on how bad americas economy is

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    Demography is Destiny

    The Daily Reckoning

    Paris, France

    Thursday, 27 March 2003


    *** Credit card delinquencies at record...mortgage
    foreclosures too...grim earnings...

    *** Economic demons from hell! Durable orders down...new
    home sales down...

    *** Gold up...a rising star in politics...the field
    marshal...and more!


    The bad news continues to trickle out as though from a
    leaky sewage pipe.

    Credit card delinquencies are at a new high. So are
    mortgage foreclosures. As people borrowed more and more
    against the 'equity' in their houses, they found it harder
    and harder to make the payments. But the borrowers didn't
    seem to notice...and the lenders didn't seem to mind;
    refinancings continued to rise alongside foreclosure rates.

    In the last two weeks, however, either the borrowers have
    been distracted by war on prime time...or they've finally
    begun to come to their senses. Or maybe a slight increase
    in mortgage rates caught their eyes just as they were
    getting ready to sign on for another $20,000 slug of debt.
    Whatever the cause, refinancing activity has fallen over
    the last couple of weeks, with the most recent week's
    activity 9% below the previous week.

    Consumer confidence is at a 10-year low. And as reported
    here yesterday, debt is growing at its fastest pace in 15

    And how's business? Like the rest of the financial
    effluent, it is smelly and repulsive. A "Grim Earnings
    Season" is how TheStreet.com describes the most recent

    Even the news from the Iraqi front is a little grim. While
    the situation could change by tonight's news, so far, the
    Iraqis do not seem to appreciate their liberators. If this
    ingratitude continues, the price tag for installing a
    puppet government - oops, we mean bringing freedom to the
    Iraqi people - could rise well beyond the $75 billion Bush
    has asked for to see him through September.

    While we have no doubts about the nobility of the cause, we
    can't help but wonder whether bringing democracy to the
    desert might turn out to be a little like building an
    expensive opera house in the jungle: it might look good for
    a while, but it would soon have vines growing through the
    unused air-ducts and bird droppings on the carpet - while
    the bonds sold to pay for the project would still need to
    be paid.

    Not that we have any better idea than George Bush or Alan
    Greenspan of what will happen. It's just that this Lenten
    Season finds us unusually worried. Maybe the war will turn
    out well...but maybe it won't. Maybe the dollar will hold
    up...but maybe it won't. Maybe stocks and the economy will
    enter a new boom phase...but maybe they won't.

    "As usual," writes the Mogambo Guru with his customary
    reserve, "I look for the dark cloud. But when the cloud is
    this big and that dark, and heavy, threatening clouds cover
    the earth like a death shroud from pole to pole, lightning
    bolts and flash floods everywhere, the silver lining that I
    am instructed to be on the lookout for may, truly, be out
    there, beyond the horizon, but I can't see it."

    Nor can we. If things go well, we might reasonably hope for
    a modest boom in the stock market...as the nation's lumpen
    investor/voters celebrate the quick and easy victory over
    Iraq that they expected. Should this happen, dear reader,
    you are advised to use it as a selling opportunity. Because
    it will be followed, most likely, by a bust, in which the
    correction that began in March 2000, made worse by
    procrastination and more debt, resumes.

    If things go badly...on the other hand...

    While America cannot lose the war in Iraq, it can make a
    mess of it. If that happens, the dollar could be the
    biggest casualty. And if the greenback goes down, it could
    "unleash the demons of hell", as the Mogambo Guru puts it.

    These demons will be worse than any we've ever seen, he
    continues: "Economic demons from Hell are what you got in
    the Old Days! These new demons are actually even worse!
    These economic demons are the ones that the regular demons
    in Hell are afraid of!"

    So there! What are you worrying about?!

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