By Glenn Beck
\nCNN
\nfrom http:\/\/www.cnn.com\/2008\/US\/02\/28\/beck.commentary\/index.html<\/p>\n
Editor’s note: “Glenn Beck” is on Headline News nightly at 7 and 9 ET.
\n
\nGlenn Beck says to always question conventional wisdom.<\/b><\/p>\n
NEW YORK (CNN) — “The people who survived the Great Depression were the ones who had money to buy when everybody else was selling.” — My grandfather<\/p>\n
I learned a lot from my grandfather, but that might have been the greatest lesson he ever taught me. He wasn’t just talking about managing money, he was talking about managing life — and his words have stuck with me since I was a child.<\/p>\n
A few years back, I was taking a theology course and the professor recommended only the books whose authors he agreed with. I read those books, but I also asked that professor which books he thought had it completely wrong — and I read those too. Then I made up my own mind. After all, following the herd is fine until they all run off the side of a cliff together.<\/p>\n
Less than a year ago, a recession was the last thing on anyone’s mind. In fact, over the summer, as I was questioning the conventional wisdom, I read an article on my television show that quoted a financial expert as saying, “It is the strongest global market that we’ve seen in the history of measuring these things.”<\/p>\n
That’s when I realized how fast the herd was approaching the cliff.<\/p>\n
But with predictions of a recession now more common than Fed rate cuts — and that’s saying something — maybe now it’s time to look at a worst-case scenario. After all, considering all sides of an issue, no matter how extreme they may be, doesn’t make you a crazy person; it makes you an educated one.<\/p>\n
So to understand what a real meltdown could look like, I turned to Nouriel Roubini, chairman of RGE Monitor and professor of economics at New York University’s Stern School of Business. He’s also a former adviser to the U.S. Treasury Department.<\/p>\n
Professor Roubini recently laid out what he called the “12 steps to financial disaster.” Unfortunately, they were really complicated, and I have severe ADD, so I’ve boiled them down into five phases that even a rodeo clown like me can understand.<\/p>\n
I think of these like our military’s “DEFCON” — or defense readiness condition — scale, except that this countdown could end in the meltdown of your bank account:
\n
\n\u2022 DEFCONOMY FIVE<\/b><\/p>\n
How you’ll know we’re here: The housing downturn turns into a free fall, making it the worst collapse in our country’s history. That not only triggers massive numbers of foreclosures and lost household wealth, but it also sets off another large wave of bank write-downs.<\/p>\n
Odds we get here: Roubini told me that it’s “extremely likely, even unavoidable” that we hit this stage because “the excess supply of new homes in the market is like we’ve never seen before.” Prices, he believes, “need to fall another 10 to 20 percent before that clears.”
\n
\n\u2022 DEFCONOMY FOUR
\n<\/b>
\nHow you’ll know we’re here: Americans upside-down on their mortgages and unable to pay their home equity loans begin defaulting on other debt, like credit cards, car loans and student loans. In addition, bond insurance companies lose their perfect credit ratings, forcing already troubled banks to write down another $150 billion.<\/p>\n
Odds we get here: High. Roubini says that 8 million households are already upside-down on their mortgages and he thinks we could see that number go to between 16 million and 24 million by the end of 2009. A lot of those people, he believes, will simply walk away from their homes and send their keys back to the bank.
\n
\n\u2022 DEFCONOMY THREE
\n<\/b>
\nHow you’ll know we’re here: Some banks begin to crack under the pressure of continuing write-downs and mounting defaults by consumers. A national or large regional bank finally collapses, triggering hedge fund failures and general chaos on Wall Street, potentially leading to a 1987-style market crash.<\/p>\n
Odds we get here: Very good. Roubini says that we’ll likely socialize the losses, “effectively nationalizing the mortgages or the banks.” It would be, he told me, “like Northern Rock (the large bank in England that was recently taken over by the British government) times three.” He thinks the stock market will head south throughout the year as fears about a severe recession are confirmed.
\n
\n\u2022 DEFCONOMY TWO
\n<\/b>
\nHow you’ll know we’re here: Most forms of credit (both to consumers and businesses) become virtually nonexistent. That results in a “vicious circle” of additional write-downs, stock market losses, and bank collapses, which leads to even less credit being available.<\/p>\n
Odds we get here: Good. Roubini says that credit conditions are becoming worse everyday across a variety of markets and won’t be getting better anytime soon. Without extra credit available, people might have to actually (gasp!) live within their means.
\n
\n\u2022 DEFCONOMY ONE
\n<\/b>
\nHow you’ll know we’re here: Welcome back to 1929. A full economic meltdown results in a complete failure of the underlying financial system. What will be known to future generations as “The Greater Depression”<\/b> has arrived.<\/p>\n
Odds we get here: Not likely. Roubini believes that this will be a “very painful and severe recession” that could last for 18 months or more, but it will be more like 1981 than 1929. Families may be eating soup again, but at least it’ll be in their own kitchens.<\/p>\n
Now, do I think any of what you just read will happen?<\/p>\n
I have no idea, and that’s exactly the problem. I’m not an economist or a stockbroker; I’m just a guy trying to make the best decisions I can, and picking the brains of real experts helps me do that.<\/p>\n
But I do know one thing for sure: Depressions aren’t advertised in advance. Last time around we went from the Roaring ’20s to bread lines in a matter of just a few years.<\/p>\n
Anyone who says that can’t happen again either doesn’t know history, doesn’t understand how interconnected the world’s economies have become, or is lying to you. While that doesn’t mean you should panic, it does mean you should prepare — something my grandfather would’ve done a long time ago.<\/p>\n","protected":false},"excerpt":{"rendered":"
Don’t follow herd on the economy Glenn Beck lays out the DEFCONOMY scale Beck ponders: Will the economy collapse into “The Greater Depression”? “Maybe now it’s time to look at a worst-case scenario,” he says Then again, maybe not: Be prepared is the key By Glenn Beck CNN from http:\/\/www.cnn.com\/2008\/US\/02\/28\/beck.commentary\/index.html Editor’s note: “Glenn Beck” is on Headline News nightly at […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":false,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[1],"tags":[121],"class_list":["post-455","post","type-post","status-publish","format-standard","hentry","category-archive","tag-defconomy-1-the-greater-depression"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack_likes_enabled":true,"jetpack-related-posts":[{"id":2787,"url":"https:\/\/reviewermag.com\/press\/2010\/09\/12\/somewhere-osama-is-laughing\/","url_meta":{"origin":455,"position":0},"title":"Somewhere, Osama Is Laughing","author":"admin","date":"September 12, 2010","format":false,"excerpt":"The Lesson Of September 12thBy Bob GreeneCNN Contributor Bob Greene is a bestselling author whose books include \"Late Edition: A Love Story\" and \"Duty: A Father, His Son, and the Man Who Won the War.\" From CNN.com (CNN) -- September 12 is always the day that reminds us that the\u2026","rel":"","context":"In "reflected news"","block_context":{"text":"reflected news","link":"https:\/\/reviewermag.com\/press\/category\/reflected-news\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":13198,"url":"https:\/\/reviewermag.com\/press\/2016\/01\/21\/glenn-freys-obituary-from-a-legitimate-eagles-anti-fan\/","url_meta":{"origin":455,"position":1},"title":"Glenn Frey’s Obituary, From A Legitimate Eagles Anti-fan","author":"Reviewer Rob","date":"January 21, 2016","format":false,"excerpt":"R.I.P. Glenn Frey\"the difference between a melted ice cream sandwich laying on the sidewalk and Baked Alaska at a five star restaurant\" by Jeff Smith from his Facebook page The \u201ccorntroversy\u201d has died down a little and I\u2019m not attempting to reignite it, just attempting to add a little clarification.\u2026","rel":"","context":"In "music"","block_context":{"text":"music","link":"https:\/\/reviewermag.com\/press\/category\/music\/"},"img":{"alt_text":"Jeff Smith of The Hickoids and Saustex Records.","src":"https:\/\/i0.wp.com\/reviewermag.com\/press\/wp-content\/uploads\/2016\/01\/jeff-smith.jpg?resize=350%2C200","width":350,"height":200},"classes":[]},{"id":1026,"url":"https:\/\/reviewermag.com\/press\/2009\/06\/29\/bernie-madoffs-two-plus-two\/","url_meta":{"origin":455,"position":2},"title":"Doing The Time: Bernie Madoff","author":"admin","date":"June 29, 2009","format":false,"excerpt":"The prince of swindlers can be sentenced to up to 150 years in prison today... 1. What prison sentence should Bernard Madoff receive? ... And the survey says: The 12 years his lawyer seeks: 6% The maximum 150 years: 74% Something in between: 21% Total responses to this question: 25749\u2026","rel":"","context":"In "reflected news"","block_context":{"text":"reflected news","link":"https:\/\/reviewermag.com\/press\/category\/reflected-news\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":8939,"url":"https:\/\/reviewermag.com\/press\/2013\/06\/18\/leos-family-photo\/","url_meta":{"origin":455,"position":3},"title":"Leo’s Historic Family Photo","author":"Reviewer Rob","date":"June 18, 2013","format":false,"excerpt":"\"There is a special place in my heart for old photographs.\" ~Leo MalevanchikTweetSan Diego Art and Fashion Photographer, and Former Russian Refusenik, Leo Malevanchik Shares His Precious Family Photo with Reviewer Magazine: Check out Leo Malevanchik\u2019s description of the stern looking people his family heirloom photo below: \u201cThe man on\u2026","rel":"","context":"In "art"","block_context":{"text":"art","link":"https:\/\/reviewermag.com\/press\/category\/art\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":17666,"url":"https:\/\/reviewermag.com\/press\/2020\/04\/22\/vegas-in-the-time-of-covid\/","url_meta":{"origin":455,"position":4},"title":"Vegas in the Time of Covid","author":"Reviewer Rob","date":"April 22, 2020","format":false,"excerpt":"Las Vegas drying upThe Independent Mayor of Las Vegas Carolyn Goodman has had enough of this shutdownThe City That Fun Built is Hard Hit by Coronavirus by Reviewer Rob Today we see the current mayor of Las Vegas is impatient. People are concerned, very concerned. They're losing money there. This\u2026","rel":"","context":"In "archive"","block_context":{"text":"archive","link":"https:\/\/reviewermag.com\/press\/category\/archive\/"},"img":{"alt_text":"Mayor Goodman","src":"https:\/\/i0.wp.com\/reviewermag.com\/press\/wp-content\/uploads\/2020\/04\/Government-MayorCityCouncil-BioMayor-225x300.jpg?resize=350%2C200","width":350,"height":200},"classes":[]},{"id":132,"url":"https:\/\/reviewermag.com\/press\/2006\/08\/28\/the-lisa-diaries-book-review\/","url_meta":{"origin":455,"position":5},"title":"The Lisa Diaries book review","author":"admin","date":"August 28, 2006","format":false,"excerpt":"[book review] \u201cThe Lisa Diaries\u201d, by Lisa Carver Review by Kent Manthie Watching CNN or reading the NY TIMES can really exacerbate depression and after a while, just to stay sane you have to turn the damn television off and crawl in bed and stare at the ceiling. OR \u2013\u2026","rel":"","context":"In "archive"","block_context":{"text":"archive","link":"https:\/\/reviewermag.com\/press\/category\/archive\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]}],"_links":{"self":[{"href":"https:\/\/reviewermag.com\/press\/wp-json\/wp\/v2\/posts\/455","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/reviewermag.com\/press\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/reviewermag.com\/press\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/reviewermag.com\/press\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/reviewermag.com\/press\/wp-json\/wp\/v2\/comments?post=455"}],"version-history":[{"count":0,"href":"https:\/\/reviewermag.com\/press\/wp-json\/wp\/v2\/posts\/455\/revisions"}],"wp:attachment":[{"href":"https:\/\/reviewermag.com\/press\/wp-json\/wp\/v2\/media?parent=455"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/reviewermag.com\/press\/wp-json\/wp\/v2\/categories?post=455"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/reviewermag.com\/press\/wp-json\/wp\/v2\/tags?post=455"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}