scarey forecast

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    but seems realistic.
    By Jay Taylor -

    "...Now debt in America has reached an incredible $32 trillion. Most of that has to be rung out of the economy during the winter. Much of this will happen through bankruptcy. This process is already beginning, and will accelerate as the ravages of winter unfold. Bankruptcy must lead to falling prices. Allow me to use Worldcom as an example. I know it’s not bankrupt yet, but the company has just axed 17,000 jobs. So here are 17,000 people, many of them with huge personal debt levels, including hefty mortgages that they cannot now service. That means that those homes will be put on the market. Who’s going to purchase these homes? More and more Americans are in similar predicament to these Worldcom employees, so the cost of housing will fall with reduced demand.

    These newly unemployed people will have to survive on greatly reduced incomes, which will be earmarked for survival only. There will be no purchases of new SUVs, no new TVs, no digital cameras, no eating out except perhaps a Sunday treat at Macdonalds. Travel and driving will be kept to a minimum, which will put additional pressure on the already over-indebted airline companies and the purchase of gasoline products will be greatly reduced.

    Worldcom has lots of rental office space, which will now become vacant. Landlords will have to find new tenants, but new tenants will be hard to find as more and more companies like Worldcom, Tyco, Qwest, Enron, Global Crossing, Kmart, etcetera, bite the dust. At the depths of the last winter depression, unemployment in the United States reached 25%, so we are only at the very early stages of the crash of the debt bubble.

    The demand for all commodities will drop, as unemployment begins its inexorable rise, as the Kondratieff winter gathers momentum. Jay, you might recall that during the Asian crisis in 1998, the demand for commodities in that region dropped and prices fell accordingly. The price for oil dropped to $10 a barrel. I remember ‘The Economist’ was predicting $4 a barrel. Imagine thereafter what will happen to demand as the worldwide winter depression begins to unfold, it will drop precipitously and so will prices.

    So you see, I am convinced that we now face a typical Kondratieff winter deflation. Alan Greenspan knows that too, and that is why he is printing money like a maniac. That was tried following the 1929 crash, but it failed, because the unwinding of the debt bubble overwhelmed the Federal Reserve’s efforts to contain deflation and I am confident in predicting, that it will fail this time, too.
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