The coming Great Depression

On my long flight back from the US, I picked up a new book by Harry S. Dent called "The Great Depression Ahead."  After reading for just a few hours, on the flight from Minneapolis to New York, the book had significantly changed my perspective about this new decade.  I was so influenced by this book that the next morning, while I was stuck in some airport hotel near JFK waiting for my evening flight to Prague, I had completely changed my stock / investment positions in preparation for the very long, cold winter ahead.

Anybody who is generally aware of today's political and economic trends likely has a general sense that the economy is unsustainable in its present form.  Consumer spending over the past few decades has been funded, to a significant extent, on credit -- second mortgages on homes and out-of-control credit card spending.  So what happens when this leads to a housing bubble that has already begun to burst?  What happens when banks stop extending credit because of a rational fear that the debt may not be paid back?  What happens, if, at the same time unemployment is rising and income is stagnant or even declining?  The obvious answer is: people will spend far less on everything.

OK, I get that (and have for some time).  I also get that the US government debt is so enormous that nobody quite understands how it could possibly be repaid.  For some time, I have believed this to be the most pressing issue, but the author of this book points out that there are even more significant, more alarming trends which will take us into a 10-year global Great Depression.  In short, he analyzes economic trends in relation to population demographics.  Some generations have more children than others, and the spending of these generations over their life-span (when they buy homes, cars, have children, retire, etc.) also has a great affect on overall economic trends.

Harry S. Dent concludes, based on looking at a number of trends (the bursting real estate bubble, an over-extended credit market, a commodity bubble that is about to burst, and a critical stage in terms of demographic trends in key economies around the world)...he concludes that we are months away from the beginning of the worst Great Depression in history...that sometime in 2010 it will start and we will not really begin to see the end of it until the 2020's.

One of the reasons I find his work credible is that he has written similar books on each of the past two decades and was able to forecast things correctly.  He has been bullish for decades, and long ago has actually been correctly forecasting much of what we are seeing today (what we say in the economic meltdown of 2008, for example).  He gets things right because he looks at factors nobody else is seeing -- highly predictable and significant factors (such as demographics).

I post this only to do my part in warning people.  I recommend that any of my readers with significant savings / investments go read this book.  Get your money out of stocks (or, better yet, get into shorting the DOW and other indexes through many of the bear ETF's on the market), keep your money in savings in a stable bank, sell real estate that isn't essential or sustainable in your life long-term.  Ultimately, if these predictions are true, this decade will not be easy for any of us.  But we have to find ways to protect ourselves or even make money in this environment...for the mere purpose of survival.

If these predictions come true, I think most of us will also become quite creative and frugal...maybe living with family or friends, gardening, walking / biking, etc.  I think we will find that what matters in life are the people around us, the relationships, our individual journeys of self-discovery, our art...all that is non-commercial. 

It is also important to understand that this long winter is necessary and essential for the long-term good of the planet, the economy, and our children.  This is sort of nature's way of clearing out all that is not working, is wrong-headed, corrupt, and destructive.  It is evolution's way of cleaning things up...punishing behaviors that are not working or not sustainable.

I know this post is strange for a music blog, but I am more than just a musician.  I felt it was right for me to warn my friends and audience about what I think to be true (while I certainly hope it isn't). 

Comments

[Donna Lee Michas]

I knew/know all of this, and I still got caught short. But thanks for posting it for others who might be able to salvalge something of their prior "good lives."

[webcams]

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[lisa]

Thanks for your personal marvelous posting! I actually enjoyed reading it, you may be a great author.I will be sure to bookmark your blog and definitely will come back down the road.

[daisy chakra]

I read this with interest - noticing that it is over 12 months old, perhaps you could post an update on your views on the topic to see if over time it has changed (better or worse) in regard to the economic global future. Thanks.

[Mark Manney]

Thanks for the comments. I posted an entry this morning to provide an update: http://www.abscondo.com/abscondo/2011/04/the-still-coming-great-depresssion.html