Great correction: You thought it was over?
The great correction continues, with low housing prices, high unemployment, and other indicators of an economy that's either contracting, Japan-style, or growing very, very slowly.
What’s new in civilization? We went to Cafayate last night. Our old friend Doug Casey hosted an intimate little dinner – for about 150 people. He’s developing a community down there – the kind of place he wants to live in…surrounded by friends, good food, bright sun, beautiful views…and everything else a man might want.Skip to next paragraph
Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind The Daily Reckoning (dailyreckoning.com).
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Whether this is a good idea or not, we can’t say. But it is fun to get together with Doug and his crowd.
Since we were back in Internet range, we checked in with our usual sources. Here’s what we found:
The economy is either growing slowly, or contracting.
Housing is probably going down. Remember, Mr. Market has to destroy the idea that “housing always goes up.” When he’s finished people will think that “housing never goes up.”
Unemployment? People are gradually beginning to realize that the last ten years were the worst for creating new jobs in America’s history. If they keep thinking about it they will realize that it is not just the bust that is destroying jobs; there was something very wrong with the boom too.
Meanwhile, the markets are still calculating, figuring, deciding what things are worth. In the last couple of days, they’ve been thinking that maybe stocks and gold got a little too uppity. Gold has lost more than $50 in the last two days. Stocks lost ground on Tuesday, but bounced up 36 points yesterday.
From all we can tell, the Great Correction continues. And here’s a report from The New York Times that tells us where it leads:
OSAKA, Japan – Like many members of Japan’s middle class, Masato Y. enjoyed a level of affluence two decades ago that was the envy of the world. Masato, a small-business owner, bought a $500,000 condominium, vacationed in Hawaii and drove a late-model Mercedes.
But his living standards slowly crumbled along with Japan’s overall economy. First, he was forced to reduce trips abroad and then eliminate them. Then he traded the Mercedes for a cheaper domestic model. Last year, he sold his condo – for a third of what he paid for it, and for less than what he still owed on the mortgage he took out 17 years ago.
“Japan used to be so flashy and upbeat, but now everyone must live in a dark and subdued way,” said Masato, 49, who asked that his full name not be used because he still cannot repay the $110,000 that he owes on the mortgage.
…For nearly a generation now, [Japan] has been trapped in low growth and a corrosive downward spiral of prices, known as deflation, in the process shriveling from an economic Godzilla to little more than an afterthought in the global economy.
“The US, the UK, Spain, Ireland, they all are going through what Japan went through a decade or so ago,” said Richard Koo, chief economist at Nomura Securities who recently wrote a book about Japan’s lessons for the world. “Millions of individuals and companies see their balance sheets going underwater, so they are using their cash to pay down debt instead of borrowing and spending.”
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