notseinfeld wrote on Mar 20th, 2009 at 1:59am:Our country is circling the drain and everyone knows it.
The whole world stepped in deep stuff.
notseinfeld wrote on Mar 20th, 2009 at 1:59am:Next up: Depression. I think this one will be the Great Depression and the one in the 30's is going to be given a new name.
Maybe, but I routinely have optimistic days where I can see a different scenario. Depending on which economists and fortune tellers we consult, one cause of the great depression was inaction - Hoover did not want to reward deadbeats, and allowed economic failures to happen that started a chain reaction that got completely out of control.
notseinfeld wrote on Mar 20th, 2009 at 1:59am: Soon we'll be printing 1T dollars, an inconceivable amount, out of thin air while tax revenue for '08 is going to shock the politicians and have them scrambling for new ways to 'supplement' it. Any way one slices it, paper wealth has all but been destroyed and proposals being snuck in during our time of crisis are severe, unconstitutional, and many.
The many differences between wealth and money are worth considering.
The ability of paper money to represent wealth has not been destroyed, but it has been shocked. According to some estimates, one half of the paper wealth in the world disappeared last year. Inflated asset prices (homes) are part of this. So are derivatives - at one point, there was an estimated 1.14 Quadrillion dollars of derivatives circulating - banks, insurance companies, hedge funds were highly leveraged and making bets and profits with money they didn't have. These collapses will affect pretty much everyone, although a hermit living in a shack might not feel it as much as you and I.
So what then must we do? We can vow to protect the value of paper money and let the other shit hit the fan. That could result in 25-35% unemployment, massive foreclosures, soup lines, etc. Protecting the purchasing power of my bank account is nice, but stocks in my retirement account would still be shot, and chances are good that I would lose my job and maybe my house - even though I am currently unaffected by the mess.
Another option: we can try to get credit/debt flowing again - reign in some types of wildly speculative activity, inject money into lending institutions, and then ride it out. It may be that most of the mortgage bundles that are currently unsellable will ultimately have a value which is close to break even, which would allow a recovery with 'moderate' losses. If the institutions stop creating derivatives that no one understands, stability may return with time. Of course, the second option has real risks of further eroding the value of paper if the money supply is increased and it isn't done right. But there is no risk-free, guaranteed solution to our problems.
notseinfeld wrote on Mar 20th, 2009 at 1:59am:Formulate a plan for yourself/family.
Never a bad idea. The garden will be bigger this year.