Predictions on how a crash will unfold

You can read Martin Weiss’ prediction here.

Keep in mind that although these predictions were made years ago, and it seems as if some of them were wrong, all that’s happened is that the trillions of dollars given to banks has kicked the can down the road.  These events will still happen for many reasons listed in other posts.


Housing: Real estate prices will need to fall more, and a lot, to make homes affordable again in a time of greatly reduced credit availability, but that same fall in prices will hammer Americans’ wealth and consumer spending like there’s no tomorrow, which will reduce available credit even more, which will further lower real estate prices and so on and so forth. There is no way to avoid going through this process, called deleveraging. None. The American economy can’t even stand still, let alone grow, without a “healthy” housing market; it’s just that big a part of the economy, a home is the biggest asset purchase of their lives for most Americans. But we have entered a time where prospective buyers can’t afford to buy at present prices, and owners can’t afford to lose the difference between what they wish their home were worth and what the market will soon tell them it is.

Everyone who today holds assets, such as real estate, or stocks, or yes, even gold and silver, will at some point need to acknowledge that the perceived value of what they hold has been hugely propped up by the government’s refusal to mark assets to market.  That is as true for your assets as it is for those held by the banks. The difference is that these banks have received trillions of dollars of your money in order to make the zombie accounting look at least somewhat credible for a while, while the same government that handed them your funds, has left you to your own means. That is to say, your own means minus what it gave away to the banks.

China, Japan, Europe all show signs of instability in many ways (my comment: too big a topic to add here, but easy to look up on the internet, and still going on despite not much news coverage).

The question is: how long can our governments and bankers extend ‘Extend and Pretend’?

The answer to that question is not that easy. The financial industry has a very firm grip on government throughout the western world. It can therefore save its own -thoroughly bankrupt- skin at the expense of the public at large for a long time.  And since the public craves the green shoots and recovery illusion so much, it may take a while to wake up. Then again, with real and actual unemployment numbers approaching 20% in the US, we need to remember what Bill Black says: “governments cannot remain in power with 20% unemployment”. Still, Wall Street owns both sides of the aisle in Washington, so a new government makes little difference. Just feed them another puppet who can rake ’em in with yet another ‘change they can believe in’.

There is a (side) effect of the Extend and Pretend, mark-to-whatever, policies, that doesn’t get a lot of attention, but that may well decide the timing of the return of mark-to-market. That is, it’s not just the banks that can keep roaming the plains in their zombie guises, while hiding the lost wagers that would do them in under lock in dark closets. Everybody appears much richer than they truly are, including pension funds, market funds, governments, and individuals. Yeah, you! Many parties among these, which are today still active as “investors”, would no longer be that if mark-to-market would be the rule of the land.

There is therefore a huge amount of fake -or virtual- money and credit out there that is looking for profits. And it’s inevitable that much of it will eventually move into commodities, thereby raising the price of oil and food and many other basic needs across the globe, including our parts of the world.

The desire to look richer today than you really are will make you a lot poorer down the line. Not just because it takes trillions of dollars per year in public funds -(future) tax revenue- in the US alone to keep the illusion alive, but also because it raises prices for everyday necessities. While at the same time, on top of all else, governments at all levels will raise taxes across the board like you wouldn’t have dreamt possible until very recently.





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