Recession was over more than a year ago? Ignorance really is strength.

The National Bureau of Economic Research says the worst recession since WW II ended June 2009.

If that's true, then the current recession started in July 2009.

Seriously, is anyone buying this?

Will The Economic Crisis Descend Into Violence?

It sure seems like it might. As the economy gets worse, politics it seems, is getting to be a rough business. American politicians have rarely had to deal with this sort of belligerent constituent rage, and it has appeared on the public stage suddenly and in a widespread fashion.

Nancy Pelosi and others blame these spectacles on conservative special interest groups. And to some extent, she's right. But it appears that all they are doing is tapping into a well of anger and distrust many Americans are obviously feeling.

I don't think the general public nor the politicians have caught onto how deep into an economic crisis we are. And in times of national struggle, such as we find ourselves, everyone must be on their best behavior to avoid widespread civil unrest. We can hardly afford that sort of thing now.

Eight States Hit Historic Highs For Unemployment In May

In May, (8) states set new records for their unemployment rate. In early August, we'll see if more states will be added to the list of new highs in 2009:

California 11.5
Florida 10.2
Georgia 9.7
Nevada 11.3
North Carolina 11.1
Oregon 12.4
Rhode Island 12.1
South Carolina 12.1

Realtors Crying Because The New Rules Are 'too tough'

Looks like the National Association of Realtors® (NAR) is really getting squeezed. Two stories out in the last week demonstrate that they pine for the old days where they could take their 5% of ridiculously inflated prices and live like kings. Take for example:

• Realtors are upset about new rules requiring that appraisals be done without any pressure from mortgage originators. They call them 'faulty' because the old way, letting appraisers value a house at whatever it was listed for, worked out so well (for them).
• They're also upset that those big old mean banks are refusing to eat millions of dollars in short sale losses. They think the banks are being too harsh on the poor home owner who wants to bail on their mortgage and leave the bank to absorb $10,000 - $100,000 + worth of bad debt. The NAR of course, is upset because they're not getting their 5% on the short sale. They say that only by reducing housing inventory will the market get healthy again. I note that they are not willing to split the loss with the bank to help 'reduce the inventory'.

I'm sure the NAR is probably getting lots of sad calls from their membership indicating the trouble they are having paying their Lexus/Mercedes lease payments with the market being what it is. But the idea that the NAR is even slightly concerned about the economy at large is laughable. Banks cannot afford to lose all this money any more than the NAR can and the faulty appraisals were a primary facilitator of what got us into this mess in the first place!

Chinese Company to Buy Hummer

Well, I hope they know that Hummers get like 8 MPG. But this is the clearest example that the Chinese are going to cash in their dissolving dollars for real assets.

Americans are going to have a hard time swallowing the idea that to get better, we must sell off the last manufacturing capability we have and become totally dependent on China.

UN Says 'Social Unrest' Is A Possibility; GM Asks For Another $2.6 billion in subsidies

UN chief Ban Ki-moon warned that the economic crisis could lead to widespread social unrest. Is that a threat or a prediction? Hard to tell.

GM asked for $2.6 billion in 'low interest loans" (i.e., subsidies) in order to build Hybrids. Oh, so now you need money to build Hybrids?? This from the company that was going to bring us the all electric Chevy Volt (and the EV-1, which they quietly killed back in the 90's.....smart move!).

How much longer can the US subsidize domestic auto manufactures before someone complains to the WTO? Isn't this what free trade isn't all about? I'm sure the automakers are just the tip of the iceberg...

Obama Gets Tough With American Automakers

By giving them more money. What, is this a joke? He's going to cover their warranty costs for them by making sure everyone knows Uncle Sam has the warranty covered.

If the news wasn't so adamant about telling me that this was "tough love" and that "frustrated Americans" (and just how many Americans were surveyed for that article??) were happy he was getting tough, I might just think Obama just caved in.

And this startled me: "Fiat is prepared to transfer its cutting-edge technology to Chrysler," he said. Fiat? Maybe things have changed since my mom's Fiat X1/9 was built....one would hope.

Depression, Here We Come.....

There's only denial left now, at least, that's how I see it. In the last year, the DJIA has lost 46% of it's value (!) . Citibank has lost 95% of it's value. Bank of America has lost 90%. GE has lost 80%. Ford has lost 70%.

Here are my predictions for the year ahead:

Inflation (thanks to the nearly $3 trillion spending spree) is not far away and will be rampant. The low prices and great 'deals' that are to be had right now are going to end fast as competition diminishes due to manufactures leaving the market (bankruptcy, mainly), and production cutbacks by the ones who survive.

When inflation comes (likely within the next year), the housing market will lock up due to high mortgage rates (remember the 16% rates of the early 1980's? I think we'll be at least that high). The 1% of buyers who can make it through the lending requirements maze with their 20% cash down-payment will find that at a 15+% interest rate, even the 'cheapest' of homes is unaffordable. Many lenders will leave the market all together, as the uncertainty of inflation and judicial modifications of mortgage contracts makes the business just too risky. Homeowners are going to have to get used to staying in their homes for the next 25-30 years. They won't be happy.

Production cutbacks will lead to high unemployment rates. Foreclosures will dominate the real estate market (much more so than today). Pension funds and 401(k)s will be virtually zeroed out. States and local governments will struggle to make ends meet as property values nosedive.

A rise in crime and economic frustration will lead to civil strife. There will likely be riots worldwide as citizens vent their frustrations against the perceived 'elite' who got everyone into this mess (and who's tab we'll all be picking up).

In short, I predict a real depression is in our future. Right now, the economic pundits on CNBC and elsewhere are looking for a bottom to the market. 6 months ago they chortled at the thought of a severe recession. In the next 6 months, they will be using the 'd' word with regularity.

The Chinese Want To Cash In Their Chips

And buy up some distressed real estate. Who can blame them? Their dollars will be massively devalued shortly. Maybe they'll buy up some of our failing banks too (Bank of China anyone?)

Why The Stimulus Bill Won't Work

If the $800 billion stimulus bill passes, which is still debatable, it will have minimum impact at best. Why? Because unlike the 1930's when government spending would go into the pockets of American workers and American companies to build American infrastructure, any stimulus that is initiated by the US government today will almost immediately exit the country and end up in the hands of a foreign country.

For example, think about the Blue Ridge Parkway which was built during the Great Depression as a way of stimulating the economy. American companies were paid to build it, and Americans were paid to do the labor. The money that went to companies was used to purchase equipment and materials. These items were almost certainly manufactured by other American companies. Thus the stimulus money created jobs on the Parkway, and in the equipment manufacturing plant in Detroit, the shovel factory in Atlanta, etc. Those business hired people who got paid and thus kept the stimulus going. Workers purchased goods with their earned money that was almost certainly American made. Thus the stimulus flowed throughout the entire economy.

Now consider what will happen today. A stimulus package to build a bridge. It will be awarded to a foreign national company who will use it to create a few jobs in the US to build the bridge but the bulk of the money will exit the American economy and go back to the home country. The materials will be purchased from the Japanese and the Chinese and maybe the Koreans.

The workers will take their money and buy a Japanese car, or maybe a nice HDTV from China, etc.. Thus their money will help sustain a retail job in the US and then exit the American economy and stimulate the Chinese Japanese Or Korean economy.

Because America produces next to nothing in this country, we cannot spend our way out of this mess like we did in the 1930's.

What the American economy needs is incentive to produce things in this country that will be desired by other Americans and people in other countries. Not more products produced by American companies in China (like Apple's iPod) but true quality, American products produced by American workers

Wow...that almost sounds like a union advertisement. Maybe they were right after all.

Pelosi Says "We Don't Need Republican Support" For The Stimulus Bill

So I assume she's fine with the Democrats taking the blame when it doesn't work? Meanwhile, the public seems to be siding more and more with the Republicans, as support for the bill has slipped 12% in the last 3 weeks. Now only 51% think it's a good idea.

This is a huge gamble for the Democrats that's likely to be a loser. If the economy gets better, they win and the Republicans look stupid. If the economy gets worse, they'll have a tough time making the case that it would have worked if we had just thrown a few more Trillion $'s down the drain.

$25 BILLION In Auto Loans Part Of Bailout

Incredibly, it's not just houses that are in desperate need of help. Auto manufacturers also are in need of a helping hand. $25 billion worth. Who's going to pay that? It's like the government just got laid off and is forced to use their credit card. Once they get done with this, we'll have $15 billion in there for new shoes too.

Just wait until we have to pay the first minimum payment to the Bank Of China.

Congress Balks At Massive Corporate Welfare

Wall Street will be sure to punish them shortly with a horrendous roller coaster ride for their reluctance. Then they will then quickly relent (probably before the week is out) and give their 'approval' for something that is already completely outside their control. Clearly the Fed is running the show here, with the ability to buy up massive corporations and chain US taxpayers to the debt. As Ron Paul said, Congress should just go home since they've abandoned their duty to the populace.

In the end, it won't matter. This bail out plan wont' fix whats wrong with the world's economy. What's wrong is that there are too many houses that were priced in a fantasy world, over leveraged by their current owners and now out of reach of most buyers. Add to that new due diligence on behalf of lenders, and you've got yourself a pyramid scheme that's reached its apex. The fed thinks if they can just get new suckers to buy into the fantasy pricing everything will be 'ok'. It won't.

The only way to fix this is to lower housing prices by either devaluing the dollar or letting the housing market crash because what supported it previously was fraud, plain and simple. Devaluation has it's own problems, as we've seen with the oil markets. Not to mention inflation will cause mortgage rates to rise, so in the end, it will be self defeating.

The only thing Paulson's plan will do is give some on Wall Street a chance to take back their gambling bets. To be sure, it will only hurt you and me. But as Paulson sees it, that's going to happen anyway, so he might as well try to help his buddies.