Monday, Jul 14, 2008
Millions died in the 1930's depression, when 90% lived in the country and many had family farms. Not much hope in the cities.
Prisonplanet: Mortgage Giants’ Collapse Could Herald 1930’s Style Depression
Veteran London Times journalist William Rees-Mogg predicts that the collapse of U.S. mortgage giants Fannie Mae and Freddie Mac could herald a downturn into a 1930’s style depression that threatens to sweep away democratic governments. Rees-Mogg served as editor of The Times, Britain’s oldest surviving newspaper, from 1967 to 1981, and currently sits in the House of Lords.
Posted by planning4acrash @ 03:53 PM (1604 views) Add Comment
14 Comments
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1. Brownout said...
(Hi all. I'm a long time lurker, first time poster)
Mr Rees-Mogg is predicting that house values might not rise past peak 2007 values until 2032 ... eeeek.
Sometime ago I drew up this graph, based on the one on entry to HPC, and extrapolating the three previous boom/bust cycles.
If past cycles repeat themselves, it *might* look someting like this :-
Link to graph
2. Fubar said...
I thought this was bad news but now that it's been heralded as an apocalypse by prison planet I know things aren't nearly so bad as they first seemed.
3. denzil said...
Rees-Mogg is like a record that's has got stuck. He's been banging on about a depression at least since the early 90's. See some of his earlier works: http://www.alibris.com/booksearch.detail?invid=9467974327&qwork=2699664&qsort=p&page=1
and this little charmer about how to survive the collapse of the welfare state:
http://www.amazon.co.uk/Sovereign-Individual-Survive-Collapse-Welfare/dp/0684810077/ref=sr_1_1?ie=UTF8&s=books&qid=1216049430&sr=8-1
and if that wasn't enough then feast on this little Beauty;
The Great Reckoning: How the World Will Change in the Depression of the 1990's
http://www.amazon.co.uk/Great-Reckoning-World-Change-Depression/dp/0330327925/ref=sr_1_3?ie=UTF8&s=books&qid=1216049508&sr=8-3
Rees-Mogg, the doyen of the tin-foil hat brigade.
4. str 2007 said...
Perhaps I'm being impatient but as I write the Dow & FTSE are both in positive territory.
Yet on Friday we had the news that FM & FM were both in trouble together with the collapse of Californian Indy Mac bank.
The bailout figures were in the reqion of $2500 billion and yet a quick word from Mr. Bush and all seems ok.
Sorry but WTF is going on.
I don't expect UK Joe Public to pay much attention to this yet - but the markets ???????
Can anyone explain why this hasn't resulted in a huge meltdown today ?
5. pelethar said...
Most of the short term shock was absorbed on Friday. The boosts in the FTSE at least were mostly down to bid news, principally the Santander/A&L thing.
As I write the Dow is back into the red.
6. techieman said...
Brownout clever graphic. I'd go along with the falls but by then who even knows if the y axis will still be in £s. All i can say is if we reach your next trough then at that point we can concern ourselves with the next (grand) suoer cycle.
7. beartil2010 said...
FTSE is slightly down at close, and gold is up. Expect this trend to continue. As far as quick reactions, the FTSE can be quite resilient, but I hear american government bond prices were jumping about like rabbits on speed.
Brownout - thanks for the graph. I think you have extrapolated the peak-line in a linear fashion, whereas with the effect of wealth groth/inflation this is in fact an exponential graph type - hence your new peak would be nearer to the left, ie. closer in time, or much higher in value in the position you have it now. You will be able to estimate this better by using the Red trend line as a constant curve - on the graph you have now, that trend line would sail over the new peak you have created.
Also, while I cannot predict whether there will be another boom (it seems likely...) your down slope is going to be much steeper ie. faster to bottom this time rather than last time. So I would guess the gap between peaks will actually be contracted even further, but that's just me guessing.
8. techieman said...
My reading of he US market - and thats the lead - is that todays high was just another attempt to squeeze some bears, so we are due an extra move down before we get a counter-trend rally. That counter trend rally will just last a bit longer and squeeze out some more bears before the falls resume. Lots of "is the bear market over?" scribes as the (hardly) magical 20% fall confirming a "bear market" gets albeit temporarily breached. Or the whole thing just craps out first :-)
9. eurorocks said...
@brownout
Nice graph....
@denzil
Yup, Rees-Mogg has lost the plot, nothing like a hot cup of tasty fear. hohum... We live in a brave new century, were the marketing slogan "sex sells" has been replaced with "fear sells better".
The real problem is that the current system is centered on growth. This cannot continue forever with fixed resources (This planet). A very good book on the subject is "Shoveling fuel for a runaway train" by Brian Czech.
http://www.amazon.co.uk/Shoveling-Fuel-Runaway-Train-Economists/dp/0520225147/ref=sr_1_2?ie=UTF8&s=books&qid=1216052412&sr=8-2
10. drewster said...
@Denzil,
Thanks for the heads-up on Rees-Mogg. Sounds like he is a stuck record then, that's a shame as I thought for a moment he might be right. You have a point: it's not going to be *that* bad. Britain didn't really have a Great Depression like America did. Our fiat currency actually makes it easier to recover from recession than it would otherwise be, primarily because inflation incentivises people to keep spending. Have a read of The Great Depression (skip to the Britain section) for more information.
That said, we are going to see a noticeable decline in quality-of-life. The easiest way out of a recession or a depression is to devalue the pound. This means imported goods (i.e. nearly everything) will become more expensive; foreign holidays will become less common (every other year rather than every year); and jobs in the domestic-facing side of the economy will suffer. The oil shock means guaranteed recession and job losses in the short term, even if oil prices fall after a few years of choked demand.
@Fubar,
Yep pretty much agreed, PrisonPlanet.com = tin-foil hat brigade.
11. denzil said...
Interesting graph "brownout". Personally I don't think the bottom will be 2020 but will be much much sooner around 2011-2012. I can see there being very rapid falls. We have to put in context the falls that we are seeing today are those sales from the Spring bounce. Wait until late Summer through Christmas. By that time public sentiment (or lack of it) will add to the heady cocktail of the credit crunch and prices will plummet. However, there is pent up demand for FTB to get on the ladder, due to the fact that there has been at least four years of FTB at record lows. Due to the backlog of FTB I really can't see 50% falls because the FTB will jump back in and stem the tide.
Since the tail-end of last year I predicted -10% nationally by close 08, around -20-25% by close of 09. During 2010-2011 the falls will slow and then bottom out.
This is based on my belief that we are not going to have a severe or deep recession. The unknown factor is the middle-east. Things could get nasty there, but again I believe this won't happen due to a change of President of the US away from war-monger Bush.
Then again I may be well and truly talking out of my rear.
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