Exactly Like 7 Years Ago? 2014 Is Turning Out To Be Eerily Similar To 2007

Tyler Durden's picture

Submitted by Michael Snyder of The Economic Collapse blog,

The similarities between 2007 and 2014 continue to pile up.  As you are about to see, U.S. home sales fell dramatically throughout 2007 even as the mainstream media, our politicians and Federal Reserve Chairman Ben Bernanke promised us that everything was going to be just fine and that we definitely were not going to experience a recession.  Of course we remember precisely what followed.  It was the worst economic crisis since the days of the Great Depression.  And you know what they say - if we do not learn from history we are doomed to repeat it.  Just like seven years ago, the stock market has soared to all-time high after all-time high.  Just like seven years ago, the authorities are telling us that there is nothing to worry about.  Unfortunately, just like seven years ago, a housing bubble is imploding and another great economic crisis is rapidly approaching.

Posted below is a chart of existing home sales in the United States during 2007.  As you can see, existing home sales declined precipitously throughout the year...

Existing Home Sales 2007

Now look at this chart which shows what has happened to existing home sales in the United States in recent months.  If you compare the two charts, you will see that the numbers are eerily similar...

Existing Home Sales Today

New home sales are also following a similar pattern.  In fact, we just learned that new home sales have collapsed to an 8 month low...

Sales of new single-family homes dropped sharply last month as severe winter weather and higher mortgage rates continued to slow the housing recovery.

New home sales fell 14.5% to a seasonally adjusted annual rate of 385,000, down from February's revised pace of 449,000, the Census Bureau said.

Once again, this is so similar to what we witnessed back in 2007.  The following is a chart that shows how new home sales declined dramatically throughout that year...

New Home Sales 2007

And this chart shows what has happened to new homes sales during the past several months.  Sadly, we have never even gotten close to returning to the level that we were at back in 2007.  But even the modest "recovery" that we have experienced is now quickly unraveling...

New Home Sales Today

If history does repeat, then what we are witnessing right now is a very troubling sign for the months to come.  As you can see from this chart, new home sales usually start going down before a recession begins.

And don't expect these housing numbers to rebound any time soon.  The demand for mortgages has dropped through the floor.  Just check out the following excerpt from a recent article by Michael Lombardi...

One of the key indicators I follow in respect to the state of the housing market is mortgage originations. This data gives me an idea about demand for homes, as rising demand for mortgages means more people are buying homes. And as demand increases, prices should be increasing.

 

But the opposite is happening…

 

In the first quarter of 2014, mortgage originations at Citigroup Inc. (NYSE/C) declined 71% from the same period a year ago. The bank issued $5.2 billion in mortgages in the first quarter of 2014, compared to $8.3 billion in the previous quarter and $18.0 billion in the first quarter of 2013. (Source: Citigroup Inc. web site, last accessed April 14, 2014.)

 

Total mortgage origination volume at JPMorgan Chase & Co. (NYSE/JPM) declined by 68% in the first quarter of 2014 from the same period a year ago. At JPMorgan, in the first quarter of 2014, $17.0 billion worth of mortgages were issued, compared to $52.7 billion in the same period a year ago. (Source: JPMorgan Chase & Co. web site, last accessed April 14, 2014.)

It is almost as if we are watching a replay of 2007 all over again, and yet nobody is talking about this.

Everyone wants to believe that this time will be different.

The human capacity for self-delusion is absolutely amazing.

There are a lot of other similarities between 2007 and today as well.

Just the other day, I noted that retail stores are closing in the United States at the fastest pace that we have seen since the collapse of Lehman Brothers.

Back in 2007, we saw margin debt on Wall Street spike dramatically and help fuel a remarkable run in the stock market.  Just check out the chart in this article.  But that spike in margin debt also made the eventual stock market collapse much worse than it had to be.

And just like 2007, consumer credit is totally out of control.  As I noted in one recent article, during the fourth quarter of 2013 we witnessed the biggest increase in consumer debt in the U.S. that we have seen since 2007.  Total consumer credit in the U.S. has risen by 22 percent over the past three years, and 56 percent of all Americans have "subprime credit" at this point.

Are you starting to get the picture?  It is only 7 years later, and the same things that happened just prior to the last great financial crisis are happening again.  Only this time we are in much worse shape to handle an economic meltdown.  The following is a brief excerpt from my recent article entitled "We Are In FAR Worse Shape Than We Were Just Prior To The Last Great Financial Crisis"...

None of the problems that caused the last financial crisis have been fixed.  In fact, they have all gotten worse.  The total amount of debt in the world has grown by more than 40 percent since 2007, the too big to fail banks have gotten 37 percent larger, and the colossal derivatives bubble has spiraled so far out of control that the only thing left to do is to watch the spectacular crash landing that is inevitably coming.

You can read the rest of that article right here.

For a long time, I have been convinced that this two year time period is going to represent a major "turning point" for America.

Right now, 2014 is turning out to be eerily similar to 2007.

Will 2015 turn out to be a repeat of 2008?

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slaughterer's picture

Think 1999-2000 rather than the glory years 2007-2009

TruthInSunshine's picture

Think more along the lines that 2008 was 1929, and we're rapidly approaching 1933.

nshine

Printing with reckless abandon always and will forever lead down the same road. It's not about bitching, but making sure people notice the pattern and inevitable outcomes:

The Harvest excerpted from the book The Creature from Jekyll Island

When men are entrusted with the power to control the money supply, they will eventually use that power to confiscate the wealth of their neighbors.

There is no better illustration of that law than the Crash of 1929 and the lingering depression that followed.
...
During the nine years before the crash of 1929, the Federal Reserve was responsible for a massive expansion of the money supply. A primary motive for that policy was to assist the government of Great Britain to pay for its socialist programs which, by then, had drained its treasury. By devaluing the dollar and depressing interest rates in America, investors would move their money to England where rates and values were higher. That strategy succeeded in helping Great Britain for a while, but it set in motion the forces that made the stock-market crash inevitable."

RafterManFMJ's picture

Oh, but this time WILL be different. This time there's no pulling out of the dive and the plane will crash into the G-DAMN MOUNTAIN!

TruthInSunshine's picture

Full quote, for those who REALLY want to see some Fed Reserve monetary policy consequences & historical similarities:

"There is no better illustration of that law than the Crash of 1929 and the lingering depression that followed.

p501
The lingering [1929] depression is an important part of the story. The speculators had been ruined, but what they lost was money acquired without effort. There were some unfortunate souls who also lost their life savings, but only because they gambled those savings on call loans. Those who bought stock with money they actually possessed did not have to sell, and they did quite well in the long run. For the most part, something-for-nothing had merely been converted back into nothing. The price of stocks had plummeted, but the companies behind them were still producing products, still employing people, and still paying dividends. No one lost his job just because the market fell. The tulips were gone, but the wheat crop remained.

So, where was the problem? In truth, there was none-at least not yet. The crash, as devastating as it was to the speculators, had little effect on the average American. Unemployment didn't become rampant until the depression years which came later and were caused by continued government restraint of the free market. The drop of prices in the stock market was really a long-overdue and healthy adjustment to the economy. The stage was now set for recovery and sound economic growth, as always had happened in the past.

It did not happen this time. The monetary and political scientists who had created the problem now were in full charge of the rescue. They saw the crash as a golden opportunity to justify even more controls than before. Herbert Hoover launched a multitude of government programs to bolster wage rates, prevent prices from dropping, prop up failing firms, stimulate construction, guarantee home loans, protect the depositors, rescue the banks, subsidize the farmers, and provide public works. FDR was swept into office by promising even more of the same under the slogan of a New Deal. And the Federal Reserve launched a series of "banking reforms," all of which were measures to further extend its power over the money supply.

In 1931, fresh money was pumped into the economy to restart the cycle, but this time the rocket would not lift off. The dead weight of new bureaucracies and government regulations and subsidies and taxes and welfare benefits and deficit spending and tinkering with prices had kept it on the launching pad.

Eventually, the productive foundation of the country also began to crumble under the weight. Taxes and regulatory agencies forced companies out of business. Those that remained had to curtail production. Unemployment began to spread. By every economic measure, the economy was no better or worse in 1939 than it was in 1930 when the rescue began. It wasn't until the outbreak of World War II, and the tooling up for war production that followed, that the depression was finally brought to an end.

It was a dubious save. In almost every way, it was a repeat of the drama played out with World War I, even to the names of two of its most important players. FDR and Churchill worked together behind the scenes to bring America into the conflict-Churchill wanting American assistance in a war England was losing and could not afford, FDR wanting a jolt to the economy for political reasons, and the financiers, gathered behind J.P. Morgan, wanting profits of war.

p502
During the nine years before the crash of 1929, the Federal Reserve was responsible for a massive expansion of the money supply. A primary motive for that policy was to assist the government of Great Britain to pay for its socialist programs which, by then, had drained its treasury. By devaluing the dollar and depressing interest rates in America, investors would move their money to England where rates and values were higher. That strategy succeeded in helping Great Britain for a while, but it set in motion the forces that made the stock-market crash inevitable.

The money supply expanded throughout this period, but the trend was interspersed with short spasms of contraction which were the result of attempts to halt the expansions. Each resolve to use restraint was broken by the higher political agenda of helping the governments of Europe. In the long view, the result of plentiful money and easy credit was a wave of speculation in the stock market and urban real estate that intensified with each passing month.

There is circumstantial evidence that the Bank of England and the Federal Reserve had concluded, at a secret meeting in February of 1929, that a collapse in the market was inevitable and that the best action was to let nature take its course. Immediately after that meeting, the financiers sent advisory warnings to lists of preferred customers-wealthy industrialists, prominent politicians, and high officials in foreign governments-to get out of the stock market. Meanwhile, the American people were being assured that the economy was in sound condition.

On August 9, the Federal Reserve applied the pin to the bubble. It increased the bank-loan rate and began to sell securities in the open market. Both actions have the effect of reducing the money supply. Rates on brokers' loans jumped to 20%. On October 29, the stock market collapsed. Thousands of investors were wiped out in a single day. The insiders who were forewarned had converted their stocks into cash while prices were still high. They now became the buyers. Some of the greatest fortunes in America were made in that fashion."

http://www.thirdworldtraveler.com/Banks/Harvest_TCFJI.html

max2205's picture

Blame helping the UK....like EU today

 

We're fucked....good luck all

N2OJoe's picture

They sure don't teach THAT in school...

kchrisc's picture

Good stuff and great book.

One of the lies taught in the indoctrination schools is that the crash brought on the Depression.

No, it was the pols, crats and banksters, as usual, "not wasting a crisis" to seize more wealth and power.

 

"Guillotines cut the banksters down to size."

IronForge's picture

Ironically enough, some say it took a Major War for the USA to "Deficit Spend via War Bonds" and "Manufacture" their way out of th Depression.

Since Major Creditors to the USA are starting to have their own problems, running into non-USD Trade Deals, and/or are considering to discontinue their use of the USD and US Soverign Debt, what's left on the Table for the Hoarders are to plunder other Countries' Assets and do so with WWII-style "War Bonds".

We're almost there!  ^_^

corporatewhore's picture

try telling that to the wife and being told you're full of shit

Muddy1's picture

This article is more BS.  Why just a couple of months ago we were being shown a graph of the stock market's rise and how it "eerily" followed the same progression as the market did back in '29.  Some went so far as to tell us that on or around January 14 was when the crash would occur.  WRONG, just like Celente, WRONG.

EggSlayer's picture

Lol, so funny how people react on this website when someone argues against the grain. I agree with you, sure these graphs are showing similar patterns, and the pimple on my ass is growing in the same spot as 2007 too. The problems that caused the '08 crisis will probably NEVER be replicated in this country again. Not to say that there will never be another crash, and that there won't be one soon, but it won't happen due to the same reasons. Therefore I think these graphs are a bunch of bull shit.

midtowng's picture

The 2007 drop in sales was twice as big.

Plus we are coming from a much smaller and shorter bubble.

So this isn't 2007 over again.

However, that still doesn't mean things will end well.

douglas's picture

¨The 2007 drop in sales was twice as big.¨ - Give it time, we´re less than a third of the way into the year...

¨Not end well¨ is an understatement - Not sure WHEN it will end, but when it does it will be GLOBAL and much worse than the Great Depression!

Aknownymouse's picture

OT. Any ETF for 5/30 steepners? Thanks

The Axe's picture

A scary amount of   NO bids....that was a flash crash in MOMO names this morning.......Danger Will Robinson Danger

mtndds's picture

Let the "Great Reset"  begin!!  Please dont kick that damn can down the road again, congress.

furgheddubouddit's picture

Can't Belgium simply buy an extra 400,000 new houses a year and prevent the oncoming meltdown?

There - problem solved.

Dr. Richard Head's picture

Hell, they can purchase US treasury bonds in multiples of the entire country's GDP in a matter opf days, so wtf not?

Schmuck Raker's picture

This time is different. Seven years ago K-Hen was too busy stealing money from his momma's purse to save the world.

maskone909's picture

the variables for collapse are like a coin oscillating on a coffee table, rapidly accelerating moments before it falls to the surface.  becomming more and more apparent and difficult to manage.

 

edit

the difference between previous economic/monetary disasters are the insane abount of monetary base, record number of unemployment, student debt, gov aid, and brewing geopolitical conflicts.  it will be EPIC

Seer's picture

Good analogy!

I'd stated it as a system going highly unstable and wobbling like mad.  It'll be like a stealth fighter with its computers knocked out...

http://www.youtube.com/watch?v=X2wYvr20nAg

"This is OK, folks, stay where you are."

"It ain't supposed to to that, man."

sunny's picture

Does this mean we have to wait until 2016 to mirror the '09 lows?  That just sucks.

saveUSsavers's picture

From Lee Adler- The CLO Tomebomb until we eradicate these parasitic bankers !

credit to the author Gilani

http://wallstreetexaminer.com/author/shah-gilani/

Seer's picture

Still does nothing to resolve the fact that we're broke and are running out of resources.  Hang all the bankers in Ukraine and they're still fucked up: or, plug "Japan" into the equation, same thing.

Stoploss's picture

So, do we JSTFUABTATFHWWIIID??

_ConanTheLibertarian_'s picture

This time: petrodollar collapse and WWIII. Bring out the popcorn.

813kml's picture

The popcorn will even get microwaved for your convenience.

ebworthen's picture

"All according to plan" IMHO.

papa_lazarou's picture

I hope 2014 is like 2007, I got laid a lot more back then...

ptoemmes's picture

And why wouldn't it be similar...the criminal fleecers fleeced then with no consequcnes as they do today. OK on a MUCH grander scale this time.  And with no consequences this time - maybe.  That's the difference between history and the future - the future ain't done yet.  Cause one of these days....

 

 

Dr. Engali's picture

Next year the title will be: 

Exactly Like 8 Years Ago? 2015 Is Turning Out To Be Eerily Similar To 2007
wmbz's picture

Time to roll out zero down adjustable rate 100 year mortages with a $1000.00 cash back at signing. The dumbmasses would flock in and sign up! The buy now or be priced out forever morons never, ever learn.

Element's picture

whocouldaknowed!?

Seer's picture

Another seven-year itch...

Can't wait to see how 2008 v.s 2015 maps out!

Hey, Snyder! GROWTH IS DEAD! (sorry, chap, traffic to your website WILL decrease)

I Write Code's picture

I didn't know that home sales had fallen off that sharply in 2007, and I'm not sure I understand why they did.  I do know that of the mortgages issues in 2007, barely half of them ever made even the first payment, which means that 98% of them were taken by speculators, - whether or not said speculator chose to live in the property, and I assume that relatively few did.

But the Big Malignancy in 2008 was not the level of any of these markets, it was the market failure that set in where for some days nothing moved except that equities tanked and then interest rates fell to nothing - where they have pretty much stayed since.  TARP and QE "fixed" the market liquidity problems.

Now that we have continued QE and the precedent for such violent market interventions, I assume the same liquidity crisis slash market failure cannot occur again.  OTOH the rainbow is God's promise never to flood the Earth again: next time the fire.

OTOH TruthInSunshine's posts about 1929 might be more relevant.  Hmm.

AuAgPt's picture

So where does one put their money if they cant leave it on "deposit" at the bank, put it in a "declining" RE market, a fake stock market etc. Holding some AU/AG/PT is a wise decision, but for anyone that wants to diversify....

Even tho RE is declining, wouldnt it be wise to take advantage of low rates and still somewhat depressed prices in certain markets (ie Las Vegas). I can see a strong rental market there with still prices hovering at 50% of what they were in 2006/7. 

 

Seer's picture

Vegas is a tourist-based economy.  Tourism is about disposible income.  Disposible income is in decline.

Where will the jobs to support renter payments come from?

headhunt's picture

Also tax on home ownership will go up in an effort to fill the income tax gap

Seer's picture

I'm not so worried about that, especially if more holding companies have RE (pressures on local municipalities).  Everything is temporary, so, yes, at some point that lever will be cranked, but it will also be uncranked (I've experienced it already).

aardvarkk's picture

Plus Lake Meade is doing a fine disappearing act.  Whither Vegas (and a lot of the rest of the area) when that finally goes away?  The American SW has a natural carrying capacity somewhere below what it's carrying now.  I wouldn't move there.

Seer's picture

I'm kind of execting that the population size in that area will drop before the water situation gets really bad.  It's the jobs thing...

"I wouldn't move there."

That wouldn't be my impulse either, but if the situation were just right (always wait for the full offer before deciding :-) )...  Consider that the population will be severely reduced, that could only make it a little better.

Eagle Keeper's picture

I see similarities too. Bit I think what was the trigger for the 2007 crash was oil going banannas. The financial markets might could have been quietly bailed out and covered up. But when gas prices spiked, consumers locked up tight and that started the snow ball rolling down the hill....

Ban KKiller's picture

I know banks are criminal from first hand experience since 2007. Now I am  much better prepped too.  Had two wins against banks yesterday....take that you fucking scumbags! Ha ha ha. Yeah, arrested development on my part.

Stack the lead, ducks to the FED.

Second Class Citizen5's picture

This time its different.

youngman's picture

Alibaba will be the last succesful IPO.....the new dot com buster....it will be sold though..and be worth billions....before the crash...