89% of Federal student loans ARE NOT being paid back right now

 According to this CNBC article, from October 7th, only 11% of people with federal student loans are paying those loans back, on time, right now.  Due to the forebearance offer, 89% of people are not paying back their federal student loans.  So what happens to the SLABS investments being funded by the payments of those millions of student loans (see previous post)?  Good question.

Jim Rickards explains the velocity of money in 2 1/2 minutes

Here's one aspect of the economy I wasn't familiar with until seeing Robert Kiyosaki interview Jim a couple of month s ago.  In this quick video, from 2015, Jim quickly explains the "velocity of money," and how important it.  

In this crisis of the last few months, The Fed has created enormous amounts of money, but the money, for the most part, isn't moving through the everyday economy much at all.  These 3 1/2 trillion dollars or so, mostly went into the banking system, the stock market and to a lesser extent, real estate, propping up those markets.  

To create the inflation that The Fed is trying desperately to create, according to Jim, we also need more velocity of all this newly created money.  While stock traders are staying busy, most everyday people are holding back on a lot of extra spending, and just trying to pay the day to day bills.  The tens of millions of people who got laid off, or have taken pay cuts, or are working fewer hours, are struggling to just pay their rent or mortgages.  They are not spending near as freely, as far as we can tell now, than they were a year ago.  Will the velocity of money pick up?  We'll see how this all plays out in the next several months.

This is OFFICIALLY a Depression now: 2020 Q2 GDP drops a record 32.9%

The U.S. GDP dropped 32.9% in the second quarter of 2020, with numbers out this morning.  There were already many issues in the economy, like the Repo Market seize up in September 2019, before the second quarter came around.  But it was the Covid-19/coronavirus pandemic shutdown that was the "black swan event" that really sent things downhill.  For those not up on economics, the GDP is the Gross Domestic Product, basically all goods and services bought in the U.S. the second quarter, April, May, and June, of 2020.  The next biggest drop was about 28%... back in 1921.  Even in The Great Depression of the 1930's, no single quarter's economy dropped this much.

I love how the CNBC hosts say, "It wasn't as bad as the 34.7% drop expected."  That's a lot like saying, "Today I expected to catch Covid-19, have a car accident, get mauled by a grizzly bear, get hit by an asteroid, and be in a plane crash.  And I ONLY got in a plane crash, caught Covid-19, and got attacked by a small bear, so it wasn't as bad as expected."  It's that ridiculous. 

If you look at the "definitions" section for an economic depression on this Wikipedia page, you'll see one of two things define an economic "depression."  Either there's a recession that lasts for 2 years or more (Investopedia and the traditional definition is 3 years), OR there's a 10% decline in GDP.  Today's numbers tripled that level.  Again, we had a 32.9% drop in GDP.  So, like it or not, this economic downturn is OFFICIALLY a depression.  When this time is written about in history, it will be called a depression, or a maybe great depression, if it lasts more than five years. 

I'll be fair, this depression would have happened if anyone was president.  Donald Trump didn't cause the depression.  But the Trump administration did do things that made it worse.  The completely inept reaction to the pandemic when it first hit U.S. shores has not only killed thousands more Americans than it would have, but it is making the economic situation far worse, in the long term.  The Trump tax cuts were a windfall for the uber-rich and major corporations, and that helped prop up a weak economy for many more months.  Because the recession that should have started in 2017 or 2018 was held off, markets went much higher, and financial bubbles got much bigger.  Because of that, the economy had (and still has) much farther to drop. 

Also, when Fed chair Jerome Powell started raising interest rates in late 2016, and into 2017, pressure was put on him to reverse course, because higher interest rates were freaking out the stock market.  At that time, Powell was trying to get interest rates from a historical low position, to a more "normal" level, which would give The Fed more ways to deal with the next recession.  But he suddenly reversed course, apparently under heavy pressure from the  White House and others, and eventually lowered rates, to help prop up stocks and other financial markets.  This also propped up a weak economy that desperately needed a serious correction, a recession. So when a crash did finally come, it was a much worse one than it would have been if it hit in 2017 or 2018. 

So why does it make a difference if we're in a recession or a depression?  A depression is simply more intense, and will likely last quite a bit longer.  Simply acknowledging that we're in a "depression," should make people think more intensely about how to survive and work out of it.  It should also get us to look at this as a longer term, serious issue, not just something that will work itself out in six months.  The downside is that a lot of people freak out when they hear "depression."  And people are freaked out already. 

My personal opinion is that it's better to state it clearly, accept that this is a major deal, and then get to work looking for solutions in all the issues facing us, like 28 million people on the verge of eviction.  We don't need millions more people on the streets or living in cars suddenly.  But our jacked up political system likes to spin things, even serious things, hoping the problems will go away if they can convince enough people it's not that bad.  Politicians can call this whatever they want, but if you get an eviction notice, shit gets serious... real quick. 

This is a serious economic crisis.  It's not being handled well, though the trillions of dollars The Fed has created have helped big business, wealthy people, and many recently unemployed people... for a while.  But this help comes at a huge cost later on, in the form of heavy inflation, possibly full blown hyper-inflation.  We need to put on our Big Boy and Big Girl pants and work out some really big solutions soon to some really big problems, and get a handle on keeping struggling people housed, finding new jobs, saving small businesses, and everything else we're dealing with. 

Here's my recent blog post explaining why I started calling this economic downturn The Phoenix Great Depression several months ago.  There are a lot of really long term trends and cycles converging, making this much more than a typical recession.

Why I believe we're in the beginning of a great depression, not a "quick" recession

This video was made in March 2020, when the stock market was hitting its first big bottom, and before most of the $3 TRILLION+ in bailouts really began.  But this video gives a great view of how big and widespread this economic crisis is.  This depth and breadth of this crisis is one major reason this will be a long downturn.

From my point of view, having followed and watched several long term social trends for many years, I see a long, rough, economic downturn for several other reasons.  There is a convergence right now of several long term trends and major social changes, it's not just an "normal" economic recession that lasts 12-18 months.

Here is one of the big social upheavals I've been watching evolve for years, which almost no one even knows is going on.  This is The Third Wave concept explained by the late futurist Alvin Toffler in his 1980 book, The Third Wave.  The basic idea is very simple, the Industrial Age dominated by factories in every town is ending, and the Information Age is being built.  At one level, we all know that.  It's like, "Duh, of course!"  To most people, this transition happened a long time ago.  The factories shut down, a lot of small cities and towns struggled, and now we're in the Information Age.

But we're only PARTLY in the Information Age.  Yes, nearly every person has a smart phone now, we don't share a phone with a cord attached to the kitchen phone like when I was a kid.  We have streaming music, not CD's or vinyl records played on a record player.  But our education system,  K-12, is still an Industrial Age model.  Our legal system, our criminal justice system, our political parties and system, they are all systems created in the Industrial Age.  A lot of our old, major, industrial, "blue chip" businesses, are still largely working on underlying Industrial Age models.  Our entire college/university system is still a model from the Industrial Age.  Our local, state, and federal government bodies and agencies are still working on Industrial Age models.  Yes, these all use new technologies, but the underlying systems and models they are based on, are still Industrial Age models.

Each of these businesses, governments, industries, or systems, will break down, and be disrupted, the same way Napster completely disrupted the music industry in 1999.  This can either happen by people of the old model, intentionally re-inventing the old system, or completely new people inventing a new, Information Age system.  Most of the time, it will be the second option.  Thinking of the retail industry, Sears, the longtime major department store didn't see the potential of online shopping, and Jeff Bezos, who started Amazon, did.  Bezos started a new model, and now, about 25 years later, Amazon is gigantic, and Sears is bankrupt.  This basic scenario WILL happen to every part of society that it hasn't happened to yet.  It's simply happening because new technologies making an entirely new business model or system possible.

This transition of everything, from the Industrial Age model, to the Information Age model, started slowly in about 1956, according to Alvin Toffler.  The speed of this change has gradually increased, and now change is happening very rapidly.  When it comes to 2020, this economic downturn is accelerating the level of this change.  So we not only have a major economic recession, which started last September (Repo crisis), AND we have a major, 100 year pandemic, which has killed over 142,000 Americans, as of this morning.  In addition to THAT craziness, those things are dramatically escalating the pace of change in the remaining Industrial Age businesses, governments at the local, state, and federal level, and systems  of other kinds.  In every system, business, or industry, these are HUGE, massive changes, and many of the old businesses wind up closing down, like chain stores in the Retail Apocalypse.  This level of change, happening in so many different places at once, cannot possible happen in 12-18 months.  Most... MOST of those major Industrial Age businesses were practically insolvent in March 2020.  These major businesses, an Wall Street, have been propped up by somewhere around $3 trillion, just to keep them afloat, so they can try to recover.  But this completely unprecedented level of bailouts WILL ALSO dramatically lengthen this recession/depression (it is officially a recession, for now). 

So this is just one of several major social trends and cycles happening, and CONVERGING, at this point in time.  The Third Wave aspect alone would turn a serious recession (6-18 months) into a depression (3 years or 10% GDP drop) or a great depression (5 year economic downturn). 

So that is PART of the reason I'm calling this economic collapse The Phoenix Great Depression.  It will be VERY deep.  It will last several years, with different economic indices going up and down at times, and it includes a level of societal change, and speed of change, unheard of in human history.  The "phoenix" part is the rebuilding of a new, viable society as we work through these many changes, at many levels, happening all at once. 

Nouriel Roubini on the "recovery," and the issues we're facing in the 2020's

A professor at NYU, and one of the most hardcore realists among economists, Nouriel Roubini gives a great take on the myriad of issues we're facing in this new decade, and what the recovery may look like.  He sees what may be a "Greater Depression" in the mid-20's, and he explains the ten drivers that could lead to it.

The Zombie (company) Apocalypse... what the U.S. and the world can learn from Japan

This is a real good video explaining the "zombie companies," how they became zombies, and their effect on a country (Japan from the 1990's on), and the zombie companies among us now. 

Financial Never Never Land... a new blog for new times

Over 42 million Americans have lost their jobs in about three months.  The stock markets plummeted in February and March 2020, as a 100 year pandemic, the Covid-19 virus, made its way into the United States, and spread rapidly.  Most businesses face a mandatory shutdown, and now millions of small businesses are struggling, most major corporations were close to insolvency in March, and tens of millions of Americans are suddenly struggling to simply pay their rent. 

It's June 21, 2020, as I write this post.  We're in weird times.  REALLY weird times.  Economics and Big Picture social dynamics is something I've had an interest in for many years, going back to high school in the 1980's.  I saw part of what's happening now coming, major economic and social issues, and wrote about them to some extent, in my previous blog.  But the Covid-19 pandemic was something I did not expect to be in the mix, and it helped shift the other issues into light speed mode.  Things are happening much faster than eve I expected.

 I first coined the term "The Phoenix Great Depression" in a blog post, last December (2019), I believe.  That's a term that popped in my head while trying to make sense of several long term trends I was watching.  As some of the things I'd been writing about for three years started happening, like the massive stock market drop and subsequent recession (possibly a depression already, if we see a 10% drop in GDP).  Over the past couple of months, I came to think of this decade we're entering as the "Tumultuous 2020's."  That's because I believe we're just at the beginning of the incredbily chaotic times, as opposed to the simply chaotic times of the last decade or so.

So many things are happening so fast right now, and I was retiring my previous personal blog, after hitting the 100,000 page view threshold, that I decided this new blog was in order.  In this blog I will collect articles, news clips, and interviews from people I think are sharing key insights going forward.  I will also share my personal views, which are a Big Picture context for all the craziness going on these days.  Hopefully this will help many of you make sense of today's Never Never Land economy, social upheaval, and chaos, and also help you find ways to make dollars from all the opportunities, as things get weirder.