The Worst Case Scenario (Someone Has to Say It)

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SamLinder
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The Worst Case Scenario (Someone Has to Say It)

The author is envisioning a worst case scenario. His predictions are just that - guesses as to what may happen. While it is a worthwhile read, please do not go out and shoot yourself after reading. 

 

The Worst Case Scenario (Someone Has to Say It)

Since the economy began sliding downhill in late 2007, mainstream economic and market experts have consistently erred on the sunny side.

As late as June 2008, mainstream consensus held that the U.S. was heading for a “soft landing” and would avoid recession. Several months later, the slump was acknowledged to have started in January 2008, but we were supposed to see renewed growth by mid-2009, with unemployment peaking in the eight-to-nine percent range. A quick “shovel-ready” stimulus bag was supposed to set us back on the road to prosperity.

In January, recovery projections were pushed forward to late 2009. Today, the consensus is for a mid-2010 recovery, with unemployment peaking at just over 10 percent. Clearly, the mainstream has struggled to catch up to reality for well over one year. What are the chances that they finally have it right this time? 

Moreover, the mainstream continues to see what is going on as a plain-vanilla recession that will be quelled with some on-the-fly monetary and fiscal tinkering. Washington, we are told, will pull us out of this slump—as soon as the masses can be enticed back to the shopping malls. Then things will return to how they were before. But what if the experts and politicians are wrong not only on their ever-changing recovery timeline, but also on the nature—nay, the very existence—of a recovery?

America’s reigning political-economic ideology has demonstrably failed. Given that its government is obviously fumbling along without a clue, its foreign and domestic credit is tapped out, and its 300 million people are discovering that their hopes for continuous material improvement will never be met, could the U.S. be headed the way of the USSR?

Instead of a recovery as the mainstream envisions it, what if America permanently bankrupts, impoverishes, and marginalizes itself? What if its cherished institutions fail across the board? For example, what happens when the police realize that their under-funded pension plans cannot support a decent retirement? Will they stay honest, or will they opt to survive by any means necessary? These are questions that the mainstream does not even begin to contemplate.

In the interests of providing you with an alternate vision—something outside the mainstream—below are ten predictions for America through the year 2012. This is not boilerplate doom-saying. Rather, I am laying out in highly specific terms what will happen over the next three-odd years. Others have thrown around the term “Depression”, but I am going to tell you precisely what it means for you, your investments, and your community.

When these predictions come true, I expect to be rewarded with a seven-figure consulting gig, a book contract, or a high-level position in whatever administration succeeds the doomed Obama team—that is, if anyone succeeds it at all.

[Read the rest of the story and his predictions here]

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JAG
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Re: The Worst Case Scenario (Someone Has to Say It)

Great Post Sam,

I'm not one to give much attention to dreams, and I rarely remember my dreams. But two nights ago I had a very disturbing dream about our future, much of which was echoed in that article. I'm having a hard time dismissing the images of it from my mind. That article didn't help much. Anyway, whether its my imagination gone over-board or what-ever, I think its time to take my preparations to the next level.

For the first time in this whole process, I must admit I'm getting a little spooked by the road ahead. At least my wife is on board now. My dream made a believer out of her. The last dream that I remembered and shared with her was a couple years ago and was about us having a little girl. I dismissed it at the time, but a year later, our little girl was born. With her in my life, I simply cannot take the chance that things will work out, I have to be prepared.

Sorry, to be such a downer.

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tx_floods
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Re: The Worst Case Scenario (Someone Has to Say It)

Sometimes, I think God speaks to us through our dreams. Have you got anything you can share with the community?

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Re: The Worst Case Scenario (Someone Has to Say It)

Sam,

Have you read the book "One Second After" by William R Forstchen? It is a fictional novel about the total “worst case scenario”  collapse of society, due to an EMP device. The book chronicles the life of a small town for a year post disaster. From food rationing and self imposed Marshall law to a small War with a maraudering band. The book points out how the community has to band together quickly, organize and put to use every ounce of talent that each and every individual has, for the survival of the whole. I would recommend it for insight on any worst case scenario.  

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JDavis
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Re: The Worst Case Scenario (Someone Has to Say It)

Sam,

Have you read the book "One Second After" by William R Forstchen? It is a fictional novel about the total “worst case scenario”  collapse of society, due to an EMP device. The book chronicles the life of a small town for a year post disaster. From food rationing and self imposed Marshall law to a small War with a maraudering band. The book points out how the community has to band together quickly, organize and put to use every ounce of talent that each and every individual has, for the survival of the whole. I would recommend it for insight on any worst case scenario.  

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ccpetersmd
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Re: The Worst Case Scenario (Someone Has to Say It)

Wow, what a strange thread to find immediately upon waking up after a disturbing dream. Well, two dreams, actually, but only one is in any way relevant, as it had to do with CM.com.

As is typical for dreams, most details are now fuzzy, but in my dream, something very controversial had occurred that was peripherally linked to CM.com, and it had made headline news. I could even see a newspaper headline in my dream, with CM.com in bold type. I woke up, in that half-reality state, thinking, "well, at least now we'll get some wide dissemination of CM's ideas", then, "oh, the forums are going to be a mess", and then, "I wish I hadn't posted half of what I had written in the forums".

Still not entirely sure my dream was in fact a dream, I had to go online to make sure, and read Jeff's comments about dreams. Jeff, cut that kind of stuff out!

I think I'll continue to maintain a lower profile, just in case that love tryst, embezzlement or murder/suicide event in my dream comes true...

What a strange start to Memorial Day!

Oh, and Sam, the link you provided does not seem to be working.

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Dogs_In_A_Pile
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Re: The Worst Case Scenario (Someone Has to Say It)

JDavis -

Welcome to the site.  You'll find a lot of great info and a lot of great people in here.  Look forward to hearing more from you.

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JAG
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Re: The Worst Case Scenario (Someone Has to Say It)
ccpetersmd wrote:

I think I'll continue to maintain a lower profile, just in case that love tryst, embezzlement or murder/suicide event in my dream comes true...

Oh No Doc! Not you too. That makes 4 people that I know that have had "the dream". Two of them have never even heard of CM.com, or have any expectations of coming calamities, so that rules out a dream-state subconscious regurgitation of their daily life.

I'm really starting to regret giving my dream any attention. I don't believe in dreams.  I don't believe in dreams.  I don't believe in dreams.  I don't believe in dreams. I don't believe in dreams (well, you get my point by now).

Keeping a low profile sounds like a very good idea to me.

Sorry.

 

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SamLinder
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Re: The Worst Case Scenario (Someone Has to Say It)

Folks,

I just found out that the link is no longer working. I apologize but it seems that "seekingalpha.com" has removed the story. However, after some diligent searching, I did manage to find two locations where the story still exists:

http://caps.fool.com/Blogs/ViewPost.aspx?bpid=191617&t=02007718965682909770

http://mercatoliberonews.blogspot.com/2009/05/worst-case-scenario-someon...

In case they also disappear before you have time to click on the link, here is the article in its entirety:

The Worst Case Scenario (Someone Has to Say It)

Since the economy began sliding downhill in late 2007, mainstream economic and market experts have consistently erred on the sunny side.

As late as June 2008, mainstream consensus held that the U.S. was heading for a “soft landing” and would avoid recession. Several months later, the slump was acknowledged to have started in January 2008, but we were supposed to see renewed growth by mid-2009, with unemployment peaking in the eight-to-nine percent range. A quick “shovel-ready” stimulus bag was supposed to set us back on the road to prosperity.

In January, recovery projections were pushed forward to late 2009. Today, the consensus is for a mid-2010 recovery, with unemployment peaking at just over 10 percent. Clearly, the mainstream has struggled to catch up to reality for well over one year. What are the chances that they finally have it right this time?

Moreover, the mainstream continues to see what is going on as a plain-vanilla recession that will be quelled with some on-the-fly monetary and fiscal tinkering. Washington, we are told, will pull us out of this slump—as soon as the masses can be enticed back to the shopping malls. Then things will return to how they were before. But what if the experts and politicians are wrong not only on their ever-changing recovery timeline, but also on the nature—nay, the very existence—of a recovery?

America’s reigning political-economic ideology has demonstrably failed...

Instead of a recovery as the mainstream envisions it, what if America permanently bankrupts, impoverishes, and marginalizes itself? What if its cherished institutions fail across the board? For example, what happens when the police realize that their under-funded pension plans cannot support a decent retirement? Will they stay honest, or will they opt to survive by any means necessary? These are questions that the mainstream does not even begin to contemplate.

In the interests of providing you with an alternate vision—something outside the mainstream—below are ten predictions for America through the year 2012...

When these predictions come true, I expect to be rewarded with a seven-figure consulting gig, a book contract, or a high-level position in whatever administration succeeds the doomed Obama team—that is, if anyone succeeds it at all.

Prediction one. The twenty-five-year equities bubble pops in 2009. U.S. and foreign equities markets will stop treading water and realign with economic reality. Stock prices will cease to reflect the “greater fool” mentality and will return to being a function of dividend yields, which have long been miserable. The S&P 500 will sink below 500. In a bid to stem the panic, the government will enforce periodic “stock market holidays”, and will vastly expand the scope of its short-selling prohibitions—eventually banning short-selling altogether.

Prediction two. With public pension systems and tens of millions of 401k holders virtually wiped out—and with the Baby Boomers retiring en masse—there will be tremendous pressure on the government to get into the stock market in order to bid up prices.

Therefore, sometime in 2010, the Federal Reserve will create and loan out hundreds of billions of fresh dollars to the usual well-connected suspects, instructing them to buy up stocks on the public’s behalf... It will have no effect other than to serve as buyer of last resort for capitulating smart-money types who want to get out of stocks entirely.

Prediction three. Millions of new retirees—including white-collar people with high expectations for a Golden Retirement—will be left virtually penniless. Thousands will starve or freeze to death in their own homes. Hundreds of thousands will find themselves evicted and homeless, or will have to move in with their less-than-enthusiastic children. Already strained by the rising tide of the working-age unemployed, state and local welfare services will be overwhelmed, and by 2012 will have largely collapsed and ceased to function in many parts of the country.

Prediction four. “Quantitative easing” will fail to restart previous patterns of lending and consumption. As the government sends out additional “rebate” checks and takes ever-more drastic measures to force banks to lend, hyperinflation could take hold. However, comprehensive debt relief via a devaluation of the dollar is even more likely. This would entail the government issuing one “new” dollar for some greater number of “old” dollars—thus reducing both debts and savings simultaneously...

As there are many more debtors than savers in the U.S., the vast majority would support devaluation. The Chinese and other foreign holders of our bonds would be screaming mad, but unable to do anything...

Prediction five. The government will stop pretending that it can finance continuous multi-trillion-dollar deficits on the private market. By late 2010, the sole buyers of new U.S. Treasury and agency bonds will be the Federal Reserve and a few derelict financial institutions under government control...

Prediction six. As the need for financial industry paper-pushers declines and people have less money to spend on lawyers and Starbucks (SBUX), unemployment will rise until the private sector has eliminated all of its excess capacity and superfluous or socially needless jobs. The government’s narrow unemployment figure (U3) will rise into the high teens by late 2010. The government’s broader unemployment figure (U6) will cease to be reported when it reaches 25 percent—it will simply be too embarrassing. Ultimately, one in three work-eligible Americans will be unemployed, underemployed, or never-employed (e.g. college grads permanently unable to find suitable work).

Prediction seven. With their pension dreams squashed, and their salaries frozen or cut, police and other local government workers will turn to wholesale corruption in order to survive. America’s ideal of honest, courteous, and impartial cops, teachers, and small-time local functionaries will have come to an end.

Prediction eight. Commercial overcapacity will strike with a vengeance. By 2012, thousands of enclosed malls, strip malls, unfinished residential developments, motels, truck stops, distribution centers, middle-of-nowhere resorts and casinos, and small-city airports across America will turn into dilapidated, unwanted, and dangerous ghost towns...

Prediction nine. By the end of 2010, tens of millions of households will have fallen behind on their mortgages or stopped paying altogether. Many banks will be unable to process the massive volume of foreclosure paperwork, much less actually seize and resell the homes.

Devaluation (as mentioned in prediction four) could ease the situation for those mortgage holders still afloat, but it would also eliminate any incentive for most banks to stay in the mortgage business. In any case, the housing market in many parts of the country will lock up completely—nothing bought or sold.

With virtually no loans being made, even the government will finally acknowledge that most banks are fundamentally insolvent. A general bank run will only be averted through a roughly one trillion-dollar recapitalization of the FDIC, courtesy of new money from the Federal Reserve.

Prediction ten. As an economy is never independent of the society within which it functions, the next few paragraphs will focus on social and political factors. These factors will have as much of an impact on market and consumer confidence as any developments in the financial sector.

Whether rightly or not, President Obama, having come to power at the dawn of this crisis, will be blamed for it by over 50 percent of the population. He will be a one-term president. In response to his perceived socialization of America, there will be a swarm of secessionist and extremist activity, much of it violent. Militias and armed sects will be more prominent than in the early 1990s. Stand-off dramas, violent score-settlings, and going-out-with-a-bang attacks by laid-off workers and bankrupted investors—already a national plague—will become an everyday occurrence...

Property crime will explode as citizens bitter over their own shattered dreams attempt to comfort themselves by taking what is not theirs. Mutinies and desertions will proliferate in an increasingly demoralized, over-stretched military, especially when states can no longer provide the educational and other benefits promised to their National Guard troops.

There will be widespread tax collection issues, and a huge backlash against Federal and state bureaucrats who demand three-percent annual pay raises while private sector wages remain frozen or worse. In short, the “Tea Parties” of tomorrow will likely not be so restrained...

By 2012, there will be a general feeling that the nation is in immediate danger of blowing up or coming apart at the seams. This fear will be justified, given that the U.S. has always been held together by the promise of a continuously rising material standard of living—the famous “pursuit of happiness”—rather than any ethnic or religious ties. If that goes, so could everything else. We were lucky in the 1930s—we may not be so lucky again.

Big Jake lives and works in the Washington, DC area. He has five years of experience in the Federal bureaucracy, Congress, and the lobbying sector. He is also a U.S. Army veteran. Notwithstanding his long-time involvement with government, Big Jake has no personal interest in any political party or ideology.

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