Tag Archives: housing

The United Stale Economy

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Back in Feb 2009, I wrote ‘Why Can’t We Just Spend Our Way out of the Depression‘, knowing full well that the American and US economy was being supported by smoke and mirrors and little else.

At the core of this article was the rationale that we’re facing a seismic shock in spending, not because of what people’s attitudes are about the economy, but because of a totally different economic issue:  life-cycle planning.

Boomers have always influenced our economic fortunes or issues.  Bananas, oil shocks, market gyrations and soon, market collapse.

Nearly a year later, I followed up with this piece on the US housing crisis.

It finally seems like the mainstream is catching on to this idea.

Wall Street Journal:  Another Threat to the Economy: Boomers Cutting Back

This piece has an excellent chart in it:

Boomers-Cutting-back

For those brilliant no-minds that just dumped billions into the auto industry:  your (and ours) investment will likely be cut in half within the next couple of years because boomers have cut their demand in half.  This makes sense because we’re seeing the steep rise in empty nesters that don’t need two or three SUVs sitting in their lot.  Instead, they’re buying one convertible or Honda Accord (for those that lost their shirts on one of the many manias in the last 30 years).

Any recovery that we’re seeing with car companies will be short-lived.  GM will have to design a marketing strategy other than giving cars away.  Chrysler will have to end ’employee’ pricing.

A lot of change will happen in the next 10 years and it won’t be pretty.  Pensions will go bust and pensioners will have to take up part-time work at dumps like Wal-Mart of Costco.

The notable increases are with health insurance and drugs.  These companies will likely be one of the only profitable sectors over the next decade, despite the cries of communism coming in the wake of Obama-care.

To pay for everything, all savings will be liquidated and converted to Viagra, Lipitor and a moderately decent nursing home.  Don’t be surprised if the best-selling horror stories are those related to retirement home abuse (or STDs).

US Is Bankrupt …

This one comes to us from Bloomberg.

The US is incapable of paying its bills and there’s suggestion that the situation will be worse than Greece within a few years.

Gerald Calente Video

Believe it or not, Gerald Calente is not the source of my predictions.  One of the people that captured some of these ideas best was David Foot, who wrote Boom Bust Echo a while ago.

Next Steps?

The US administrators will continue to try to bail out industry over the next decade.

Every time they do, they will face an economic wall.  Bailouts require that they print money, printed money = inflation, inflation = dollar deflation, falling dollar = rising commodity prices, rising commodity prices = economic collapse.

This cycle was best recently described by Jeremy Rifkin as an Economic Endgame.

What To Do?

Realistically, there are three things we can do:

  1. Stop spending, particularly on stupid wastes like car companies, prisons and military;
  2. Start taxing the rich and taxing consumption;
  3. Start slashing what corporations can deduct from their taxes.

People like Bill Gates and Warren Buffett are smart because they’re getting old and they saw it coming a while ago.  The Bill and Melinda Gates Foundation and other efforts are great ways to say ‘I’ve made all of this money and I’m going to protect it before the government comes and takes it away’.

Fine … we’ll tax the charities too, especially the religious ones.

As people like me get older, we won’t have the luxury of avoiding the wealthiest in our effort to feed our parents and kids at the same time.

We’re going to lift every rock to find money and we’re going to start at the top.

US Housing Crisis: Just Getting Started

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Zero Hedge put together some comments on the CIBC research in “The Next Leg of the Housing Crisis in Five Simple Charts“.

Short version:  we’re all f**ked.

Longer version:  there are so many layers to this crisis that throwing cash at just won’t solve.  Two decades of Republican fiscal irresponsibility, creating structural deficits and hiding behind international crises like fabricated wars have driven the US to the bottom.

Clashing with this level of ineptitude in the US is the increasing bulk of retiring baby boomers, many of whom have started to sell off their real estate as they enter retirement and more of whom will do anything they can to preserve what few assets they have left after spending a life-time of pursuing economic bubble (gas prices in the 70s, interest rates in the early 80s) after economic disaster (the dot-com heist, the recent financial crisis).

Grind all of this together with a generation of youth that are no longer interested in unwieldy and impotent governments all the while deciding that they cannot live with themselves while consuming more and more Made-in-China / Bank of WalMart crap and you have the perfect storm.

The fall of 2008 was just the start of a very long, very deep structural economic adjustment that we will all have to work our way through.

One of the few solutions is to finally address the deepening divide between the haves and the have nots.  Tax policy, social engineering and economic incentives will all have to be drastically overhauled in order to improve upon this situation.

In Canada, this means reversing the ridiculous decision of the Cons to reduce corporate and individual tax rates, along with increasing the GST.  While I would prefer that the GST be increased to a much more realistic level like 12%, I’ll at least accept the 7% that we used to pay.

I would also recommend that we cease to allow companies and organizations to deduct expenses that are killing us, starting with gas and fuel allowances.  For too long, we’ve been subsidizing the ownership of carbon-burning fossils and this needs to change.