Depression in the New America
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- Published on Wednesday, 18 July 2012 15:15
- Written by Andrew Snyder, Editorial Director, Inside Investing Daily
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Depression is a strong word. For many investors, it's taboo -- like mentioning a bomb at the airport or an ex-girlfriend on a first date.
Most often the pundits associate the D-word with the fiscal nightmare that plagued the world some 80 years ago. But for most folks, the Great Depression is an abstract idea.
You are led to believe "The Depression" was a one-off event that can't happen again so we might as well retire the term and hang it from the rafters like a ballplayer's jersey.
I pray we don't.
When great thinkers like Bill (his brain created an empire) use the word depression, it's easy to let the gravitas of the term slip through our grasp.
It's easy to dismiss the idea and move onto something more gnawing and more immediate... like paying the phone bill.
But if we step back from the zigzagging chaos of our daily lives, we see a clear picture. The outcome of all this is undeniable.
Let's start with a fact we can all agree on. By all measures, the American economy is dead.
The only thing keeping it alive is a half-cocked monetary scheme -- life support for a beast that once ruled the world.
The result is a Zombie Economy.
On Monday, we released my latest video update to Unconventional Wealth members.
In the clip, I outline why our economy cannot live without government intervention. But more importantly, I show subscribers what it means for their wealth.
One of the topics I cover is what to do about the fact most Americans have been duped into believing a recovery is inevitable.
Instead of believing the facts and understanding the truth... the herd listens to the political hype and believes generations' worth of greed and flat-out fraud can be pushed aside with yet another scheme from Washington.
It's either ignorance or an odd form of self-medication.
The truth is Obama can't fix this. Nor can Romney. And Bernanke, Geithner et al. are only making it worse.
But tell that to Joe Sixpack and he'll spew the same rhetoric as that cute, redheaded orphan... the sun will come out tomorrow.
Sadly, the forecast tells of a Cat. 5 hurricane.
I've got evidence...
I used the chart below in my video to show why stock investors are effectively running on a treadmill. Even though they're running forward, the average investor is getting nowhere. The headwinds are too strong.
Trading volume peaked in 2008 and has waned ever since. In the video, I explain why a big part of the problem is the fact that desperate and broke investors are ditching their stocks and the idea of savings... because they have no choice.
They're too broke to gamble on Wall Street.
Think of this declining trading volume as the bellow that's blowing cool, dry air into our forge of depression.
The more volume slips... the hotter the fire. And the hotter the fire... the more folks get scorched.
A perfect example is the one out of every five Americans that have outstanding loans against their 401(k). These poor saps borrowed from their life savings because they drank the Kool-Aid. They believe the political lie that says recovery is inevitable.
Many of them got burnt.
A report out today shows 17% of those borrowers defaulted on the loans they made to themselves. They were too poor to pay themselves back.
They gambled on a sunny tomorrow... and got rained on.
Because of their misguided move... nearly $40 billion was sucked from the nation's collective retirement savings.
Put another way... $40 billion in American wealth was eradicated because of the flimsy idea that a recovery was inevitable. These borrowers were told the job market would pick up. They were told the markets would recover. They were told the value of their home would rise.
Just trust us... we'll right our wrongs.
Lie. Lie. Lie.
Because Cash for Clunkers, Operation Twist, QE1, QE2, the Detroit bailout, TARP and every other lie we've been fed over the past four years rotted in failure, our economy continues to spiral downward.
The average American is far more broke today than he was during the Great Recession.
Over the past three months more folks signed up for disability payments than got a job. Food stamp rosters are at record highs. Cities are bankrupt. Schools are closing.
This is not your daddy's depression. This is depression in the New America.
From the Inside,
Aaron
P.S. Another report out this morning shows that 47% of Americans think it is impossible to get rich in this economy. They could not be more wrong. It's true that conventional techniques will fail. But in the New America... opportunities abound for contrarian investors.
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