--- In FairfieldLife@yahoogroups.com, "Rick Archer" <[EMAIL PROTECTED]> wrote: > > From: FairfieldLife@yahoogroups.com [ > > The end result of the global economic slowdown may be the U.S. > announcing national bankruptcy as the government cannot afford the > bailouts that it promised and the market will not bail out the > government, Martin Hennecke, senior manager of private clients at > Tyche, told CNBC on Thursday. > > "We expect a depression in the United States. We expect a depression, > very possibly, also in Europe," Hennecke said on "Worldwide Exchange." > > ~~Full article and video at: http://www.cnbc.com/id/26656750 > > So what should a person of modest means do to prepare for a depression?
Learn to speak chinese. While a depression is sustained large, negative growth, of the economy, two other things have a high probability of arising under those conditions: 1) the tanking of the stock market -- while not the defining characteristic of a depression,-- would most-likely occur as its value -- driven by earnings expectations -- tank 2) the insolvency of the US govt. Bailouts could swamp the US with massive and spiraling debts, the dollar would tank (more), foreigners would try to unload their 3 tril of Treasury securities, tax revenues plummet -- US govt going insolvent has huge implications -- including the dissolving of ties to the federal govt by some/many states. Looking at the level of foreign ownership of the US market -- and thus its companies -- could soar. Not saying this will happen, but some perspective on the quantities of the numbers involved is insightful. US market capitalization is about $15 tri (US public debt close to 6, total paper debt near 10). The depression of the 30's saw the stock market plunge 80% within several years from pre-crash 1929 level -- though fluctuated around 50% for much of the 30's. For perspective, if the stock market went to mcap of 3 tril, same percentage as 30's decline -- and then Chinese holdings of US Treasury securities --currently at .5 tril (same as Japan) -- if doubled as US tries to borrow its way out of crisis -- China and Japan would each have "liquid" dollar-based securities of 1/3 US market cap. Total foreign holdings of US securities 3 tril now, would be some multiple of this after crises borrowing. Enough in concept to buy all public US companies. The above is for perspective -- not a prediction. China and Japan getting out of 1-3 (or 6 tril as govt trying to borrow out of crises could create) trillion of US treasury securities would not be easy or quick. The value would plummet as they try to sell large chunks, as interests SOAR to unimaginable levels, the government becomse totally insovlvant, the economy would tank, tax revenues plummet, etc. all part of the downward death spiral of which would be driving the market crash. And of course the Chinese economy would be tanking with no exports to US. Any number of scenarios could unfold -- the more probable would be a weathered crises, and then on with things in several years as the financial and real-estate markets unwind. However, Bear Stearns, Lehman and Merril Lynch and Fannie / Freddie going under or absorbed was not on the radar of most 3-6 months ago. China owning 20-30% of US companies in 10 years? Not unthinkable. So -- learn chinese.
