Voices of Warning: 2008 Recession or Depression Likely

Many economic analysts are predicting difficult times ahead for the U.S. in 2008. The thing they seem to repeatedly be saying is that the Greenspan-era reckless sub-prime lending has led to a credit crisis and a steep decline in the housing market. This along with other bad economic policies has contributed to the declining value of the dollar with the fed pumping in large quantities of liquidity and this is all leading to higher oil prices. Here are some of the articles I’ve seen recently written by some economic experts. I don’t mean to instill fear, but rather inspire people to be prepared.

Economic Outlook 2008: Darkening Clouds From Lew Rockwell.com

. . .Presidential election years usually are not recessionary but [this] year will be an exception. Several economic factors are colliding in an almost perfect storm to markedly slow the general economy and the stock market.

The most important signal flashing recession is, of course, the sub-prime mortgage fiasco. After years of monetary inflation on the part of the Federal Reserve, individuals and families with poor credit were suckered into low-down-payment/low-interest adjustable mortgages that simply cannot be maintained or repaid under current conditions.The second major factor indicating a near-term recession is the sky-high price of crude oil and refined product. . .The third factor in the current recession scenario – and the real wild card – is the continuing decline in the value of the dollar in international money markets caused by our Iraq blunder and the Federal Reserve–generated oversupply of dollars.

Recession 2008? Wall Street Journal

Over the past half century, every U.S. housing downturn as sharp as the current one has translated into a U.S. recession. U.S. house prices are falling at an annual rate of nearly 4% — an event not seen since the Great Depression — and the downward trend is accelerating.

The credit crunch that has emerged since late July is a clear signal of a move closer to recession. Tighter credit conditions mean that the drag on the U.S. economy will soon spread beyond the housing sector to affect consumption and investment decisions.

Hedge Funds Anticipate Recession in 2008 Yahoo Finance

The U.S. economy is heading for a recession in 2008, according to a poll conducted on behalf of CPA firm Rothstein Kass by Russ Prince, a leading authority on private wealth. Over 61% of hedge fund industry principals surveyed indicated that a recession in 2008 is a “very likely” scenario.

Can the U.S. economy pull an Indiana Jones? Marketwatch.com

One reason the recession fears haven’t gained more prominence is that economists are generally loathe to forecast serious downturns. Carl Tannenbaum, chief economist at La Salle Bank in Chicago, who used to compile economists’ surveys from the National Association of Business Economics, said he doesn’t recall ever seeing a formal forecast of a recession.

What generally happens in a recession is that the economy starts to slow down, and then growth just falls sharply. None of the complex econometric models in use can forecast this break.

House prices seen falling 30 pct Reuters.com (12.06.07)

Housing markets from Punta Gorda, Florida, to Stockton, California, will crash and suffer price drops of more than 30 percent before the housing crisis is over, a report from Moody’s Economy.com said on Thursday.

“This is the most severe housing recession since the post-World War II period,” Zandi told Reuters.

These markets have been hard hit due to several reasons, namely the exiting of investors from the areas, a fair amount of subprime mortgage loans causing an increase in foreclosures and overbuilding by home builders. . .

Top economist says America could plunge into recession Times Online (12.31.07)

Professor Shiller, author of Irrational Exuberance, a phrase later used by Alan Greenspan, the former Federal Reserve chairman, said: “This is a classic bubble scenario. A few years ago house prices got very high, pushed up because of investor expectations. Americans have fuelled the myth that prices would never fall, that values could only go up. People believed the story. Now there is a very real chance of a big recession.”

There is at least one man who is saying that it wasn’t Fed policies that caused the housing downturn, but rather the “extraordinary forces of globalization.” Who is that man? None other than Alan Greenspan himself, the man with responsibility of setting the market’s short term interest rates.

Greenspan: Recession Odds ‘Clearly Rising’ NPR (12.14.07)

Global forces beyond the Federal Reserve’s control helped fuel the bubble that led to the current housing meltdown, former Fed Chairman Alan Greenspan said Thursday. In an NPR interview, Greenspan also said that the odds of a recession are “clearly rising.”

Greenspan iterated his comments about the possible recession days later on ABC. If you watch the video in the upper right, Greenspan also mentions the forces of globalization again.

Greenspan: U.S. Moving Closer to Recession ABC News (12.16.07)

“The probabilities of a recession have moved up to close to 50 percent — whether it’s above or below is really extraordinarily difficult to tell. I think that’s correct,” he said in an exclusive “This Week” interview with George Stephanopoulos.

“It’s very critical that this thing reach a selling climax — if I may put it in other words, exhaust itself,” Greenspan said. “It’s only when the markets are perceived to have exhausted themselves on the downside that they turn. Trying to prevent them from going down just merely prolongs the agony.”

We appear to be witnessing the unfolding of a crash exactly as predicted by Joseph Stiglitz in October of 2006.

Former World Bank Chief Economist Predicts Global Crash Prisonplanet.com

Former World Bank Vice President, Chief Economist and Nobel Prize winner Joseph Stiglitz has predicted a global economic crash within 24 months (of October 2006 [also noting the housing decline]) - unless the current downturn is successfully managed. Asked if the situation was being properly handled Stiglitz emphatically responded “no”. . .

Stiglitz puts the blame for the current crisis on former fed chief Alan Greenspan:

In the longer term, lessons must be learnt from the turmoil. One is that you don’t solve the problems of a collapsing bubble by blowing up another, which is what Alan Greenspan did after the dotcom fiasco in 2001 - the most irresponsible behaviour of any central banker in living memory.

Impending Destruction of the US Economy Paul Craig Roberts

Superpower America is a ship of fools in denial of their plight. While offshoring kills American economic prospects, “free market economists” sing its praises. While war imposes enormous costs on a bankrupt country, neoconservatives call for more war, and Republicans and Democrats appropriate war funds which can only be obtained by borrowing abroad.

By focusing America on war in the Middle East, the purpose of which is to guarantee Israel’s territorial expansion, the executive and legislative branches, along with the media, have let slip the last opportunities the US had to put its financial house in order. We have arrived at the point where it is no longer bold to say that nothing now can be done. Unless the rest of the world decides to underwrite our economic rescue, the chips will fall where they may.

Some experts are even predicting the recession will turn into a depression:

Long Wave Analyst

When debt creation becomes unsustainable, the bubble bursts… The war may not be an issue to many Americans, but an economic depression will be.

Gerald Celente: Dollar Will Fall 90 Percent Truth New.us

Gerald Celente is not your garden variety doom-and-gloom crackpot. Celente, director of Trends Research Institute, forecasted the subprime mortgage financial crisis and the decline of the dollar a year ago and gold’s current rise in May. He also predicted the 1997 Asian Currency Crisis and the fall of the Soviet Union. “We are going to see economic times the likes of which no living person has seen,” he told United Press International.

Wait a minute. That includes people who lived through the so-called “Great Depression.” Does Celente think the “Panic of 2008″ will be worse than the Depression? It would appear so.

From “Meet the Weimar Dollar” (2.07.2008):

Where is this $150,000,000,000.00 “economic stimulus package” coming from? Let’s make this really clear. The United States government does not have any money. On the contrary, the national debt now stands at $9.2 trillion dollars, which is more than 61 times more than the “package.” So, as they don’t have the money to give, those $600 checks they plan to mail out this spring will literally comprise just printing money.

. . . But then what we will have is a national debt, thus increased, in addition to whatever natural increase will occur, to at least $ 9,350,000,000,000.00. When the country owes that kind of money, what is the currency - in this case the dollar bill in your wallet – really worth? It is really worth “-1/9,350,000,000,000.00.” (Note the minus sign).

Crude Oil Prices Increase as Dollar Declines Against Euro Bloomberg.com

The euro-dollar exchange rate and oil have moved in the same direction 90 percent of time during the past year, according to Bloomberg calculations based on the correlation of their value changes.

(The declining dollar is the reason gas prices are going up. Its inflation.)
[These are only a few of the articles that I found, hundreds more could have been added to this list predicting a similar scenario. Time to prepare for the worst and hope for the best.]

More:
Recession: With War or Without It? Lew Rockwell.com, 7.12.08

The Great Panic of 2008 Don Harrold.net, 7.01.08

How to stop the Great Crash of ‘08 Asia Times, 7.02.08

Report: OPEC president sees oil at $170 this year Marketwarch.com, 6.28.08 Khelil blames Fed, falling dollar, increased demand for surging crude prices

CORRECT: U.S. stocks plunge; worst June for Dow since 1930 Marketwatch, 6.26.2008

RBS issues global stock and credit crash alert Telegraph.co.uk, 6.18.08

Morgan Stanley warns of ‘catastrophic event’ as ECB fights Federal Reserve Telegraph.co.uk, 6.17.08

The Government Wrecks the Economy Lew Rockwell, 6.14.08

Oil Rally Topped Dot-Com Craze in Speculators’ Mania Bloomberg, 6.13.08

World has enough oil reserves, says BP boss The Guardian, via the Raw Story, 6.11.08 “I am certainly not a subscriber to peak oil (theories).”

Why the Oil Price Is High “…the two biggest factors in oil’s high price are the weakness in the U.S. dollar’s exchange value and the liquidity that the Federal Reserve is pumping out.” Chronicles Magazine, 6.10.08

Welcome to the ‘recession’
Buffett says we’re there. Greenspan says we’re likely so. It may not be official, but the question is: How long will the funk last? CNNMoney.com 5.27.08

‘Numbers racket’ exposes potential disaster for economy, markets Marketwatch, 5.19.2008
JPMorgan Chase CEO: Recession Just Beginning Money News.com, 5.13.08

The next bubble: Priming the markets for tomorrow’s big crash Harper’s Magazine, 2.08

Buffett says recession may be worse than feared Yahoo News, 4.28.08
IMF says US crisis is ‘largest financial shock since Great Depression’ 4.9.2008 UK Guardian
More than 50 percent chance of U.S. recession: Greenspan 4.6.2008 Reuters
Bernanke: “Recession Is Possible” 4.408 No World System
Fed’s interest rate games could destroy the dollar 4.4.08 Detroit News
Bernanke warns of possible recession AP 4.2.08
U.S. economy could even contract in the first half, Fed chief says Marketwatch 4.2.08
USA 2008: The Great DepressionThe Independent 4.1.08
Looks Like There’s a Silver Shortage 3.24.08 Seeking Alpha
Stock Guru Granville: We’re in a Crash Truthnews/Bloomberg 3.17.2008
Depression2: Welcome to the Future Depression2.tv 3.16.2008
No Money Truthnews/ Keystone PA Spaces 3.17.2008
Dollar Declines to 12-Year Low Versus Yen, Record Against Euro Bloomberg, 3.15.2008

Derivatives the new ‘ticking bomb’
Buffett and Gross warn: $516 trillion bubble is a disaster waiting to happen 3.10.08 Marketwatch

Recession fears rise on more job cuts 3.7.08 Reuters
New ’super-spike’ might mean $200 a barrel oil 3.7.08 Marketwatch.com
The numbers behind the lies “Economist John Williams says real unemployment and inflation numbers — figured the old-fashioned way — may be two or three times what the government admits. Heres why, and what it means for Social Security.” 3.6.08 Contrarian Chronicles
Why the dollar is so cheap, and euro and gold are so dear3.5.2008 Robert H. Smith School of Business
Stiglitz Blames Greenspan For Recession 2.26.2008 Infowars.net
Wall St. Banks Confront a String of Write-Downs NYTimes 2.19.2008
Banks “quietly” borrow $50 billion from Fed: report Reuters 2.19.2008
Bernanke Warns of Worsening Economy AP Economics Writer 2.14.08
‘Dean of Oil Analysts’ Maxwell (Part 4 of 4): Oil Crisis Will Lead to 10-Year Financial & Political Crisis Energy Tech Stocks.com 2.07.2008
10 Reasons to be Critical of the Federal Reserve Currency Trading.net 1.31.08
US recession will dwarf dotcom crash Telegraph.co.uk 1.29.2008
Soros predicts worst recession for 50 years First Post, 1.23.08
The US economy is set for a long recession, a panel of economists at the World Economic Forum has warned BBC News, 1.23.2008
Miserable Monday as biggest FTSE crash since 9/11 wipes off nearly £60bn in shares 1.21.08
Coming Week: Upside Down The Street.com, 1.19.08
Odds are, U.S. is in a recession Marketwatch, 1.18.08
2007 Wholesale Inflation Highest in 26 Years AP Economics, 1.15.2008
Recession in the US ‘has arrived’ BBC, 1.08.2008
Bush Meets With ‘Plunge Protection Team’ Roguegov./Telegraph, 1.08.2008
How the dollar’s collapse will lead to a new gold standard MoneyWeek
How high would gold rise under a new gold standard? MoneyWeek
US recession risk rises as job market slows Telegraph.co.uk, 1.04.2008
Irish Stock Market Crash and Global Depression WiseUpJournal, 12.30.2007
2008 Is Shaping Up to Be a Tough Year MoneyWeek, 12.27.2007
The World’s Largest Banks Are Now Trapped Lew Rockwell.com, 12.12.2007
BIS warns of Great Depression dangers from credit spree
Crisis May Make 1929 Look Like a ‘Walk in the Park’ Telegraph, 12.29.2007
13 reasons Bush’s bailout won’t stop recession
Denmark Bank predicts Ron Paul presidency, U.S. depression
Top economist says America could plunge into a recession Times Online 12.31.2007
Blame abounds for housing bust
Mild recession likely, Morgan Stanley says
Why is Economic Depression Imminent?
Is the U.S. Headed Towards the Second Great Depression?
Economic Depression – Precisely Why and Approximately When
Financial Worry, Health, and the Reverse Wealth Effect As Housing Pops
Ten resolutions that will help you survive the coming bear market 12.31.07
The Great Depression-2008

(Know of some other good articles on the subject? Add a comment with a link.)

Here’s my latest blog posts on the Economy, U.S. Dollar, Oil, and other economy-related topics.

ECONOMIC SOLUTIONS FROM THE RON PAUL SCHOOL:

The following are excerpts taken from articles written by Ron Paul. I believe that these are the only permanent solutions for our nation to prevent a depression and climb successfully out of the recession we are currently in.

Ron Paul Unveils a REAL Economic Stimulus Plan RonPaul2008.com 1.24.08

The comprehensive economic revitalization plan is available online at: http://www.RonPaul2008.com/Prosperity.

The four areas that the plan covers are:

1. Tax Reform: Reduce the tax burden and eliminate taxes that punish investment and savings, including job-killing corporate taxes.

2. Spending Reform: Eliminate wasteful spending. Reduce overseas commitments. Freeze all non-defense, non-entitlement spending at current levels.

3. Monetary Policy Reform: Expand openness with the Federal Reserve and require the Fed to televise its meetings. Return value to our money.

4. Regulatory Reform: Repeal Sarbanes/Oxley regulations that push companies to seek capital outside of US markets. Stop restricting community banks from fostering local economic growth.

Another ‘Emergency’ Spending Bill Ron Paul (03.21.2006)

The real emergency is in Washington, where Congress is spending and borrowing America into a perfect storm. As economist James Turk explains, the federal government now relies upon debt to finance 20% of its spending. Low interest rates during the 1990s and early 2000s kept interest payments on government debts – Treasury Bonds and Treasury Bills – somewhat manageable. During the same period, however, the Federal Reserve greatly increased the money supply, which has caught up to us in the form of price inflation. The Fed now must raise rates to combat this inflation, but higher interest rates will chill economic growth and slow tax revenue. To quote Mr. Turk, “The federal government faces a potentially toxic mix of constrained revenues, soaring expenditures, ballooning debt, and rising interest rates.”

This is the real emergency that must be addressed in Washington, and the only solution is to reduce government spending substantially. If we don’t put the brakes on the spending spree soon, we may find ourselves facing another period of economic malaise that rivals the 1930s.

Paul calls for eliminating federal income taxes to avoid recession USA Daily 1.22.08

While touring Louisiana before today’s caucus, Republican presidential candidate once again proposed eliminating federal income taxes and returning to a gold backed currency to rescue the nation’s economy.

Paul had warned that the current economic crises would develop and has blamed the Federal Reserve for creating it. Paul said, “The Fed has again taken our country into a terrible crisis. Who else is talking about honest money that cannot be printed up at will by DC bureaucrats? My opponents in both parties are all some variety of print-and-spend Keynesians.”

Paul continued, “Only we are telling the truth, about who is to blame for this recession, and how we can build real prosperity with sound money, no IRS, no deficit, and strict obedience to the Constitution. And, of course, no hyper-expensive, hyper-dangerous empire all around the globe.”

Economic Terror: Ron Paul (02.09.2002)

. . . In the 1970s, wage and price controls were used to suppress price inflation and to help the economy, without realizing the futility of such a policy. Not only did it not work, the economy was greatly harmed. Legislation, per se, is not necessarily harmful, but if it reflects bad policy, it is. The policy of wage and price controls makes things worse and represents a serious violation of people’s rights.

Today, we hear from strong advocates of higher taxation, increased spending, higher budget deficits, tougher regulations, bailouts and all kinds of subsidies and support programs as tools to restore economic growth. The Federal Reserve recognized early on the severity of the problems and, over the past year, lowered short-term interest rates an unprecedented 11 times, dropping the Fed funds rate from 62 % to 1: %. This has not helped, and none of these other suggestions can solve the economic problems we face either. Some may temporarily help a part of the economy, but the solution to restoring growth lies not in more government but less. It is precisely too much government, and especially manipulation of credit by the Federal Reserve, that precipitated the economic downturn in the first place. Increasing that which caused the recession can’t possibly, at the same time, be the solution.

. . .Monetary inflation is the chief cause of recessions. Therefore, we must never expect that this same policy will reverse the economic dislocations it has caused.

For over a year, the Fed has been massively inflating the money supply, and there is no evidence that it has done much good. This continuous influx of new credit instead delays the correction that must eventually come- the liquidation of bad debt, and the reduction of overcapacity. This is something Japan has not accomplished in 12 years of interest rates around 1%. The market must be left to eliminate the misdirected investments and allow the sound investments to survive.

There are other policies that will assist in a recovery that the Congress could implement. All taxes ought to be lowered, government spending should be reduced, controls on labor costs should be removed, and onerous regulations should be reduced or eliminated.

. . .Sadly lacking in the Congress is a conviction that free markets- that is truly free markets- and sound money can provide the highest standard of living for the greatest number of people. Instead, we operate with a system that compromises free markets and causes economic injury to a growing number of people, while rewarding special interests and steadily undermining the principles of liberty. Unfortunately, the policy of monetary inflation is most harmful to the poor and the middle class, especially in the early stages.

Since rejecting the current system and endorsing economic freedom diminishes the power and influence of politicians, it’s difficult to get political support for such a program. The necessary changes will only come when the American people wake up to the reality and insist that the Congress pursues only those goals permitted under the Constitution.

Instead of moving in that direction of freer markets, the more problems the western countries face, the more government programs are demanded. If one looks at Europe, the United States, or even Japan as their economies weaken, government involvement in the economy increases. But in China and Russia, the horrible conditions that communism causes, ironically, made these two countries move toward freer markets when they encountered serious troubles. Even the central banks of these two countries today are accumulating gold, while western central banks are selling.

. . .Very few in Washington, however, recognize the dire consequences to economic prosperity that welfarism, warfarism, and inflationism cause. Most believe that the occasional recession can be easily handled by government programs and a Federal Reserve policy designed to stimulate growth. It’s happened many times already, and almost everyone believes that in a few months our economy and stock market will be roaring once again.

This is where I disagree.

Every recession in the last 30 years, since the dollar became a purely fiat currency, has ended after a significant correction and resumption of all the bad policies that caused the recession in the first place. Each rebound required more spending, debt and easy credit than the previous recovery did. And with each cycle, the government got bigger and more intrusive.

Bigger government with more monetary debasement and deficit spending means a steady erosion of the free market and personal freedoms. This is not tolerated, because the people enjoy or even endorse higher taxes, more regulations and fewer freedoms. It’s tolerated because most people believe that their financial and economic security is the responsibility of the government. They believe they are better off with government assistance in facilitating the free market, having been taught for decades that it is necessary for government to put a human face on capitalism. Extreme capitalism, i.e. freedom, we have been told is just as dangerous as extreme socialism. As long as this belief prevails, our system will continue in its inexorable march toward fascist-type socialism.

. . .The economic loss is bad enough, but whether it’s fighting the war on terrorism, acting as the world’s policeman, or solving the problems of vanishing wealth, the real insult will come from the freedoms we lose. These freedoms, vital to production and wealth formation, are necessary and represent what the American dream is all about. They are what made us the richest nation in all of history, but this we will lose if Congress is not careful with what it does in the coming months.

. . .Many realists who see the world as it really is and who recognize the dilemma we face in the United States to preserve our freedoms in this time of crisis are despondent and pessimistic, believing little can be done to reverse the tide against liberty. Others who share the same concern are confident that efforts to preserve the true spirit of the Constitution can be successful. Maybe next month or next year or at some later date, I’m convinced that, in time, the love for liberty can be rejuvenated. Once it’s recognized that government has no guarantee of future success, promoting dependency and security can quickly lose it allure.

The Roman poet, Horace, two thousand years ago spoke of adversity: “Adversity has the effect of eliciting talents which in times of prosperity would have lain dormant.” Since I believe we will be a lot less prosperous in the not-too-distant future, we will have plenty of opportunity to elicit the talents of many Americans.

Leonard Read, one of the greatest champions of liberty in the 20th Century, advised optimism:

In every society there are persons who have the intelligence to figure out the requirements of liberty and the character to walk in its ways. This is a scattered fellowship of individuals- mostly unknown to you or me- bound together by a love of ideas and a hunger to know the plain truth of things.

He was convinced that this remnant would rise to the occasion and do the necessary things to restore virtue and excellence to a people who had lost their way. Liberty would prevail.

Let us be convinced that there is not enough hate or anger to silence the cries for liberty or to extinguish the flame of justice and truth.

We must have faith that those who now are apathetic, anxious for security at all costs, forgetful of the true spirit of American liberty, and neglectful of the Constitution, will rise to the task and respond accordingly.

Here in 1983, Ron Paul foresees the recession of 1987 (which did occur). The video is of a debate on the Gold Standard, featuring Congressman Ron Paul and Charles Partee, member of the Federal Reserve Board of Governors. This debate took place at the 1983 Capital Hill Gold Standard Conference in Washington, DC, which was hosted by the Ludwig von Mises Institute.

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