The Bears Are Coming Out

123 banks have failed so far this year and despite the run up in stocks things are looking worse as the effects of the stimulus end.  Check out this post at The New Editor and watch the video of Meredith Whitney talking about the stock market.  Warning:  her analysis is not a happy thing to watch and she points out that there is no reason for the stock market to be going up.

I’ve long thought the stock market was divorced from reality and is based on the emotional attitudes held by gamblers. The fact that consumer credit has contracted more than during the Great Depression is a huge warning sign that we may be in an unprecedented economic collapse.  That this is being ignored by the investors is amazing.

Over in France, the bank Société Générale is warning their clients to prepare for a possible global economic collapse in the next two years. Basically the idea is that all the problems of the banks have been transferred onto the governments making them insolvent in turn. Quote of the article:

The bank said the current crisis displays "compelling similarities" with Japan during its Lost Decade (or two), with a big difference: Japan was able to stay afloat by exporting into a robust global economy and by letting the yen fall. It is not possible for half the world to pursue this strategy at the same time.

No, it isn’t possible and a lost decade is very possible for the entire planet, if not lost decades.

In previous posts, I’ve written about gold going up and that it isn’t a good sign. Martin Hutchinson at PrudentBear.com points out that the last time gold ran up so quickly in value was before the economic woes in the early 1980’s.  Only it is a lot faster this time and Hutchinson predicts $2000 an ounce will be hit in six months time. His belief is that once gold went over $1000 the point of no return was reached and that a second recession is guaranteed.  I’d argue that we never got out of the first one, that any recovery has been an illusion generated by shuffling nonexistent money around.

Once again, I wish I had good economic news to report.  I think what we are about to face is going to make the Great Depression look good by comparison.