How bad is this economy going to get?

Discussion in 'West Mall' started by AustinHorn24, Apr 1, 2020.

  1. AustinHorn24

    AustinHorn24 25+ Posts

    I live north of DFW in a town of about 40k.

    I'd estimate at least 90% of the businesses in this town will fail within a month without stimulus money.

    For comparison about 70,000 businesses declared bankruptcy during the 2008 crisis.

    Obviously my town is not representative of everywhere in the USA, but lets say 50% of businesses nationwide fail, that translates to over 500,000 business failures. I'm counting only brick and mortar establishments, not home based or internet-based businesses.

    About 50% of Americans work for small businesses -- if half those businesses go under it will put unemployment at 25% -- similar to the worst years of the Great Depression in 1932-1933.
     
  2. Musburger1

    Musburger1 2,500+ Posts

    I don’t know what will happen, but here’s my best guess. Many of the small businesses will be gone and the large corporations such as Amazon, Big Ag, etc. will gobble them up. The Federal Reserve will monetize trillions, and the government deficit might exceed $6 trillion in a single year. We will see stagflation at best and hyper-inflation at worst, as the powers that be will not allow systemically important and connected entities to fail.
     
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  3. iatrogenic

    iatrogenic 2,500+ Posts

    Never give Musberger an opening to proclaim the apocalypse is here. He will magically appear out of his bunker to respond.
     
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  4. Musburger1

    Musburger1 2,500+ Posts

    And you see a MAGA led V-shaped recovery with the greatest economy ever. Yeah, right.
     
  5. AC

    AC 1,000+ Posts

    I do agree that inflation WILL set in. See my post about Crypto Currency. If you don't like that then Gold, Silver. Fiat Currency is the issue. Too much money printing Globally. The EU is worse! Those of us who buy Gold, Silver and BTC now will get bargain basement real estate deals to invest in later. I can see where Musberger is coming from. I just want to help everyone invest WITHOUT any reliance on Fiat Currency. Hence, Gold, Silver and BTC. It's just a mindset of changing your investment strategy. I was buying Gold and precious metal stocks mostly back in 2007-2010 during Obama. I thought he was going to print us into oblivion. But now Corona Virus has happened! I feel like my investment strategies are starting to pay off. Time will tell. So my take is help others to weather this coming storm. And if some of you don't agree, I would still like to be friends. None of us can see the future. Kensyian Money Theologies are not going to be treated well in future history books! IMHO.
     
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  6. Musburger1

    Musburger1 2,500+ Posts

    Deflation
    1. Massive unemployment reduces income which slows consumption.
    2. Loss of income stalls debt payments (rent, loans) and leads to default.
    3. Loans decrease because there are fewer qualified borrowers.
    4. Asset values decrease (real estate, stocks) as money supply shrinks; houses aren’t purchased and loans aren’t originated.

    Inflation
    1. Fed makes interest free loans in the trillions to prop up banks and connected businesses.
    2. Government spends trillions in helicopter money to citizens.
    3. If citizens don’t spend, the government repeats step 2 until they do spend.
    4. Because lobbyists and corporations control government, and because jobless, hungry citizens eventually cause unrest, the government will respond to every wave of deflation with money printing. Both the rich and the poor will demand this.
     
  7. AC

    AC 1,000+ Posts

    When people don’t spend what that does is slow down the velocity of money.
    When velocity slows it will eventually cause BTC, Gold, Silver to skyrocket! There is a lag but that money won’t sit on the sidelines forever, it WILL reinvest. QE can only kick the can down the road for so long.
     
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  8. Musburger1

    Musburger1 2,500+ Posts

    Another question is what happens to the US oil industry? If global economies remain in recession, the oversupply will keep the price of oil low and destroy the industry. Other than a war to either destroy Saudi production or confiscate Venezuelan oil, I don’t see a way out. The end of US shale would potentially destroy the role of the dollar as global reserve currency. Deflation would morph into loss of faith in the dollar leading to massive printing and hyper-inflation. Theoretically precious metals and possibly cryptocurrency would retain some value.
     
  9. AC

    AC 1,000+ Posts

    No, Trump will E.O. a moratorium on crude imports. Oil is king!
    Damn you are negative!
     
  10. iatrogenic

    iatrogenic 2,500+ Posts

    You have no idea about Mus.....
     
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  11. Austin_Bill

    Austin_Bill 2,500+ Posts

    All those trillions going to poor people, good time to invest in sin stocks and Walmart, Amazon and anyone that makes purses and TVs.

    Poor people are poor for a reason.
     
    • Agree Agree x 1
  12. Horn2RunAgain

    Horn2RunAgain 500+ Posts

    To be honest, I can see this as a possibility. Maybe even a strong possibility. Hoping for a different and better outcome but preparing for pretty much anything
     
  13. Chop

    Chop 2,500+ Posts

    While I have grave reservations about some opinions Musberger has posted in the past, especially regarding Chavez and Maduro, I believe he’s dead right on some of these things like:

    Deflation, it’s causes and dreadful effects;

    Massive bankruptcies in the oil and gas industry (and other industries) will lead to the consolidation of such industry. The big boys will end up bigger, and the little and medium folks will become scarce and embattled. If you lived through the 1980s in Texas, you’ve seen it before. Monopolies and Oligopolies will become (even more) common and dominate the economic scene. Huge business and government will frequently partner up and effectively own each other (you can call it “corporate fascism” or a more friendly name like Japanese and South Korean style “industrial planning”). Just about all business will be hurt. Small business will be hurt the most.

    People will demand more and easier money. The government will respond and print it. I personally don’t think we’ll end up like the Weimar Republic or a number of Latin American countries who have experienced hyper-inflation. I think, if high inflation kicks in, it will likely look more like the Jimmy Carter era. It’s not hellacious, but it’s not where we want to be.
     
  14. Chop

    Chop 2,500+ Posts

    Poor people are poor for many reasons. It differs from person to person. Some reasons are within their control, and some are not.

    if I ever had to be poor again, I’d rather be poor in this country than just about any other place.
     
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  15. AC

    AC 1,000+ Posts

    I've Been a small business entrepreneur for 14 years. Was having a great year and I have not slowed down yet with Corona Virus. It IS tough, it’s why I hate Aggies so much. They’re the biggest crooks in O&G! But we’re always underestimated. I’m changing my business model this week and probably into May, June. I think it will be a pain in my *** but I can double my profit with these changes. Some of the greatest small businesses were born out of recessions. Shipleys Donuts, Gallery Furniture,
    Hobby Lobby, I’m sure as hell not shutting down.

    The opportunities that will come about from this recession will be massive!
     
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  16. Austin_Bill

    Austin_Bill 2,500+ Posts

    These are the times when people can become rich. This isn't a time to worry about losing money, this is a time to get some great stocks at discounted prices. I'd talk to your financial advisor to come up with a plan because I regret that in 1994 I had the chance to buy Apple at 4.25 a share.

    Airline stocks are looking very very tasty right now. They will bounce back just like the car companies did in 2008 and we are looking at some great profits when they do.
     
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  17. iatrogenic

    iatrogenic 2,500+ Posts

    We have had high inflation before and solved the problem.

    We have seen the market corrections many times in the past as well, so why worry about the end of days?

    Why worry about controlling the money supply when you can just make up a currency out of the blue with no intrinsic value, having limited liquidity, is highly volatile, prone to theft, slows transactions, and is used by criminals to hide illicit activities? In fact, make up a bunch of these currencies, and waste .3% of the world's electricity trying to justify their existence.
     
  18. SabreHorn

    SabreHorn 5,000+ Posts

    A lot more money to be made in bad times than in good.
     
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  19. horninchicago

    horninchicago 5,000+ Posts

    I'd tell you to buy Frontier, but we are privately held. Otherwise, I hope you are correct for all the airlines.
     
  20. iatrogenic

    iatrogenic 2,500+ Posts

    And when the government is literally handing out money like candy, the results are astonishing.:smokin:
     
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  21. Musburger1

    Musburger1 2,500+ Posts

    When evaluating a company's stock price, there's more to look at than the general health of the company. You also have to speculate whether the company will receive preferential treatment from the Federal Reserve or government, or whether the company will be on its own. There is no such thing as a free market.
     
  22. horninchicago

    horninchicago 5,000+ Posts

    It was just a shameful plug for my airline.
     
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  23. Musburger1

    Musburger1 2,500+ Posts

    I wasn't referring to any specific company. Your post just got me thinking about back in 2009 when the Federal Reserve basically took large, insolvent banks and turned them into gigantic winners.
     
  24. Mr. Deez

    Mr. Deez 10,000+ Posts

    He's not totally wrong on economics. He's just overly pessimistic on the market economy's ability to adjust. The main thing I'm wondering is how long it'll take for him to post a Global Research or RT article about how great Vladimir Putin is handling everything.
     
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  25. Musburger1

    Musburger1 2,500+ Posts

    There is no “market economy” adjustment. Not in 2009 and not now. I’m not sure what the term should be, but it sure as heck isn’t a market economy.
     
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  26. Austin_Bill

    Austin_Bill 2,500+ Posts

    Russians are getting their asses kicked just like everyone else, but Putin is playing poker. he sends over a plane full of medical supplies to the United States and asks that they be reciprocated when the time comes.

    Of course the time has already come, he is waiting to let the world know how bad it is there, then he will seek his own American Bailout. Once we get our industry rolling out things like ventilators he will seek to have millions sent over.

    For everything he is about, Putin is a hell of a poker player.
     
  27. Musburger1

    Musburger1 2,500+ Posts

  28. iatrogenic

    iatrogenic 2,500+ Posts

    Looks like a market adjustment to me.
     
  29. mb227

    mb227 2,500+ Posts

    Find some stocks you really like and look at the Options Call Contracts for January 2022 (the latest dates that I have seen on most of the Options Chains). There are some definite steals to be had. I have mentioned this in other threads. pointing out that the only thing you lose out on in the interim is the dividends (which will go to the actual holder of the stock).

    If you hit the option expiry date, you can either acquire the stock at the strike price, do nothing if the strike was not met (and be out only the cost of the contract) or engage in what amounts to a flip where they execute the trade on the system but flip it elsewhere, leaving you just with the profit from the difference between strike and actual price of the stock...

    Do I have an absolute crystal ball? No. Just like some of the futures bets at the sports book, I am sure some will be a swing and a miss. But many of them are things I expect to pay off very well...as in not just "eff you money" but "eff everybody money" (as attributed to F. Ross Johnson in Barbarians at the Gate).
     
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  30. Musburger1

    Musburger1 2,500+ Posts

    You guys are talking about opportunities to get rich, or at least protect your wealth. That's prudent, but most likely there will be much greater concerns.
    Uproar Among Workers Supplying the World’s Meat Is Spreading
    Opinion | Will the Coronavirus Threaten Our Food?

    If food supply chains shut down, money won't get you what you need. The second link above is definitely worth reading. It's a short article and very straight forwards. One short excerpt:
    Those imports are at risk. Another threat is that those nations and others will take steps to protect their own food supplies. Last week, Kazakhstan, a major exporter of wheat flour, and Vietnam, the world’s third-largest supplier of rice, suspended exports of those products. Because the United States no longer holds national grain reserves, significant parts of the food supply could be jeopardized should food protectionism accelerate.
    I bolded the last sentence. It's important. If we have a bad crop this season, there is going to be shortages. That means social unrest. We aren't there yet. It may not happen. But...It's not out of the question.
     

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