[Eli]

I know most of you know who Karl Denninger is, well today his Market Ticker blog is quite disturbing.

Basically he explains how the current pricing in the credit markets is predicting a Greater depression, unemployment of above 20% and 2 million businesses BK.

The Market Ticker

[Micki]

Let's see if this will have any impact.
quantitative-easing-has-begun

Printing presses have hardly been warmed up.
But they need to krank up the speed a few more notches pretty soon now before the bankrupcies start becoming too common.

[PenultimateManStanding]

I know most of you know who Karl Denninger is, well today his Market Ticker blog is quite disturbing.

Basically he explains how the current pricing in the credit markets is predicting a Greater depression, unemployment of above 20% and 2 million businesses BK.

The Market Ticker

Unemployment above 20% means employment above 70% Great Depression unemployment was at it's height at 25% How does this translate to a "Greater Depression"? The Great Depression equities market dropped 90% Seems to me we'd have to have 30%+ unemployment and 95% equities fall to qualify as a Greater Depression. Plus it would have to last for many years.

[Eli]

I hear you Pen, time will tell.

But Karl has been very accurate at explaining what the credit market is pricing in.

At some point we are going to have a collapse of the dollar, then things will get even worse. We will be like Germany in GD1.

[Micki]

Just read my newsletter from investordailyedge. (email, so no link)

They had a depressing article on GM and the ripple effect on the economy. (GM going under would alone result in 2.5Million jobs lost)
I've posted most of it here as I don't have a link.

They still have a choice. Sacrifice the economy or sacrifice the Dollar (and by that later sacrifice the economy).
Tick Tock Tick Tock - Time is up. What is your decision?

Last Saturday I wrote about GM. Not only did I write about GM, but I also talked about how I felt they should get government assistance.

I only received one bit of reader feedback – someone debating as to exactly how many jobs would be lost if GM went bankrupt. The reader sent a screenshot of Yahoo finance where it said how many employees GM has. Then he wondered how that number could possibly turn into 2.5 million.

The answer is simple.

That employee count in Yahoo doesn’t include those employed by dealerships, suppliers, ad agencies, and mechanic shops that all rely on GM to a heavy degree. If GM goes broke, the flow of money to these companies stops. And then they layoff their workers. After about a year, we’d lose about 2.5 million workers thanks to a GM bankruptcy.

Here’s what gets me furious about all of this, though. If the government was just going to let GM go bankrupt, why did they save the financials? Wasn’t it to prevent a depression? But if GM goes bankrupt, that’s most likely what we’ll encounter – a depression.

Because if GM goes bankrupt, Chrysler will follow suit and Ford will have a hard time building cars when the entire automotive distribution network in the US nearly bankrupts completely.

Together, the big three are responsible for one out of every 10 jobs. So, if they go bankrupt, we’ll have unemployment of 16 – 17 percent within two years. That’s depression territory.

So I don’t understand why the government wouldn’t act on this immediately.

In Congress, the Republicans are holding up the bill. I knew that would happen, after all most Republicans believe in “free markets”. They feel that GM put themselves in this situation, so they deserve to go down. But didn’t the banks do the same damn thing? In fact, I’d venture to say that what the banks did was even worse. They knowingly sold crap to the American public.

The Democrats, on the other hand, want to pass a bailout bill without putting any significant restrictions on it. This I don’t agree with. If GM is going to get bailout money, they need a new plan moving forward to become and stay profitable.

Most importantly, a GM bankruptcy might be ok if the economy weren’t already circling the toilet. My fear is that if GM goes bankrupt, we’ll have another credit squeeze similar to what happened when Lehman went under. But this time, the Fed doesn’t have much ammunition left to try and make things “less bad”.

If GM goes under, banks may wonder who’s holding automotive assets and refuse to lend to each other in the suspicion that someone’s balance sheet is much smaller than it used to be. This would cause the LIBOR rate to spike higher. I also fear that more money will move into treasuries and out of every other asset. The DOW could hit 6,500 in a GM bankruptcy. And if Ford followed suit, a huge part of American manufacturing would go down the drain.

I say this to warn you that a GM bankruptcy is huge. Job losses would go through the roof and more retailers would go broke. Hell, the state of Michigan may enter default, which would be a huge mess. After all, it’s not like they could merge with the state of Illinois to reduce overhead, like banks are doing.

The times ahead are getting darker and even scarier then we could have imagined.

When will it all end? Nobody knows. But we must stay prepared and try to take advantage of any big opportunities we see.

[eastbay]

Well, from the brief peak to the lowest dip it was about a 90% drop, but if one excludes the year and a half when the DJIA was under $90, and the few months in 1929 when it was over $320, the drop during most of the Great Depression was only (lol) around 70% or so.

We really don't have all that far to go to reach those levels. Maybe 30 million more unemployed and a few thousand point drop in the DOW, but then the market would have to remain low for about 15 years to be anything as severe as The Big One.

On the other hand, we're adding 1/2 million more unemployed each week... so it may not take all that long to get there.... or to get worse.

[Eli]

Eastbay it is happening very quickly.

As we take the next step down, other nations are cutting off US debt, if the US can't sell its debt then we have two choices at that point shut down the Gov. and spending or naked printing.

Boom! we will hit another inflection point and then everything will find another level of collapse.

[firestarter]

Eli,

That was an excellent Ticker today. I also must admit that Denninger has largely cleaned up his act over at the forum. There is no longer any tolerance there for race baiting or political partisanship. And you are correct, he has been far ahead of most people regarding how this mess will be playing itself out. If he says 300 SPX, 3000 DJI along with a Depression you'd do well not to bet against him.

[eastbay]

Eastbay it is happening very quickly.

As we take the next step down, other nations are cutting of US debt, if the US can't sell its debt then we have two choices at that point shut down the Gov. and spending or naked printing.

Boom! we will hit another inflection point and then everything will find another level of collapse.

Darn it Eli, I know you are right... but I still hope there's some magic cure about to be discovered and quickly ready to be injected.

And yes, it's happening really fast. It's starting to scare me a little.

We were sitting quite comfy just a few months ago with no idea (well, for 99.9% of us anyhow) such a speedy collapse was right around the corner and about to pounce on all of us.

[twobyfouroftruth]

Ethanol and palm oil, that will save us.

[Eli]

Well the former will definitely ease the pain, and it will be much too precious to put into a useless car to take you to a job you no longer have.

[eastbay]

Palm oil: March, 2008 price = $ 1,420/ton
November 21, 2008 = $ 399/ton

[lowem]

Palm oil: March, 2008 price = $ 1,420/ton
November 21, 2008 = $ 399/ton

I think it was said in jest, Eastbay

[Sixstrings]

from the marketticker:

The credit market is telling you that we are headed for an S&P 500 trading at three hundred and a DOW at under three thousand.

over 2 million businesses going bankrupt in the next three years, and literal starvation and privation - all across America. No part of this nation will be spared.

Heavy stuff.

[lowem]

... unemployment of above 20% and 2 million businesses BK.

Wouldn't be too surprised if the unemployment rate hits 50%.
Half the country jobless.

[nobodypanic]

Ethanol and palm oil, that will save us.

you forgot backyard gardens.

[nobodypanic]

... unemployment of above 20% and 2 million businesses BK.

Wouldn't be too surprised if the unemployment rate hits 50%.
Half the country jobless.

i find it difficult to envision how the US could survive that level of unemployment intact.

[lowem]

i find it difficult to envision how the US could survive that level of unemployment intact.

I hear that, among certain segments of the population, and in certain smaller towns, it's already starting to approach this level. Like that DHL town.

Will 2009 be the Year of Collapse? We'll see.

[eastbay]

Palm oil: March, 2008 price = $ 1,420/ton
November 21, 2008 = $ 399/ton

I think it was said in jest, Eastbay

Oh I know.... I was just tossing some gas on the fire, as we say here in The West... lol