Just a few weeks ago, markets around the world were crashing, and a disaster seemed all but certain. The federal reserve responded by slashing the Fed Rate three-quarters of a point, and the Stock Market avoided a wholesale disaster. The underlying problems of a sub-prime mortgage disaster, millions of good-paying jobs being outsourced and a huge illegal alien population draining our government services are still there, and predictions of a coming recession or crash are rampant.
The Financial Times of London reports “So how bad might this downturn get? To answer this question we should ask a true bear. My favorite one is Nouriel Roubini of New York University’s Stern School of Business, founder of RGE monitor.Recently, Professor Roubini’s scenarios have been dire enough to make the flesh creep. But his thinking deserves to be taken seriously. He first predicted a US recession in July 2006. At that time, his view was extremely controversial. It is so no longer. Now he states that there is ‘a rising probability of a catastrophic financial and economic outcome.’ The characteristics of this scenario are, he argues: ‘A vicious circle where a deep recession makes the financial losses more severe and where, in turn, large and growing financial losses and a financial meltdown make the recession even more severe.’ ”
The Financial Times then goes on to list a very interesting twelve-step progression to a complete collapse of the U.S. economy, which is too long to reproduce here, but which takes into account a number of factors which have already occurred, such as the collapse of the American mortgage industry. Roubini predicts at least ten million American households with negative equity; there are probably that many already, if not more.
The housing market crash is probably the tipping point, because it will in turn lead to the crash and bankruptcy of home builders, construction companies, and construction supplies. Chain stores like Home Depot and Lowe’s will be badly hit as new home construction hits an all-time low.
When the United States began shipping its high-paying manufacturing jobs out of the country (never to return), the slack was taken up by the construction industry, years of building, building, building all the sprawling suburbs and subdivisions where white people escaped the blacks, crime and squalor of the cities. Construction was the last high-paying blue collar job in America where a white man could earn a living and raise a family with the labor of his own hands.
But now no one is buying all those particle-board tract homes, because no one can get a mortgage any more unless they’re rich enough not to need one. So the construction lay-offs have already started, although they’re not so noticeable now because construction is seasonal and we’re in the middle of winter. But when spring comes, we’re not going to hear all that hammering and sawing across the land as new subdivisions arise out of the waste ground miles from the city centers.
As unemployment spreads, people will begin defaulting on credit cards, auto payments and student loans, which will begin the domino effect of cutting off all credit and demanding cash on the barrel head for everything. That’s cash –people no longer have because they’ve lost their jobs or else because their $75,000 per year yuppie job was sent overseas to India and they’re trying to make it on 32 hours a week flipping meat patties at Burger King.
To make a long story short, the American economy is like a thousand dominoes all neatly lined up in a row. A few Americans have paid off their houses and gotten themselves out of the domino line, but a huge percentage of Americans have not. Add to the many economic problems, the fact that a crazy socialist in the form of McCain, Hillary or Obama is the likely next president.
Will the crash, long overdue for many years, finally come in 2008? Let’s re-phrase the question: what, exactly, will stop it from happening?
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