Coming Financial Collapse of America

Get ready because we're going to be in for a ride not felt since 1929. And probably much worse, given the multiples involved since then.

The U.S. economy is set to crash. And it all has to do with a growing worldwide loss of faith in the U.S. dollar. Here are some worrying trends:

1. Greed has driven the economy since the emergence from the 2001 recession.
   
2. The Housing bubble occurred simply because cheap credit was plentiful because the Fed cut interest rates with rapidfire regularity.
   
3. As Wall Street lagged, investors sought alternative sources of appreciation. Real estate, derivitives and hedgefunds became the preference.
   
4. The thirst for higher and higher returns has inflated the prices of those investments.
   
5. All of this has been because of a worldwide glut in liquidity. Excessive cash (as in the U.S. dollar) finding havens to invest because there is a growing concern on the dollar. Better to find an investment with a small return than keep the dollar.
   
6. Now people like the Oracle of Omaha are saying the dollar is a bad bet.

Today, a great story appeared in the National Post regarding a meeting of notable bears. Here are the predictions of doom from those much more educated than myself.

Much of this follows other threads I've talked about in the past:

Housing to spur 2007 Global Recession.

OPEC Threatens to Derail U.S. Economy

War on the Dollar

Now the question becomes, how does the little guy, the average American worker -- nay, the average worldwide worker -- buffer herself against the coming financial armageddon?

[edit on 5/17/2007 by behindthescenes]

[edit on 5/17/2007 by behindthescenes]

Is today the beginning of the collapse? This is really serious everyone.

Of course, we may rebound tremendously tomorrow, but I think the storm clouds we've been witnessing brewing on the horizon have finally come to coalesse. This may be the proverbial straw that broke the camel's back.

Global Market plunges on credit fears. [/url/

[url=http://www.atimes.com/atimes/China_Business/IG26Cb02.html]Another fear realized: China no longer going to support our credit addiction. Halting buying of mortgage-backed securities....

How all of this can collapse the U.S. dollar...

“Worries that have been out there for the past couple of years are coming to a head right now,” said investment strategist Edward Yardeni, president of Yardeni Research Inc. “It’s show time.”

Everyone, cross your fingers and make sure your job is secure as you can make it....

the short term key to wether this is a one or two day affair or trend will likely be FRIDAY"S 2n'd quarter GDP report. which of course is tomorrow. maybe some insiders found out it will not meet the forecast 2.7% growth.

anything less than 2.5% will cause A FALL and possibly a Large one. the report will be in tomorrow morning.

Originally posted by behindthescenes
Now the question becomes, how does the little guy, the average American worker -- nay, the average worldwide worker -- buffer herself against the coming financial armageddon?

This is what I hate about this crap. Us "average" joes can do nothing about it. The wealthy seem to always land on their feet if not improve their standing. We've been dupped into putting our money in 401k for retirement (since SS won't be around much longer) and with a quick little "correction" or two we lose tens of thousands. Someone gains from this... it's not you or I.

[edit on 26-7-2007 by mecheng]

Assuming an economic collapse does happen, will our funds in the bank be safe or are they going to not allow us to withdraw money? What about my house? I think I remember getting a fixed interest rate, guess I better double check.

There are definitely signs of collapse, but there has been for years and I'm surprised it hasn't happened yet. Hate to say it, but maybe the wars America has gotten into has kept the economy afloat. Isn't that the main reason Germany went to war... for economic reasons?

Im actually going to the bank to talk to the mortgage guy on saturday to start paperwork to find out about my fiancee and I buying a town house.
Ive heard that the mrket may collapse soon so I definately have my fears, I know I want the fixed rate, or so Im told, but man if my 401k goes bye bye I just dont know what Ill do. move back in with the parent's probably. Scary.

well when the 2'nd quarter GDP forecast comes out tomorrow if it less than the forecast amount of 2.7% there will be a drop in the markets

the bigger issue is what will Ben Bernanke and the Federal Reserve do later this summer/fall with intrest rates. thinking worse case scenario he could take weak GDP report like this;

"well growth in the second quarter moderated slightly more than forecast but significantly increased from the first quarter, and we expect this trend to continue albeit slowly due to the continued drag in the housing sector , but as we move forward into the summer we will focus primarily on the upside risk's to inflation which are in regards to some of our indicators getting a bit out of our comfort zone.

what this would due is two fold. the stock market will drop if only a 2% gdp report comes out, regardless of what bernanke says later about it. and worse if that (transpires) and his biggest concern remains inflation then that signals he will likely Raise intrest rates in the summer/fall and this will put a further squeeze on the stock markets, the consumer and liquidity, which will lead to a recession IMO

also if he cuts rates, the dollar will be hurt and it is already looking injured , what they need is central bank intervention around the world (Like the U.N) were calling for earlier in June, because a rate cut would help the economy and the housiing situation (but be plausible if only central banks around the world supported the dollar, and thus the global economy) i know alot of this sounds like gibberish and confusing, and they may just hold steady longer and do nothing with rates , but the central bank of central banks the BIS in it's annual report last week said they recommend rate hikes in country's with large deficits and sighted some of the bigger risks could be a big fall in the u.s economy (funny this did not get much media attention)

Looks more like Black Monday back in 1987. That was a big drop as well. Don't know if people like to use that as a comparsion, but thought I just include it.

It won't just be America that suffers a financial collapse. Everyone has so much interdependence of the economies. A hiccup in Japan causes a burp in Europe and then a spasm in the USA market.

sickboy1313 the fixed rate is a good idea for now. If things rebound, in 10 years or so, you can refinance with a possible lower fixed rate. You'll have some equity by then, so it should work to your advantage.

A 2.2% correction is nothing - yet....

As for the whole economy tanking - not going to happen as the major derive lot's of overseas revenue and on the whole, most business are leaner and meaner today. Individual sectors may tank and that may trickle into hits in related sectors but as whole, it's not going to happen. 9/11 was the litmus test and after the "penguin syndrome" shook itself out, things went back to normal....

As for GDP/debt/deficit numbers we are decidedly mid-pack, not great, but also not bad in comparison to other countries ratios....

Fun fact, did you know our (USA) technology exports are larger in terms of dollars than our energy (oil/gas) imports..?? Nifty huh...!

UofCinLA

what is your definition of tanking

there is a wildcard in this whole housing slowdown and the intrest rates will play a crucial part in the avaiable liquidity in the markets in the united states and abroad. if intrest rates rise and credit and liquidity is squeezed more , in such a leveraged market the hedge funds and derivatives mess will get a "stress test". How will they perform? Nobody knows but they will be felt globally.

if the united states economy goes into recession (different from "tanking" in my book) the rest of the world will feel the side effects especially as credit and financing becomes tighter, also as the u.s consumer gets tapped out. and also if the dollar goes south as well, which will make foreign country's exports more expensive. So while the domestic economy will tank first, the "official economic numbers" which represent a bit more of a global picture will probably have more lag time, and and if anything be more of a reason why the fed will be able to focus on inflation and raise rates , and combined with the chance of a falling dollar appreciating other currency's foreign exports could go higher in price, as well as if the derivatives markets implode then all hell would break loose and there would be a world financial collapse.

but your point brings up the reality that there will be more of a two tier society with the domestic economy tanking while the multi nationals at least keep there heads above water, but these emerging economies will be hurt more than most realize if the u.s consumer falls, there will just be some lag time IMO

[edit on 26-7-2007 by cpdaman]

I guess my definition of tanking is the type of doom and gloom that we get on ATS all the time.... To my mind a 20-30% correction would be a tanking....

I see the credit problem as really nailing those that "played with fire" with similar slumps in outlying affected industries but look at it this way - the banks have already tightened a huge amount - they will take some write downs but people there will still have jobs. Housing will get hit hard, but so did those of us in the tech boom and bust. It will shake out the marginal players and sharks that were only there to make a quick buck but the major players will survive and still write loans and so on.... People will still need a place to live so the rental market will survive.... Because of higher gas/travel, people will go back into the cities into marginal areas to live closer to work versus fighting their way back and forth to the suburban jungle. I guess the point I'm trying to make is the connections are not clear cut and simple in a downturn. Life does go on, people need to eat, buy clothes, fix their cars, etc. and because of all that jobs will need to be filled and things will plod along.

Hedge funds play with fire by nature - if they get burned so be it. They are not the place for the average investor anyway, at least for retirement type funds. Same with people over-extending on the home loans "hoping" for a rise in value to offset the un-affordable mortgage....

I studied as a bio-major - so that influences things for me. I believe in the free market system just like a take solace in nature. They tend to work themselves out into a happy equilibrium and while things may get hurt the whole will be better for it down the road. Spock said it best - "the needs of the many outweigh the needs of the one".... Yeah it's harsh, but it does work...!

i like your post, but i think that the prices (bills) and cost of goods, food, gas domestically are going to rise and lots of people will be living below the poverty line and unemployment will be rampant (we will be a tapped out consumer nation sinking a service economy) bad recipe as well as one that breeds civil unrest. kind of like united states workforce transforms and has a standard of living similiar to haiti/mexico

i think there will be a mass emmigration out of america and that political instability will rise and that it will culminate in wars in various parts of the world, and eventually a cash less all credit society , naturally i hope i am wrong


i think there will be less and less people on the elevator of prosperity in america other than those heading multi national corporations, major lending institutions i.e JP morgan, goldman sachs, oil exec's, or rich foreigners (who buy up all the cheap assets at bargain prices)

[edit on 26-7-2007 by cpdaman]

[edit on 26-7-2007 by cpdaman]

To be honest, there are a lot of threads on this, however, I believe you and everyone else who think this are right. The market is starting to come back down, however, most stock are really overpriced and over valued. I know, because I own some of them. I actually want to reinvest my money I have from selling some stock, but I'm worried because, well, I still don't like the market, but, then again, I could be making money now, but, if I invest, and the market goes way down, like my gut says, then I'm stuck with nothing, if I don't invest and my other stocks/mutual funds crash, at least I'm stuck with a $1000 in cash. It's not a good time in the market, it's very uncertain, and of course the oil stocks are inflated, but that isn't all, almost all stocks are. The market needs to correct, but the correction will be big, maybe not 1929 big, but probably into the 10,000 range or so.

Originally posted by ChrisJr03
To be honest, there are a lot of threads on this, however, I believe you and everyone else who think this are right. The market is starting to come back down, however, most stock are really overpriced and over valued. I know, because I own some of them. I actually want to reinvest my money I have from selling some stock, but I'm worried because, well, I still don't like the market, but, then again, I could be making money now, but, if I invest, and the market goes way down, like my gut says, then I'm stuck with nothing, if I don't invest and my other stocks/mutual funds crash, at least I'm stuck with a $1000 in cash. It's not a good time in the market, it's very uncertain, and of course the oil stocks are inflated, but that isn't all, almost all stocks are. The market needs to correct, but the correction will be big, maybe not 1929 big, but probably into the 10,000 range or so.

I'm in the same boat.

Overall the market is overpriced, particularly in the financials sector (yes, believe it or not). While I think many blue chips are fundamentally sound, volitility is really what's keeping me out of the market for the moment.

In a sick way, I'm holding out for a 5-10% correction as the ideal time to go bargain shopping.

The real problem, and the sky is falling scenario for me, is the dollar, and the confidence behind the dollar. Never in modern history has so many strikes been against our currency. Right now, the Fed is playing a dangerous game of chicken with gradual devaluation of the dollar. While I'm a strong dollar proponent, I can see the benefits -- mainly for our manufacturing and low cost sectors -- for a weaker dollar. But there is too many bills in the hands of private investors (through mortgages, credit funds, direct reserve holdings) who have fed Americans their high fat diet of cheap money that are now becoming increasingly uneasy. When I start to hear people like Morgan Stanley's CFO say, boy, the Euro is looking mighty attractive as a long-term investment tool, and countries like China and Iran (although motives are more geopolitical than practical) are shifting towards Euro as choice du jour for payment, then a complete crash of the dollar is more and more a possibility.

What will be the instigator of the fall? Who knows. The problem is that any number of scenarios are playing out right now that could very well start such a fall.

Scary times.

well good news (as long as the numbers don't change), The Gdp forecast is in and it was above the forecast (3.4%) which shows that even with housing tanking the big multi-nationals and other numbers, even though the consumer's showed some weakness

for one thing, as i hinted at this will show investors, that the fed has no intention of cutting rates, but the core infation numbers the fed was looking at dropped from 2.4 to 1.4 percent

this gives more strength to the belief among speculators that the fed will not change rates for a while. this is good news, now we just need other central banks to help support the dollar.

overall good news today on the GDP front but, even better news on the inflation front (at least regarding to wether the FED would move to increase intrest rates and squeeze the market) they won't becaue inflation is supposedly down. at least that is my take and any bernanke speeches will result in further posts (in case he want's to stay ahead of inflation and take pre-emptive measures)

the market should stabalize as long as the yen does not strengthen again today

although cred worries may have been at the heart of the yen falling anyway and therefore would persist but really i can't forecast day to day fluctuations (DUH)


[edit on 27-7-2007 by cpdaman]

DJIA -151.84 as of 11:20 CT.

Originally posted by mecheng
DJIA -151.84 as of 11:20 CT.

i make it 122 (CNBC)

Funny that folks are posting the drop in the dow of the last two days. Was anyone posting the incredible run that it has had recently? The market fluctuates and sometimes greatly. I dont think yesterday and today's drop signify an impending collapse. If it goes back up 300 points next week will someone post that? No probably not because its POSITIVE.

I wouldn't say a collapse, but, a 5-10-15% correction is probably needed. I look at the market and I see stocks that have no business being as high as they are. Are all of the oil stocks really that valuable, maybe, maybe not. But even the 2nd/3rd tier stocks are doing really well. Take for example, Dynegy (DYN). I use to own it, I doubled my money and got rid of it. They're a power company/holding company, something like that. Are they worth about $8.88, thats around what it is now, no, no they aren't. They recentyl took on $1.1 Billion in debt to take over another company; and yes that is potential, but is the stock worth $8-9 per share? I doubt it. I'd think with that amount of debt, and the information that they where sending out in their shareholder info, I would think it would be at $5 or so. Thats just my opinion of the market...but then again, who really knows; sometimes the market does some really weird things.