Update on America's Second Great Depression

Update on America's Second Great Depression (Part 1)
Mike Stathis
April 25, 2010

http://www.avaresearch.com/article_details-519.html

Washington, Wall Street and their partners in crime, the media, have continued to spread the myths of an economic recovery since late summer 2009.

In response to the propaganda, the stock market has continued to rally. But most individual investors have been left out of this tremendous rally.

Yet, the economic data paints a different picture than the media presents. Make no mistake, we are seeing the early stages of what will written in history books as America’s Second Great Depression, just as I predicted in America’s Financial Apocalypse (2006).

Who are you going to trust? The media and their government hacks who have been wrong over and over, or someone who has been right about virtually everything over the past five years?

Who are you going to trust, people with clear political and financial agendas, or someone with neither?

At best, the U.S. will continue to experience economic malaise for well over a decade. As the nation progresses through this treacherous period, any of the small improvements will be offset by longer-term issues that are virtually impossible to overcome.


(1) Most of the 80 million baby boomers will never be able to fully retire. They did not have adequate retirement savings even before the economic collapse. Now they are in much worse shape. As a result, they will not only pull out of the stock market much faster as a means to survive, but they will be dead consumers.

(2) Most states will continue to struggle with budget gaps for many years. This will lead to even more cuts to vital programs.

(3) The entitlement tsunami will engulf Washington’s budget, causing a sustained period of massive deficits. This will be addressed by further cuts to benefits and premium hikes to Medicare and Medicaid.

(4) The massive national debt will continue to threat the solvency of the U.S. This will lead to a long period of high interest rates even after the approaching interest rate surge, expected to mount within a couple of years.

For a variety of reasons, the climb back up to the previous highs reached in 2006 will take at least another ten years, as stated previously. Furthermore, as more foreclosures hit the market, prices will plunge, erasing any gains made.

Accordingly to government data, the number of unemployed Americans stands at around 16 million, with the U-6 population of unemployed and underemployed at nearly 26 million. My own estimates for U-3 and U-6 are 18 million and 32 million respectively.

The problem with being out of work for an extended period (besides the immediate financial problems it creates), is that the longer one remains out of work, the higher chance that they will have to change careers.

And it’s not likely that a career-change will lead to the same wages as the person earned in their previous career since they are starting fresh. That’s the big problem with the unemployment picture that no one seems to get. What does this mean? It simply adds more fuel to America’s long period of declining living standards.

Even assuming the more optimistic GDP estimate for a 5-year period, the U.S. economy would need to grow by about 5% annually for the remaining 5 years in order to bring unemployment down to around the “fully employed” level of around 5.0%.

GDP growth really doesn’t matter unless you adjust for debt-spending. The U.S. could grow by 5% for five years if Washington borrowed tens of trillions of dollars to pump into the economy. What is needed is real growth, not debt-fueled growth. Without real growth, you have an illusion, just like the growth after the dotcom bubble burst.

Previously, I discussed the fact that there would be no real recovery for most Americans.

The fact is, the results will be the same regardless who is in office because America no longer has a real democratic process. The key decisions are made by a group of individuals you rarely hear about. The president merely serves as the puppet. This has been going on for many years.

This dynamic isn’t going to change without a drastic movement from the masses. But this is unlikely to occur since most Americans have been brainwashed by a media industry controlled by corporations and political interests.

As you can imagine, the decline in sales, income, property and other tax revenues has also hit cities and states very hard. This has resulted in budget deficits for most cities and all but two states.

Has running the currency printing presses in overdrive and accumulating record levels of federal debt been worth the results?

Absolutely not.

Over 40 million Americans are on food stamps, or more than 13% of Americans. This is the highest rate on record, going back 50 years.

Why don't you start with the guys in the media club who have positioned as experts, like Faber, Schiff, Shiller, Prechter and so on. They don't come close.

Once you have convinced yourself of my track record, you need to ask why the media continues to ban me.

Allow me to cut to the chase. The financial media works for Wall Street. Wall Street buys the ads and commercial, so the last thing the media wants is to provide you with credible experts with good track records. Instead, they interview extremists with terrible track record, offering no specific guidance. This is the way it works. If you don't see this by now, you are forever doomed.