3 Things That Happened Just Before The Crisis Of 2008 That Are Happening Again Right Now

Michael Snyder
By Michael Snyder December 7, 2018 08:39

3 Things That Happened Just Before The Crisis Of 2008 That Are Happening Again Right Now

This article was gladly contributed by author Michael Snyder from The Economic Collapse.

Real estate, oil and the employment numbers are all telling us the same thing, and that is really bad news for the U.S. economy.  It really does appear that economic activity is starting to slow down significantly, but just like in 2008 those that are running things don’t want to admit the reality of what we are facing.  Back then, Fed Chair Ben Bernanke insisted that the U.S. economy was not heading into a recession, and we later learned that a recession had already begun when he made that statement.  And as you will see at the end of this article, current Fed Chair Jerome Powell says that he is “very happy” with how the U.S. economy is performing, but he shouldn’t be so thrilled.  Signs of trouble are everywhere, and we just got several more pieces of troubling news.

Thanks to aggressive rate hikes by the Federal Reserve, the average rate on a 30 year mortgage is now up to about 4.8 percent.  Just like in 2008, that is killing the housing market and has us on the precipice of another real estate meltdown.

And some of the markets that were once the hottest in the entire country are leading the way down.  For example, just check out what is happening in Manhattan;

In the third quarter, the median price for a one-bedroom Manhattan home was $815,000, down 4% from the same period in 2017. The volume of sales fell 12.7%.

Of course things are even worse at the high end of the market.  Some Manhattan townhouses are selling for millions of dollars less than what they were originally listed for.

Sadly, Manhattan is far from alone.  Pending home sales are down all over the nation.  In October, U.S. pending home sales were down 4.6 percent on a year over year basis, and that was the tenth month in a row that we have seen a decline;

Hope was high for a rebound (after new-home-sales slumped), but that was dashed as pending home sales plunged 2.6% MoM in October (well below the expected 0.5% MoM bounce).

Additionally, Pending Home Sales fell 4.6% YoY – the 10th consecutive month of annual declines…

When something happens for 10 months in a row, I think that you can safely say that a trend has started.

Related: How To Tell When People Are Lying to You (in a crisis)

Sales of new homes continue to plummet as well.  In fact, we just witnessed a 12 percent year over year decline for sales of new single family houses last month

Sales of new single-family houses plunged 12% in October, compared to a year ago, to a seasonally adjusted annual rate of 544,000 houses, according to estimates by the Census Bureau and the Department of Housing and Urban Development.

With an inventory of new houses for sale at 336,000 (seasonally adjusted), the supply at the current rate of sales spiked to 7.4 months, from 6.5 months’ supply in September, and from 5.6 months’ supply a year ago.

If all of this sounds eerily similar to 2008, that is because it is eerily similar to what happened just before and during the last financial crisis.

Up until now, at least the economic optimists could point to the employment numbers as a reason for hope, but not anymore.

In fact, initial claims for unemployment benefits have now risen for three weeks in a row;

The number of Americans filing applications for jobless benefits increased to a six-month high last week, which could raise concerns that the labor market could be slowing.

Initial claims for state unemployment benefits rose 10,000 to a seasonally adjusted 234,000 for the week ended Nov. 24, the highest level since the mid-May, the Labor Department said on Thursday. Claims have now risen for three straight weeks.

This is also similar to what we witnessed back in 2008.  Jobless claims started to creep up, and then when the crisis fully erupted there was an avalanche of job losses.

And, just like 10 years ago, we are starting to see a lot of big corporations announce major layoffs.

General Motors greatly upset President Trump when they announced that they were cutting 14,000 jobs just before the holidays, but GM is far from alone.  For a list of some of the large firms that have just announced layoffs, please see my previous article entitled “U.S. Job Losses Accelerate: Here Are 10 Big Companies That Are Cutting Jobs Or Laying Off Workers”.

A third parallel to 2008 is what is happening to the price of oil.

In 2008, the price of oil shot up to a record high before falling precipitously.

Well, now a similar thing has happened.  Earlier this year the price of oil shot up to $76 a barrel, but this week it slid beneath the all-important $50 barrier;

Oil’s recent slide has shaved more than a third off its price. Crude fell more than 1% Thursday to as low as $49.41 a barrel. The last time oil closed below $50 was in October 4, 2017. By mid morning the price had climbed back to above $51.

Concerns about oversupply have sent oil prices into a virtual freefall: Crude hit a four-year high above $76 a barrel less than two months ago.

When economists are asked why the price of oil is falling, the primary answer they give is because global economic activity is softening.

And that is definitely the case.  In fact, we just learned that economic confidence in the eurozone has declined for the 11th month in a row;

Euro-area economic confidence slipped for an 11th straight month, further damping expectations that the currency bloc will rebound from a sharp growth slowdown and complicating the European Central Bank’s plans to pare back stimulus.

In addition, we just got news that the Swiss and Swedish economies had negative growth in the third quarter.

The economic news is bad across the board, and it appears undeniable that a global economic downturn has begun.

But current Fed Chair Jerome Powell insists that he is “very happy about the state of the economy”;

Jerome H. Powell, the Federal Reserve’s chairman, has also taken an optimistic line, declaring in Texas recently that he was “very happy about the state of the economy.”

That is just great.  He can be as happy as he wants, and he can continue raising interest rates as he sticks his head in the sand, but nothing is going to change economic reality.

Every single Fed rate hiking cycle in history has ended in a market crash and/or a recession, and this time won’t be any different.

The Federal Reserve created the “boom” that we witnessed in recent years, but we must also hold them responsible for the “bust” that is about to happen.

This article was gladly contributed by author Michael Snyder from The Economic Collapse.

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Michael Snyder
By Michael Snyder December 7, 2018 08:39
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21 Comments

  1. Spike December 7, 16:42

    Before the 08 recession oil sky rocketed to $140/barrel. I always said that is what caused the housing crash because all of a sudden people couldn’t make house payments due to $4.50 gas prices. $75 dollar oil is a far cry from 140. Granted, the housing market was so crazy prior to ’08 it had to correct it self immensely.

    Reply to this comment
  2. Labienus December 7, 17:17

    Impeachment

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  3. left coast chuck December 7, 17:57

    The housing crash in ’08 was due to housing speculation. People bought houses that they couldn’t afford with ballon payment loans. Lending institutions were encouraged to make bad loans by the federal government with the backing of Fanny Mae. Subpar loans were packaged and sold as investments and were made salable by the implied federal guarantee of the loan.

    It was the Clinton administration that precipitated the ’08 crash with their “every one deserves a home” program. Remember that slogan? The original concept of saving for the day when one could make a down payment on a home was cast aside as old fashioned and out of date. Everyone “deserved” a home, no matter how spendthrift they were; no matter how many repossessions were in their credit record; no matter how many creditors were hounding them, they deserved a home and safeguards were discarded, red flags were ignored and loans were made.

    Too many people bet on home values continuing to inflate so that they could make the balloon payment due in 3 or 4 years by refinancing based on the increased value of the home. With so many players in that game it was just a matter of time until something gave.

    Was it gasoline at $4.00 a gallon? Was it some lesser company folding and laying off workers? Was it some cut back by a major company?

    We can probably say it was a combination of all of the above and perhaps more, but the hurricane came and with the hurricane the whole carefully balanced house of cards tumbled down.

    Will it happen again? Some say yes; some say maybe; some say that things are great and will continue to grow.
    In the meantime, the 2,000 pound gorilla of federal deficit spending continues to grow and grow.

    My own personal opinion is that like Argentina, our federal debt will destroy our way of life. The federal reserve just cannot continue cranking the printing presses day and night churning out more specie to cover the debt. I believe one of these days the house of cards will again tumble down only it will be a lot worse than it has been in the past. Life will be as austere as it was during the great depression. There is a good chance it will be a good deal worse. During the 30s a greater percentage of the population still lived in rural areas that allowed them to at least grow subsistence food for themselves. Today most of the population live in cities and are unable to grow subsistence food. We won’t have to worry about social security running out of money, people will be dying of malnutrition, disease and violence. Life expectancy in the U.S. will tumble from where it is now back to what it was in the early 1800s.

    “Cheer up” he said. “Things could be worse.” So I cheered up and sure enough, they got worse.

    Reply to this comment
    • Armin December 7, 19:34

      As always, you make some really good points, Chuck. I don’t want to be a jackass but might you not mean federal reserve notes as opposed to “specie”? I don’t think the Federal Reserve produces “specie”. But I do agree with most of what you have to say. I hope I’m half as smart as you when I hit MY eighties. LOL!

      Reply to this comment
      • left coast chuck December 8, 01:01

        Armin: You are correct. The federal reserve prints bank notes and the Denver mint produces coin. Both of which are worthless. Even the penny is no longer copper but is copper washed zinc. Specie according to my dictionary is only coin. Learn something every day. For as long as I can remember I always thought specie was real money as opposed to stocks, bonds and other paper of value. Maybe that was my mistake. What we are using is no longer real money. It is backed by nothing except the credit of the federal government. Real money is based on some valuable durable such as gold or silver or platinum. I can remember when the paper money was denoted as silver certificates and was redeemable at certain banks in real silver. Although in actual practice if you wanted silver you usually had to give the bank a couple of days notice so they could get it. You didn’t get bullion, you got silver coins. The last coins in circulation that I know of that actually was silver were dimes. I guess there still are silver dollars but certainly not in circulation.

        Every once in a while one can run across a silver dime that was spent from some collection but that is becoming rarer and rarer as people like us take them out of circulation.

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        • Steel Magnolia December 10, 22:57

          It’s a shame that we allow THE FEDERAL RESERVE to have so much power. I’m a newbie and I realize that many times, I am wrong. Or as my father-in-law used to say, “ONCE I THOUGHT I WAS WRONG, BUT I WAS MISTAKEN!” 🤭 I’ve watched the CREATURE FROM JEKYLL ISLAND more than once. G. EDWARD GRIFFIN explains on YouTube how the Federal Reserve was started. If Mr. Griffin is correct, the United States has been bamboozeled since the formation of the Federal Reserve!

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  4. Bill December 7, 18:11

    I would prefer to have these books in hard copy or paper back, is that possible thanks

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  5. Armin December 7, 19:27

    The whole global system is a house of cards and wouldn’t take much to bring the whole thing tumbling down around our heads. Right now it’s being artificially kept afloat. Just like they’ve got computers in everything including planes and cars. Those computers fail and the planes become bricks and the cars become a ton of useless metal. I still can’t decide whether I’m just a little chicken shit or a realist but the future worries me greatly. Even though all my worrying will not change things one whit. I have another 20 years or so left and hopefully this leaky boat of a system held together with ceiling wax and string will stay afloat that long and after that I don’t care. I don’t mean to sound harsh because the generations after me WILL have to deal with any problems that come along. And the food producers have already warned us that we will see a spike in grocery prices in the new year. Supply and demand. Food prices have been steadily creeping up over the years. 20 years ago I used to be able to buy a week’s worth of groceries for 30 bucks. Not anymore. Now even a hundred bucks barely cuts it. Maybe it is time to think about culling the herd. There ARE many useless eaters on the planet that don’t need to be here. The earth is a finite resource and can only support so many of us. All these people being born daily need a place to live eventually. Where do they get the land from? The farmers. No one wants to farm anymore. Farmers are the backbone of a country. Without farmers we’re toast or may not be able to make any after a while. The groups having the big families are the blacks, the Chinese and the east Indians. Governments need to step in and say enough is enough. You’re allowed 2 children and that’s it for the good of the planet as a whole. They say that by 2025, world population will be over 8 billion people. (Approx. 7.7 billion now) Around 2040 it could hit 9 billion and by 2100 it could reach a massive 11 billion people. You think it’s bad right now you ain’t seen nolthin’ yet. Stick around for another hundred years and it may very well be hell on earth. Screw Mars. They should be using that money to fix the problems here now. The world’s population is increasing at a rate of approx. 200,000 per day. That’s a MILLION people per week. This is unsustainable over the long run. People need to learn to keep it in their pants. The human race is like a virus on this planet and sooner or later either nature or man will HAVE to intervene for the good of us all so that we as a species can actually move forward.

    Reply to this comment
  6. PHIL TRIMMER December 7, 19:33

    Also, the banks started to fail and the American tax payer had to bail them out. Maxine Waters husband did not loose anything because Maxine intervened for him. Another one of her CORRUPT ways. We never got paid back but CEO’s of the banks got golden parachutes of MILLIONS. Their biggest problem was trading in DERIVATIVES., This is just like a BET. They are betting Billions when they only have Millions to cover them. When they loose, they DO NOT have the money to cover the BET. This should be illegal to do. If I go to a casino and make a thousand dollar bet and only have a hundred, I had better come up with it, not the American people or the U S Economy. They are now in so much that if it fails, there is NO WAY OUT. The GREAT DEPRESSION #2.

    Reply to this comment
    • Armin December 7, 21:48

      You may be right, Phil. For all the talk about EMP and all the rest the next crisis may very well be an economic one. THEY’VE warned us for quite some time now that the next depression is not a matter of if but when and this next one will make the Great Depression of the thirties look like a walk in the park. Again, as best as you can, hope for the best but be prepared for the worst. 🙂

      Reply to this comment
  7. Fly-over Dave December 7, 23:57

    This is the first time I disagree with this site. The housing “issue” in higher priced home like on the NE coast and CA is caused by taxpayer migration. People are moving out of over taxed states for more tax friendly places… and no-one is replacing them.

    Employment is at an all time high. GM is having problems because when they took the billions during the bail out in 2008, they didn’t change anything. Now 10 years later, their bad management has put them right back where they were, only now, there is no chance of a bail-out. (sadly, they probably still haven’t learned their lesson.)
    Oil prices have dropped consistently since late 2016 and has gotten as low as $36 a barrel. T some degree, lower oil prices are very good for the economy. More money in the populous’ hands.
    Just as wall street has been due for a major correction since last May, I for one am happy it is happening. Buy low is a great idea.
    Just my opinion….

    Reply to this comment
    • left coast chuck December 8, 02:53

      Dave: I would respectfully disagree that higher home prices are caused by a lack of buyers. I can’t speak for the east coast, but I feel I can speak with regard to the housing market in Kallyforniya. The demand is there. Houses turn in very short order. Yes, folks are moving out. I only wish my personal circumstances allowed me to flee to the United States.

      However, housing demand is unbelievable. For instance. The house down the street from me just sold for $840,000.00. It was on the market for less than 10 days. The buyers have money or an excellent line of credit. They have a big duded up Tahoe or Escalade, a newer Corvette and a big crew cab pickup. After they bought the house they spent what I estimate to be in the neighborhood of $50,000 to re-landscape the front. I don’t know what they did in back. I know they did interior work too. I would estimate they have spent close to a million on that house. This isn’t some exclusive neighborhood, I live here. Of course, if I had not bought 50 years ago I would not be able to live here. If it were not for property tax protection from Proposition 13, I would not be able to afford the taxes on this house if it were assessed at current market value.

      I would agree that higher prices in adjoining states are caused by what I call equity fugitives. Those are the folks like me who have a lot of equity in their house getting fed up with Kallyforniya politics and moving to some adjoining state and driving up housing prices because they are accustomed to high prices where they left.

      Oregon used to have a bumper sticker that read “Welcome to Oregon. Now go home.” The reason for it was equity fugitives from Kally driving home prices to unaffordable levels in Oregon.

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      • Nita December 8, 12:43

        We had the same thing happen around here (the foothills of the Adirondacks) back in the 60s and 70s. Real estate prices were reasonable and locals could afford houses and land. Then a real estate person form the NY City area opened an office in town. Prices went up (because retired NY City people were buying real estate here). They thought they were getting wonderful prices since they were used to NY City prices. Local people didn’t see much change in their wages so many were locked out of the market. Now things have changed again since the real estate people from NY city have died and our properties aren’t being advertised there.

        Reply to this comment
      • Flyover Dave December 8, 20:19

        I am not familiar with the west coast. I escaped New Jersey back in the 70’s. I buy and sell a fair amount of real-estate. I am naturally drawn to the flipper shows, which are mostly produced in CA. Homes that they flip for $400 grand, I buy for 70 thousand here in Indiana. I live on 13 wooded acres in a 4 BR with a barn, shop and 3 car garage; very good shape and only paid $130,000. I can give up the beach easily to live like I do. Gasoline is $2.02 this week. I only work a 40 hour work week and carry very little stress. Coastal folk are just too busy…

        Reply to this comment
  8. red December 8, 02:04

    I’m not overly concerned. Be prepared in all circumstances, but don’t wither away because of fear. As long as we have the curse of ungodly liberalism and false conservatism, we’ll have crisis. Her your hearts not be troubled. Stay prepped, and keep peace in your heart. Be warriors because that’s what you’re training to be, not weak-willed false-pride children. Niio. Walk in beauty.

    Reply to this comment
  9. Hoosier Homesteader December 8, 04:54

    There’s something else we have in common with the ’08 event: We’re entering another solar minimum cycle. It appears this one could effect us more than the one in ’08 because this solar period (cycle 24) is being viewed by “experts” as the beginning of a Grand Solar Minimum cycle that could cool the earth through about 2050. That could mean longer, colder winters, and shorter, cooler growing seasons. I’m no expert by a long shot. I do know, though, that the more sunspots there are, the warmer the earth gets. The fewer there are, the cooler it gets.
    I’ve watched the site SunSpotWatch.com for a little while now to get a daily sunspot count. From 12/1 to 12/4, the sunspot count was ZERO. On 12/5 there were 16, and on 12/6, 17 were counted. Back in 1990, the count was around 200.
    I noticed the month of November where I live in south central Indiana was colder than usual. The NOAA November summary showed a 5 degree below average temperature for the month. So far, December hasn’t been much different.
    I’m giving a lot of thought to living in a cooler world; gardening, home heating, more cold weather gear, etc.
    Folks, I hope the experts are wrong about an extended period of cooling, but I’m not going to ignore the chance that it could happen.
    I hope you don’t either.

    Reply to this comment
    • Dreaded December 9, 18:57

      They claim the earth is heating up roflmao. Because of all the emissions. Now we see the opposite claim and because of solar flares decreasing. I am 67 years old and I have a problem with all of this. When I was a boy I was told by our teachers that in early 1900’s scientist were saying we were entering a new ice age because in history according to the records of how often the earth went through a ice age(this history is from samples from the earth by archaeologist) that the earth went through an ice age every 100 thousand years and that it had been that long since the last one. Scientist only see what they want to see. If all the known data is taken in then we have a theory not a fact.
      I am not disagreeing with any of you just making a point.

      Now as to the economy. I once read a report by a very knowledgeable man. He described how the fed worked by using a balancing scale. On the one side you have the government debt and on the other the amount of taxes collected. So to balance this the fed prints new money and sends it to the banks for whatever the proposed payment is. Well that money is not used directly by the banks to pay that bill but the money is used as a security to secure loans for anything the bank thinks will make money.
      Now the problem with this is every time the fed prints money two things happen.One is inflation increases and two the value of the dollar decreases. This balancing act has been going on since the dollar was changed from having to have gold and silver backing it up to world credit backing it up.The balance scales has tip to far one direction so there has to be a balancing action and that my friend means a complete collapse of our money system. This was predicted to happen in the 1980’s somewhere between the year 2000 and 2021

      Reply to this comment
  10. Wannabe December 8, 13:15

    The whole financial system we have today is a system of credit. The federal reserve act of 1913 was the downfall of American economics. That was the beginning of the destruction of paper money actually being worth something because every note was backed by gold or silver. The American dollar actually had competition from bank to bank because it was still legal in different communities for banks to issue their own notes and trade for goods and services, now the federal reserve bank is the only one who can legally produce currency in the paper form. Easier to control and track. And they are a private bank not a government entity. So all we do today is trade numbers in a computer. Not much tangible. Even if you have a million dollars in cash it is worthless because of no backing. Just numbers in a computer. Swipe a credit card, debit card, gift card, write a check, all numbers in a computer. If you have 50000 dollars in the bank then just go withdraw 40000 and see how uneasy the bankers get. Transfer it from one account to the next or get it in check form no problem because all you are doing is moving numbers in a computer. Research federal reserve act of 1913 it is scary. The law was written by bankers on Jekyll island and in 1916 Woodrow Wilson regretted signing it. Any way that’s my two cents. Banks used to be able to compete with one another on lending money by having percentage rate wars, but today it all hinges on credit scores. And those are just numbers in a computer as well. Just one big happy lending institution family. Look at China today. They are building the ability to get things on social credits. The more you go along with their system the more social credits you get and more of the ability to borrow to have things, and google is helping them to build this part of their empire. I have ranted enough. P.S., all numbers in computers.

    Reply to this comment
    • left coast chuck December 9, 21:17

      Wannabe: If you try to withdraw $40,000 cash the bank MUST report that transaction to the federales. If you use it to buy a car and pay the money in bank notes, the car dealer must report the transaction to the federales. They want to know who is using large amounts of cash, so large cash transactions (I believe it is anything over $5,000) must be reported to some federal snooper.

      I would be willing to bet that if you get reported for a large cash transaction the next thing that will happen is that you will get a notice that your income tax returns are being audited and they will “request” your presence at the local Infernal Revenue Office.

      One of the sore points of the forfeiture law (you have heard of that, haven’t you?) is that often times “law” enforcement agencies will seize large amounts of cash based on the erroneous theory that if you have a large amount of cash (“large amount” to be determined by the seizing officer) you must be dealing in drugs or some other illegal activity. No one who is within the law deals in cash according to that theory.

      So one is presented with a dilemma. Keep your funds in a savings account which pays next to nothing in interest and have it subject to seizure when the credit binge finally runs out as happened in Greece. Or keep it in cash under your mattress and if the storm troopers come rooting through your house, have it be seized as the ill gotten gains from some illegal transactions. Or bury it in the woods and hope your heirs remember where you told them you buried it if you die and hope it doesn’t get paved over for another shopping mall or government building before you can dig it up.

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