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This is No Cyclical Recession… It is a Secular DE-pression
Few if any commentators understand what is happening in the US today. The reason for this is that the vast majority of investment professionals believe that what they’ve experienced in their lifetimes is the norm.
Put another way, an entire generation of investment professionals has:
1) Never witnessed a secular economic change
2) Never witnessed or invested during a bear market in bonds
3) Hasn’t studied enough history to know about either of these items
I firmly believe that what’s happening in the US today is not a cyclical recession, but a one in 100 year, secular economic shift.
See for yourself. Here’s duration of unemployment. Official recessions are marked with gray columns. While the chart only goes back to 1967 I want to note that we are in fact at an all-time high with your average unemployed person needing more than 20 weeks to find work (or simply falling off the statistics).
Here’s the labor participation rate with recessions again market by gray columns:
Another way to look at this chart is to say that since the Tech Crash, a smaller and smaller percentage of the US population has been working. Today, the same percentage of the US population is working as in 1980.
Here’s industrial production. I want to point out that during EVERY recovery since 1919 industrial production has quickly topped its former peak. Not this time. Despite spending TRILLIONS in stimulus industrial production is well below the pre-Crisis highs.
Again, what’s happening in the US is NOT a garden-variety cyclical recession. It is a STRUCTURAL SECULAR DEPRESSION. And the reason is that we are currently witnessing the collapse of the greatest debt bubble of all time.
Going into this recession, total US credit market debt was at its highest level of all time: over 350% of GDP. In comparison, during Roosevelt’s New Deal during the Great Depression we hit only of 300% total GDP.
Debt is absolutely endemic in our financial system. The average non-financial corporation in the US is sitting on a debt to equity ratio of 105%. Bank leverage, while relatively low compared to Europe (13 to 1 vs. 26 to 1), is still high enough that an 8% drop in asset prices wipes out ALL capital.
Debt is absolutely endemic in our financial system. The average non-financial corporation in the US is sitting on a debt to equity ratio of 105%. Bank leverage while relatively low compared to Europe (13 vs. 25) is still high enough that an 8% drop in asset prices wipes out ALL capital.
The situation is even worse for the US consumer. During the housing boom, consumer leverage rose at nearly twice the rate of corporate and banking leverage. Indeed, even after all the foreclosures and bankruptcies, US household debt is equal to nearly 100% of US total GDP.
To put US household debt levels into a historical perspective, in order for US households to return to their long-term average for leverage ratios and their historic relationship to GDP growth we’d need to write off between $4-4.5 TRILLION in household debt (an amount equal to about 30% of total household debt outstanding).
Again, this is not a garden-variety recession. This is a structural secular DEPRESSION. And we’re nowhere near the end of it. Indeed, if anything, we’re about to enter the second and worst round of the Great Crisis: the sovereign debt round.
Folks, we’re not out of the woods yet… not by a long shot. The same problems plaguing Europe today are coming to the US’s shores. And when they do, everyone will realize what I’ve been saying since 2009: that 2008 was the warm up… the REAL Crisis is when the US defaults and we face systemic collapse.
On that note, if you’re looking for specific ideas to profit from this mess, my Surviving a Crisis Four Times Worse Than 2008 report can show you how to turn the unfolding disaster into a time of gains and profits for any investor.
Within its nine pages I explain precisely how the Second Round of the Crisis will unfold, where it will hit hardest, and the best means of profiting from it (the very investments my clients used to make triple digit returns in 2008).
Best of all, this report is 100% FREE. To pick up your copy today simply go to: http://www.gainspainscapital.com and click on the OUR FREE REPORTS tab.
Good Investing!
Graham Summers
PS. We also feature four other reports ALL devoted to helping you protect yourself, your portfolio, and your loved ones from the Second Round of the Great Crisis. Whether it’s my proprietary Crash Indicator which has caught every crash in the last 25 years or the best most profitable strategy for individual investors looking to profit from the upcoming US Debt Default, my reports covers it.
And ALL of this is available for FREE under the OUR FREE REPORTS tab at: http://www.gainspainscapital.com
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Attempts to inflate a bubble that first burst in 2000 disrupted the natural cycle and made implosion inevitable.
-Based on Ponzi dynamics, credit expansions and speculative manias are naturally self-limiting. Credit expansions expand exponentially until the debt they generate can no longer be serviced and no one remains to push prices higher.
Central Banks, Bubbles And The Coming Unwind
Can you say; Counter Party Risk? See how money, created out of thin air has exploded the worlds financial sector and how it will disappear as if it never existed:
Evaporation of Wealth on a Vast Scale: How $Millions - Trillions Can Disappear
If we truly want to restore real Free Market Capitalism to the Republic, we must first eliminate the most pernicious corrupting force of all. END THE FED.
See:
Money Power And The Central Bank: Life Is But A MEME
END THE FED: THE FIRST STEP IN RESTORING OUR CONSTITUTIONAL REPUBLIC
- Inflection Point
What does "secular" mean in this context?
Remember, everyting is relative, but...
cyclical=short term
secular=long term
thank you
DOW chart reveals very overextended price action and another Wile E Coyote scenario...
http://stockmarket618.files.wordpress.com/2011/11/2011-11-09_dow_4_zb.png
What can poor people do survive? Besides buy a gun.
There's lots you can do to survive, you have to 'Go Galt'. Besides the usual advice to buy gold, which doesn't help Joe Blow, you have to become self sufficient. That means first getting rid of all credit card debt. If you have investments, diversify worldwide. Beyond that, start a garden, learn a trade on youtube, fix your own car, cut your expenses, stop eating out - a million ways to downsize. A lot of this is painful, but not nearly as painful as what is about to happen as your friends are forced into debt slavery. http://www.futurnamics.com/goinggalt.php
Learn to eat bugs and wild plants...
this whole argument that people are making mistakes because they didnt live thru a certain time period is bullsh%t. i didnt live thru the witch hunts in the old days...so today we dont have witch hunts, but that doesnt mean there arent witches out there.
i have a report coming out that will show official goverment numbers on known witch populations. it will be on sale on my website with a witch burning kit.....
i think this guy is spot on. so what if he wants to sell his newsletter.
he's prob right.
He's darned right. And I'm sick and tired of this mess being called The Great Recession. Our government should have the decency and enough respect for the American people to call this thing what it is: a Depression in our time. Just because we have some social safety nets now that didn't exist in the 30's doesn't make this travesty any less of a Depression. Allow those who have lost their jobs through no fault of their own to at least retain their dignity and self respect by knowing that their lot was caused by a Depression and not a mealy-mouthed Recession that our government and Congress can hide behind.
Crisis in Europe averted - ECB agressively buys Italien bonds. I thought they couldn't monetize debt according to treaty but there you go. QE is on in Europe from England, Greece, Italy, and soon to be Spain/Portugal. QE3 is coming here very soon so no need to fear anything.
The REAL problem here is how gov't has crowded out the private sector.
During boom times, gov't should be handing off to the private sector. It should be using its bullets to smooth out bust times and "fill the gap" that business can not during those times.
Unfortunately, county governments got SO RICH SO FAST with property values going up, they used that income to borrow and expand MORE! Ultimately, they got hooked on the opium of Federal money and now, as that well is running dry, there will be little or no water for a while.
The solution ... Brawndo ... It's got electrolytes!!
Please ... allow me: http://www.youtube.com/watch?v=e1fKzw05Q5A
Know what's cyclical? You pushing your bullshit little "report". Every 2 or 3 days, there you are. Like an un-flushable turd.
Can we put ZH on the "Do not Call List"? Its like when you are eating Dinner and you get that 500th call from Verizon pitching their bundled TV/phone/internet deal.
If we all pitch in $1 each and buy their stupid $500 Armageddon kit will they go away?
Turd Furgeson ... that's the new name.
http://www.youtube.com/watch?v=aN6rjLcpBnI