Now at 21.5% (including those who have fallen off UE compensation), unemployment continues to ravage the US and world economy, and seal our collective fate in relentless deflationary depression. Approximately by year end, we will officially pass the peak unemployment rate of the Great Depression (24%), when measured using the same assumptions. The difference, unfortunately, is that our UE rate is only beginning to fall.
Experts I trust predict 33% peak UE, but I think there is a distinct possiblility of a spike that is dramatically higher if our economic foundation crumbles, perhaps as high as 75%. Back in mid-2007, I stated my belief that there was about a 50/50 chance of U.S. economic failure in the coming years, depending on how our government reacts to the crises. Now in only 2009, we have $2-3T annual deficits piling on top of $12T in standing debt, so I am going to up my odds of the USA failing as an economically viable nation to 70% before 2020.
As I said and will continue to reiterate, there is no guaranty we walk out of this alive.
Friday, September 4, 2009
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I know you're bearish on gold long term but what is your intermediate term forecast? How high do you see gold going?
ReplyDeleteGreat to see you back.
if there is a 70% chance of the USA no longer existing as a functional nation, then it seems odd to be in favor of locking in a large portion of one's cash into C of I bonds. i understand the idea that one is betting on there continuing to be a world in which to do anything, but, still, is 30% all we have at this point? our best option is a 30% chance of living?
ReplyDeleteDoes that mean we are setup for the biggest fall of the millenium anytime now? What would Dows next stop be?
ReplyDeleteWhat does this all mean, FDR? Do you still hold to your thesis of deflation, or the misery of inflation?
ReplyDeleteFDR a lot has been speculated and said about the dollar.Do you see the dollar index falling further?
ReplyDeleteisn't this in contradiction with the deflation prediction -- when the USG goes bust, what happens to the (external) value of the dollar? it's got to drop through the floor, doesn't it? or is that later down the line, and at first the dollar will hold up, and then at some point when USG default is imminent you have to get out? thanks for a great blog!
ReplyDeleteThis posting is about as disturbing as the one you wrote (quite a while back) about changing the health care system to facilitate the demise of the old because they are not easily suckered into going deeply into debt, or buying the latest widgets. The latest news makes me think you are spot on.
ReplyDeleteFDR, I think we have all been trained to search out the next bubble as a way to get rich. I watch the early baby boomers trying to claw back some of their market losses. They hope they can jump off the bubble before it pops, but, in the meantime, their they go.
For a jump of 300 basis points in unemployment rate by year end, wouldn't that mean something like 600,000 job losses per month?
"isn't this in contradiction with the deflation prediction -- when the USG goes bust, what happens to the (external) value of the dollar? it's got to drop through the floor, doesn't it?"
ReplyDeleteIt depends if the government fails, or if only the economy fails (1930s style). If the government fails and chaos rules the day, then it is possible that US debt owed the Federal Reserve will become worthless, and thus FRNs will become worthless.
But...
A debt-based monetary system has never hyperinflated. The reason is simple, the only failure mode is the evaporation of debt issue, which means surviving currency becomes more valuable, not less.
If the debt-based US/world economy fails, then tradable paper will become exceptionally rare, since the commercial banks that issue/print currency on top of (leveraged upon) Federal Reserve paper will plunge in quantity due to a lack of profitable borrowers.
Most people get this wrong, they think economic prosperity = a strong dollar, but nothing could be farther from the truth. As we've seen over the past 80 years, prices have continuously risen (rising prices = weaker dollars), because increasing creditworthiness in a debt-based monetary system means more and more and more dollars are issued as debt (=inflation).
In a bad economy (= rising unemployment and falling credit) fewer and fewer dollars can be printed by commercial banks, meaning the relatively few dollars that remain in existence soar in buying power.
FDR, what is your take on PM?
ReplyDeleteU6 stats show 16%+ unemployment rate, plus significant wage erosion.
ReplyDeleteThe realization is finally sinking in with the MSM what FDR has been talking about for 2+ years.
ReplyDeletehttp://www.telegraph.co.uk/finance/economics/6147211/Barack-Obama-accused-of-making-Depression-mistakes.html
FDR your take on the Dollar and Euro,GBP and yen,yuan now? Do you expect any currency to fail in the near or short term? If yes which one is that likely to be and what would the repercussions be?
ReplyDelete"FDR your take on the Dollar and Euro,GBP and yen,yuan now? Do you expect any currency to fail in the near or short term? If yes which one is that likely to be and what would the repercussions be?"
ReplyDeleteI expect all major paper to continue their massive strengthening trends. The dollar should continue to buy more and more every day, as mega retail sales simply become the new pricetag for everything from real estate, to business suits, to cars, to HDTVs.
FDR could you elaborate this one with an example? Lets take the USD and the chinese Yuan for instance.If the dollar is gonna strengthen massively then what happens to the yuan? Does that mean that the yuan would get weaker and one needs to shell out more yuan to purchase the dollar? What happens to the exchange rate - it increases/decreases? or its value remain the same?
ReplyDelete"FDR could you elaborate this one with an example? Lets take the USD and the chinese Yuan for instance.If the dollar is gonna strengthen massively then what happens to the yuan? Does that mean that the yuan would get weaker and one needs to shell out more yuan to purchase the dollar? What happens to the exchange rate - it increases/decreases? or its value remain the same?"
ReplyDeleteThat's a great question, and one that a lot of people misunderstand my stance. My stance is that all paper currencies are strengthening together.
Hoarding any major paper currency will massively increase your buying power in the deepening depression.
This is because of the obscene amount of inflated cash, already sold into, and thus sloshing around in the economy, dwindles to nothingness as bank leverage goes bad. This happens in all major economies at once, meaning that all currencies can and will strengthen in unison. "Exchange rates" do not matter, as they are irrelevant to the increasing buying power of all types of paper. Please see:
http://fdralloveragain.blogspot.com/2009/02/usd-behavior-during-deflation.html
Glad to see you back. I was worried you'd met your demise. Please let us know next time you decide to disappear.
ReplyDeleteFor my part I am wondering if this gold thing has legs. It's all talk about getting into gold and how the chinese are buying and it's up and up. My losses mount and I lose resolve. fwiw Start to question if they could be right about $15-2000 gold. grrrrr.