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The
Second Great Depression
is a frightening book. It shows how massive consumer debt will trigger
the next depression, starting about the year 2007. Most of the logic
used to support this premise is based on the government's own published
data.
The
exuberance resulting from the overheated stock market of the 90s caused
consumers to stop saving and go into debt. Then, the dramatic drop in
mortgage rates enabled people to refinance their homes and go even
further into debt. People are no longer living on what they can afford;
instead they are living the lifestyle they think they deserve, costs be
damned!
With
interest rates increasing, savings rates near zero, and debt at its
maximum; many people will be pushed over their debt limit, having homes
foreclosed by the banks or going into bankruptcy. Others will heed the
warnings and reduce spending, causing a dramatic slowing of the economy.
Other
problems related to the economy, such as balance of payments and
deficits, are discussed. But it is consumer debt that will trigger the
depression.
Even
during a depression, people will need to save for their future. To
survive this depression, savings should be in Treasury Inflation
Protected Securities, and the stock market should be reentered only
after it drops 73% from its 2004 level. Included charts show required
savings for retirement. These charts give different options as to the
number of years before retirement, expected pension, and the amount of
existing savings.
In
this depression, the United States will be brought to its knees. But not
unlike the mythical bird Phoenix that dies in flames and is then reborn
out of its own ashes, the United States will also be reborn. However, it
will be a poorer and less arrogant country that emerges from its own
ashes.
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