The Great Depression Online

Great Depression Online Archive Issue:

A Blessing in Disguise

Great Depression Online
Long Beach, CA
May 01, 2009

Inside This Issue You Will Discover…

*** Slowing the Rate of Economic Death
*** House Price Decline Decelerating
*** A Blessing in Disguise
*** And More

“It’s what you learn after you know it all that counts.” – John Wooden

Slowing the Rate of Economic Death

“The economy has continued to contract, though the pace of contraction appears to be somewhat slower,” stated Fed Chairman Bernanke on Wednesday.

Then, as if to confirm Bernanke’s statement, the Commerce Department announced first quarter GDP contracted at a rate of 6.1 percent.  Note the economy contracted at a rate of 6.3 percent during the fourth quarter last year.  And, yes, 6.1 is ‘somewhat slower’ than 6.3.  

Wall Street loved the two tenths of one percent improvement in the rate of economic death and celebrated by launching the DOW 168.78 points…or for a 2.1 percent increase.

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That night, President Obama explained, “I’m confident of the future, but I’m not content with the present.”

The next day Chrysler filed for Chapter 11 bankruptcy.

But that’s not all that happened this week…

House Price Decline is Decelerating

Several ‘glimmers of hope’ also dimly twinkled from the economic darkness earlier in the week.  In fact, they were so dim if you blinked at the wrong time you missed them.

For example, on Tuesday we got word the Conference Board Consumer Confidence Index improved in April, all the way to 39.2 from 26.9 in March.  Then, also on Tuesday, we learned from Henry Blodget at the Business Insider that “…the rate of decline in house prices is finally decelerating.

“This does NOT mean prices have bottomed.  Far from it.  This just means that, for the first time since the market peaked in 2007, the rate of plunge is finally slowing.

“House prices still fell 19% year over year in February, close to the peak rate of January.  They are down almost 30% from the peak now, and they will likely bottom down at least 40% and probably closer to 50%.  But this is, finally, the first sign of a turn.

Similarly, as Bernanke stated, the economy is still contracting…albeit ‘somewhat slower.’

A Blessing in Disguise

Could it be possible economic recovery is just around the corner?

We’d like to think so, but we have our reservations.  For what – but debt – could possibly drive the growth? 

Yes, we’re suspicious of any quick return to economic growth.  Because such growth would not be the real growth driven by savings and capital investment…it would be another credit induced bubble boom like earlier in the decade.

Yet that’s what the Fed wants.  Inflation.  Particularly asset inflation.  And they’ll keep issuing debt and pumping – and printing – money until they get it.

But we’re not sure how many more of these bubble booms the economy can handle…more and more good people are wiped out with each one.

For a time – maybe several years – it’ll seem like the good times are here again.  Unemployment may even decrease as new jobs are created to support the new debt based bubble economy.  Perhaps a new alternative energy industry will sprout up like houses did in Southern California’s Inland Empire or dot com corporations did in the Silicon Valley.  Early investors may even get rich off it.

Yet, at some point, consumer price inflation will show up too.  And if the government’s still running trillion dollar deficits, while the Fed’s printing money, interest rates on Treasury bonds will convulse…then go vertical.  Lenders will finally recognize that there’s no way they’ll ever be repaid.  Conversely, the dollar will fall flat on its face.

That’s when the gig will be up…as the next phony debt based bubble boom goes bust.  Still, there’s a lot that could happen between now and then.  Treasury bonds could spike up now and save us the trouble.  It would be a blessing in disguise.  Especially for those who’ve planned accordingly: Crisis Strategy Alert.


M.N. Gordon
Great Depression Online

P.S.  As promised, we’ll be sending out a Special Announcement for an extraordinarily remarkable opportunity a little later today.  Hint: It’s part of a celebration.  And if you join in on the fun, you’ll receive all sorts of free goodies.  More to come.


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