Effects, Causes & Future Predictions

What does all this mean to you?

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It is my belief that “The Financial Crisis of 2007-2010″ will later be reported as “The Greater Depression of 2007-2017.” The report below and my accompanying report on Shocking Trends, leads me to this conclusion.

Forecasters use long-term economic cycles to predict future trends. Common threads in the history of depressed times include:

  • Downturns in lending and credit markets
  • Real estate speculation and bubbles
  • Stock market collapses
  • Banks failures
  • Unemployment
  • War
  • Creating currency not backed by hard assets
  • Government polices and intervention

Depression of 1796–97

  • A series of downturns in credit markets that led to broader commercial downturn in the US.
  • Problems first emerged with land speculation bubble bursting in 1796.
  • Deepened into a depression when the Bank of England, which faced insolvency due to the exploding cost of the French Revolutionary Wars, suspended payments.
  • In combination with the unfolding collapse of the US real estate market, the Bank of England’s action had disflationary repercussions in the financial and commercial markets.
  • By 1800, the crisis had resulted in the imprisonment of many American debtors and financiers.

Depression of 1837-42

  • A panic in the US built on a speculative fever.
  • The bubble burst when every bank in NYC stopped payment in gold and silver.
  • Was followed by a 5-year depression with bank failures and record unemployment.
  • Caused by US economic policies resulting in the bank withdrawals, excessive printing of unbacked paper money and inflation.

Depression of 1873-79

  • Began 77 years after 1796 Depression started
  • A severe economic depression in the US with deflation and low growth.
  • Precipitated by the bankruptcy of a Philadelphia banking firm.
  • Followed strong economic growth fueled by the Second Industrial Revolution and end of the Civil War.

Great Depression 1929-33

  • Began 92 years after 1837 Depression started
  • A severe worldwide economic depression in the decade preceding World War II.
  • Start in the US with the stock market crash but quickly spread to most countries.
  • Personal income, tax revenue, profits and prices dropped, and international trade plunged.
  • Unemployment in the US rose to 25%
  • Construction was virtually halted.
  • Farming and rural areas suffered as crop prices fell by 60%
  • Jobs dependent on primary sector industries suffered the most.

The Great Recession 2007-2017

  • Began 78 years after 1929 Depression started
  • Began in the US in December 2007 with greater intensity September 2008.
  • Linked to reckless and unsustainable lending practices resulting from the deregulation and securitization of real estate mortgages.
  • The US mortgage-backed securities, which had risks that were hard to assess, were marketed around the world. A more broad based credit boom fed a global speculative bubble in real estate and equities, which served to reinforce the risky lending practices.
  • The emergence of Sub-prime loan losses in 2007 began the crisis and exposed other risky loans and over-inflated asset prices.
  • With loan losses mounting and the fall of Lehman Brothers on September 15, 2008, a major panic broke out on the inter-bank loan market.
  • As share and housing prices declined, many large investment and commercial banks suffered huge losses and even faced bankruptcy, resulting in massive public financial assistance.
  • Has resulted in a sharp drop in international trade, rising unemployment and slumping commodity prices.
  • In December 2008, the National Bureau of Economic Research declared that the US had been in recession since December 2007.
  • Several economists predict that recovery may not appear until 2011 and that the recession will be the worst since the Great Depression.
  • Contributed to the failure of key businesses, declines in consumer wealth estimated in the trillions of U.S. dollars, substantial financial commitments incurred by governments, and a significant decline in economic activity.
  • Both market-based and regulatory solutions have been implemented or are under consideration, while significant risks remain over the 2010–2011 periods.
  • The collapse of a global housing bubble, which peaked in the U.S. in 2006, caused the values of securities tied to real estate pricing to plummet thereafter.
  • Questions regarding bank solvency, declines in credit availability, and damaged investor confidence had an impact on stock markets, where securities suffered large losses during late 2008 and early 2009.
  • Critics argued that credit rating agencies and investors failed to accurately price the risk involved with mortgage-related financial products, and that governments did not adjust their regulatory practices to address 21st century financial markets.
  • Governments and central banks responded with unprecedented fiscal stimulus, monetary policy expansion, and institutional bailouts.

Economic trend forecasters expect the shake-out period now to continue, followed by stagnant growth until the next period of booming prosperity begins around 2020, and a new era of depression around 2087.

According to Dr. Jack Lessinger, we have seen 5 socio-economic cycles in the US which rise and fall in 60 year cycles.

  1. Peak prosperity peaking circa the 1790’s
  2. Peak prosperity peaking circa the 1840’s
  3. Peak prosperity peaking circa the 1900’s
  4. Peak prosperity peaking circa the 1960’s
  5. Peak prosperity peaking circa the 2020’s

Economic prosperity in 5 different “regions of opportunity” relate to peaking population growth:

  1. East Coast locations — Peaked circa the 1790’s
  2. River locations — Peaked circa the 1840’s
  3. Continental locations –Peaked circa the 1900’s
  4. Coastal locations – Peaked circa 1950-1970
  5. Pentrubia locations — Peaking circa the 2020’s

When two opposing societies and economies collide, we experience a season of depression (and never at any other time):

  • 1 vs 2 = Depressions of 1815 and 1837
  • 2 vs 3 = Depressions of 1873 and 1893
  • 3 vs 4 = Depression of 1929-1941
  • 4 vs 5 = Depression of 2007-2017

In 1991 Dr. Lessinger published “Pentrubia: Where Real Estate Will Boom AFTER the Crash of Suburbia.” In 1994, I read his book and used it to relocate my family to a pentrubian county in Colorado. Living in Hawaii at the time, I experienced the benefit of rising real estate prices caused by speculative Japanese investors, but cashed out based on Jack’s predictions. The penturbia counties in his 1991 book (based on 1988 data) grew twice as fast the national average through 2005. As a marketing consultant I also contacted Jack in 1994 about promoting his fascinating work. The last time I spoke to him was in September of 2008 after I saw the economy unraveling.

Since I moved a pentrubian county to Colorado I have purchased and sold (and still own) millions of dollars worth of real estate since 1995. Jack kept me out of the risky coastal areas and subsequent housing bubble.

Harry Dent is another market trend forecaster, author of  ”The Great Depression Ahead: How To prosper in the Debt Crisis of 2010-2012.” I read his book previous book on “The Roaring 2000’s” which predicted a 15 year boom from 1993 to 2008 based on spending habits of baby boomers. He is currently forecasting a shake-out period with decreased spending and deflation through 2020, and major stock market correction in 2010-2011 under 4,000 on the Dow. That is based on an 80 year new economic cycle.

MORE market forecasts and reports here

Disclaimer: I am not a professional market forecaster or investment advisor. The conclusions I have drawn are purely my opinion based on research and personal experience. For the sake of the nation I hope I’m wrong. But I am confident that my members, clients and students will be exceptionally better off if I’m right, and even more successful with their real estate investing if I am wrong.

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