At the Market Ticker, Karl Denninger recommends extreme stinginess and prudence for all Americans, and if it can be managed a peaceful revolution against the debt-financed fiscal idiocy that we have been practicing since the onset of the 1929 Depression. Otherwise, violent revolution is always an option for the dark days Denninger sees for 2010.
Have a taste of his analysis of the economy as it is.
Debt has risen at a faster rate than GDP for the last seven years. This has led to a falsely-stated increase in GDP, in that when debt rises faster than GDP (on a percentage of GDP basis) what you’re doing is financing expansion through debt that is not being paid down through production. Due to the nature of interest, that being the compound nature of it, this constitutes a pseudo-Ponzi Scheme that must fail. It now is failing, yet The Media continues to report falsehoods on exactly what is going on with households (and for that matter, businesses as well.)
Now try his analysis of what is to be.
- The economy will not recover in 2009. Job loss will continue through the year and unemployment will reach 8% in the “headline” statistic by the end of the year. U-6 (broad unemployment, or the closest to “real” unemployment without government “cooking”) will top 15%. All the “talking heads” are predicting a turnaround in the second half of 2009. They will be wrong. Look at their records for 2008 – all of them were predicting closes at or above 1500 for the S&P 500. Why does CNBC continue to put people on the air who, if you listened to them, cost you 40% or more of your money?
- Deflation, not inflation, will become evident well beyond housing. Other capital goods beyond housing will see real price declines for the first time since the 1930s. Debt is inherently deflationary; the “hyperinflationists” will once again be shown to be wrong (how many years running will it be now?)
- Housing prices will continue to decline. I believe we’re about halfway done with the price correction. Those who think we will turn this in 2009 are wrong – unless we get an all-on collapse in prices in early 2009, which I do not believe will occur. I’ve heard several claims we will have positive year-over-year home price changes in 2009. I’ll take the other side of that bet.
That’s just a small taster of the entire article. It’s not all doom and gloom. He has actual advice on what you and I and other ordinary people should do in this mess. In short, you should read it now!