree that our economy is in a recovery. A very slight "uptick" in some economic indicator (like retail sales) does not make an economic recovery. Hell, most of us stopped believing in the reliability of the government's statistics. They're manipulated to say the least (how can you have more job losses, but have the overall rate go from 10% down to 9.7%?). You say that the banking system hasn't collapsed, and that's why we aren't in a depression. Two points. First, what makes a depression? Is a depression determined solely on whether or not the banking system collapses? Second, our banking system IS collapsing. Did you read today's stories on The Business Insider? How many banks have recently failed? How many are on the government's watch list? And the problems with the big banks weren't fixed. They were merely papered over with accounting tricks to prevent the citizens from panicking. Most people agree that those big banks are basically zombies. It would be nice if we were in fact in a recovery. But all of the major evidence says that the worst is yet to come. But thanks for the comment. Reply DOSOMEFUCKINGRESEARCH on Mar 16, 11:08 AM said: 2 9 Flag as Offensive Jimmy Carter told the truth and Americans lost their minds. "THINGS ARE FANFUCKINGTASTIC" is what Americans want to hear. Face it, we're soft and gooey on the inside. When will the WAR TAX ratio be too much? Reply theworldisnotenough (URL) on Mar 16, 1:12 PM said: 0 2 Flag as Offensive @DOSOMEFUCKINGRESEARCH: Jimmy Carter scapegoated the nation at large, but especially his cabinet. The truth was not his cup of tea. Reply Ilan Ben Menachem on Mar 16, 11:16 AM said: 1 2 Flag as Offensive Who will say truth???? If anyone say truth then .They can do the try to solve this problem. The it will happen nice. Reply Charles on Mar 16, 11:46 AM said: 2 1 Flag as Offensive Bet you did not know that this site practices censorship. Post something inconvenient, you will be prevented from any further posting. (via the IP address I guess) The way to know is when you try to post it will kick you to top of page. How do I know, well, I suspected this and am writing this from my laptop, and voila, no problems posting. Wonder how quickly this post will be taken down. Reply theworldisnotenough (URL) on Mar 16, 1:21 PM said: 0 0 Flag as Offensive @Charles: I have been "banned" several times. Send an email. Also the formatting on the webpage is atrocious. Live with it. Reply theworldisnotenough (URL) on Mar 16, 1:18 PM said: 0 0 Flag as Offensive The deflation then inflation scenario: http://www.zerohedge.com/article/albert-edwards-predicts-deflation-followed-double-digit-inflation-governments-opt-default-an Reply Join the discussion Name (Required) Email Address (Required but never displayed) URL Comments (You may use HTML tags for style) FB.init("4c2beef9095adba24ec14d3cacd2dd8e", "/xd_receiver.htm"); Sign up today to getThe Money Game delivered to your inbox Email Zip The Money Game Select see sample More: Silicon Alley Insider Select see sample Silicon Alley Insider Chart Of The Day see sample The Wire Select see sample Clusterstock Select see sample Clusterstock Chart Of The Day see sample Green Sheet Select see sample War Room Select see sample Law Review Select see sample Apple Investor see sample Insider 411 see sample $(function() { $('#newsletter-expand a').lightBox(); // Select all links in object with gallery ID }); Subscribe Got a tip? 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