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On the First Day of Advent, Some Cautiously Optimistic Thoughts on The Continuing Economic Crisis

If you are involved in business today, you know that we are looking at a tough fight out of the collective mess that we are in. Just 6 months ago today, I wrote a post that featured a “Deep Dive” with John Mauldin on housing.

It ended with “We are in for a slow, Muddle Through recovery, with the real potential to slip back into recession when the tax increases hit. Stay tuned.”

Well, that was 6 months ago.

So, as the always dependable Rocky Vega at the “Daily Reckoning” put it today: “Recognized financial editor John Mauldin recently gave a “Thoughts on the Continuing Crisis” lecture where he showed the US is entering a deflationary period much like the one Japan’s been in for about two decades.

The Business Insider has put together a slideshow of over 20 of his charts, and here are 11 highlights from the presentation:

1.  The US headline Consumer Price Index indicates deflation

2.  A record nine million Americans, more than at any other time, are working part-time for economic reasons

3.  U6, the “real” unemployment measure, has hit new highs… and, when you include workers who’ve given up on finding a job, unemployment rises to 21.1 percent

4.  33 percent of the unemployed have been looking for jobs for over six months, more than ever before

5.  Available jobs continue to decrease at a much steeper rate than in an average recession… 18 million brand new jobs must be created over the next five years in order to return employment to 2007 levels

6.  US consumer borrowing is grinding to a halt and personal saving has turned sharply higher

7.  Prime mortgage delinquency rates are rising and are increasingly mirroring the subprime problem

8.  The recovery is most likely to be a W-shaped… and we still have yet to hit even the first bottom

9.  Bank lending to both consumers and businesses has fallen off dramatically

10.  Money supply, as measured by M2, has stayed flat and the velocity of money is way down

11.  Government tax receipts have tanked, and by almost any estimate the annual budget deficits are going to be in the trillions

Here’s an embedded copy of The Business Insider article which has a chart by chart review of John’s lecture. If you care at all about higher level thinking on economic issues, then John Mauldin is worth following.


I’ll let John wrap this up with a quote from his most recent “Thoughts From The Frontline” article entitled “Why I Am An Optimist” that he published this weekend – I hope that you see the same cautious optimism in my thoughts that many of us do in John’s thoughts:

“All that being said, while I am an optimist, I am a cautious and hopefully realistic optimist. I do not think the stock market compounds at 10% a year from today’s

I rather doubt the Fed will figure the exact and perfect path in removing its quantitative easing. I doubt we will pursue a path of rational fiscal discipline in 2010 or sadly even by 2012, although I pray we do. I expect my taxes to be much higher in a few

But thankfully, I am not limited to only investing in the broad stock market. I have choices. I can be patient and wait for valuations to come my way. I can look for new opportunities. I can plan to make the tax burden as efficient as possible, and try and
insulate myself from the volatility that is almost surely in our future – and maybe even figure out a way to prosper from it.

A pessimist never gets in the game. A wild-eyed optimist will suffer the slings and arrows of boom and inevitable bust. Cautious optimism is the correct and most rewarding path. And that, I hope, is what you see when you read my weekly thoughts.”

For more information on John or his FREE weekly economics letter, go to: .

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