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What Is America Going To Look Like When Stocks, Home Prices And Even Used Cars All Crash By At Least 50 Percent?
Have you ever thought about what comes after the bubble? In 2008 we got a short preview of what life will be like, but most Americans seem to have come to the conclusion that the last financial crisis was just a minor bump in the road toward endless economic prosperity. But of course the truth is that the ridiculously high debt-fueled standard of living that we are enjoying now is not sustainable, and after this bubble bursts it will be an extremely painful adjustment for our society.
Since the last financial crisis, the U.S. national debt has nearly doubled, corporate debt has doubled, stock valuations have reached exceedingly ridiculous extremes, the student loan debt bubble has surpassed a trillion dollars, we are facing the largest unfunded pension crisis in U.S. history, and in many parts of the country (particularly the west coast) we are facing a housing bubble that is even worse than the one that burst in 2007 and 2008.
And even with all of these bubbles, U.S. GDP growth has been absolutely anemic. Even if you believe the grossly manipulated numbers that the federal government puts out, the U.S. economy grew at a “miserably low” rate of just 1.6 percent in 2016…
In terms of GDP, the fourth quarter was revised up slightly, but there were adjustments for prior quarters, and overall GDP growth for the year 2016 remained at a miserably low 1.6%. We’ve come to call this the “stall speed.” It’s difficult for the US economy to stay aloft at this slow speed. As Q4 gutted any hopes for a strong finish, GDP growth in 2016 matched the worst year since the Great Recession.
And corporate profits, despite a stock market that has been surging for years, are even worse. A lot worse. They’ve declined for years. In fact, they declined for years during the prior two stock market bubbles, the dotcom bubble and the pre-Financial-Crisis bubble. Both ended in crashes.
Things have continued to get even worse early in 2016. At this point, it is being projected that U.S. GDP will grow at an annual rate of just 0.9 percent during the first quarter of 2017.
So anyone that tries to tell you that the U.S. economy is in good shape is simply not being honest with you.
But even though things don’t look great now, they are going to look far, far worse after the biggest debt bubble in human history bursts.
For example, what do you think that America will look like after half of all stock market wealth disappears? In a recent note to his clients, John P. Hussman stated that his team is projecting that by the end of this current market cycle “roughly half of U.S. equity market capitalization – $17 trillion in paper wealth – will simply vanish”.
And of course that projection lines up perfectly with what I have been saying for quite a while. In order for key measures of stock market valuation (such as CAPE, etc.) to return to their long-term averages, stocks are going to have to fall at least 40 to 50 percent from their current levels.
As this coming crisis unfolds, other asset classes will experience astounding downturns as well. This week, Morgan Stanley (one of the too big to fail banks) released a report that said that used car prices “could crash by up to 50%” over the next several years…
For months we’ve been talking about the massive lending bubble propping up the U.S. auto market. Now, noting many of the same concerns that we’ve highlighted repeatedly, Morgan Stanley’s auto team, led by Adam Jonas, has just issued a report detailing why they think used car prices could crash by up to 50% over the next 4-5 years.
Housing prices are primed for a major plunge as well. This is especially true on the west coast where tech money and foreign purchasers from Asia have pushed home values up to dizzying levels. Half a million dollars will be lucky to get you a “starter home” in San Francisco, and it was being reported that one poor techie living there was paying $1400 a month just to live in a closet. Many believe that some cities on the west coast will be quite fortunate if home values only go down by 50 percent during the coming crash.
Everywhere you look there are bubbles. In a recent piece, Daniel Lang pointed out some more of them…
- Eric Rosengren, the president of the Federal Reserve Bank of Boston, recently made a startling tacit admission. We may be in the midst of yet another real estate bubble. Major financial institutions in this country are in possession of over $14 trillion worth of residential real estate loans. That’s well over $40,000 for every man woman and child in America.
- Low interest rates have fueled a bubble in subprime auto loans, and that bubble appears to be reaching its limits. There are now over 1 million ordinary and subprime auto loans that are delinquent, a number that hasn’t been this high since 2009.
- There is now well over a trillion dollars worth of student loan debt in this country; much of it owned by low income families. And there’s little hope that these students will ever see a return on their investment. That’s why at least 27% of student loans are in default. While more than one in four students are in default now, that number was one in nine a decade ago. And if current trends continue, there could be $3.3 trillion of student loan debt by the end of the next decade.
At some point the imbalances become just too great and the system collapses in upon itself.
In other words, we are heading for a massive implosion.
And once the implosion happens, people are going to go absolutely nuts. Anger and frustration are already rising to the boiling point all over the country, and it isn’t going to take much to push millions of Americans completely over the edge.
In a recent interview with Greg Hunter, author James Rickards warned that when things get really bad in America we could actually see what he refers to as “money riots”…
So, could we be facing a “Mad Max” world if the financial system totally crashes? Rickards says, “In ‘Road to Ruin,’ I talk about what I call the money riots. There is a lot of reasons for rioting. When you start shutting banks and the stock exchange and they say you can’t get your money, it’s only temporary, trust us, people will go out and start to burn down banks. The government is ready for that also with emergency response and martial law. . . . Governments don’t go down without a fight. . . . You can see the shutdown coming because they will try to buy time until they come up with a solution, whether it’s gold, Special Drawing Rights (SDR), guarantees or whatever it might be. There are only two or three possibilities here, but all of them will take time, and they will have to shut down the system. . . . People will not sit for that. So, that means people will riot. They’ll burn down banks. They will smash windows, but what is the reaction to that? The answer is martial law, militarized police, actual military units and you get something that looks like fascism pretty quickly.”
I very much agree with his assessment.
All it is going to take is another major financial crisis and this nation will go completely and utterly insane.
Unfortunately, all of our long-term economic problems have proceeded to get a lot worse since the last time around, and so when things fall apart this time we will likely be looking at a scenario that is absolutely unprecedented in American history.
A lot of people have become very complacent out there these days, but that is a huge mistake.
Just because a crisis is delayed does not mean that it is canceled. And because our leaders have kept making this economic bubble larger and larger, that just means that the coming crisis will be even more painful than it otherwise could have been.
53 Comments on "What Is America Going To Look Like When Stocks, Home Prices And Even Used Cars All Crash By At Least 50 Percent?"
Plantagenet on Mon, 3rd Apr 2017 8:08 pm
The US has recessions every 7 or 8 years. Hopefully the next one won’t be as severe as the last one.
Cheers!
Dooma on Mon, 3rd Apr 2017 9:34 pm
I watched a video by a millennial who was basically blaming the owners of YouTube for killing off small YouTubers (20,000 subs) like himself.
He lamented about the days when he got 1,000,000 views for one of his’ videos and blamed YouTube for being more strict now censoring it’s content.
For starters a bad tradesman blames his’ tools and you should never bite the hand that feeds you. Also welcome to the real world of small business where just because you do well once, does not automatically guarantee that it will happen again.
I was going to say that he could always get a real job but there probably aren’t too many around. That is America for you. Everyone has the chance to make it rich but most wont even come close.
makati1 on Mon, 3rd Apr 2017 9:34 pm
“What Is America Going To Look Like When Stocks, Home Prices And Even Used Cars All Crash By At Least 50 Percent?”
Bangladesh, or at least, the 3rd world. What a shock that is going to be.
“All it is going to take is another major financial crisis and this nation will go completely and utterly insane.”
Yep! I totally agree on that one. It is already well on its way. Just keep the prez away from that red button. lol
makati1 on Mon, 3rd Apr 2017 9:37 pm
Plant, you are already living in a recession. What is coming will make the Great Depression look like Sunday in the park. You cannot even imagine the U$ after…
“…when things fall apart this time we will likely be looking at a scenario that is absolutely unprecedented in American history.”
So be it. I’m waiting.
Midnight Oil on Mon, 3rd Apr 2017 9:37 pm
Another article by David Stockman????
Outcast_Searcher on Mon, 3rd Apr 2017 10:22 pm
Another week. Another doomer predicting “economic collapse” real soon now. Gee, what a surprise.
Sissyfuss on Mon, 3rd Apr 2017 11:59 pm
Snyder, the author, is trying to entice Jesus to come back ASAP. He must be lonely.
madalin stunt cars 2 on Tue, 4th Apr 2017 2:36 am
“All it is going to take is another major financial crisis and this nation will go completely and utterly insane.”
Yep! I totally agree on that one. It is already well on its way. Just keep the prez away from that red button. lol
Go Speed Racer on Tue, 4th Apr 2017 2:54 am
There is a happier viewpoint.
The money supply has always increased.
They print more and more money, put that
into circulation.
It’s possible that instead of everything
collapsing to zero in a fit of deflation,
it will run the other way and inflate to
infinity.
In the latter scenario, a starter house will
cost you $1 Million dollars, a Big Mac is $8
but you earn $150K a year to pay for it all.
Seems like government plows under its sins
from decades earlier, by burying it with
money from the printing press. If we
examine the last 100 years of history, thats
how it goes.
GregT on Tue, 4th Apr 2017 3:13 am
GSR,
“In the latter scenario, a starter house will cost you $1 Million dollars, a Big Mac is $8 but you earn $150K a year to pay for it all.”
At least part of you scenario is correct. Around these parts, a starter home will cost you 1.2 million, a Big mac will set you back $5.25, and the average wage is ~$35K a year.
The happier, more realistic viewpoint.
Cloggie on Tue, 4th Apr 2017 3:55 am
What Is America Going To Look Like When Stocks, Home Prices And Even Used Cars All Crash By At Least 50 Percent?
It would be a popping bubble, what’s so bad about that? The chances are good that after being Globalist Central, America will be much more inward looking, like the failed real “America First” movement of the thirties…
https://en.wikipedia.org/wiki/America_First_Committee
…close the borders, not just for immigrants but also for foreign products and rebuild American industry. America is big enough to be largely self-sufficient.
makati1 on Tue, 4th Apr 2017 4:21 am
OR…. it could declare war on Russia and/or China in its last death throes. That would be typical of a dying empire and seems to be the way the future is pointing at this time. Too many old fruitcakes with a black, hating, heart in control. Peace in our time? I would give you 10:1 odds against.
Davy on Tue, 4th Apr 2017 5:07 am
Step forward those who think the fall will stay in America. I want to rip your naiveté and agenda apart. We are all connected to the dangers of collapse. Large too big to fail economic zones are Europe, US, China, Russia, and ME. The rest are manageable. The rest of the developed world and emerging markets can if big enough cause a contagion to one or all of the other major nodes. Generally they are small enough that they can be managed. The US is here to stay anti-Americans so quit circle jerking. You guys circle jerk daily here. Isn’t your junk getting sore? Your evil US is here to stay as long as the rest of you are. Clog, Europe will never survive a decline in the US and China. In fact Europe is likely along with China to be the shoe that brings the global economy down. China will die without the US makati…..sob sob. Poor guy his whole world is built around the collapse of the US.
Cloggie on Tue, 4th Apr 2017 5:49 am
Davy, I don’t buy your dead end street collapse world view. World history is a yuge series of transformations. Nobody claims that the US is going to evaporate into thin air. But even you have admitted recently that in your view the (attempted) US global empire is going to fail. America is not going to subjugate Russia and/or China. And Europe will “emancipate” from the empire. It is not an “anti-American” thing to say so, just pure realism. Only certain neocons in Washington haven’t accepted that message yet.
The long term geo-physical prospects for America aren’t that bad at all. It is not overpopulated as China is and to a lesser extent Europe (from Atlantic to Ural mountains).
Yes there likely will be a collapse of the western financial system. And yes it is going to implicate everybody. But just like in the case of Russia after 1991, there will be a recovery from that, everybody being sadder and wiser.
But there will a change in global distribution of power, with the US less and Europe and Russia and China more.
Do we in Eurasia like that? Yes.
Labeling that as “anti-American” is irrelevant, it is just “human”.lol
Davy on Tue, 4th Apr 2017 6:16 am
Clog, you are a habituated creature who sees a past and paints a future from it. You deny science and history that does not conform to your visions. This includes before man became civilized and falsely exceptional. You deny this because it does not conform to your manifest destiny. This manifest destiny is of the white Euro race who will be transformed into a powerful block of nations with alternatives as your energy base. You will still be a war mongering people with the rest of the world. Still exploiting the rest of the world with a huge footprint. This is OK with you because much of the rest of the world is colored and less human in your eyes.
I am not saying the American empire will fail. I am saying it has failed. The country has already been hijacked and dissected by globalism. It is being used by a cable of globalist and oligarchs for their own designs and in alliances with others who are the same in other regions. This includes your Europe. Sure some are Jews but plenty more are all the rest of the spectrum of psychopathic colors. All cultures have them and especially Europe. Blaming the Jews for everything is intellectually lazy.
Clog, who says there will be an economic recovery? Where is it written in your embellished history books and academic analysis? Who says a recovery will not be horrific? There is something called fate and it is beyond human design. There is something called a planetary system that is above human intervention. We can destroy the planet but we will never rebuild it. None of us know the future at this point because we are in uncharted waters. Science as reveled just enough to allow us to know how little we really know. Our complexity has become a shroud that prevents us from making good decisions. Our decisions are now more often based on emotions. We act like we make business and scientific decisions based on rational scientific method and business models. This is not true. We are animal spirits now “buying the fucking dip” and scientist parading around with talk of outpost on Mars. All this as our house of cards teeters near collapse. All civilizations have ended like this and we are no different. Now there is a destroyed planet so there is no new one rising from the ashes. This is it clog. This is the end.
There will be a change in global distribution of power all right and it will be a die off. It will strike those with too much population and those with too much complexity. Too bad clog your wonderful Euro has both. Your screwed clog and act like you have this golden age ahead. Your little story may play out for a time. This is a natural process and it does not follow human timelines. Yet, nature is nonnegotiable. When planetary limits are hit things will break. Our systematic brittle arrangement built around globalism is teetering on the abyss. Seven billion people cannot live without globalism. This teetering is from unfunded liabilities of a people who think they have their cake and they are eating it. Europe is by far the most exposed to this because nowhere is the standard of living higher. The US, China, and Russia are more a hybrid of 1st and 3rd world. Europe is pure 1st world and is going to fall the hardest.
makati1 on Tue, 4th Apr 2017 6:19 am
Rome fell and the rest of the world went on and even prospered.
England fell and the rest of the world went on.
The U$ will fail and the rest of the world will go on. (IF the U$ doesn’t nuke it in its death throes.)
History has been a succession of failing empires, yet here we are.
Will the rest of the world be affected. Yep, but but as much as Americans might want to believe. The Ps will turn to China, Russia, Australia, New Zealand, etc. for anything it cannot get from the U$ anymore, including weapons. Oops! They are already doing that. Egypt will turn to Russia for it’s needs. Oops! Also happening now. Europe will get it’s FF from Russia, as always. And on and on. 4% of the world’s population is just a thorn in the world’s side and it will be glad when it is pulled.
Looking at my pantry and where my supplies come from, I see:
China, Thailand, Vietnam, New Zealand, Australia, South Africa, Kenya, Italy, Spain, Germany, France, Brazil, Argentina, Japan, India, Turkey, Columbia, Canada, and the U$. Canada and the U$ is about 10% of the items and they are not necessary items.
My Heinz Ketchup comes from Indonesia.
My Campbell’s Tomato soup comes from Malaysia.
My Campbell’s Mushroom soup comes from Canada.
My Del Monte pineapple comes from … the Philippines.
Will the crash of the U$ change this. I doubt it.
Self-centered, arrogant Americans are in for a huge shock someday soon.
makati1 on Tue, 4th Apr 2017 6:22 am
BTW: That is my food storage and part of my preps to be subsidized by fresh farm goods. Any farmer who depends only on his current drop for his/her existence is going to be disappointed. Caning, drying and other food storage is a necessity in the changing climate.
Davy on Tue, 4th Apr 2017 6:49 am
makatiland advice from fantasy farm acres located in the heart of 20MIL people Manila. Not a patch of soil around only pavement, glass, and steel….lol
Cloud9 on Tue, 4th Apr 2017 7:56 am
Think about the fragility built into the system. Basil Eleby, a 39 year old crack head is credited with bringing down that bridge in Atlanta. He single handedly disrupted the traffic of a quarter of a million commuters for months and sent his state a bill for at least ten million. The irony of all this is that Basil was not a Muslim terrorist or a Mossad tool. He was just some simple minded imbecile playing with fire. He had no clue as to the impact of his actions. The so called deep state that has been put in place ostensibly to protect us, while running its super computers, mining all of our data and building profiles on all of us, failed to anticipate and prevent the actions of a single crack head.
The point is simple. We have an incredibly complex interdependent system. Nobody understands how it works. There are billions of free agents at play who have no concept as to how their independent actions might impact the system.
We cannot predict the future, but we can look at the past. Failed states are the rule not the exception. My parents lived through the Great Depression. They did not understand what happened when it happened. Dad said it was like a bomb went off and everything changed. They were lucky enough to live on farms in a thinly populated area. They never went hungry. Few people today live in a similar circumstance. I suspect we have been weighed in the balance and found lacking.
joe on Tue, 4th Apr 2017 9:06 am
First off the debt to gdp issue. Where has 10 trillion gone? Why is growth low is debt is high? The main reasons are high taxes so Uncle Sam gets a fat load of change right back at him, next is a ton of it is making to the Dow nearly 20,000. Next is, allot of it has been invested in war and lost forever then allot of it has been traded to China and helped them to build their empty cities. US debt to gdp is slightly over 100%, it can easily go to 120% or 150% thats nearly 27 trillion dollars! My guess is theres allot of cash to pump into this balloon yet. Debt is in every country and nobody dares to default, Iceland did, Greece is dying because Germany can’t face the demise of their precious (and advantageous) Euromark, I mean Euro.
When the next recession hits as it must in the crapitalist system it must do so when rates are rising so that will be the trigger.
An interesting view of history
http://money.cnn.com/2005/12/27/news/economy/inverted_yield_curve/
Anyway, rates need to spike to cause anything like the distruption of 2007. The fallout of decisions made to save banks and pensions and whole countries has been that money has flowed faster to the rich. Hey, its fiat money anyway, none of it is real.
paulo1 on Tue, 4th Apr 2017 9:45 am
Davy,
There are meds, you know. Relax a bit. You immediately start you first post with an attack. Then, finish that way.
Circle jerk? Come on.
The Economic Collapse wonk is a religious crackpot. ’nuff said.
Davy on Tue, 4th Apr 2017 10:34 am
Paulo, you know you are getting through to people when all they are able to do is recommend medication. Your cousins out there in west coast Canada do that too. Are all you guys out there in BC medicated?
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