The Great Depression of Debt takes a close look at today’s economy and offers a bleak prediction for its future. However, those positioned to handle dramatic shifts in consumer spending, the mortgage industry, and the stock market are at a great advantage. Author Warren Brussee offers insight into the coming economic situation and provides steps to prepare for it. For example, he recommends that savings be in Treasury Inflation Protected Securities until the stock market drops 73% from its 2004 level. Methods of determining when the stock market is again a good buy are defined, and different investment options are evaluated. Even during a depression, people will need to save for their future, and Brussee provides detailed charts that show retirement savings requirements.
A recession occurs when there is a signiﬁcant decline in economic activity spread across more than a few months. This decline is shown in real GDP, real income, employment, industrial production, and wholesale-retail sales. When the recession becomes severe or long enough, it transitions into an economic depression. As I write this book in late 2008, all the measures of economic activity are declining, so we certainly qualify for a recession. And given the depth of the housing, mortgage, debt, and credit issues, we appear well on the way to a full-blown depression.
The U.S. economy began to slow in 2007, and the GDP went negative in the fourth quarter of 2007. Some people only look at the GDP (Gross Domestic Product) when determining whether we are in a recession/depression. However, the government’s deﬁnition of a recession includes many additional factors, such as unemployment. And, as mentioned earlier, a depression is just a severe and extended recession. In the Great Depression the GDP went down four years in a row starting in 1930; it then went up the next four years, down the next year, then up again as we entered World War II. But we generally consider the whole period of 1929 through 1940 a depression because of its severity, because unemployment stayed very high, and because other economic measures remained weak even during the years when the GDP was rising.
The start of the current recession/depression was delayed almost a year longer than I expected because people continued to do cash-out reﬁnances on their homes well into 2007, even though homes had already begun to drop in price. However, this delay is only going to make the recession/depression worse because of the increased number of people with mortgages greater than the values of their homes. As I write, 10 percent of homeowners are upside down on their mortgages, and this is increasing at a relentless pace as homes continue to drop in value and more homes come into the market due to record foreclosures.
This, in turn, hurts all the credit markets as “mortgage walkers” abandon their homes, causing mortgage-backed securities to continue to lose value. In addition, an extra 1.5 million homes were built in response to the demand caused by the increased number of people able to buy houses based on foolish mortgages. These extra homes are now an albatross around the neck of the housing recovery. Home prices will continue to drop for years; and home building will be largely stagnant, driving related unemployment up. And, of course, all of this is in addition to the underlying problem that consumers have been spending more than their incomes, which is now reversing out of necessity. This reduced spending is causing a severe slowing of the economy, exacerbating the economic problems related to housing.
These problems are so severe that it will take until 2012 or 2013 before the economy bottoms out and our economy again begins to grow. In the meantime, the stock market will drop dramatically, unemployment will be over 15 percent, and the dollar will lose its position as lead currency. Our country will be humbled as it is forced to adapt to a far lower and simpler standard of living. Although the turnaround of the economy is likely to happen in approximately 2013, it will be somewhere around 2020 before our country’s economy fully recovers.
- The Crazy Nineties
- The Debt Bubble
- Why Are the Good Times Ending and the Bubbles Breaking?
- Current Times Compared to 1929–1930
- What This Depression Will Be Like
- What Else May Deepen the Depression
- Could the Fed Have Stopped This Depression?
- Now That It Has Started, How Are We Going to Work Our Way Out of This Depression?
- Why the Stock Market Is Currently a Bad Investment
- When to Get Back Into the Stock Market
- Once You Are Back in the Stock Market
- How to Survive the Coming Depression
- Saving Before and During the Depression
- Retirement Savings Charts for People Planning to Retire in 15 to 40 Years
- I Want to Retire Soon. How Much Money Will I Need?
The Great Depression of Debt: Survival Techniques for Every Investor By Warren Brussee pdf