Dude, We’re Screwed! Recession to Get Worse – Unemployment to Rise – Government Spending Debt to Skyrocket!

Slow Growth – Double Dip Recession may be coming – Odds are over 50% – We are in the process of De-Leveraging our Debt and this trend will continue for years. If it happened all at once, we really would have a depression! Unemployment rate will rise 1% per year for the next few years and put pressure on the government to create jobs – spend more money – create higher deficits and debt, and the consumer will pull back and spend less – which is bad for business and people’s jobs! – all very risky for our long term economic growth. Dude! Save Your Money!!

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Gary Shilling’s Bearishness Doesn’t Seem Nutty

The recession will now turn deeper and the Federal Reserve is worried about deflation.

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Gary Shilling says, House Prices Still Have Another 10%- 20% To Fall

A year ago, house prices finally stopped collapsing after two years of brutal declines. Over the following few quarters, moreover, they actually rose. This led many observers to conclude that the housing bottom had been reached and that we were headed for a v-shaped bounce.Not Gary Shilling.Gary Shilling, head of economic research firm A. Gary Shilling & Co., thinks house prices still have another 10%-20% to fall. Just as bad, Gary thinks this fall will happen over the next three years, meaning that house prices won’t bottom until 2013. Most people think prices have already bottomed, or will bottom later this year or next.Why is Gary so bearish?Supply versus demand.Basically, Gary says, we still have way too many houses relative to the number of people who want to buy them. Consumers are under pressure, overloaded with debts and struggling to find work, and the mass-hallucination that investing in housing was a “sure thing” is now a distant memory. These days, many would-be home buyers are moving in with relatives or downsizing or dumping second homes. And the supply-demand balance is so out of whack, in Gary’s view, that even super-low interest rates won’t keep prices afloat.

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Fannie Mae and Freddie Mac Money Pit Will Suck 1 trillion Of US Taxpayer Cash

Bloomberg checked in on the state of Fannie Mae and Freddie Mac, the two once-quasi-private mortgage subsidy companies that are now almost wholly owned by taxpayers. Bloomberg found that Fannie and Freddie have already drawn down $145 billion in their unlimited line of taxpayer credit, and that their losses could ultimately be as high as $1 trillion.To put that in context, Fannie and Freddie alone may consume more than the entire TARP Wall Street bailout, which was in the neighborhood of $800 billion. Fannie and Freddie’s taxpayer-money-vaporization will likely dwarf even that of AIG, which most people still consider the most appalling bailout beneficiary of all.Just as bad, Congress isn’t even pretending that it has a plan to stop the losses at Fannie and Freddie. Reducing the Fannie and Freddie losses would mean reducing a huge housing-market subsidy–and that’s the last thing Congress wants in an election year. Also, the Fannie and Freddie losses are functioning as a back-door Wall Street bailout: Fannie and Freddie are using the taxpayer cash to buy mortgages from Wall Street, and they are paying prices so high that they’re taking a loss.It’s certainly tough to decide what SHOULD be done about Fannie and Freddie, because just disbanding them immediately would likely have a negative effect on the housing market and economy.But it doesn’t seem to much to ask to demand that Congress at least come up with a plan.

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Stocks party like it’s 2009 but George Soros sees ghosts of the ’30s

From April 26 through June 7, the Dow fell 12.4% and the S&P dropped 13.7%, The Wall Street Journal reports, in a rapid-fire decline that scared many investors out of the market.So, of course, stocks rallied at the end of last week and are starting Monday off with gains as the euro is rallying after France announced an austerity package and a report showed eurozone industrial output surged in April.The “risk on” trade appears to be back in vogue for the moment — commodities are also rallying early Monday, while “safe havens” such as the dollar, Treasuries and Japanese yen are in retreat. There’s no telling how long this latest rally effort will last or how far it will take the major averages. But if the past 18 months are any indication, the move will probably go further and farther than most of us expect.Still, long-term investors are understandably leery of trusting any rally, and there’s plenty to worry about. Amid the “obvious” concerns about jobs, deficits, financial contagion and the like, legendary investor George Soros warned late last week “we have just entered Act II” of the crisis, declaring “the collapse of the financial system as we know it is real, and the crisis is far from over.”Act 2: Sovereign Debt FearsWhile the banking system was stabilized by massive bailouts starting in 2008 and continuing today, the next phase of the crisis began when “the financial markets started losing confidence in the credibility of sovereign debt,” Soros declared in a speech in Vienna. “Greece and the euro have taken center stage, but the effects are liable to be felt worldwide.”Moreover, “we find ourselves in a situation eerily reminiscent of the 1930s,” Soros declared. “Keynes has taught us budget deficits are essential for counter-cyclical policies, yet many governments have to reduce them under pressure from financial markets. This is liable to push the global economy into a double-dip.”As noted above, the markets cheered France’s austerity measure — the latest of a series of such steps in the Europe — but if economic growth comes to a halt, that embrace won’t last long.Whatever you think about Soros’ politics, there’s no arguing with his success in the financial markets: when George Soros speaks, it usually pays to listen.Meanwhile, pundits such as John Tamny of RealClearMarkets.com and Charles Ortel of Newport Value Partners are seeing “eerie” similarities to the 1930s (if not current day Venezuela) in the U.S. government’s assault on BP as the Deepwater Horizon disaster flows on. “The process playing out is most harmful to confidence that foreign investors used to have in the relative reliability and fairness of our legal process,” Ortel writes.If anti-business sentiment leads to slower growth and tit-for-tat tariffs and trade barriers, the past year-plus of recovery will be remembered as the eye of a horrific economic hurricane, not the end of the crisis

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Paul Krugman says, Governments Are Panicked About Spending And Debt

As the rest of the world works itself into a panic over debt and deficits, Princeton professor and New York Times columnist Paul Krugman continues to argue that acting on this fear will quickly make things far worse:What’s the greatest threat to our still-fragile economic recovery? Dangers abound, of course. But what I currently find most ominous is the spread of a destructive idea: the view that now, less than a year into a weak recovery from the worst slump since World War II, is the time for policy makers to stop helping the jobless and start inflicting pain…Both textbook economics and experience say that slashing spending when you’re still suffering from high unemployment is a really bad idea — not only does it deepen the slump, but it does little to improve the budget outlook, because much of what governments save by spending less they lose as a weaker economy depresses tax receipts. And the O.E.C.D. predicts that high unemployment will persist for years. Nonetheless, the organization demands both that governments cancel any further plans for economic stimulus and that they begin “fiscal consolidation” next year.In terms of short-term impact, Krugman’s logic makes sense. Anyone who argues that we should cut spending instantly without acknowledging that this will cause major short-term pain is either delusional or disingenuous.But the longer term implications of continuing to spend boatloads of money we don’t have also needs addressing. Specifically, Prof. Krugman needs to explain why debt-fear-mongers like Niall Ferguson are wrong that, once government debt hits about 90% of GDP (where ours is headed), default is pretty much inevitable.Pointing to the post-World War II experience, when US government debt soared and then shrank gradually as a percent of GDP over the next two decades, doesn’t take into account the massive consumer and financial debt the country currently carries. In those days, it was just the government that borrowed up to its eyeballs. Today, in terms of total debt to GDP, we’re in completely uncharted territory.

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Robert Prechter Says, “We Are On Schedule for a Very, Very Long Bear Market.”

MoneyBob NEW YORK (AP) — The Dow Jones industrials plunged below 10,000 Tuesday after traders dumped stocks on worries about the global economy and tensions between North and South Korea. The Dow fell about 190 points in late morning trading. It has fallen 1,346 points, or more than 12 percent, from its recent high of 11,205, reached April 26. The Dow and broader stock indexes all fell about 2 percent. Investors also exited the euro and commodities including oil and again sought safety in Treasury securities. Look out below!

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