I write about my opinions on the ongoing economic collapse extensively on my other blog, but I tend to hold back on the depths of my viewpoints and my fears and/or realizations.Privately I think the US and its citizens are up the creek without a paddle. I believe the nation is headed downhill big time and we are going to return to a standard of living much differently than what we have seen in recent years. Much of this will be bad for some, even many; but likewise is true as well, particularly for those in the lowest quintille economically. I think stock prices and values are headed back to where they were in the early 1990s and late 1980s. The great wealth accumulation by many, primarily the wealthy, is going to be carved up and minimized substantially.
For much of the history of the nation, there was a ratio of 3:1 between home prices and per capita income. In much of the last three decades, this historical ratio has been seriously out of whack, rising to an 6:1 level in most places and even 10:1 to 12:1 or more in some locales. Incomes have been largely stagnant for a number of years and certainly have not risen anywhere near the rate of housing costs and values. I now believe the US is headed back towards housing values of the late 70s to mid 80s, which would be representational of what incomes exist. Obviously home cost more to build with more expensive materials and accessories as part of the construction, but a big part of the cost is the price of land; this particular element will be a big part of the downturn in prices and values as it will reflect more accurately and justly relative to per capita incomes.
If all this does eventuate -- and its far from a sure thing -- the nation we will be living in within the next five years will show far less social and economic stratification that what has been witnessed since the Reagon years and through the Bush Junior years.
One thing to note -- if one factors in the rate of inflation, the DJI is still at levels seen in the year 1966.... but I now suspect there is a greater possibility that the DJI is headed to levels below the 4000 mark, and going to even below the 3000 mark is certainly possible now.
What will all this mean ? Quite simply, an economic depression...
http://www.thenation.com/doc/20090323/ehrenreich_fletcher?rel=hp_picks
http://www.ritholtz.com/blog/2009/03/inflation-adjusted-dow-is-at-1966-levels/
*****
Posts
