Credit Collapse: The Depression Countdown Begins

[ms]

Wednesday, March 26, 2008 7:30:39 PM
[View Source]
From Survivalblog.com

Credit Collapse: The Depression Countdown Begins

SurvivalBlog includes plenty of gloom and doom, but I do my best to not be a ranting and raving alarmist. The recent torrential flood of bad economic news, however, has led me to now urge greater preparedness. Don't quit your job and head for the hills yet, but by all means redouble your efforts to get ready. In my estimation, we are now on a short countdown to economic depression. Back in early 2006, I first warned about derivatives trading. Since June of 2007, I have been warning about the larger implications of CDOs. In January of 2008, I pointed the finger of blame at exotic debt repackaging instruments that are "marked to mystery" and causing the credit market to collapse. Now, these manifold dangers are apparent even the mainstream media. New bank accounting rules go into effect on March 31st, so the Fed is pumping liquidity frantically. This will likely exacerbate the problem. Please take the time to read the two following linked articles about the ongoing collapse of the global credit market:

1. Meltdown Looms Larger as Credit Markets Freeze. Here is a key quote: "As for Bernanke's Term Securities Lending Facility (TSLF) it is intentionally designed to circumvent the Fed's mandate to only take top-grade collateral in exchange for loans. No one believes that these triple A mortgage-backed securities are worth more than $.70 on the dollar. In fact, according to a report in Bloomberg News yesterday: “AAA debt fell as low as 61 cents on the dollar after record home foreclosures and a decline to AA may push the value of the debt to 26 cents, according to Credit Suisse Group."

2. IMF tells states to plan for the worst.

Clearly, the global credit collapse is getting much worse, but ominously, it is also now clear that the collapse is just in its early stages. I now have a high level of confidence that the credit collapse will trigger a global economic depression that may be as bad, if not worse than the Great Depression of the 1930s. At this point, it seems almost inevitable. The Federal Reserve lowering interest rates will not prevent it. At best, this will forestall it by a few months. To borrow an old Wall Street aphorism, Ben Bernanke is "pushing on string." Without financing, the global economic machine is grinding to a halt. Helicopter Ben and his cronies can't re-start it until after a lot of bad debt has worked its way through the system.

If you've been reading SurvivalBlog for several months, then you know what you need to do. And if you have been hesitating, then I strongly suggest that you get busy immediately: and actively prepare. Get the food and other key logistics, get the training, team up with like-minded friends and relatives, and if possible, buy and fully stock a retreat in a lightly-populated region. Get OUT of your dollar-denominated investments and re-invest in practical tangibles that you can barter. Companies with derivatives exposure and hedge funds will be the first to go, followed soon after by a stock market crash. Eventually, even erstwhile "safe" municipal bonds will be wiped out.

In the short term, please follow my advice on preparation for surviving bank runs. The recently-announced bailout of Bear Stearns is indicative of how quickly a bank's fortunes can turn. Here is a key quote from a recent Financial Times article on the Bear Stearns bailout: "One problem with the credit crunch is that banks' solvency positions can change overnight. As banks force fire sales of assets to recover their loans from hedge funds, the prices of those assets fall. But as the prices fall, the amount of capital that the banks need rises. Lena Komileva, a Tullett Prebon economist, said: 'This is what is fueling the vicious cycle. Things can deteriorate very rapidly and banks can reach insolvency almost overnight.'" In my estimation, bank runs are now imminent.

Am I being an alarmist? I don't think so. Just look at the US Dollar Index and the spot price of gold. Pray hard, folks. There's a storm coming.



 

[billy_56081]

I'm kinda looking forward to it. I know me and mine will not go hungry.

[zombiewolf]

    They used to tell me I was building a dream, and so I followed the mob,
    When there was earth to plow, or guns to bear, I was always there right on the job.
   
They used to tell me I was building a dream, with peace and glory ahead,
    Why should I be standing in line, just waiting for bread?

    Once I built a railroad, I made it run, made it race against time.
    Once I built a railroad; now it's done. Brother, can you spare a dime?
   
  Once I built a tower, up to the sun, brick, and rivet, and lime;
    Once I built a tower, now it's done. Brother, can you spare a dime?
(Yip Harberg, 1931)
                                                                                                             

[zombiewolf]

I'm kinda looking forward to it. I know me and mine will not go hungry.

Ditto.

Bring it on!

[gypsyman]

I do believe your right ms. Couple of main differences that will cause major problems with what will probably happen now, and what happened back in the '30s. Population of the country was less than half of what it is now. (123 million, just looked it up) Percentage of people living in the rural/farm area's was much greater. Most of them could raise their own food, vegetable gardens, livestock, chickens,pigs maybe a cow. Just to sustain themselves and family. Not sure of the exact percentage, but I'll bet it's over 90% of the people living today never killed an animal, put in a garden, canned for the winter time. And a whole bunch of them have been living off of govt. handouts most of their lives. Work is a dirty word to them. Stealing is much easier.
Not sure how bad it might get, bigger cities will be hurt the worst. Vast majority of the people living in them have such a short supply of food, living mostly out of the shelves of the supermarkets. I believe there will be food shortages.(I remember seeing a news story from Russia, about a year after it collapsed, a man beat his neighbor to death with a pipe, because he caught him stealing a sack of potatoes from his shed, and that was the only food he had for his family) So I can guarantee you, if 14 and 15 year old kids will kill each other for a pair of expensive tennis shoes or a sports jacket now, what'll happen when the food gets scarce.
Not sure how far down the bunny trail this might go, but I'll bet the Easter bunny will be on a spit.   gypsyman

[torpedoman]

you'll need gold silver guns and ammo and a willingness to defend what you have

[Graybeard]

Anyone who thinks a world wide or even just USA wide depression is something to look forward to needs a reality check. Still things are gonna get bad and likely soon so being prepared is best. I'd think those folks living in AK in the out back areas would be some of the best prepared. For most in the lower 48 the throngs from the cities will over run us even if we're out in the country.

Really these days in most places especially those east of the MS river "country" is a relative term only as things have become so civilized that there really isn't much real "country" left. The nearest city to me is around 7-8 miles away and other than it the next closest is more like 20 miles away. However it's kinda hard to tell really along much of the path to them that it's not all city as things have grown up so much that there is little open land left and folks are stacked in like cord wood really.

I suppose that I own enough land I could grow most of what I need here and survive in that regard except for all those hoards that would be over flowing from towns and smaller pieces of property coming in to take what is not theirs. IF/WHEN this happens it's not gonna be pretty.

[Dee]

Graybeard I would have to agree with you. Anyone whom looks forward to a catastrophe such as a depression, is actually CLUELESS, as to the repercussions of such an event. They must picture themselves as miniature Rambo's defending themselves and family against the onslaught, when in reality, when city folks get hungry they will get mean. It would be in some areas a blood bath. But also, how many hungry children are these dreamers willing to turn away that show up at their doors hungry? Better still, how many can they feed?
I for one opt for common sense on the matter, and hope it NEVER happens, but I believe it is actually inevitable.

[beemanbeme]

For once, I agree 100% with Dee. 

[rex6666]

If i remember my schooling correctly, this is the way the last big depression got started, people
preaching the sky is falling so every one ran to get their money out of the banks.
You have to keep on keeping on, business as usual, maybe at a slower pace, may have to miss a night
out, shoot a few less bullets. but don't lay down and give up. make every thing count.
The quickest way to get doom & gloom is start thinking it, reading it, believing it.

I have to agree with both Dee and GB
If you look at most big cities, the druggies are already stealing and robbing to feed their habits
to the point that the PD can't keep up. When you put people in a position of no money to steal,
to buy drugs and add to that people with no money to buy food, you will be looking at something
that most of us have never seen. I live between Dallas and Ft. Worth approximately 5 million folks,
I am sorry to say that when the time comes i will eat, just like many others. For a person to think he can protect his own is kinda unrealistic their will be many people hunting some thing to eat. Like
GB said if you are in AK or some where their are few people you might be OK.

[magooch]

Rex6666, I couldn't agree more.  If ever there was a prophecy that is self fulfilling, it is this "end of the world" economic crap.  As usual, the media is the main accomplice in getting it done.  The sheeple have got to quit letting the journalists and politicians--who have a giant stake in predicting and promoting disasters--drag us into their nightmare scenarios.

[myronman3]

graybeard and dee are right on here.   

there was a time i didnt care if it happened; i had little to lose.  now i have a family and people depending on me.   
 
 grandpa watched the first one, and said it would happen again, only next time, it would be worldwide and even worse.   everyday it looks like the old man knew his bananas; and that scares the hell out of me.

[dukkillr]

Graybeard I would have to agree with you. Anyone whom looks forward to a catastrophe such as a depression, is actually CLUELESS, as to the repercussions of such an event. They must picture themselves as miniature Rambo's defending themselves and family against the onslaught, when in reality, when city folks get hungry they will get mean. It would be in some areas a blood bath. But also, how many hungry children are these dreamers willing to turn away that show up at their doors hungry? Better still, how many can they feed?
I for one opt for common sense on the matter, and hope it NEVER happens, but I believe it is actually inevitable.

WHAT?!?!  I agree as well.  I usually just smile at all the puffed-out-chest crazy talk, but I'm glad someone else said something.

I like that you opt for common sense, I try to always do that as well.  Seems like such an obvious choice, but many don't make it.

[SHOOTALL]

I agree also .
It will be hard to be an island in the flood of humanity looking for help and food  no matter how many guns you have .
Don't take my word ask a vet from Korea what a human wave looks like !

[zombiewolf]

Look, nobody really wants any of this crap to happen,
but if this is what it takes to wake people up to
the fact that the federal reserve, and the world bank
have been screwing us over for decades,then we get what
we deserve.The founding fathers warned us of it!

"If the American people ever allow private banks
to control the issue of their currency,
First by inflation then by deflation,
the banks and corporations that grow up around them
will deprive the people of all property until their children
wake up homeless on the continent their fathers conquered"
  (Thomas Jefferson)

I got no Rambo delusion

I'm more with George Carlin, its entertaining.....

To watch it all go down in a swirling cesspool

BTW,if you want a revolution,you can count me out.

I've been beat down by the system to the point where I just don't give a **** any more.

There is a lot more to living than what we are being taught by this stupid movie\nightmare called modern life!

[myronman3]

lend me those glasses you are using,  it looks so nice.   i wish it were that simple.   myself, as dee an g.b. pointed out,  would have a hard time watching people suffer.  i would NOT enjoy it.  there is no way i could sit and eat if there were hungry kids around.  it is one thing to hypothisize, it is another reality altogether to see it firsthand.  i doubt you could turn a cold shoulder to it anymore than i could.

[zombiewolf]

lend me those glasses you are using,  it looks so nice.   i wish it were that simple.   myself, as dee an g.b. pointed out,  would have a hard time watching people suffer.  i would NOT enjoy it.  there is no way i could sit and eat if there were hungry kids around.  it is one thing to hypothisize, it is another reality altogether to see it firsthand.  i doubt you could turn a cold shoulder to it anymore than i could.

You are absolutely right, and I confess to being overtly provocative(check my signature)
 However,I do think it is that simple.

The human suffering part I will not enjoy, but I do find it interesting a lot of people focus on how to protect their stuff from the hoards of hungry people that will ensue.
I like to imagine American people becoming more willing to help each other out, as a natural instinct.
You look at the aftermath of natural disasters, and you will see neighbors that previously didn't even know each other,helping each other.

Those are my only plans, to help my relatives first, and as many on the periphery as I am able.

I tell ya though, I'd probably be pretty freaked out if I still lived in the city.

[Dee]

While your idealistic view of such a catastrophic event would indeed bring out the best in SOME, zombiewolf, let us not forget New Orleans, La. I go there three times a week, and it will never be the same. Not that, THAT is a bad thing in this case. HOWEVER, also keep in mind that the gangs there were SHOOTING AT RESCUE HELICOPTERS, and eventually the 82nd Airborne ( a unit my son is a Sgt. in) was called in to patrol the streets as the National Guard could not handle it.
TODAY, two years later I see the military in GROUPS doing vehicle stops in New Orleans. Is that your idea of a wake up call. Martial Law, and the MILITARY patrolling YOUR NEIGHBORHOOD? It's not mine.
Also remember that the last GREAT DEPRESSION that hit the U.S. lasted more than TEN YEARS. Are you that anxious to watch YOUR family suffer for that long? I'm not.
As far as our financial system being what it is, YOU ARE RIGHT, however this thing started in 1913, and by the time my generation and my fathers' for that matter was borne it was in place. This thing you say we deserve is true in part that YOU AND I, have done nothing but WATCH IT SPIRIAL, and now it is almost time to pay the fiddler for the music that you and I, and our fathers have been dancing to for several generations.
I have never gone hungry a day in my life, and doubt that you have either. Most of our personal financial woes, that we have suffered in the past, we brought on ourselves. The world after all, does not owe us a living.
With a MUCH INCREASED population as compared to 1929, that depression will look like a Sunday Outing compared to the next one. In 1929, most Americans were of an agricultural back ground, and could grow a garden, milk a cow, and change a flat, or fix a motor. Today's folks in their forties and younger, can't find the supermarket, or the spare tire in their own car.
These facts will make for a long ten plus years if it HSTF. Helping others, might not be as important as just STAYING ALIVE for awhile. No medicine, where a common cold can put you in the ground. No 911 to call. Millions of people whom have NO PREPERATIONS AT ALL, roaming the streets. How many can you shoot before a military unit shows up at YOUR DOOR? A military so over-whelmed by calls that they disarm EVERYONE they get a call on. THEN WHAT?
I pray that God DOES NOT give us what we deserve. I do NOT say "bring it on". I say God spare us the misery of our mistakes and transgressions on this matter. JMO

[zombiewolf]

Wait, I feel another song coming on...
 


    People are queer, they're always crowing, scrambling and rushing about;
    Why don't they stop someday, address themselves this way?
    Why are we here? Where are we going? It's time that we found out.
    We're not here to stay; we're on a short holiday.

    Life is just a bowl of cherries.
    Don't take it serious; it's too mysterious.
    You work, you save, you worry so,
    But you can't take your dough when you go, go, go.

    So keep repeating it's the berries,
    The strongest oak must fall,

        The sweet things in life, to you were just loaned
        So how can you lose what you've never owned?

    Life is just a bowl of cherries,
    So live and laugh at it all.

    Life is just a bowl of cherries.
    Don't take it serious; it's too mysterious.
    At eight each morning I have got a date,
    To take my plunge 'round the Empire State.
    You'll admit it's not the berries,
    In a building that's so tall;

        There's a guy in the show, the girls love to kiss;
        Get thousands a week just for crooning like this:

    Life is just a bowl of . . . aw, nuts!
    So live and laugh at it all!

[SHOOTALL]

ZOMBIWOLF , With regard to banks controlling our money - a private bank can borrow 10 dollars from the federal reserve bank  with only 1 dollar of deposit . to do this the fed. prints money . Some see this as the private bank creating money .
If that's not controlling our currency then what is it ?
If you take time to look the banking / finical system world wide is in constant repair .

[SHOOTALL]

When placing blame don't forget the millions that live on plastic and way beyond their means . In a country where WE are the govt. and We are free to not put ourselves in debt , MANY WE"S chose to go in debt !
Guess WE will be taking it on the chin !

[beemanbeme]

Shootall's right, since all of a sudden somebody wants to start assigning blame, nobody forced those folks to buy a bigger house than they could afford, a bigger car, etc. Everybody is screaming about oil prices but have you seen anyone slow down?  Those monster SUV's are still selling like hotcakes. And if you don't have a TV bigger than my first apartment, you ain't nobody. Truth is, IMO, we did it to ourselves.

My folks lived thru the depression and told of going for months and months without seeing a dime of cash money.

A quick quiz: How many of you that are planning on growing your own garden when/if things fall apart know that if you save the seeds from the vegtables grown from the hybrid seeds that you buy in the store will not reproduce?  That is to say, if you grow a stand of corn and save the seeds and replant them next year, you'll get plants but no corn or some stuff that ain't fit to eat. 

[rex6666]

Dee, Beeman, Shootall
I think WE have a good idea what this is all about. I have listend to my mom and dad talk about
living through the BIG depression, they lived on a farm and could grow most every thing they NEEDED
but no money. Thier was a gov. program for people in town, called the WPA paid about $1-2.00
A DAY not an hour, my dad didn't qualify because he lived on the farm, but they could sell milk, eggs
to these people. It has been years but i think i could still run a farm tractor or raise a big garden if i could find some farmer that needed some help. What will the young folks that have lived on cel-phones
computers, and runs to the super marke do, the ones that i hear saying the gov. needs to do something, i can't find a job. will they be able to work for $2-3.00 a day if it is avalible, many more folks now.

[Dee]

Exactly rex6666, & beemanbeme. It's similar to those refuse to take responsibility for their own mistakes and welfare of their family. My father and mother also went thru the Great Depression, and it had lasting effects on their mentality toward debt and living high on the hog's back. They ended up successful, but their work ethic was phenomenal.
Dad would work when he could hardly walk.
I remember in the early 50s sitting on a wagon seat, while he and my grandfather, harvested corn BY HAND throwing it into the wagon. This was done with a team of horses, and dad was in a cast having had his hand crushed in a cotton mill. Now days folks call in sick. That wagon seat, and the backsides of Slim & Short our team was my baby sitter. During cotton harvest I played under the cotton wagons while they picked it.
What was said about hybrid seeds being saved from the harvest is true. They will come up, and sometimes produce BUT, the hybrid each generation will step closer backward to it's original make up. Corn is this way, but then so is a hog. Turn a couple spotted Poland china, or Duroc, or Hampshire hogs loose in the woods and come back a couple years later and look at their off spring. You will not recognize them.
Can you see the under 50 crowd trying to butcher a hog, or plant a garden. Of know WHEN to plant a garden for that matter.
My parents and grand parents worked for fifty cents a day, and were glad to get it. A dollar was as big as a saddle blanket. If the economy goes south, and I think it will, it will not be interesting times. It will be HARD TIMES, and the 50 and under crowd is going to suffer the worst, as they will find it nothing like they imagine. JMO

[SHOOTALL]

Hey Dee , on a farm ( if you have a phone ) who do ya call into ?
your post was good !

[rex6666]

I realize now how the depression affected my parents, My dad did not waste money. He did not have a credit card until he was about 60, then oonly because he could get a $30 discount from sears on a house A/C if he used a sears card, he got the card biught the a/c paid the card off and cut up the card no more c/c's
when i was 8-10 years old we would raise 30-40 acres of watermelons every year, today i would not walk across the street to eat one. we moved to town when i was 13 but still farmed, cotton and wheat killed two hogs ever year and a calf, did not take them to town done all our selves.
I can remember HOG KILLINS when 3-4 families would bring their hogs to our place, maybe
kill 5-6 today and 5-6 tommrow, us kids were kept busy caring wood to the scalding vat, later on we started taking them to town to be butchered.
I remember the first wild hog hunt i went on we killed 3-4 the first mourning,  i nade the mistake of asking where the scalding vat was, then i had to explain, after every one had a good laugh on me
they explained that they skined them, had never heard of skinning a hog.

[JonD.]

Exactly rex6666, & beemanbeme. It's similar to those refuse to take responsibility for their own mistakes and welfare of their family. My father and mother also went thru the Great Depression, and it had lasting effects on their mentality toward debt and living high on the hog's back. They ended up successful, but their work ethic was phenomenal.
Dad would work when he could hardly walk.
I remember in the early 50s sitting on a wagon seat, while he and my grandfather, harvested corn BY HAND throwing it into the wagon. This was done with a team of horses, and dad was in a cast having had his hand crushed in a cotton mill. Now days folks call in sick. That wagon seat, and the backsides of Slim & Short our team was my baby sitter. During cotton harvest I played under the cotton wagons while they picked it.
What was said about hybrid seeds being saved from the harvest is true. They will come up, and sometimes produce BUT, the hybrid each generation will step closer backward to it's original make up. Corn is this way, but then so is a hog. Turn a couple spotted Poland china, or Duroc, or Hampshire hogs loose in the woods and come back a couple years later and look at their off spring. You will not recognize them.
Can you see the under 50 crowd trying to butcher a hog, or plant a garden. Of know WHEN to plant a garden for that matter.
My parents and grand parents worked for fifty cents a day, and were glad to get it. A dollar was as big as a saddle blanket. If the economy goes south, and I think it will, it will not be interesting times. It will be HARD TIMES, and the 50 and under crowd is going to suffer the worst, as they will find it nothing like they imagine. JMO

Your exactly right. My Pappy used to say "if the electricity goes off, people won't know how to get home". And he was right, people have no common sense. They know nothing about how to grow food, or hunt or fish. I'm not so sure that people would spread out and ravage the land right away, hurricane Katrina told a lot about peoples first reaction in a survival situation. I think they would sit around waiting for someone to help them and then when they saw no help coming they would start looting.

Common sense tells you that when we import ten times more than we export something has to give. We are getting close to 20 trillion dollars in debt. Our money is becoming more and more worthless. Just like ms said at the end of the very first post, Pray hard. Things are going to get very very bad. I believe we are coming under judgment from God for our national sins and our turning away and rebelling against Him. I pray that our country will turn back to Him and He will have mercy on us.

[torpedoman]

I really hope that it won't happen but all the signs say it will. I remember the southeast coalfields in the late 40's and 50's times were tough but when everybody has nothing they help one another at least they did then. The society has changed and most of the people now are used to instant gratification and being able to get what they need when they need it. How are they going to react when they hear the no word?We had a cow that gave more milk than we could use mother gave it to people who needed it. I think in today's world most people would keep it til it spoiled. I really hope i am wrong.

[Dee]

torpedoman, I believe that folks will still help each other. HOWEVER, it will be after the fight. Our society is living on credit and instant gratification as has been said here. As soon as the TAKERS in our society are educated or executed, which ever comes first, then and only then, will folks step in line to help one another. But they are going to have to suffer first, and try bullying first, BEFORE they realize that some will push back. Then the arrogance will dissipate. JMO

[scout34]

When the truck doesn't bring the food to the supermarket and water doesn't flow when you turn the tap, you will have anarchy.  People will have to learn how to provide the basics for themselves within a matter of days.  Those who are unable to will succumb to dehydration, starvation, exposure, disease, and predation within a matter of weeks.  If you live within a tank of gas from a major metropolitan area you had better have a plan to hunker down and hide until the worst is over.

 $200 bucks will buy you a sealed package of heirloom seeds that can be kept for a rainy decade.  Two or three of those will provide for quite a few people.  A year or two of stored food will get you past the really hard times until your crops start coming in, if you are not already growing stuff now.

The best way to ensure that as many people as possible are fed and protected is to plan ahead with your neighbors and friends.  A neighborhood protection association, mutual assistance group, or a plain ol' militia.  Organization and prior planning are what will get you through.  Find some capable people who think like you and make a plan.  Then implement it and prepare.