What Will Trigger Economic Collapse / Recession?

originally posted by: toysforadults
a reply to: theantediluvian

how can housing grow when people aren't making more money?

it doesn't make any sense

You had lots of foreign investors , but now they appear to be pulling out as well.

a reply to: interupt42

thank god get the hell out!!

originally posted by: toysforadults
a reply to: interupt42

thank god get the hell out!!

Well that will cause pain for the locals when their property values decrease and they can no longer use their HELOC nor sell their property.

If they actually delivered the promise to kick out all the illegals than you would really see our economy take a Cr@p over night.

After decades of lies and our politicians selling our country out to the highest bidder , Its a mess that needs to be acknowledged but handled slowly and carefully or it will bring everyone down with it.

a reply to: interupt42

Let it correct.

Rip the bandaid off.

a reply to: Edumakated

Just curious are we at the beginning of another implosion or recession. What is going to trigger it?

Few people keep as close an eye on this as I do and its simply my humble speculation that Corporate Debt is going to be a serious problem that might, over time, begin a slow implosion that ultimately takes down the economy, especially as the Fed continues to raise interest rates. Its well established that Bull Markets die as the Fed raises interest rates. This time it might be different i.e. much worse because of the number of near Zombie corporations sitting on huge amounts of debt.

www.cnbc.com...

www.foodlogistics.com...

In order to put today’s debt levels into perspective, Flum discussed them as a percentage of GDP (gross domestic product). Total U.S. debt is currently at three-and-a-half times GDP. Although it is wise to be concerned about those who borrowed too much, we should be particularly concerned about the owners of that debt: investors such as pensions and 401Ks. As Flum pointed out, even a moderate drop in the value of those securities would involve a loss of wealth equivalent to a large fraction of GDP. For example, a 10 percent decline in the value of this debt would wipe out wealth equal to 35 percent of GDP.

Best article on the subject:
www.truthdig.com...

Zombie Companies Fueled by cheap Fed money and low rates, the amount of outstanding corporate debt has nearly doubled from pre-crisis levels of $3.4 trillion to record levels of $6.4 trillion.As history has shown us, all bubbles pop. Until then, certain companies are the equivalent of the living dead. The Bank of International Settlements (BIS), or central bank of global central banks, defines zombie firms as “firms that could not survive without a flow of cheap financing.” The latest BIS Quarterly Report labeled one of every 10 corporations in emerging (EME) and advanced countries as a “zombie.” Corporate debt of nonfinancial U.S. companies as a percentage of GDP has surged before each of the last three recessions. This year, it reached 2007 pre-crisis levels. That didn’t end well last time. Plus, now, that debt has been powered by central banks the world over.

And there you have it.

originally posted by: Edumakated
Raising rates will hurt the housing market. I'm starting to see it now. People seem to be throttling back their price point as mortgage rates are much higher. As the housing market goes, so does construction and other trades.... then it trickles down to retail... then it affects cars...

Higher rates will also start showing up in credit card payments too.

The fed left rates too low for way too long.

Agreed. And the Fed did too much qualitative easing trying to jump start things. The only way to get all that empty cash out is to raise rates. It's going to hurt.

a reply to: Edumakated

I think that the trigger will be the bottom falling out of social networking. More specifically, the data monetization model. So many companies have been founded on the idea of monetizing data, and most of them are coming up short. Even the big platforms like Facebook, Google, and Amazon aren't seeing the returns they need and the data that is collected is becoming harder and harder to analyze, while being less and less representative of the general public.

When this model eventually fails, we're going to see a big hit in the software industry as Silicon Valley loses 50% of it's companies overnight. Most of these startups are funded through major investment firms, when they lose their entire investment at once (rather than just the usual percent of failures they expect), they'll be forced to start calling in the other debts they finance. This means mortgages and car loans.

I don't think we'll see a mortgage crisis at the beginning of this, but auto loans will start getting called in and subsequently defaulting. With no reliable transportation to work or shopping centers, we end up with a huge employment crisis, ending with a mortgage crisis.

a reply to: ketsuko

And it is probably much needed at this point.

I just don't see how the majority afford new housing any more. If we were to return to the time tested formula of house price = 3 years disposable income, I bet 75% of people out there wouldn't be able to afford a standard 30 year fixed loan. They are saying 6+ years disposable income is now standard and they make it look good on paper by offering 40+ year adjustable loans.

Madness. Simply madness. Like becoming a debt slave for life, unless you buy the BS that a house is an investment instead of just somewhere to hang your hat. Everyone who thought their residence was an investment will be in for a very rude awakening. Then 10 years will pass, everyone will forget and we will start this #t show again.

We are becoming debt slaves more and more every year. Our educational system will garuntee the majority don't understand this and instead see nothing but $$$$$$$$$$$$ signs. Bling bling. 'Look at me, I am keeping up with the neighbors', 'Do I win life now'?


ggggrrrrrrrrrrrrrrrrrrrr

a reply to: Edumakated

Great post S+F from me. I personally think that as the fed "normalize" interest rates, inflation will pick up and thus scare them into raising interest rates more in an attempt to thwart massive inflation. When that happens all the risk in the market, bad mortgages, bad loans, student loans, public and private debt become unmanageable and pop. We never fixed the last bubble, we just pumped more air into it to prevent it for resetting.

Oh and pensions, dont forget the elephant in the room.

originally posted by: toysforadults
a reply to: interupt42

Let it correct.

Rip the bandaid off.

Suicide will also get rid of a stomach pains, but their are better ways to go about it.

But I agree we are due for a correction and the recovery was based on full on BS.

a reply to: Edumakated

"What Will Trigger Economic Collapse / Recession?"

That would be the bankers, as to the reason, well that would be the bankers also.

a reply to: ClovenSky

Other countries have a much different model for health care and college. As we see automation take it's toll, I often wonder if many conservative ideals are going to be buggy whips.

I think automation and fiat/petro dollars are a huge risk to the world econ.

originally posted by: andy06shake
a reply to: Edumakated

"What Will Trigger Economic Collapse / Recession?"

That would be the bankers, as to the reason, well that would be the bankers also.

Exactly the bankers and their investors so remember to go thank a rich person .

a reply to: interupt42

what recovery?

there was only a recovery for a small sector of the population and tech that's it

a reply to: hopenotfeariswhatweneed

For the economic collapse???

Just so they can get more rich whilst everyone else gets bent over the proverbial barrel?

Aye, i would be up for thanking them in person profusely right around the time of the next Purge. LoL

a reply to: andy06shake

I concur....

It will start out as a market correction but some unforeseeable event will turn that correction into a panic, then ultimately the CRASH. House of cards, all fall down!!

a reply to: Edumakated

I gauge what is coming as far as the economy goes by how much rent costs rise and how rapidly. We live in a really nice apartment complex but not far from us is an older but still very decent apartment complex. A few years ago we checked into moving to the older complex (less than 2 years actually) and for a large 2 bedroom they were asking $600 per month. As of yesterday that same complex is asking for $750 for a much smaller, one bedroom economy apartment. Rental rates are climbing all over the metro area, and while we would absolutely LOVE to move into an actual HOUSE the rental rates on those have skyrocketted much more than apartments in the area (ex: a house that was $750 monthly less than 2 years ago is now nearly $1000).

Every time I have noticed rent costs rising as steeply and quickly as they have recently it has been a precursor for the economy taking a massive nose dive. Believe me or don't- but do not say you weren't warned when it all hits the fan.

a reply to: atsgrounded

Maybe I am not living in the real world, but it appears to me that many of the conservative values are closer to reality than any other ideology.

Social welfare is still pretty much in its infancy. There are more and more stories about the upcoming failure that socialized medicine is becoming, probably being led by the UK and some of the nordic countries. When you don't have any skin in the game, why take care of yourself? If you answer just because it is the responsible thing to do, you are probably closer to conservative ideals (nothing to do with politics what so ever).

When you remove the freedom of perish, things start going downhill and gain momentum in startling fashion, which I believe we are starting to see today. Not even the conglomerate news media will be able to effectively put lipstick on this pig for much longer.

I think having the US $ as the world reserve currency puts us in a really bad spot. A lot of people claim the exact opposite but if we weren't the world reserve currency, we would have had a true correction a long time ago. We are getting bled out slowly and painfully due to this status.

a reply to: ClovenSky

And our medical system isn't going to collapse? People have plenty of skin in the game in the US and there are super fit people that watch every thing to do with health and super slobs that don't give a hoot.

Social welfare is still pretty much in its infancy. There are more and more stories about the upcoming failure that socialized medicine is becoming, probably being led by the UK and some of the nordic countries. When you don't have any skin in the game, why take care of yourself? If you answer just because it is the responsible thing to do, you are probably closer to conservative ideals (nothing to do with politics what so ever).

The coming changes to gameful employment is going to make many of the conservative cornerstones obsolete, IMHO. As we all know cost of living keeps going up and pay is stagnant and has been for 35+ years.