Not Everything Changes (Podcast episode)
The Question of Love (podcast episode)

The still-coming Great Depresssion

A reader recently posted a comment in response to an old piece I did called The coming Great Depression.  She asked me, since the original post was more than a year old and obviously my predictions have yet to come true, whether I still believe what I originally wrote in the post.

The short answer is "yes", I still think America is headed for an economic crash much greater than anything in our history.  As I should have known upon reading Harry Dent's book, the problem is that the exact timing is always difficult to predict.

I know a little bit about bubbles, firstly by having worked in the software industry in Seattle in the late 1990's.  During the Internet / tech bubble, stock prices went so ridiculously high that it seemed hard to believe.  Investors wanted in because to remain on the sidelines was to miss out on a sure thing...endless exponential growth in stock prices.  Deep down, everyone knew it was a bubble...but, as in any bubble, rational doubts are eventually burried somewhere in that sense of normalcy surrounding you day after day.  After all, how can you be right when everyone around, even the entire press, says you're wrong?  This sort of thing is a battle between, 1) on one hand, your rational mind and inner-voice, and 2) voices and messages from the society around you.

The same thing happened with the real estate bubble.  I remember, back in 2003 and 2004, watching my coworkers buy houses they couldn't really afford with zero money down, even with variable rate interest loans!  I told them that it was foolish...the real estate prices could not keep rising forever.  But the conventional wisdom at the time was that real estate always goes up.  Sure.  Since 2007, prices have been going down.  Real estate prices will decline even further in the coming years.

So now I look at things in 2011.  Now EVERYTHING is in a bubble.  Stocks, real estate, debt, commodities...everything.  The Federal Reserve and the IMF keep printing money and pumping it into the system just as fast as one might pump air into a leaky baloon (See Quantitative Easing).  How long can they keep pumping?  What if the fragile baloon bursts anyway?  And when?  Now my guess is that the crash will start in late Summer, 2011.  But it could happen today.  It could happen next Summer.  I don't know.  But it will happen.  The USSR was bound to collapse, and it eventually did.  The USA (as we know it) is bound to collapse, and it eventually will.

Strangely, I found this highly recommended piece on the front page of Yahoo! Finance this morning.  This author goes even further than I have, than Harry Dent has...even further than Max Keiser has.  It is worth a read.