David Haggith

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Writer, The Great Recession Blog

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Seeing the Great Recession Before it Hit

My path to writing this blog began as a personal journey. Prior to the start of this so-called “Great Recession,” my ex-wife had a family home that was an inheritance from her mother. I worked as a property manger at the time, and near the end of 2007, I could tell from rumblings in the industry that the U.S. housing market was on the verge of catastrophic collapse. I urged her to press her brothers to sell the family home before prices dropped. The house went on the market and sold right away — and just three months before Bear-Stearns and others crashed, taking the U.S. housing market down for the tumble. Her family sold at the peak of the market.

My first syndicated newspaper articles on The Great Recession

Having foreseen the beginning of what is now called The Great Recession half a year before it hit, the economic collapse seemed to me the kind of thing anyone should have seen if his eyes were wide open. So, I decided in the months thereafter to write humorous editorials in a series I called “Downtime“, which chided the U.S. government and banking people who should have seen the economic collapse on the horizon but whose greed, cronyism, and ineptitude got us into this mess. I self-syndicated those articles to The Hudson Valley Business Journal, The Valley City Times-Record (North Dakota), The Daily Herald (Tennessee) and a news website in Israel (www.worthynews.com) and another in Australia (australia.to).

The articles were critical of the Bush and early Obama administrations and stated without reservation why all political efforts at the time were wrong, sometimes bordering on immoral, and why they would fail — even how long it would take for them to fail. You can use the link above or in the sidebar to go back and see whether or not the Great Recession was foreseeable.

Letters to a friend predicting each stage of The Great Recession

My own economic situation changed to where I no longer had time to write because property management became more than full-time. I did, however, continue correspondence with a friend who was a financial advisor. With less humor and more full-on punch, I criticized the daily news — not just the content but the uncritical, unthinking nature of almost all of the reporting. Routinely reporters would repeat the government’s mantra of “recovery” as if there were one. They endlessly parroted the government’s statement that the Great Recession had ended in the summer of 2009 when it was so obvious it had not. Frustration over such reporting kept me writing to my friend. I also discussed where programs like Ben Bernanke’s quantitative easing would lead (and what it would not lead to, i.e., “recovery”) and when it would fail. I ventured a number of economic predictions along the way.

The predictions proved right on schedule. (Well, let’s say they ran tighter to schedule than Amtrak anyway.) Toward the end of that writing, I told my friend we could expect further economic collapse mid-to-late summer of 2011 after quantitative easing ended in June. I said this would come for certain because quantitative easing had not created any sustainable recovery. It had merely propped up the middle of what would eventually be seen as an economic depression. It was an illusion of recovery. When the prop disappeared, so would the “recovery.”

Quantitative easing was the wrong prescription and had only created another economic bubble in the stock market due to the huge dump of baseless money the Fed was pouring into the economy. When the essentially free money ended, so would the bubble. The bubble held briefly through July, and then it burst in another market freefall that lasted most of August.

Why should I have known this when Ben Bernanke and the Federal Reserve board members clearly did not?

Another reason I gave for predicting an end-of-summer freefall was that the Republicans, who were willing at the time to risk the flawless credit rating of the entire United States, did not believe their brinkmanship over the debt ceiling would cause a credit downgrade and a stock-market plunge. Because they knew they would come to an agreement in time to avoid default (that much being under their control), they did not fear any economic damage. I was certain they were wrong and that their brinksmanship would cause serious damage even though they would come to a final-hour agreement. It did.

Why should I have known this while they did not?

Economic denial brings on The Great Recession

The simple answer to both questions above is that people do not see what they do not want to see. It’s called “denial.” (Well, that, and you have to consider that, if I were wrong in my predictions, I wouldn’t be telling you about it.)

I stated before the U.S. credit rating downgrade that the Republicans were ignorant in not seeing that the very fact of their quarreling — all by itself — would trigger a downgrade in the U.S. credit rating, which would bring a cascade of other problems. That was because it would, without a doubt, cause intelligent people throughout the world to think the U.S. cannot manage its problems; so, some institution would finally muster the courage to downgrade U.S. credit.

Again, that was exactly what happened. The Republicans came to a final-hour agreement, but the downgrade happened immediately thereafter anyway. That downgrade by Standard and Poor’s triggered the August market nosedive, which I had already said was a load ready to fall due to the end of quantitative easing. With their brinksmanship, the Republicans pulled the stick out from under the load that propped it up. I pointed out to my friend that this market plunge exactly mirrored the collapse that led into the Great Depression (graphically speaking).

Other economic predictions during The Great Recession

As a result of the market crash, gold skyrocketed. I had also strongly suggested my friend and his colleagues consider investing in gold and get out of the stock market for the time being. In a few weeks, gold nearly doubled from $1,000 an ounce, which many already thought high, to nearly $2,000 an ounce.

My final prediction before I decided it was time to start this public blog was that we could expect to see an even more significant collapse in the market in late September or October when the financial tsunami we sent over to Europe with our housing collapse finally bounced back to our own shores. The stock market plunged for two days in September, as I began the work of creating The Great Recession Blog, and again at the end of October due to troubles in Europe; but the big drop over the cliff I had predicted did not happen at that time. Rather, it was more like deep tremors anticipating the great plunge began to show.

During those months Europe people started calling the euro crisis “perilous” who were the type of folk usually resistant to statements of doom and gloom: Leaders of the European Central Bank and the International Monetary Fund began saying the situation in Europe was more grave financially than it had ever looked. On October 7, 2011 the head of the Bank of England said,  “This is the most serious financial crisis we’ve seen, at least since the 1930s, if not ever.”

As I write this “About ” page, I believe the real plunge will come soon when those European problems materialize as facts and not just worries. I believe, as I finally begin this blog, that we are going over the precipice of the second dip of the Great Recession, which will be deeper and longer than the first. (I’ll make that prediction here in this “about” article so that those exploring the site in months ahead can see if I was right or not. It’s the first prediction of this new blog.)

Knave Dave — critic of the blind prophets of false hope

Now that my own situation has changed again, thanks to my wife, Erin, to where I am able to write full-time, I have decided the world needs a voice that will present more insightful commentary on the economic news of the day than has been available anywhere in the mainstream press so far. That may be presumptuous, but it is based less on thoughts of my own intelligence than on the shear blindness of everything we’ve seen to date. I am simply one who chooses to see reality straight on. I don’t wear rose-colored glasses for myself or anyone else.

While I’m not an economist by training, the fact is we have been inundated throughout the years of the Great Recession with editorials by highly vaunted economists who have missed the mark every time with their own economic predictions. What good is it to be an economist if you are blind to the biggest picture that  unfolding daily all around you? So, I will mince no words. It’s time to bring economists a little disrespect for their cerebral stem rot.

Likewise, too many famous reporters and commentators continue to parrot the government’s talking points. The recession ended in June 2009? Really? Who forgot to the tell the unemployed? Anyone with eyes should have been able to see that the employment lines did not look like the end of a recession. How can it have ended when the exact fundamentals that created it are still in place? It’s time to take people to task for saying such absurd things.

Knave Dave — vigilante against the false profits of The Great Recession

Too many criminal CEOs still fill their porky bellies with the biggest taxpayer bailouts in the history of the world. These bailouts protect their reputations, saving them from the fall they should have taken. They continue to receive bonuses for having done an unparalleled job of destroying their companies! Many of their companies wouldn’t be making any profit at all if not for the interest they’re making off of nearly free government bailouts.

Just this week Hewlett-Packard fired its CEO, but is still paying him a bonus of millions of dollars in exchange for a year of corporate wandering in the wilderness. Netflix’s CEO cost his company hundreds of thousands of subscribers and had to reverse his decision. Bank of America’s CEO launched a debit-card fee plan that was immediately stupid in the eyes of many, but greed an arrogance led him to think he could pass it by his customers, and he lost customers in droves and had to reverse his decision, as did the many major banks that followed him. Since these corporate leaders do things most of us can immediately see as being dumb, why are they rewarded with salaries a thousand times greater than many of us make?

Knave Dave — political eye poker

Finally, it is time to bring much greater pressure on the government — Democrat and Republican — that has proven so inept at handling any of this and that has turned a blind eye to the corporate corruption that was involved. Since I started putting The Great Recession Blogtogether, a movement has begun called “Occupy Wall Street,” and it is already sweaping the world. People are, at last, speaking out. I have wondered how long it would be before citizens would get angry enough at footing everyone else’s bill that they would start to protest all the corruption, greed, and lack of government response to it. Maybe millions are beginning to speak up who see things as I do. In which case, The Great Recession Blog couldn’t be more timely.