In my previous post, I mentioned contrarian indicators that the recession may be softening. Now, my contrarian indicators seem to think things will get worse.

If I chat with my cousin in college or my personal trainer, all the talk assumes that the economy will be back to normal near year-end. That’s a pretty rosy assumption…isn’t that the same assumption everyone made last year?

I don’t see a repeat of last fall happening…a banking crisis, market meltdown, strong dollar….it’s almost too lame for the exact same thing to happen. I think the key will be the US treasury bubble bursting. With the $2 trillion+ in debt we’ll be issuing, there just may be no buyers. The world may simply not have the money to fund our lavish governmental expesnes. When will it happen? I don’t know. It may be early 2010 or it may be a slow bleed. But once it happens and the government has to pay 8% to borrow money, bad stuff will happen. No one can borrow then, everything will freeze up and the recession will deepen. That or the Fed will print money to lower rates and we’ll have inflation. We’ll have our choice to make.

The government has been acting like deficits don’t matter for a long time. Strange, that’s how people with subprime loans acted. Who cares? Just charge it to my credit card…or we’ll refinance the house and make money off of that! The US government is maxing out our credit card it seems. With Medicare about to burst and California going under, there are plenty of triggers to set these wheels in motion. It’s not a matter of if but when in my opinion.