By special request, the Titanic analogy repost
By special request, I am reposting this because it is still applicable:
I’m going to use the Hollywood version, because I was not actually on the Titanic, nor have I done any further research on it, but I have seen the Titanic movie a lot of times.
So Imagine that the US, or even Global economy is the Titanic in this example.
The Titanic took hours to sink. All evening, in the movie. It was very slow. Those at the Captains level weren’t seeing water until right before it sank. Those at the bottom knew something was wrong right away. Those in the bottom levels of the ship and those in the engine room were seeing water right away. They were screaming, running, and panicking but those at the top could not hear them. The passengers at the top of the ship may have had some idea that something might be wrong, but there was no visible proof that anything was wrong but rumors and maybe a view of some people leaping out from below. It took hours for the top level passengers to eventually see water and the chaos of the ship sinking and all evening before the ship finally sank. Before it sank all the wealthy people at the top got into the life-boats and most were fine, but the lower classes either drowned or froze because of the temperature of the water.
The current situation of the Titanic sinking in the US economy has been happening since September 11, 2001 when the economy took a massive hit from the terrorist attacks and the effect it had on the country. The lowered interest rates, down to 1%, were a band aid for a shotgun wound. The shadow economy sprouted and it looked like there was growth. Really, there was little actual growth but very much shadow growth based on borrowing and false equity created by the low interest rate, cheap borrowing housing boom. All the while, the ship was leaking, and already sinking. The top levels were partying, and the bottom levels were doing OK still. Slowly, level by level, those passengers began to feel the effects of the leaking, there were foreclosures and those jumping out of the lower levels, while those at the top were relatively uninterrupted. This continued and we are now looking at the point where those at the top have finally started to see the water, and have started to get into the life-boats.
So now the economy is sinking and is nearing the breaking point, where the ship splits and breaks in half. It is nearing that point, even though it may have seemed to already happened, just because there is flooding in the ship and people are fleeing, the ship is still there and semi-afloat. When it splits it will cause a massive rift in the markets and the economy, there will be increased losses of jobs, a realization of the massive amount of consumer debt that has been bulding and will not be resolved overnight. There will be those that will hang on to the ship on the rails, while the ship goes into the water, and some will jump before it sinks but some will go down with it. Either way, it is definitely sinking and the next things to look for:
-Continued drops in the levels of the market.
-Continued reports of corporate losses and economic data which shows that the economy is contracting.
-Continued tighening of credit standards.
-High Inflation from the recent actions that have been taken by the FED.
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