CDZ Economic Carnage Is Coming

[Thunk]

I'm more of an optimist than some on this thread. There is going to be (IMO) 2-3 quarters of hurt as the economy is gearing up again.

I would agree with you until debt, and leverage, and credit default swaps come into play

Did I mention derivatives?

Wiping out a lot of debt and screwing over the peasants seems to be a possibility.

Derivatives add up to over a thousand-trillion dollars.

If even 1 or 2% of them default...the world is bankrupt.

Warren buffet called derivatives "financial weapons of mass destruction".

 

[candycorn]

If you were President, what would you tell the people to do to prepare for the oncoming carnage?

 

[Meister]

A reminder....this is the CDZ, on topic

 

[Olde Europe]

The latest CBO prognosis:

Unemployment Rate (Percent) 2020 2021
Unemployment Rate (Percent) 11.4 10.1

In particular, the unemployment rate is projected to decline to 9.5 percent by the end of 2021.​

Gruesome.

 

[Meister]

The latest CBO prognosis:

Unemployment Rate (Percent) 2020 2021​

Unemployment Rate (Percent) 11.4 10.1​

​

In particular, the unemployment rate is projected to decline to 9.5 percent by the end of 2021.​

Gruesome.

The CBO projections for anything is a crap shoot IMO. They are never fed the proper numbers and are easily manipulated for a desired outcome.

 

[Thunk]

If you were President, what would you tell the people to do to prepare for the oncoming carnage?

I don't know.

Not everybody has the means to do certain things.

Own physical gold & silver...but it's VERY hard to get right now...even if you have the money.

Cash on hand...plant a victory garden...all fall short of really protecting yourself.

 

[Thunk]

The CBO projections for anything is a crap shoot IMO. They are never fed the proper numbers and are easily manipulated for a desired outcome.

I agree.

The CBO just crunches the numbers they've been given...they are pointless for the most part.

 

[Olde Europe]

Question B: Adjusting for legal restrictions on what the CBO can assume about future legislation and events, the CBO has historically issued credible forecasts of the effects of both Democratic and Republican legislative proposals.

Responses

Strongly agree: 26%
Agree: 57%
Uncertain: 5%
Disagree: 0%
Strongly disagree: 0%
No Opinion: 5%​

That's a mere 83% for (strongly) agree, "the CBO has historically issued credible forecasts".

But, what do a bunch of economists know at which the alternative-fact right wouldn't like to jeer? The CBO may even have issued a warning or three dozen that no, tax cuts really, really, really do not pay for themselves. Dealing in hard and spiky things usually known as "facts" doesn't really endear the CBO to certain factions.

 

[Meister]

Question B: Adjusting for legal restrictions on what the CBO can assume about future legislation and events, the CBO has historically issued credible forecasts of the effects of both Democratic and Republican legislative proposals.​

​

Responses​

​

Strongly agree: 26%​

Agree: 57%​

Uncertain: 5%​

Disagree: 0%​

Strongly disagree: 0%​

No Opinion: 5%​

That's a mere 83% for (strongly) agree, "the CBO has historically issued credible forecasts".

But, what do a bunch of economists know at which the alternative-fact right wouldn't like to jeer? The CBO may even have issued a warning or three dozen that no, tax cuts really, really, really do not pay for themselves. Dealing in hard and spiky things usually known as "facts" doesn't really endear the CBO to certain factions.

Nobody was making it a partisan issue. Those that live within the US borders understands that the CBO numbers have been manipulated on key issues.

Not all issues, but enough to not believe everything the CBO forcasts....left or right

 

[Thunk]

If they are given true and accurate numbers to crunch...the CBO is excellent! But politics has infiltrated those numbers to such a degree as to make the CBO worthless (and it's not the CBOs fault).

If a department is getting 7% more money this year instead of 10% more...some politicians will call that a "cut".

 

[candycorn]

If you were President, what would you tell the people to do to prepare for the oncoming carnage?

I don't know.

Not everybody has the means to do certain things.

Own physical gold & silver...but it's VERY hard to get right now...even if you have the money.

Cash on hand...plant a victory garden...all fall short of really protecting yourself.

And do you think the President will ask Americans to sacrifice/ Advise Americans of the impending austerity?

 

[Ame®icano]

Feel free to disagree with me...but this is not a left or right thread...leave politics out of it please.

We have massive money printing going on (stimulus checks) which will cause inflation...primarily with food because that is primarily where the printed money is going.

We have massive shutdowns of business which has cause massive loss in tax revenue.

We had unsustainable pension plans that have been hanging on by their finger tips for years...the loss of tax revenue will certainly be enough to tip these over.

The job losses have caused millions to not be able to pay their rent or mortgage...landlords and mortgage companies CAN'T TAKE THAT HIT...they'll go bankrupt.

It is said that 4 out of 5 businesses that are closed right now will not re-open. That will hit the commercial mortgage sector. (not to mention the MBS's and the CDO's which is what started the 2008 financial crisis).

What we are about to see is going to be biblical in scope! And if you are not afraid, you are not paying attention.

Good thread.

The current corona virus crisis has been a unique one in that given the social distancing public health guidance, the state governments are actually trying to keep people home by design. Along with federal government's support, it’s not surprising that Congress’s $2 trillion relief bill, rushed through to “do something", has resulted in many workers getting paid more in unemployment benefits to stay home than they would normally be earning at their jobs. Why would anyone want to go back to work if federal government is offering benefits through July 31?

Some Senators warned at the time that the CARES Act’s sharp raise in unemployment benefits, and it happened as they predicted, because additional $600 a week did create disincentives, and discouraged those workers from returning to the work so long as those extreme benefits remained in place.

We should've never closed the economy, but just impose social distancing, along with responsibility to self and others, along with increased hygiene and wearing masks and gloves when around other people.

We can keep having the public health versus economics debate over the best corona virus policy, because it's an important one. But so long as Congress leaves these expansive unemployment benefits in place, reopening the American economy isn't really possible anyway.

 

[Ame®icano]

I've delayed posting this thread for weeks because I wanted to post how to protect yourself...but I'm not seeing a way to do that

How to financially protect yourself?

If you live paycheck to paycheck, that's not really possible, if your forced from job, and not working from home, you're on the mercy of the government. Isn't that convenient to them, especially those who want's government to take care of them from cradle to grave?

If you have savings at hand, look to make small investments. It's always batter to put your money to work, instead of letting it sit in the bank. You're at home anyways, trading is nearly free, go for it.

 

[Ame®icano]

Financially speaking...we are going to get SLAMMED from about 15 different directions.

Correct.

In Michigan, the amount of unemployment is $362 per week, and with additional $600 from feds the amount is $962.
In New York, that amount is, I think $946. So lets put that into perspective.

If worker in New York who regularly earns $36,000 a year is now eligible for weekly unemployment benefits of $946. Annualized, that is equivalent to a roughly $49,000. Why would anyone who makes less than that be willing to return to work?

There is going to be a strong political demand for Congress to extend these enormous benefits beyond July 31, what with 30 million workers and counting having filed for unemployment in the last six weeks. Progressives will paint eliminating the extra $600 a week as "cruelty toward struggling workers", and, sadly, most of our policymakers aren't exactly known for sticking to smart policy principles over emotional appeals.

 

[Ame®icano]

First, we will not have consumer price inflation. Even with all the money printing, the forces of deflation - including the pandemic - are simply too powerful. CPI may be a problem in 10-20 years, but it isn't now.

Second, we are in a deep recession / depression. For a number of reasons, this will not be a repeat of the 1930s. But it will be the biggest economic decline since then.

Third, CDOs are a 2008 thing, not a 2020 thing. What you are referring to is CLOs. CLOs are a thing. They aren't as big of a thing as the CDOs of the GFC, but they will cause economic dislocation over the next few years.

Fourth, the actions of the Federal government and the Federal Reserve have prevented a repeat of the 1930s. But it is creating massive government debt. That debt will be monetized over the decades to come. Interest rates will stay low for a very long time.

Fifth, the pension problem was a problem before COVID. This makes it worse. Expect a ton of pressure for President Biden to bail out the states, which Democrats favor and Republicans - rightly - oppose.

Sixth, MMT will become a thing. Google it.

Seventh, there will be an economic boom in 2022/23. The economy will not fully heal until a vaccine is fully available, which will not happen until the back half of 2021. When that happens, the pent-up demand will cause a boom in consumer spending, leading to the re-election of President Klobachur after President Biden resigns due to Alzheimer's. The anti-vaxxers can do everyone a favor and let COVID off them.

Eighth, the US will onshore more of it's critical production, probably through the use of tariffs. This will officially deep-six the Friedman/Reagan/Thatcher era, which was on it's deathbed after the GFC. It will lead to lower GDP growth, but higher wages and less inequality as society reorders itself to no longer prioritize economic efficiency and the primacy of shareholders' interests.

Ninth, excess supply wipes out most of the fracking industry. Excess supply will not rebalance until 2022 at the earliest. Probably 2023. Oil production in this country grew from 8 million barrels a day to 13 million barrels a day in five years. It will fall by 4 million barrels as wells shut in. Much of the oil industry capacity is lost. There could be revolutions in countries which require much higher oil prices to function. There will be a wave of bankruptcies in the oil patch that we haven't seen since the 1980s. However, the seeds of capacity destruction will sow the seeds of $80-$100 oil in the back half of the decade. ETFs include XLE, XOP and OIH. The first ETF is the safest, the latter two the riskiest.

Tenth, there has been no investment in copper mines globally for years. This is leading to a supply shortage, which will likely hit in the middle of the decade. This will happen regardless of the adoption of electronic vehicles. Oil is going to be around for a long time. But the adoption of EVs requires more copper. This will lead to a boom in copper prices, to as high as maybe $10 a pound. COPX is the ETF to play this. It's at $13 today. It was at $60 a few years ago. It will break $100.

Eleventh, natural gas is at $1.80 mBCF. The rise of EVs means more electricity generation. That will lead to an increase in nat gas demand. Expect natty to top $3 in the back half of the decade, if not higher. The destruction of the oil industry benefits nat gas because it is a byproduct of oil production. There is an ocean of gas under the earth's crust in this country, so it is unlikely to hit $17 as it did in the 00s. But it will be higher.

You had few points... until

"pressure for President Biden"

 

[Thunk]

Right now...we all have food to eat...and we should be THANKFUL for that!

It may not be the food we WANT to eat...but we are really not going hungry!

Being thankful...showing gratitude...IS important!

 

[Ame®icano]

I'm more of an optimist than some on this thread. There is going to be (IMO) 2-3 quarters of hurt as the economy is gearing up again.
Most places in the US weren't hit has hard as the 4-5 states that got nailed. Those other states will get back to normal a lot sooner and
will lead the way for those other hard hit states. This event overall, is a short lived event in the scheme of things. Our economy was fairly
strong before the virus and had good numbers right up to when the virus hit, so there weren't a lot of other negatives affecting us.

View attachment 328591

Going to be a lot of small businesses that never open up again.

Especially if this type of lock down becomes common.

*****SMILE*****

Several states are starting to open up businesses as I'm typing.

Well, most blue states aren't opening. They'll try to drag it as long they can, while demanding for Federal support. Of course, they're also pushing for voting by mail, which might happen if they succeed to keep lockdown in force.

Now, the stimulus has an inherent flaw. It requires small businesses to retain employees on their payroll to get their loans forgiven but provides workers with a strong economic disincentive to stay attached to their employer. As the move to end the lockdown gathers steam, this could get worse. There are protests in some states clamoring to open up the economy and get people back to work. But this won't really even be possible so long as generous unemployment benefits are in place, and that actually could continue long beyond July 31.

Longer we pressure small businesses to stay closed, more painful is going to be for all of us.

 

[Ame®icano]

I'm about to start a thread that explains our way of dealing with the massive money printing going on.
It's a little short on details but uses plenty of examples of why's and how's-

As far as this doom and gloom type thinking in this thread- beat em at their own game, live your life as best you can and strive daily to leave your space a little better than you found it- better defined by you, not society or some empty suit clown on the take - don't worry be happy- I saw a quote today: Fear does not stop death. It stops life. Worrying does not take away tomorrow's troubles. It takes away today's peace.

"Fear does not stop death."

Lets look at Pilgrims who got into flimsy sailing ships to have a life of freedom they never could have imagined. The Pilgrims were willing to risk their own children in order to find freedom, and 49 out of 102 on the Mayflower died at sea or soon after landing.

Or lets look at Wright brothers asking themselves, wouldn’t it be wonderful if we could build something that could fly? Imagine that... And then Wilbur tells to Orville: “Nah, we can’t do it. One of us might die. Imagine how mom would feel.”

So what's the point?

Hospitals are laying off nurses because of your fear you might get the virus. Hospitals are being closed for the public’s the fear of getting infected by corona virus. Private practice doctors and small clinics are closing their offices for good too, some of them probably wont reopen. But, didn't doctors sign up for something like this, isn't this their job? Just like a soldier who join the forces knowing he might be deployed, or worse... die.

The very safety net which our society depends upon so we can exercise the freedom to drive cars and fly in airplanes in relative safety is slowly vanishing. The very institutions and doctors that give us a sense of safety in our society are already gone, to produce a less safe, instead of more safe country.

We may not have realized where this self confinement was heading because, in the beginning, it was "voluntary", then ordered into mandatory. We were compliant, to a fault. We were not alert enough to see our freedoms were being taken away because of some political hacks and media a-holes intentionally exaggerated statistics that are now revealed and confirmed to be scare tactics.

 

[Ame®icano]

It looks like the state of NY is out of unemployment funds

As in...OUT!

Shouldn't unemployment be funded for at least six months?

 

[Ame®icano]

Question B: Adjusting for legal restrictions on what the CBO can assume about future legislation and events, the CBO has historically issued credible forecasts of the effects of both Democratic and Republican legislative proposals.​

​

Responses​

​

Strongly agree: 26%​

Agree: 57%​

Uncertain: 5%​

Disagree: 0%​

Strongly disagree: 0%​

No Opinion: 5%​

That's a mere 83% for (strongly) agree, "the CBO has historically issued credible forecasts".

But, what do a bunch of economists know at which the alternative-fact right wouldn't like to jeer? The CBO may even have issued a warning or three dozen that no, tax cuts really, really, really do not pay for themselves. Dealing in hard and spiky things usually known as "facts" doesn't really endear the CBO to certain factions.

Those are responses by "economists".

However... analyzing CBO estimates shows that they are very good for the same year in which they are made, accuracy deteriorates rapidly. By year 3, CBO projections have actually been no better than luck.

CBO Budget Projections: After Two Years No Better Than Throwing Darts