My Predictions for 2009: Great Depression II

I’m looking at the New Year through the glasses of an insurance adjuster and risk manager…ME! What I’m seeing ain’t good.

Burglaries, robberies, thefts and carjackings will increase. They have done so in the past during times of economic downturn. It will be worst in the urban areas, where the population density is highest. But the suburbs will experience these crimes at a level previously unknown.

Arson will increase, as desperate people try desperate things to survive. A lot of arson goes unproven and unprosecuted because the evidence cannot be absolutely tied to the policyholder. Insurance companies have a hard time denying a claim they cannot disprove.

Some large insurers will go bankrupt because of Credit Default Swaps, the completely unregulated derivative securities invented primarily to insure mortgage-backed securities. Banks and insurance companies worldwide scooped up these CDSs, and now CDSs are defaulting. Just like a margin call at the stock brokerage, the insurers and banks are being required to make up the difference…and they don’t have it.

Sometime early in 2009, Barack Obama will know just how bad things are, and will realize that the luckiest man in the USA is John McCain because he didn’t win the election.

Significant inflation to strike the US. The Federal Reserve has printed TRILLIONS of new dollars. That MUST eventually make the existing dollars worth less in buying power. We had huge inflation back during the Carter/Ford years, and Congress wasn’t running deficits then.

More layoffs, unemployment to 20% or higher. The Department of Labor has been fudging the numbers on unemployment, and actual unemployment is about twice higher than reported.

The Dow Jones Industrial Average will end the year at 6000 or lower.

Thousands of bank failures due to Credit Default Swaps and Adjustable Rate Mortgages(ARM) resets. Another ARM reset point is set to occur before Spring 2009, and will wreak havoc with the lenders holding the mortgages.

Gold and silver shortages and price spikes. Gold may end 2009 above $2,000 an ounce, and silver may be at $100.00 an ounce. Price increases will be due to a flight by investors to sound money as well as shortages of bullion.

Massive foreclosures as unemployment increases, as well as the ARM resets scheduled to occur in Spring 2009.

Bankruptcy of all three domestic automakers. Congress will not bail them out, and they will enter Chapter 11 reorganization. However, they still will not change their fundamentals, and I predict Chrysler will eventually go Chapter 7 and liquidate.

Airlines will go bankrupt as people stop flying.

Some markets will dry up, like luxury items, travel and sports/leisure vehicles.

Donations to charities will dry up, as donors will take cash safety and wealth conservation positions and drastically reduce contributions. Many charities rely on donations for their operating revenues, and some may close up shop or drastically scale back operations.

Get ready, readers. We are about to enter a long depression, not just a short recession. The Federal Government continues to interfere in the free market, which will only prolong the blood-letting and recovery. Only when the Federal Government collapses will there be a recovery from Great Depression II.

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