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The Depression Of 2011? 23 Economic Warning Signs From Financial Authorities All Over The Globe

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Could the world economy be headed for a depression in 2011?  As inconceivable as that may seem to a lot of people, the truth is that top economists and governmental authorities all over the globe say that the economic warning signs are there and that we need to start paying attention to them.  The two primary ingredients for a depression are debt and fear, and the reality is that we have both of them in abundance in the financial world today.  In response to the global financial meltdown of 2007 and 2008, governments around the world spent unprecedented amounts of money and got into a ton of debt.  All of that spending did help bail out the global banking system, but now that an increasing number of governments around the world are in need of bailouts themselves, what is going to happen?  We have already seen the fear that is generated when one small little nation like Greece even hints at defaulting.  When it becomes apparent that quite a few governments around the globe cannot handle their debt burdens, what kind of shockwave is that going to send through financial markets?

The truth is that we are facing the greatest sovereign debt crisis in modern history.  There is no way out of this financial mess that does not include a significant amount of economic pain.

When you add mountains of debt to paralyzing fear to strict austerity measures, what do you get?

What you get is deflationary pressure and financial markets that seize up.

Some of the top financial authorities in the world are warning us that unless something substantial is done, that is exactly what we are going to be seeing as 2010 turns into 2011.

Of course some governments around the world could try to put these economic problems off for a while by printing and borrowing even more money, but we all know by now that only makes the long-term problems even worse.

For now, however, it seems as though most governments are opting for the austerity measures that the IMF seems determined to cram down the throats of everyone.

So what will austerity measures mean for the global economy?

Think “stimulus” in reverse.

Yes, things are going to get messy.

It looks like there is going to be a great deal of economic fear and a great deal of economic pain in 2011 and the years beyond that.

So are we headed for “the depression of 2011”?

Well, let’s hear what some of the top financial experts in the world have to say….

#1) Economist Nouriel Roubini:

“We are still in the middle of this crisis and there is more trouble ahead of us, even if there is a recovery. During the great depression the economy contracted between 1929 and 1933, there was the beginning of a recovery, but then a second recession from 1937 to 1939. If you don’t address the issues, you risk having a double-dip recession and one which is at least as severe as the first one.”

#2) Bank of England Governor Mervyn King:

“Dealing with a banking crisis was difficult enough, but at least there were public-sector balance sheets on to which the problems could be moved. Once you move into sovereign debt, there is no answer; there’s no backstop.”

#3) German Chancellor Angela Merkel:

“The current crisis facing the euro is the biggest test Europe has faced for decades, even since the Treaty of Rome was signed in 1957.”

#4) Paul Donovan, the Senior Economist at UBS:

“Now people are questioning if the euro will even exist in three years.”

#5) Michael Pento, Chief Economist at Delta Global Advisors:

“The crisis in Greece is going to spread to Spain and it’s going to be very difficult to deal with. They are bailing out debt with more debt and it isn’t sustainable. It’s a wonderful scenario for gold.”

#6) LEAP/E2020:

“LEAP/E2020 believes that the global systemic crisis will experience a new tipping point from Spring 2010. Indeed, at that time, the public finances of the major Western countries are going to become unmanageable, as it will simultaneously become clear that new support measures for the economy are needed because of the failure of the various stimuli in 2009, and that the size of budget deficits preclude any significant new expenditures.”

#7) Telegraph Columnist Edmund Conway:

“Whatever yardstick you care to choose – share-price moves, the rates at which banks lend to each other, measures of volatility – we are now in a similar position to 2008.”

#8) Peter Morici, an Economics Professor at the University of Maryland:

“The next financial tsunami is emerging and will ripple to America.”

#9) Bob Chapman of the International Forecaster:

“The green shoots of recovery have now turned into poison ivy. The abyss has again been filled with more debt and more fiat currency. In the process the Fed and now the ECB have lost all credibility.”

#10) Telegraph Columnist Ambrose Evans-Pritchard:

“The M3 money supply in the United States is contracting at an accelerating rate that now matches the average decline seen from 1929 to 1933, despite near zero interest rates and the biggest fiscal blitz in history.”

#11) Professor Tim Congdon from International Monetary Research:

“The plunge in M3 has no precedent since the Great Depression. The dominant reason for this is that regulators across the world are pressing banks to raise capital asset ratios and to shrink their risk assets. This is why the US is not recovering properly.”

#12) Reuters Columnist Iliana Jonas:

“The default rate for commercial mortgages held by banks in the first quarter hit its highest level since at least 1992 and is expected to surpass that by year-end and peak in 2011, according to a study by Real Capital Analytics.”

#13) Paul Krugman, a Nobel Prize-winning Economist:

“It’s not hard to see Japan-style deflation emerging if the economy stays weak.”

#14) Stan Humphries, Chief Economist for Zillow.com:

“Anyone expecting a robust rebound in the housing market … will be sorely disappointed.”

#15) Fox News:

“As the national debt clock ticked past the ignominious $13 trillion mark overnight, Congress pressed to pass a host of supplemental spending bills.”

#16) Bloomberg:

“The U.S. government’s Aaa bond rating will come under pressure in the future unless additional measures are taken to reduce projected record budget deficits, according to Moody’s Investors Service Inc.”

#17) Peter Schiff:

“When creditors ultimately decide to curtail loans to America, U.S. interest rates will finally spike, and we will be confronted with even more difficult choices than those now facing Greece. Given the short maturity of our national debt, a jump in short-term rates would either result in default or massive austerity. If we choose neither, and opt to print money instead, the run-a-way inflation that will ensue will produce an even greater austerity than the one our leaders lacked the courage to impose. Those who believe rates will never rise as long as the Fed remains accommodative, or that inflation will not flare up as long as unemployment remains high, are just as foolish as those who assured us that the mortgage market was sound because national real estate prices could never fall.”

#18) The National League of Cities:

“City budget shortfalls will become more severe over the next two years as tax collections catch up with economic conditions.  These will inevitably result in new rounds of layoffs, service cuts, and canceled projects and contracts.”

#19) Dan Domenech, Executive Director of the American Association of School Administrators:

“Faced with continued budgetary constraints, school leaders across the nation are forced to consider an unprecedented level of layoffs that would negatively impact economic recovery and deal a devastating blow to public education.”

#20) Mike Whitney:

“Without another boost of stimulus, the economy will lapse back into recession sometime by the end of 2010.”

#21) Kevin Giddis, Managing Director of Fixed Income at Morgan Keegan:

“There is big money making big bets that at a minimum we we’ll have a recession if not a depression that could last for years.”

#22) John P. Hussman, Ph.D.:

“In my estimation, there is still close to an 80% probability (Bayes’ Rule) that a second market plunge and economic downturn will unfold during the coming year. This is not certainty, but the evidence that we’ve observed in the equity market, labor market, and credit markets to-date is simply much more consistent with the recent advance being a component of a more drawn-out and painful deleveraging cycle.”

#23) Richard Russell, the Famous Author of the Dow Theory Letters:

“Do your friends a favor. Tell them to “batten down the hatches” because there’s a HARD RAIN coming. Tell them to get out of debt and sell anything they can sell (and don’t need) in order to get liquid. Tell them that Richard Russell says that by the end of this year they won’t recognize the country. They’ll retort, “How the dickens does Russell know — who told him?” Tell them the stock market told him.”

 
  • Mmm. This could be scary. I was expecting it to happen in 2012.. But this’ll leave a lot more people scrambling.

    How well did silver fare in a deflation, I wonder?

  • Anna

    The book AFTERSHOCK: a 20 year mega-depression is coming with a Dollar Bubble & Government Bubble bursting. Up to 50% unemployment. Gold to soar.

    Larry Burkett (who died in the early 2000s) of The Coming Economic Earthquake: “In the event the Treasury decides to print fiat money to pay the government’s bills, you can be sure the action will be cloaked in secrecy & disguised as something else, contrary to the securities’ laws…..The printing of money to pay the government’s bills will be ONE OF THE LAST and certainly the MOST DESPERATE, measures because of the potential severity of the consequences. (pg 160)

  • I don’t think we’re headed for a depression. I think we’re in one now. For additional 25 forecasts regarding the direction of the industrial economy in 2010, click here.

  • rich

    Wait a minute……now its 2011…..I thought we were supposed to already be in a depression? Hogwash

  • Michael

    Rich:

    It is not 2011 yet.

    In addition, I am not “guaranteeing” that anything is going to happen in 2011. I am just pointing out that a lot of financial experts and governmental authorities are warning that the next couple of years could be very, very hard economically. That is why there was a question mark in the headline.

    There are a lot of ways that all of this can play out. It is certainly possible that we could be heading into a very deep recession or even a depression in 2011, but that depends on a lot of factors.

    If governments around the world suddenly decide to fire up the printing presses, we could find ourselves facing hyperinflation instead of a depression.

    There are a lot of moving parts, so there are no guarantees.

  • This Only Just Begun

  • MrPotato

    Oh please.. we all know nothing that will go down in 2012 not 2011, but after that our everyday lifes will be to travel the country raiding abandoned supermarkets for leftover batteries and medpacks, have fun

  • Matt

    ask yourself – ask your friends:

    Do you want the government to just fix everything and take care of you no matter what it takes?

  • Matt

    A recession is when your neighbor loses her/his job. A depression is when you lose yours. Therefore 20% of ‘the workforce’ is in a depression ;P

  • Matt

    Dear Mr. Obama,

    I’d like to start living the govt-sponsored way of American life and apply for the following:

    1. a union membership complete with a union pension and health care benefits package
    2. an unlimited extension to my free stay in my foreclosed house
    3. an electric car subsidized by those big greedy oil companies
    4. an unlimited extension to my unemployment benefits until the economy improves
    5. food stamps
    6. or, if you cannot provide any or all of the above, then a high-paying govt job, one that I can sleep on like you friend Larry Summers

  • This is scary stuff and apparently lots of experts are thinking this way. Now is the time to start preparing for what could be a rough ride. “Thriving During Challenging Times, The Energy, Food and Financial Independence Handbook” is a great reference guide to figure out where to start to make yourself more resilient to coming shocks like this. http://www.cammather.com

  • Chris

    Long-time reader, first-time comment.

    From the oil spill, to the debt crisis, to the rising unemployment, one thing is perfectly clear — we’re in big trouble.

    Everyone has their own opinions on potential solutions, as does this blog as discussed in the Declining Value of Work, but nobody seems to recognize the central flaw of this system as a whole — the monetary system itself.

    Technological Unemployment, which was touched on in the Declining Value of Work blog, is not going to slow down. First the agriculture industry was decimated by technological unemployment, then manufacturing was displaced, and now the service sector is becoming more and more displaced by machines (ATM’s, self check-out, cooked food vending machines, robot chef’s, automated wait staff’s [Germany], automated warehouses, soon-to-be automated transportation/delivery). This will only continue to accelerate as the years go by. What happens when all of this automation becomes cheaper than outsourcing?

    We are left with less and less unskilled labor jobs, and more and more skilled labor that is driven primarily by intrinsic motivation. As Daniel Pink demonstrated in a recent TED Talk, extrinsic motivation in the form of monetary incentives slow production when the task requires even rudimentary critical thinking or creativity. Our incentive-based economic model once worked well when the majority of labor was unskilled and incentive dependent, but it is now obsolete.

    Going back to the “good ole’ days” is not an option. The only constant in this world is change. We can’t use 18th century philosophies to solve 21st century problems. It is time to let go of our superficial traditional notions and embrace scientific innovation. What we need is to transition slowly to a Resource Based Global Economy. Please look into The Venus Project, and its activist organization, The Zeitgeist Movement.

  • jc

    Hogwash? People keep saying it will get better (trying to convince themselves?) but I always ask them ‘What about the debt?’ We have too much – privately and publicly held debt. How do we pay this off? California and Illinois are completely broke. Michigan and a host of other states are months away from broke. How will we dig ourselves out? No one answers that question because no one can.

    It could happen in 2010, 2011, 2012 – pick a date. You might be wrong, but not for long…

  • ParLay

    Rich – we’re not in a depression because the U.S. Government threw us a lifeboat by spending, printing or guaranteeing around $11 Trillion (with a T) of U.S. Dollars. The question remains on how much time has this bought?

  • The simpliest answer, let the true price of gold an silver run to where it should be. Then let the gov tax the hell out of it. Since it soon to be the only thing worth anything. But then again who would in there right mind would sell there gold an silver for a falling dollar. If they let the price of silver an gold go to the moon. I dont think that it would cause massive inflation. The only thing bad it would take investment dollars away from other things like stock market.

  • matt

    “it a minute……now its 2011…..I thought we were supposed to already be in a depression? Hogwash”

    RICH! You are a fool!!

  • Jim Em

    I think the one coming out of this in ok shape will be China. They proved that they are very resilient, that when the economic collapse happened they turned inward to their 1.3 billion people and kept their country in the black with 6-9% growth.

    China wants to be top dog, but not at the expense of everyone else. They are very aware that markets need to flourish, that what is good for the rest of the world is good for China.

    China and the rest of Asia is slowly forming an economic union. I think that will prove to be extremely powerful and will make the EU seem third class.

    Also, look for banking to move east.

  • Dan

    Who sponsors the ‘Is Obama bad for business? Vote here now’ so-called ‘poll’ I see on the right side of this page? (An identical ‘poll’ on Yahoo said, ‘Is Obama to blame for the oil spill? – Vote here now.’

    Also, in an unrelated vein, does anyone know how much it costs the US government per military or drone ‘Taliban’ kill in Afghanistan?

    Just curious.

    Thanks.

  • Dan

    Oh, never mind on the ‘poll’ ad – in very small letters below the ‘poll’ it says sponsored by ‘Newsmax.’

    My cost-per-‘Taliban’ in the AfPak war inquiry still stands, though.

    It must be many goats worth.

  • Gerry

    Let’s pull off the bandage and not just tug at it. It’s time to reset the value of gold and silver to thousands of dollars per ounce and have the governments pay off their debts using their precious metals. Otherwise, we are going to see years of financial pain and suffering.

  • Now is the time to invest in gold and silver … prepare finacially for the inevitable.. Silver Gold Bull inc is here to help..

  • There is no question that there are hard times ahead. The first clue will be when China refuses to roll over our debt. Then there will be three alternative; 1)austerity, 2)default and maybe military takeover, and 3)inflation. To see why we are betting on #3, take a look at http://thegreatrecessionconspiracy.blogspot.com for evidence that Congress is highly unlikely to act responsibly. Then, to see how our problems could be solved sensibly, see our book at http://www.scribd.com/doc/16864582/The-Great-Recession-Conspiracy. It is also a Kindle book.

  • parth vasa

    As lng as you can fish and hnt its realy no big deal. It will be like one big camping holiday.

  • liam

    the lemmings are all about to wiped out the shorts and the longs, gold and the dollar will go up along with silver. until the dollars falls and gold(along with its shiny cousin) are the last men standing, history always repeats when it comes to fiat currencies we are about to have a repeat and global shift as all the gold is now in the hands of asians.
    he who has the gold makes the rules.China time has come ,gold shares will weather the storm as the smart money in gold will soon make way for dumb money, as it always has.

  • The title of this article is rather amusing considering that we have already been in a DEPRESSION for quite some time! All economists, media and governments are liars!

  • A prolonged if not almost permanent poor housing market will not help matters. The tens of millions of people who are unemployed or underemployed simply cannot afford to buy houses and it’s difficult to purchase a house in a climate of employment instability.

    Another possible problem is that many potential purchasers are recent college graduates who could not find career jobs in their fields, many of whom are saddled with debt. In other words, many members of the younger generations that would normally purchase houses are unable to do so.

    I thus predict that housing prices will only continue to decrease.

  • Tawney

    We need to start praying !!!! this counttry is headed for big trouble. No one really knows how much trouble yet…it’s hard there are so many liars among us so it could get worse…much worse then predicted in this Blog. I would suggest filling up your house with food and medicine all home supplies. When inflation hits or the next Depression everyone will thank me…you will be among the few having dinner. Seriously people buy some extra….a lot extra if possible. It will be sad when we can’t afford food and heat so do it when you can….

  • Jim

    This kind of goverment spending cannot be sustained, if we were smart we would cut goverment spending in half at least…social programs be damded, and cut taxes bigtime! Read on the Depression of 1920, probably havent heard of it huh. In that case thats exactly what they did and in 9 months they were into major growth. In the Depression of 1920 we had a 1 year low, lower than any single year in the Great Depression. Do this and watch all the fearful people with money, looking for a safe haven, throw their money at America.

  • steve erickson

    CNN.com/gps reported according to CIA, it costs 1 billion $/year to wage war against al quaeda tough guys in Afghamistam.

  • rick rolled

    ‘The depression of 2011’ is going to be the name the masses have started calling it. will it get as old as shock and aww…

  • John

    I find it interesting that only one person had the insight to make this highly relevant observation…”We need to start praying!” It should be obvious to even the most casual observer that this situation is already beyond any human solution. I predict 2010 will look like a day in the park in the sharp focus of 20/20 hindsight. Get ready!

  • David

    John; we have been praying, but to which God? Where our treasure is, there also is our heart.

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