Paul Krugman Throws In Towel, Says We’re Headed For Another Depression

For the last several months, Princeton professor Paul Krugman has become increasingly agitated about what he feels is a disastrous mistake in the making — a sudden global obsession with “austerity” that will lead to spending cuts in many nations in Europe and, possibly, the United States.Krugman believes that this is exactly the same mistake we made in 1937, when the country was beginning to emerge from the Great Depression. A sudden focus on austerity in 1937, it is widely believed, halted four years of strong growth and plunged the country back into recession, sending the unemployment rate soaring again.In Krugman’s view, the world should keep spending now, to offset the pain of the recession and high unemployment–and then start cutting back as soon as the economy is robustly healthy again.Those concerned about the world’s massive debt and deficits, however, have seized control of the public debate, and are scaring the world’s governments into cutting back.Which fate is worse? It depends on your time frame.Cutting back on spending now would almost certainly make the economy worse, at least for the short run. Not cutting back on spending later, meanwhile (and Congress has shown no ability to curtail spending), will almost certainly keep us on a road to hell in a handbasket.The White House’s own budget projections show the deficit improving as a percent of GDP to about -4% by 2013. After that, however, even the White House doesn’t think things will get much better. After a few years of bumping along at about -4%, the deficit will begin to soar at the end of the decade. And thanks to the ballooning costs of Medicare, Medicaid, and Social Security–along with inflating interest payments from all the debt we’re accumulating–the White House expects the deficit to soar to a staggering -62% of GDP by 2085.What Krugman and his foes agree on is that that’s no way to run a country. And it’s time we finally faced up to that.In the meantime, we’ll continue to fight about what to do in the near-term. And Krugman thinks he has lost that war and we’re headed for another Depression.

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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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Good Financial Advice – Yahoo! Finance

This is a very good video on “Long Term Investing” by Aron Task and Henry Blodget. You should listen to it more than once to get all the important but subtle points.

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Nouriel Roubini Says You Should Preserve Capital

CNN Money

CNN Money

8 really, really scary predictions

Dow 4,000. Food shortages. A bubble in Treasury notes. Fortune spoke to eight of the market’s sharpest thinkers and what they had to say about the future is frightening.

Known as Dr. Doom, the NYU economics professor saw the mortgage-related meltdown coming.

We are in the middle of a very severe recession that’s going to continue through all of 2009 – the worst U.S. recession in the past 50 years. It’s the bursting of a huge leveraged-up credit bubble. There’s no going back, and there is no bottom to it. It was excessive in everything from subprime to prime, from credit cards to student loans, from corporate bonds to muni bonds. You name it. And it’s all reversing right now in a very, very massive way. At this point it’s not just a U.S. recession. All of the advanced economies are at the beginning of a hard landing. And emerging markets, beginning with China, are in a severe slowdown. So we’re having a global recession and it’s becoming worse.

Things are going to be awful for everyday people. U.S. GDP growth is going to be negative through the end of 2009. And the recovery in 2010 and 2011, if there is one, is going to be so weak – with a growth rate of 1% to 1.5% – that it’s going to feel like a recession. I see the unemployment rate peaking at around 9% by 2010. The value of homes has already fallen 25%. In my view, home prices are going to fall by another 15% before bottoming out in 2010.

For the next 12 months I would stay away from risky assets. I would stay away from the stock market. I would stay away from commodities. I would stay away from credit, both high-yield and high-grade. I would stay in cash or cashlike instruments such as short-term or longer-term government bonds. It’s better to stay in things with low returns rather than to lose 50% of your wealth. You should preserve capital. It’ll be hard and challenging enough. I wish I could be more cheerful, but I was right a year ago, and I think I’ll be right this year too.

Fed To Buy Frozen Money Market Assets

Show Me The Money

Show Me The Money

New Money Market Investor Funding Facility (MMIFF)

Fed To Buy Frozen Assets To Meet Redemptions from Money Market Accounts

Federal Reserve will help finance purchases of up to $600 billion in assets from money market mutual funds which have suffered redemptions from investors seeking the safety of government debt. The program start date should be announced by the end of this week. Holy Hell, what’s next?

Gold (GLD) – SPDR Gold Shares

On 10/16/2008 – Bought GLD at $80 per share.

SPDR Gold Shares (GLD)

SPDR Gold Trust (the Trust), formerly StreetTRACKS Gold Trust, is an investment trust. The Trust holds gold, and from time to time, issues the SPDR Gold Shares (Shares) (formerly streetTRACKS Gold Shares) in blocks of 100,000 Shares (Baskets) in exchange for deposits of gold and distributes gold in connection with redemptions of Baskets. The Shares represent units of fractional undivided beneficial interest in and ownership of the Trust. The investment objective of the Trust is for the Shares to reflect the performance of the price of gold bullion. The sponsor of the Trust is World Gold Trust Services, LLC. The Bank of New York is the trustee of the Trust. HSBC Bank USA, N.A. serves as the custodian of the Trust’s gold.

Silver (SLV) – iShares Silver Trust

On 10/10/2008 – Bought SLV at $10 per share.

Silver (SLV) ETF

Silver (SLV) ETF

iShares Silver Trust (SLV)

is a grantor trust. The purpose of the trust is to own silver transferred to the trust in exchange for shares issued by the trust. Each iShare represents a fractional undivided beneficial interest in the net assets of the trust. The assets of the trust consist primarily of silver held by the custodian on behalf of the trust. The sponsor of the trust is Barclays Global Investors International, Inc. The activities of the trust are limited to issuing Baskets of iShares in exchange for the silver deposited with the custodian as consideration; selling silver as necessary to cover the sponsor’s fee, trust expenses not assumed by the sponsor and other liabilities, and delivering silver in exchange for Baskets of iShares surrendered for redemption. The objective of the trust is for the value of the iShares to reflect, at any given time, the price of silver owned by the trust at that time less the trust’s expenses and liabilities.