Update on America's Second Great Depression (Part 1)
Mike Stathis
April 25, 2010
http://www.avaresearch.com/article_details-519.html
Washington, Wall Street and their partners in crime, the media, have continued to spread the myths of an economic recovery since late summer 2009.
In response to the propaganda, the stock market has continued to rally. But most individual investors have been left out of this tremendous rally.
Yet, the economic data paints a different picture than the media presents. Make no mistake, we are seeing the early stages of what will written in history books as America’s Second Great Depression, just as I predicted in America’s Financial Apocalypse (2006).
Who are you going to trust? The media and their government hacks who have been wrong over and over, or someone who has been right about virtually everything over the past five years?
Who are you going to trust, people with clear political and financial agendas, or someone with neither?
At best, the U.S. will continue to experience economic malaise for well over a decade. As the nation progresses through this treacherous period, any of the small improvements will be offset by longer-term issues that are virtually impossible to overcome.
(1) Most of the 80 million baby boomers will never be able to fully retire. They did not have adequate retirement savings even before the economic collapse. Now they are in much worse shape. As a result, they will not only pull out of the stock market much faster as a means to survive, but they will be dead consumers.
(2) Most states will continue to struggle with budget gaps for many years. This will lead to even more cuts to vital programs.
(3) The entitlement tsunami will engulf Washington’s budget, causing a sustained period of massive deficits. This will be addressed by further cuts to benefits and premium hikes to Medicare and Medicaid.
(4) The massive national debt will continue to threat the solvency of the U.S. This will lead to a long period of high interest rates even after the approaching interest rate surge, expected to mount within a couple of years.
For a variety of reasons, the climb back up to the previous highs reached in 2006 will take at least another ten years, as stated previously. Furthermore, as more foreclosures hit the market, prices will plunge, erasing any gains made.
Accordingly to government data, the number of unemployed Americans stands at around 16 million, with the U-6 population of unemployed and underemployed at nearly 26 million. My own estimates for U-3 and U-6 are 18 million and 32 million respectively.
The problem with being out of work for an extended period (besides the immediate financial problems it creates), is that the longer one remains out of work, the higher chance that they will have to change careers.
And it’s not likely that a career-change will lead to the same wages as the person earned in their previous career since they are starting fresh. That’s the big problem with the unemployment picture that no one seems to get. What does this mean? It simply adds more fuel to America’s long period of declining living standards.
Even assuming the more optimistic GDP estimate for a 5-year period, the U.S. economy would need to grow by about 5% annually for the remaining 5 years in order to bring unemployment down to around the “fully employed” level of around 5.0%.
GDP growth really doesn’t matter unless you adjust for debt-spending. The U.S. could grow by 5% for five years if Washington borrowed tens of trillions of dollars to pump into the economy. What is needed is real growth, not debt-fueled growth. Without real growth, you have an illusion, just like the growth after the dotcom bubble burst.
Previously, I discussed the fact that there would be no real recovery for most Americans.
The fact is, the results will be the same regardless who is in office because America no longer has a real democratic process. The key decisions are made by a group of individuals you rarely hear about. The president merely serves as the puppet. This has been going on for many years.
This dynamic isn’t going to change without a drastic movement from the masses. But this is unlikely to occur since most Americans have been brainwashed by a media industry controlled by corporations and political interests.
As you can imagine, the decline in sales, income, property and other tax revenues has also hit cities and states very hard. This has resulted in budget deficits for most cities and all but two states.
Has running the currency printing presses in overdrive and accumulating record levels of federal debt been worth the results?
Absolutely not.
Over 40 million Americans are on food stamps, or more than 13% of Americans. This is the highest rate on record, going back 50 years.
Why don't you start with the guys in the media club who have positioned as experts, like Faber, Schiff, Shiller, Prechter and so on. They don't come close.
Once you have convinced yourself of my track record, you need to ask why the media continues to ban me.
Allow me to cut to the chase. The financial media works for Wall Street. Wall Street buys the ads and commercial, so the last thing the media wants is to provide you with credible experts with good track records. Instead, they interview extremists with terrible track record, offering no specific guidance. This is the way it works. If you don't see this by now, you are forever doomed.
Showing posts with label Great Depression. Show all posts
Showing posts with label Great Depression. Show all posts
Friday, April 30, 2010
Thursday, November 13, 2008
Surviving the “Contained Depression”
Surviving the “Contained Depression”
Paul Kedrosky
Nov 11, 2008
http://paul.kedrosky.com/archives/
2008/11/11/surviving_the_c.html
Interesting David Levy piece in the current issue of Institutional Investor. Here is the money ‘graf(s):
Without the government’s containment the economy would indeed ace another Great Depression, but fortunately, nothing so dire will occur. The government will prevent a collapse of the financial system and partially buffer the damage to the economy, containing the depression. The government will succeed not because it is wise about economic affairs or because it won’t make mistakes. Rather, it will have no choice but to keep patching holes in the financial sector, and its sheer size and presence guarantee a sizable fiscal stabilization. The government has virtually unlimited power to intervene to protect the basic functioning of the financial system, and in an emergency can spend whatever is necessary. Although government solutions will not fix the fundamental problems that will cause the depression, they will limit the financial fallout. By the end of the contained depression, the government will likely have committed trillions between rescue operations and running huge deficits. And although some may complain about the price tag, it will be a bargain for enabling us to avoid another Great Depression.
Levy thinks we will be out the other side in late 2009 or early 2010, albeit out in a tepid way.
Paul Kedrosky
Nov 11, 2008
http://paul.kedrosky.com/archives/
2008/11/11/surviving_the_c.html
Interesting David Levy piece in the current issue of Institutional Investor. Here is the money ‘graf(s):
Without the government’s containment the economy would indeed ace another Great Depression, but fortunately, nothing so dire will occur. The government will prevent a collapse of the financial system and partially buffer the damage to the economy, containing the depression. The government will succeed not because it is wise about economic affairs or because it won’t make mistakes. Rather, it will have no choice but to keep patching holes in the financial sector, and its sheer size and presence guarantee a sizable fiscal stabilization. The government has virtually unlimited power to intervene to protect the basic functioning of the financial system, and in an emergency can spend whatever is necessary. Although government solutions will not fix the fundamental problems that will cause the depression, they will limit the financial fallout. By the end of the contained depression, the government will likely have committed trillions between rescue operations and running huge deficits. And although some may complain about the price tag, it will be a bargain for enabling us to avoid another Great Depression.
Levy thinks we will be out the other side in late 2009 or early 2010, albeit out in a tepid way.
Monday, November 3, 2008
Stocks likely to recover no matter who's president
Stocks likely to recover no matter who's president
Madlen Read, AP Business Writer
Nov 02, 2008
http://news.yahoo.com/s/ap/20081102/
ap_on_bi_ge/election_stock_market
Wall Street prefers Republicans, McCain supporters argue. But stocks have done better under Democratic presidents, Obama supporters fire back.
When it comes to the stock market — especially this turbulent market — does it really matter who is elected president?
Yes and no. Politicians do influence the economy — and they'll play a big role in how the country emerges from this current crisis. But analysts say neither presidential candidate can be a cure for what's ailing Wall Street.
Moreover, most analysts believe the battered stock market has nowhere to go but up next year, no matter who ends up in the White House — and history will probably give the victor credit even if he actually had little to do with the rally.
Still, the stock market is just one part of the economy, and under either Barack Obama or John McCain, the United States needs to recover from a downturn whose severity has not yet been determined. And either candidate will face a budget deficit of around $500 billion when he's sworn into office — a shortfall expected to climb to $1 trillion next year.
Because of the deficit, the financial climate might end up affecting the new president's policies more than his policies will affect the financial climate.
That's not to say, of course, there aren't differences in the impact McCain or Obama would have on U.S. businesses, and in turn, their stocks. Robert Froehlich, an investment strategist at Deutsche Bank, said it's likely that under Obama, the alternative energy sector would do well, and possibly the paper and steel industries if he enforces trade treaties. And under McCain, Froehlich said, it's likely that big energy companies would do better because he does not support a windfall profits tax, and that financial companies could benefit because of his stance on dividend taxes, long-term capital gains taxes, and estate taxes.
"Don't expect the next president to say, 'I'm strapped with this economic crisis, I'm going to throw all my plans away,'" Froehlich said.
There are historical trends one can draw between presidents and how the stock market performs. The question is how seriously to take them.
The Dow Jones industrial average and the broader Standard & Poor's 500 index have posted larger returns during the terms of Democratic presidents. But this statistic doesn't prove that Democratic policies boost the stock market — the major indexes have also done better under a Republican Congress than a Democratic Congress.
Another pattern to take note of is the stock market's apparent four-year cycle, described by market historian Yale Hirsch in his Presidential Election Cycle Theory. The theory says the stock market does well in a presidential election year, badly in the year after the election and then improves until the next presidential election. This pattern has held up for most of the century, although it's being tested by the two terms of President George W. Bush.
However, the monetary policy of the Federal Reserve, rather than the influence of the president, can explain this pattern better, according to a 2007 study by CFA Institute Education managing director Robert Johnson, University of Wisconsin professor Scott Beyer and Northern Illinois University professor Gerald Jensen. Their study found that the Fed has tended to lower interest rates during the latter half of presidential terms — and lower interest rates encourage borrowing and spending.
And investors shouldn't get too caught up in the market's short-term reaction after the election results. The Dow surged, for example, after President Hoover was elected in 1928 — and the next year the it crashed, ushering in the Great Depression.
Madlen Read, AP Business Writer
Nov 02, 2008
http://news.yahoo.com/s/ap/20081102/
ap_on_bi_ge/election_stock_market
Wall Street prefers Republicans, McCain supporters argue. But stocks have done better under Democratic presidents, Obama supporters fire back.
When it comes to the stock market — especially this turbulent market — does it really matter who is elected president?
Yes and no. Politicians do influence the economy — and they'll play a big role in how the country emerges from this current crisis. But analysts say neither presidential candidate can be a cure for what's ailing Wall Street.
Moreover, most analysts believe the battered stock market has nowhere to go but up next year, no matter who ends up in the White House — and history will probably give the victor credit even if he actually had little to do with the rally.
Still, the stock market is just one part of the economy, and under either Barack Obama or John McCain, the United States needs to recover from a downturn whose severity has not yet been determined. And either candidate will face a budget deficit of around $500 billion when he's sworn into office — a shortfall expected to climb to $1 trillion next year.
Because of the deficit, the financial climate might end up affecting the new president's policies more than his policies will affect the financial climate.
That's not to say, of course, there aren't differences in the impact McCain or Obama would have on U.S. businesses, and in turn, their stocks. Robert Froehlich, an investment strategist at Deutsche Bank, said it's likely that under Obama, the alternative energy sector would do well, and possibly the paper and steel industries if he enforces trade treaties. And under McCain, Froehlich said, it's likely that big energy companies would do better because he does not support a windfall profits tax, and that financial companies could benefit because of his stance on dividend taxes, long-term capital gains taxes, and estate taxes.
"Don't expect the next president to say, 'I'm strapped with this economic crisis, I'm going to throw all my plans away,'" Froehlich said.
There are historical trends one can draw between presidents and how the stock market performs. The question is how seriously to take them.
The Dow Jones industrial average and the broader Standard & Poor's 500 index have posted larger returns during the terms of Democratic presidents. But this statistic doesn't prove that Democratic policies boost the stock market — the major indexes have also done better under a Republican Congress than a Democratic Congress.
Another pattern to take note of is the stock market's apparent four-year cycle, described by market historian Yale Hirsch in his Presidential Election Cycle Theory. The theory says the stock market does well in a presidential election year, badly in the year after the election and then improves until the next presidential election. This pattern has held up for most of the century, although it's being tested by the two terms of President George W. Bush.
However, the monetary policy of the Federal Reserve, rather than the influence of the president, can explain this pattern better, according to a 2007 study by CFA Institute Education managing director Robert Johnson, University of Wisconsin professor Scott Beyer and Northern Illinois University professor Gerald Jensen. Their study found that the Fed has tended to lower interest rates during the latter half of presidential terms — and lower interest rates encourage borrowing and spending.
And investors shouldn't get too caught up in the market's short-term reaction after the election results. The Dow surged, for example, after President Hoover was elected in 1928 — and the next year the it crashed, ushering in the Great Depression.
Saturday, November 1, 2008
The Great Depression of 2008
The Great Depression of 2008
Leeroy F. Dermit
Sep 27, 2008
http://www.leeroyfdermit.com/2008/09/
great-depression-of-2008.html
On issue after issue, every time I dig deeper and think for myself, I discover that government is the cause – not the cure, but if free markets are so great, then how have we come within days of another Great Depression? Is it really about free markets vs. regulation? Is it naked short sellers? How big a factor is consumer and business confidence? Do the media and politicians really understand economics? Could there be economic terrorism afoot?
Conventional Wisdom
The conventional wisdom just doesn’t add up.
The conventional wisdom is that America has been in recession since late 2007, and that the cause is 20 years of Republican deregulation. Deregulation supposedly caused a recession by causing the prices for oil, steel, copper, etc. to soar, by allowing some greedy people to sell loans to some people who couldn’t afford them, and by allowing some people to more easily bet that stocks will go down (naked short sellers).
By August 28th, I had lost 3% of my savings, so how had I lost 53% of my savings by October 10th?
The conventional wisdom is obviously a myth, so we are going to have to look at a lot of facts and think for ourselves.
Free Markets
The argument for deregulation, free markets, competition, etc. is that although problems (both internal and external) can occur at all levels and at all times, for each kind of problem, some competitors will have made the right decisions to survive while those who made the wrong decisions will fail. Failure makes room for new competitors. Also, competitors can learn from past mistakes. Therefore, while every kind of problem big and small can happen once, free markets continually adapt and improve, and thus a future recurrence of that problem is unlikely. Free markets are thus more likely to serve customers best.
Unlike businesses and private organizations, government is a monopoly that forbids competition and forces us to buy its services, and thus government is less accountable and less adaptable than businesses. Therefore, government can afford to be inefficient and can make the same mistakes over and over again. Government is thus more likely to cause a problem than to solve one.
This is a pretty good summary of the argument for free markets.
Liberal Fascists
The argument for regulation may have been best summarized by Mario Palmieri (“The Philosophy of Fascism”, 1936):
Economic initiative cannot be left to the arbitrary decisions of private individual interest. Open competition, if not wisely directed and restricted, actually destroys wealth instead of creating it.
I used to think that regulation was the new form of socialism, but then I read this quote, and now I see that the Democrats are not really socialists – but are fascists. Therefore, we could accurately refer to the Democrats as socialists or as fascists – but let’s not get sidetracked.
American Capitalism
America does not really have free markets (a.k.a. capitalism). We have the second highest business taxes in the world, a ton of regulations, a load of frivolous lawsuits, the Federal Reserve, the IRS, Fannie Mae, Freddie Mac, the Securities Exchange Commission, etc.
The trend is not purely deregulation either. We now have Sarbanes Oxley, a resurgence of The Community Reinvestment Act, etc.
Of course, we do have some scary deregulation too. For example, we now have naked short sellers.
The Community Reinvestment Act
Everybody knows that banks gave loans to people who could not pay them back, and that this supposedly wouldn’t happen in a free market – which is true. However, we don’t have a free market.
The government instituted the community Reinvestment Act which ordered Fannie Mae to encourage banks to give loans to poor people and minorities regardless of credit worthiness – because that is fair, and socialism is fair if it is anything.
Freddie Mac was charged with converting these subprime loans into Mortgage Backed Securities.
Don’t take my word for it. Wikipedia says:
In early 1993 President Bill Clinton ordered new regulations for the CRA which would increase access to mortgage credit for inner city and distressed rural communities. The new rules, during a time when many banks were merging and needed to pass the CRA review process to do so, substantially increased the number and aggregate amount of loans to low- and moderate-income borrowers for home loans, some of which were "risky mortgages."
What did the Bush Administration do?
In 2003, the Bush Administration recommended that a new Department of the Treasury agency should supervise the primary agents guaranteeing subprime loans, Fannie Mae and Freddie Mac. Congressional support was approximately split along Party lines and the proposal eventually failed.
What did Obama do? Obama worked with ACORN to train activists to pressure banks to make bad loans. Any bank that wants to expand or merge with another has to show it has complied with CRA – and approval can be held up by complaints filed by groups like ACORN. I got this fact from a very revealing article about Obama/ACORN at: Obama helps ACORN set up Homeowners for Failure.
Clearly, the CRA is an example of increasing regulation (and Democrats) contributing to the current financial crisis.
Fannie Mae
To better understand how the government (not Wall Street) is a major cause at the center of the subprime mess, it is helpful to first understand that Fannie Mae and Freddie Mac are basically an arm of the Democratic party.
Sarbanes-Oxley
Part of the Sarbanes-Oxley regulation (instituted to prevent another Enron) requires the use of Mark-to-Market accounting – even in cases such as those instruments created by government institution Freddie Mac known as Mortgage Backed Securities (perhaps an unintended consequence?). Therefore, MBSs are treated just like stock even though there are real houses with their own market values as collateral for them, and thus at the end of a day, if the market value of those MBSs (not the houses) is too low, then a bank may not have enough money to pay the margin call unless they sell enough assets at a huge loss. In July This happened to Merrill Lynch who had to sell 30.6 billion dollars worth of MBSs for 6 billion. The houses alone were worth 25 billion.
Again, we see that government intervention itself has contributed to the current economic crisis.
The Fed did It
As we all know, Alan Greenspan artificially lowered interest rates in a largely successful (although now temporary) attempt to bring us out of the great Clinton.com crash at the end of the Clinton administration, which of course continued into the Bush administration.
Low rates obviously contributed greatly to the housing bubble. Low rates also increased the supply of dollars through increased borrowing, which thus weakened the dollar.
Again, we see that government intervention itself has contributed to the current economic crisis, and guess what – they’re doing it again!
The Cities did it
Perhaps the other main contributor to the housing bubble (in addition to the Fed) is the rapidly growing trend of local government intervention known as Managed Growth. It takes many forms, but Managed Growth typically is where a city restricts permits for new houses and buys up land along its outskirts to prevent development there too.
Note that cities such as Atlanta, Houston, and Dallas did not employ managed growth and thus continued to have steady housing appreciation consistent with previous decades. Consequently, housing prices in these cities did not fall (except for a little bit very recently).
Again, we see that government intervention itself has contributed to the current economic crisis, and guess what – they’re still doing it!
It’s Confidence Stupid
By all accounts, the overall problem in the market that has suddenly turned the problems of a few banks and home owners into another Great Depression – is a loss of confidence.
Just a few months ago, most businesses were still having record profits, but if consumers and businesses lose confidence and fear a recession, then they will spend less and pay down debt – which will cause a recession!
Markets Succeed where Governments Fail
What did happen was that Russia invaded Georgia, and Obama was utterly powerless to do anything about it. The US government was utterly powerless, and the European Union was just as powerless.
However, another force more powerful than the US Government, the European Union, and even more powerful than Barack Obama … forced Russia to promptly withdraw from Georgia.
In a nutshell, Putin had been acting aggressively, such as flying nuclear bombers to the edge of Alaskan airspace, then he invaded Georgia, and his agression caused foreign investors and businesses to flee Russia. Whereas, the governments of America and Europe failed to influence Russia in the least, market forces brought the conflict to a prompt end.
The conventional wisdom is that government solves problems created by markets, but we now see that markets solve problems created government – such as war.
Conclusion
I know it is hard to stop thinking about those naked short sellers, but the reality is that politicians, government, laws, regulation, etc. are the cause of the current economic crisis. The media and the Democrats call for more government, and no strong voice has countered them, but we now know that government is a problem masquerading as its own cure.
Neither political party has shown the slightest understanding of economics. The Democrats, the media, and Obama blame deregulation, and all John McCain can do is look guilty. I thought he was going to cry at the beginning of the first Presidential debate. PULEEEASE!
I know of precisely ONE politician who understands – Ron Paul.
You won’t hear any of THIS on MSNBC. Does that make Keith Olberman the – WORST PERSON IN THE WORLD? J
Let’s summarize:
The conventional wisdom is that Republicans, free-markets, and deregulation caused the current economic crisis; whereas, the reality is that Democrats, government, and regulation caused the current economic crisis.
1. Alan Greenspan helped cause a housing bubble when he lowered interest rates in a largely successful attempt to bring us out of the crash at the end of the Clinton administration.
2. Managed growth laws by local governments also contributed greatly to the housing bubble.
3. The Community Reinvestment Act caused a proliferation of subprime loans, which implicates Clinton, Obama, ACORN, Fannie Mae, and the whole Democratic Party.
4. The Democratic Party and most of the mainstream media have been working diligently to spread fear and reduce confidence, and fear causes recessionary behavior.
5. The new Sarbanes-Oxley regulations caused the new government mandated Mortgage Backed Securities to be valued at the market price (Mark-to-Market) at the end of each day, which caused banks to go under with little forewarning.
6. The war in Iraq has played a small role, but has reduced confidence in America and the dollar.
7. Markets solve problems, like the Russian invasion of Georgia, where governments are powerless.
The Future
Maybe once the people learn the reality, they will have a greater desire for freedom.
The promise of reality is freedom.
Leeroy F. Dermit
Sep 27, 2008
http://www.leeroyfdermit.com/2008/09/
great-depression-of-2008.html
On issue after issue, every time I dig deeper and think for myself, I discover that government is the cause – not the cure, but if free markets are so great, then how have we come within days of another Great Depression? Is it really about free markets vs. regulation? Is it naked short sellers? How big a factor is consumer and business confidence? Do the media and politicians really understand economics? Could there be economic terrorism afoot?
Conventional Wisdom
The conventional wisdom just doesn’t add up.
The conventional wisdom is that America has been in recession since late 2007, and that the cause is 20 years of Republican deregulation. Deregulation supposedly caused a recession by causing the prices for oil, steel, copper, etc. to soar, by allowing some greedy people to sell loans to some people who couldn’t afford them, and by allowing some people to more easily bet that stocks will go down (naked short sellers).
By August 28th, I had lost 3% of my savings, so how had I lost 53% of my savings by October 10th?
The conventional wisdom is obviously a myth, so we are going to have to look at a lot of facts and think for ourselves.
Free Markets
The argument for deregulation, free markets, competition, etc. is that although problems (both internal and external) can occur at all levels and at all times, for each kind of problem, some competitors will have made the right decisions to survive while those who made the wrong decisions will fail. Failure makes room for new competitors. Also, competitors can learn from past mistakes. Therefore, while every kind of problem big and small can happen once, free markets continually adapt and improve, and thus a future recurrence of that problem is unlikely. Free markets are thus more likely to serve customers best.
Unlike businesses and private organizations, government is a monopoly that forbids competition and forces us to buy its services, and thus government is less accountable and less adaptable than businesses. Therefore, government can afford to be inefficient and can make the same mistakes over and over again. Government is thus more likely to cause a problem than to solve one.
This is a pretty good summary of the argument for free markets.
Liberal Fascists
The argument for regulation may have been best summarized by Mario Palmieri (“The Philosophy of Fascism”, 1936):
Economic initiative cannot be left to the arbitrary decisions of private individual interest. Open competition, if not wisely directed and restricted, actually destroys wealth instead of creating it.
I used to think that regulation was the new form of socialism, but then I read this quote, and now I see that the Democrats are not really socialists – but are fascists. Therefore, we could accurately refer to the Democrats as socialists or as fascists – but let’s not get sidetracked.
American Capitalism
America does not really have free markets (a.k.a. capitalism). We have the second highest business taxes in the world, a ton of regulations, a load of frivolous lawsuits, the Federal Reserve, the IRS, Fannie Mae, Freddie Mac, the Securities Exchange Commission, etc.
The trend is not purely deregulation either. We now have Sarbanes Oxley, a resurgence of The Community Reinvestment Act, etc.
Of course, we do have some scary deregulation too. For example, we now have naked short sellers.
The Community Reinvestment Act
Everybody knows that banks gave loans to people who could not pay them back, and that this supposedly wouldn’t happen in a free market – which is true. However, we don’t have a free market.
The government instituted the community Reinvestment Act which ordered Fannie Mae to encourage banks to give loans to poor people and minorities regardless of credit worthiness – because that is fair, and socialism is fair if it is anything.
Freddie Mac was charged with converting these subprime loans into Mortgage Backed Securities.
Don’t take my word for it. Wikipedia says:
In early 1993 President Bill Clinton ordered new regulations for the CRA which would increase access to mortgage credit for inner city and distressed rural communities. The new rules, during a time when many banks were merging and needed to pass the CRA review process to do so, substantially increased the number and aggregate amount of loans to low- and moderate-income borrowers for home loans, some of which were "risky mortgages."
What did the Bush Administration do?
In 2003, the Bush Administration recommended that a new Department of the Treasury agency should supervise the primary agents guaranteeing subprime loans, Fannie Mae and Freddie Mac. Congressional support was approximately split along Party lines and the proposal eventually failed.
What did Obama do? Obama worked with ACORN to train activists to pressure banks to make bad loans. Any bank that wants to expand or merge with another has to show it has complied with CRA – and approval can be held up by complaints filed by groups like ACORN. I got this fact from a very revealing article about Obama/ACORN at: Obama helps ACORN set up Homeowners for Failure.
Clearly, the CRA is an example of increasing regulation (and Democrats) contributing to the current financial crisis.
Fannie Mae
To better understand how the government (not Wall Street) is a major cause at the center of the subprime mess, it is helpful to first understand that Fannie Mae and Freddie Mac are basically an arm of the Democratic party.
Sarbanes-Oxley
Part of the Sarbanes-Oxley regulation (instituted to prevent another Enron) requires the use of Mark-to-Market accounting – even in cases such as those instruments created by government institution Freddie Mac known as Mortgage Backed Securities (perhaps an unintended consequence?). Therefore, MBSs are treated just like stock even though there are real houses with their own market values as collateral for them, and thus at the end of a day, if the market value of those MBSs (not the houses) is too low, then a bank may not have enough money to pay the margin call unless they sell enough assets at a huge loss. In July This happened to Merrill Lynch who had to sell 30.6 billion dollars worth of MBSs for 6 billion. The houses alone were worth 25 billion.
Again, we see that government intervention itself has contributed to the current economic crisis.
The Fed did It
As we all know, Alan Greenspan artificially lowered interest rates in a largely successful (although now temporary) attempt to bring us out of the great Clinton.com crash at the end of the Clinton administration, which of course continued into the Bush administration.
Low rates obviously contributed greatly to the housing bubble. Low rates also increased the supply of dollars through increased borrowing, which thus weakened the dollar.
Again, we see that government intervention itself has contributed to the current economic crisis, and guess what – they’re doing it again!
The Cities did it
Perhaps the other main contributor to the housing bubble (in addition to the Fed) is the rapidly growing trend of local government intervention known as Managed Growth. It takes many forms, but Managed Growth typically is where a city restricts permits for new houses and buys up land along its outskirts to prevent development there too.
Note that cities such as Atlanta, Houston, and Dallas did not employ managed growth and thus continued to have steady housing appreciation consistent with previous decades. Consequently, housing prices in these cities did not fall (except for a little bit very recently).
Again, we see that government intervention itself has contributed to the current economic crisis, and guess what – they’re still doing it!
It’s Confidence Stupid
By all accounts, the overall problem in the market that has suddenly turned the problems of a few banks and home owners into another Great Depression – is a loss of confidence.
Just a few months ago, most businesses were still having record profits, but if consumers and businesses lose confidence and fear a recession, then they will spend less and pay down debt – which will cause a recession!
Markets Succeed where Governments Fail
What did happen was that Russia invaded Georgia, and Obama was utterly powerless to do anything about it. The US government was utterly powerless, and the European Union was just as powerless.
However, another force more powerful than the US Government, the European Union, and even more powerful than Barack Obama … forced Russia to promptly withdraw from Georgia.
In a nutshell, Putin had been acting aggressively, such as flying nuclear bombers to the edge of Alaskan airspace, then he invaded Georgia, and his agression caused foreign investors and businesses to flee Russia. Whereas, the governments of America and Europe failed to influence Russia in the least, market forces brought the conflict to a prompt end.
The conventional wisdom is that government solves problems created by markets, but we now see that markets solve problems created government – such as war.
Conclusion
I know it is hard to stop thinking about those naked short sellers, but the reality is that politicians, government, laws, regulation, etc. are the cause of the current economic crisis. The media and the Democrats call for more government, and no strong voice has countered them, but we now know that government is a problem masquerading as its own cure.
Neither political party has shown the slightest understanding of economics. The Democrats, the media, and Obama blame deregulation, and all John McCain can do is look guilty. I thought he was going to cry at the beginning of the first Presidential debate. PULEEEASE!
I know of precisely ONE politician who understands – Ron Paul.
You won’t hear any of THIS on MSNBC. Does that make Keith Olberman the – WORST PERSON IN THE WORLD? J
Let’s summarize:
The conventional wisdom is that Republicans, free-markets, and deregulation caused the current economic crisis; whereas, the reality is that Democrats, government, and regulation caused the current economic crisis.
1. Alan Greenspan helped cause a housing bubble when he lowered interest rates in a largely successful attempt to bring us out of the crash at the end of the Clinton administration.
2. Managed growth laws by local governments also contributed greatly to the housing bubble.
3. The Community Reinvestment Act caused a proliferation of subprime loans, which implicates Clinton, Obama, ACORN, Fannie Mae, and the whole Democratic Party.
4. The Democratic Party and most of the mainstream media have been working diligently to spread fear and reduce confidence, and fear causes recessionary behavior.
5. The new Sarbanes-Oxley regulations caused the new government mandated Mortgage Backed Securities to be valued at the market price (Mark-to-Market) at the end of each day, which caused banks to go under with little forewarning.
6. The war in Iraq has played a small role, but has reduced confidence in America and the dollar.
7. Markets solve problems, like the Russian invasion of Georgia, where governments are powerless.
The Future
Maybe once the people learn the reality, they will have a greater desire for freedom.
The promise of reality is freedom.
Friday, October 24, 2008
Panics and Politics
Panics and Politics
John Steele Gordon
Oct 22, 2008
http://www.american.com/archive/2008/
october-10-08/panics-and-politics
How often have U.S. financial crises been followed by major political realignments?
Will the current financial crisis spur a major political realignment? If history is any guide, the answer is probably no. America has experienced recurrent financial meltdowns since its birth in the late 18th century. Indeed, there were severe credit crunches and Wall Street collapses in 1792, 1819, 1837, 1857, 1873, 1893, 1907, 1929, 1987, and now 2008. Most of these panics have not been followed by seismic political shifts. To be sure, President Martin Van Buren, who took office a month before the stock market crash of 1837, lost badly when he ran for reelection in the depression year of 1840. But Van Buren was an unpopular and ineffective president, and his defeat did not signal a realignment.
Two post-crisis elections, however, in 1896 and 1932, were focused overwhelmingly on economic issues stemming from a depression. In each case, the victorious party became the dominant force in American politics for a generation.
In the post-Civil War era, there were a number of close elections. The 1876 election wasn’t settled until shortly before inauguration day in 1877. In 1888, Democrat Grover Cleveland won the popular vote but lost in the Electoral College to Republican Benjamin Harrison. Four years later, Cleveland defeated Harrison, becoming the only president to serve two non-contiguous terms.
The 1896 election ended the era of evenly balanced parties. It followed the Panic of 1893, which had triggered a deep and painful depression. The urban working class that had been expanding rapidly as the country industrialized was dependent on wages and was bearing the brunt of high unemployment. GDP had declined by 12 percent in the year after the market crash. Unemployment had increased from 3 percent in 1892 to 18.4 percent two years later. Fifteen thousand companies had failed, as had 491 banks.
Two post-crisis elections, in 1896 and 1932, were focused overwhelmingly on economic issues stemming from a depression. In each case, the victorious party became the dominant force in American politics for a generation.
With the 1896 election, the Republicans became the majority party; they would win every presidential election from 1896 to 1932, with the exceptions of 1912 and 1916. In 1912, Theodore Roosevelt split the GOP and Democrat Woodrow Wilson was elected with only 41.8 percent of the popular vote. In 1916, Wilson barely won reelection despite having the advantage of incumbency and a very dangerous foreign situation.
By the early 1930s, America was experiencing its most profound crisis since the Civil War. The economy had begun slowing in the spring of 1929, and the stock market had crashed that October. Then a series of disastrous policy mistakes turned an ordinary economic downturn into the unique calamity of the Great Depression. The Federal Reserve kept interest rates high when it should have lowered them dramatically. The Smoot-Hawley Tariff Act raised tariffs to their highest level in U.S. history and sparked a trade war that crippled global commerce. In the summer of 1932, as the depression worsened, Congress passed an enormous tax hike in hopes of balancing the budget.
Although President Herbert Hoover, a Republican, tried his best to quell the crisis and did more than any previous president to relieve economic suffering, he failed miserably in his 1932 reelection bid. Democrat Franklin Delano Roosevelt won a landslide and went on to become one of the most consequential presidents in U.S. history. FDR remade American politics, forging an alliance between Southern whites and Northern blue-collar workers that guaranteed Democratic dominance for nearly 40 years. Only when his equal as a politician, Ronald Reagan, rose to power did the Republicans return to being the dominant party.
Will the Panic of 2008 bring about a new shift? If the financial markets calm down and prudent reforms are enacted, probably not. American politics has always been the politics of the center. It’s a good bet that it will remain that way for the foreseeable future.
John Steele Gordon is the author of An Empire of Wealth: The Epic History of American Economic Power (HarperCollins).
John Steele Gordon
Oct 22, 2008
http://www.american.com/archive/2008/
october-10-08/panics-and-politics
How often have U.S. financial crises been followed by major political realignments?
Will the current financial crisis spur a major political realignment? If history is any guide, the answer is probably no. America has experienced recurrent financial meltdowns since its birth in the late 18th century. Indeed, there were severe credit crunches and Wall Street collapses in 1792, 1819, 1837, 1857, 1873, 1893, 1907, 1929, 1987, and now 2008. Most of these panics have not been followed by seismic political shifts. To be sure, President Martin Van Buren, who took office a month before the stock market crash of 1837, lost badly when he ran for reelection in the depression year of 1840. But Van Buren was an unpopular and ineffective president, and his defeat did not signal a realignment.
Two post-crisis elections, however, in 1896 and 1932, were focused overwhelmingly on economic issues stemming from a depression. In each case, the victorious party became the dominant force in American politics for a generation.
In the post-Civil War era, there were a number of close elections. The 1876 election wasn’t settled until shortly before inauguration day in 1877. In 1888, Democrat Grover Cleveland won the popular vote but lost in the Electoral College to Republican Benjamin Harrison. Four years later, Cleveland defeated Harrison, becoming the only president to serve two non-contiguous terms.
The 1896 election ended the era of evenly balanced parties. It followed the Panic of 1893, which had triggered a deep and painful depression. The urban working class that had been expanding rapidly as the country industrialized was dependent on wages and was bearing the brunt of high unemployment. GDP had declined by 12 percent in the year after the market crash. Unemployment had increased from 3 percent in 1892 to 18.4 percent two years later. Fifteen thousand companies had failed, as had 491 banks.
Two post-crisis elections, in 1896 and 1932, were focused overwhelmingly on economic issues stemming from a depression. In each case, the victorious party became the dominant force in American politics for a generation.
With the 1896 election, the Republicans became the majority party; they would win every presidential election from 1896 to 1932, with the exceptions of 1912 and 1916. In 1912, Theodore Roosevelt split the GOP and Democrat Woodrow Wilson was elected with only 41.8 percent of the popular vote. In 1916, Wilson barely won reelection despite having the advantage of incumbency and a very dangerous foreign situation.
By the early 1930s, America was experiencing its most profound crisis since the Civil War. The economy had begun slowing in the spring of 1929, and the stock market had crashed that October. Then a series of disastrous policy mistakes turned an ordinary economic downturn into the unique calamity of the Great Depression. The Federal Reserve kept interest rates high when it should have lowered them dramatically. The Smoot-Hawley Tariff Act raised tariffs to their highest level in U.S. history and sparked a trade war that crippled global commerce. In the summer of 1932, as the depression worsened, Congress passed an enormous tax hike in hopes of balancing the budget.
Although President Herbert Hoover, a Republican, tried his best to quell the crisis and did more than any previous president to relieve economic suffering, he failed miserably in his 1932 reelection bid. Democrat Franklin Delano Roosevelt won a landslide and went on to become one of the most consequential presidents in U.S. history. FDR remade American politics, forging an alliance between Southern whites and Northern blue-collar workers that guaranteed Democratic dominance for nearly 40 years. Only when his equal as a politician, Ronald Reagan, rose to power did the Republicans return to being the dominant party.
Will the Panic of 2008 bring about a new shift? If the financial markets calm down and prudent reforms are enacted, probably not. American politics has always been the politics of the center. It’s a good bet that it will remain that way for the foreseeable future.
John Steele Gordon is the author of An Empire of Wealth: The Epic History of American Economic Power (HarperCollins).
Tuesday, October 7, 2008
Lesson From a Crisis: When Trust Vanishes, Worry
Lesson From a Crisis: When Trust Vanishes, Worry
David Leonhardt
Sep 30, 2008
http://www.nytimes.com/2008/10/01/business/
economy/01leonhardt.html
For now, the crisis has had little effect on most Americans, beyond their 401(k) statements. So to them, the specter of a depression can sound alarmist, and the $700 billion bill that Congress voted down this week can seem like a bailout for rich scoundrels.
Almost no economist thinks that even a terrible downturn would look like the Depression. The government has already responded more aggressively than it did in Herbert Hoover’s day. So a Depression-like contraction — a 30 percent drop in economic activity — is highly unlikely. The country is also far richer today, which means that a much smaller portion of the population is living on the edge of despair. No matter what happens, you’re not likely to see shantytowns.
But the Depression is still relevant, because the basic mechanics of how the economy might fall into a severe recession look quite similar to those that caused the Depression. In both cases, a credit crisis is at the center of the story.
At the start of the 1930s, despite everything that had happened on Wall Street, the American economy had not yet collapsed. Consumer spending and business investment were down, but not horribly so.
In late 1930, however, a rolling series of bank panics began. Investments made by the banks were going bad — or, in some cases, were rumored to be going bad — and nervous customers besieged bank branches to demand their money back. Hundreds of banks eventually closed.
Once a bank in a given town shut its doors, all the knowledge accumulated by the bank officers there effectively disappeared. Other banks weren’t nearly as willing to lend money to local businesses and residents because the loan officers at those banks didn’t know which borrowers were less reliable than they looked. Credit dried up.
“If a guy has a good investment opportunity and he can’t get the funding, he won’t do it,” Mr. Mishkin, who’s now an economics professor at Columbia, notes. “And that’s when the economy collapses.” Or, as Adam Posen, another economist, puts it, “That’s when the Depression became the Great Depression.” By 1932, consumption and investment had both collapsed, and stocks had fallen more than 80 percent from their peak.
As a young academic economist in the 1980s, Mr. Bernanke largely developed the theory that the loan officers’ lost knowledge was a crucial cause of the Depression. He referred to this lost knowledge as “informational capital.” In plain English, it means that trust vanished from the banking sector.
The same thing is happening now. Financial markets are global, not local, today, so the problem isn’t that the failure of any single bank locks individuals or businesses out of the credit markets. Instead, the nasty surprises of the last 13 months — the sort of turmoil that once would have been unthinkable — have caused an effective breakdown in informational capital. Bankers now look at longtime customers and think of that old refrain from a failed marriage: I feel like I don’t even know you.
Bear Stearns, for example, was supposed to have solid, tangible collateral standing behind some of its debts, so that certain lenders would be paid off no matter what. It didn’t, and they weren’t.
The current, more serious stage of the crisis began two weeks ago today, after the collapse of Lehman Brothers and the Fed’s takeover of the American International Group. Those events created a new level of fear. Banks cut back on making loans and instead poured money into Treasury bills, which paid almost no interest but also came with almost no risk. On the loans they did make, banks demanded higher interest rates. Over the past two weeks, rates have generally continued to rise — and these rates, not the stock market, are really what you should be watching.
The current fears can certainly seem irrational. Most households and businesses are still in fine shape, after all. So why aren’t some banks stepping into the void and taking advantage of the newly high interest rates to earn some profit?
There are two chief reasons. One is fairly basic: bankers are nervous that borrowers who look solid today may not turn out to be so solid. Think back to 1930, when the American economy seemed to be weathering the storm.
The second reason is a bit more complex. Banks own a lot of long-term assets (like your mortgage) and hold a lot of short-term debt (which is cheaper than long-term debt). To pay off this debt, they need to take out short-term loans.
In the current environment, bankers are nervous that other banks might shut them out, out of fear, and stop extending that short-term credit. This, in a nutshell, brought about Monday’s collapse of Wachovia and Glitnir Bank in Iceland. To avoid their fate, other banks are hoarding capital, instead of making seemingly profitable loans. And when capital is hoarded, further bank failures become all the more likely.
David Leonhardt
Sep 30, 2008
http://www.nytimes.com/2008/10/01/business/
economy/01leonhardt.html
For now, the crisis has had little effect on most Americans, beyond their 401(k) statements. So to them, the specter of a depression can sound alarmist, and the $700 billion bill that Congress voted down this week can seem like a bailout for rich scoundrels.
Almost no economist thinks that even a terrible downturn would look like the Depression. The government has already responded more aggressively than it did in Herbert Hoover’s day. So a Depression-like contraction — a 30 percent drop in economic activity — is highly unlikely. The country is also far richer today, which means that a much smaller portion of the population is living on the edge of despair. No matter what happens, you’re not likely to see shantytowns.
But the Depression is still relevant, because the basic mechanics of how the economy might fall into a severe recession look quite similar to those that caused the Depression. In both cases, a credit crisis is at the center of the story.
At the start of the 1930s, despite everything that had happened on Wall Street, the American economy had not yet collapsed. Consumer spending and business investment were down, but not horribly so.
In late 1930, however, a rolling series of bank panics began. Investments made by the banks were going bad — or, in some cases, were rumored to be going bad — and nervous customers besieged bank branches to demand their money back. Hundreds of banks eventually closed.
Once a bank in a given town shut its doors, all the knowledge accumulated by the bank officers there effectively disappeared. Other banks weren’t nearly as willing to lend money to local businesses and residents because the loan officers at those banks didn’t know which borrowers were less reliable than they looked. Credit dried up.
“If a guy has a good investment opportunity and he can’t get the funding, he won’t do it,” Mr. Mishkin, who’s now an economics professor at Columbia, notes. “And that’s when the economy collapses.” Or, as Adam Posen, another economist, puts it, “That’s when the Depression became the Great Depression.” By 1932, consumption and investment had both collapsed, and stocks had fallen more than 80 percent from their peak.
As a young academic economist in the 1980s, Mr. Bernanke largely developed the theory that the loan officers’ lost knowledge was a crucial cause of the Depression. He referred to this lost knowledge as “informational capital.” In plain English, it means that trust vanished from the banking sector.
The same thing is happening now. Financial markets are global, not local, today, so the problem isn’t that the failure of any single bank locks individuals or businesses out of the credit markets. Instead, the nasty surprises of the last 13 months — the sort of turmoil that once would have been unthinkable — have caused an effective breakdown in informational capital. Bankers now look at longtime customers and think of that old refrain from a failed marriage: I feel like I don’t even know you.
Bear Stearns, for example, was supposed to have solid, tangible collateral standing behind some of its debts, so that certain lenders would be paid off no matter what. It didn’t, and they weren’t.
The current, more serious stage of the crisis began two weeks ago today, after the collapse of Lehman Brothers and the Fed’s takeover of the American International Group. Those events created a new level of fear. Banks cut back on making loans and instead poured money into Treasury bills, which paid almost no interest but also came with almost no risk. On the loans they did make, banks demanded higher interest rates. Over the past two weeks, rates have generally continued to rise — and these rates, not the stock market, are really what you should be watching.
The current fears can certainly seem irrational. Most households and businesses are still in fine shape, after all. So why aren’t some banks stepping into the void and taking advantage of the newly high interest rates to earn some profit?
There are two chief reasons. One is fairly basic: bankers are nervous that borrowers who look solid today may not turn out to be so solid. Think back to 1930, when the American economy seemed to be weathering the storm.
The second reason is a bit more complex. Banks own a lot of long-term assets (like your mortgage) and hold a lot of short-term debt (which is cheaper than long-term debt). To pay off this debt, they need to take out short-term loans.
In the current environment, bankers are nervous that other banks might shut them out, out of fear, and stop extending that short-term credit. This, in a nutshell, brought about Monday’s collapse of Wachovia and Glitnir Bank in Iceland. To avoid their fate, other banks are hoarding capital, instead of making seemingly profitable loans. And when capital is hoarded, further bank failures become all the more likely.
Monday, September 29, 2008
My Answer to the President
My Answer to the President
Ron Paul
Sep 25, 2008
http://www.campaignforliberty.com/blog/?p=616
Dear Friends:
The financial meltdown the economists of the Austrian School predicted has arrived.
Last night the president addressed the nation about the financial crisis. There is no point in going through his remarks line by line, since I’d only be repeating what I’ve been saying over and over - not just for the past several days, but for years and even decades.
Still, at least a few observations are necessary. [..]
Then come the scare tactics. If we don’t give dictatorial powers to the Treasury Secretary "the stock market would drop even more, which would reduce the value of your retirement account. The value of your home could plummet."
It’s the same destructive strategy that government tried during the Great Depression: prop up prices at all costs. The Depression went on for over a decade. On the other hand, when liquidation was allowed to occur in the equally devastating downturn of 1921, the economy recovered within less than a year.
F.A. Hayek won the Nobel Prize for showing how central banks’ manipulation of interest rates creates the boom-bust cycle with which we are sadly familiar. In 1932, in the depths of the Great Depression, he described the foolish policies being pursued in his day - and which are being proposed, just as destructively, in our own.
To combat the depression by a forced credit expansion is to attempt to cure the evil by the very means which brought it about; because we are suffering from a misdirection of production, we want to create further misdirection - a procedure that can only lead to a much more severe crisis as soon as the credit expansion comes to an end: It is probably to this experiment, together with the attempts to prevent liquidation once the crisis had come, that we owe the exceptional severity and duration of the depression.
The only thing we learn from history, I am afraid, is that we do not learn from history.
The very people who have spent the past several years assuring us that the economy is fundamentally sound, and who themselves foolishly cheered the extension of all these novel kinds of mortgages, are the ones who now claim to be the experts who will restore prosperity! Just how spectacularly wrong, how utterly without a clue, does someone have to be before his expert status is called into question?
Ron Paul
Sep 25, 2008
http://www.campaignforliberty.com/blog/?p=616
Dear Friends:
The financial meltdown the economists of the Austrian School predicted has arrived.
Last night the president addressed the nation about the financial crisis. There is no point in going through his remarks line by line, since I’d only be repeating what I’ve been saying over and over - not just for the past several days, but for years and even decades.
Still, at least a few observations are necessary. [..]
Then come the scare tactics. If we don’t give dictatorial powers to the Treasury Secretary "the stock market would drop even more, which would reduce the value of your retirement account. The value of your home could plummet."
It’s the same destructive strategy that government tried during the Great Depression: prop up prices at all costs. The Depression went on for over a decade. On the other hand, when liquidation was allowed to occur in the equally devastating downturn of 1921, the economy recovered within less than a year.
F.A. Hayek won the Nobel Prize for showing how central banks’ manipulation of interest rates creates the boom-bust cycle with which we are sadly familiar. In 1932, in the depths of the Great Depression, he described the foolish policies being pursued in his day - and which are being proposed, just as destructively, in our own.
To combat the depression by a forced credit expansion is to attempt to cure the evil by the very means which brought it about; because we are suffering from a misdirection of production, we want to create further misdirection - a procedure that can only lead to a much more severe crisis as soon as the credit expansion comes to an end: It is probably to this experiment, together with the attempts to prevent liquidation once the crisis had come, that we owe the exceptional severity and duration of the depression.
The only thing we learn from history, I am afraid, is that we do not learn from history.
The very people who have spent the past several years assuring us that the economy is fundamentally sound, and who themselves foolishly cheered the extension of all these novel kinds of mortgages, are the ones who now claim to be the experts who will restore prosperity! Just how spectacularly wrong, how utterly without a clue, does someone have to be before his expert status is called into question?
Wednesday, September 3, 2008
Did You Ever Think A Financial Crisis Would Feel Like This?
Did You Ever Think A Financial Crisis Would Feel Like This?
By Vadim Pokhlebkin
Fri, 29 Aug 2008 11:00:00 ET
http://www.elliottwave.com/freeupdates/archives/2008/08/29/
Did-You-Ever-Think-A-Financial-Crisis-Would-Feel-Like-This.aspx
The credit crunch has already been more damaging than any of the financial crises of the past two decades.
But it's amazing how fast the seeming normalcy of our present situation disappears once you scratch the surface. Just try typing "great depression" into Google News. Then, you get:
"Slowdown echoes Great Depression, says Bank's deputy chief."
"S&P on track for 4th-most volatile year since Great Depression."
"...the US housing market currently suffering the worst downturn since the Great Depression."
And these are just the most recent news reports. On top of that, take a look at this chart The Economist published in its May 15 article, "Paradise lost":
http://www.economist.com/specialreports/displayStory.cfm?story_id=11325347
It's a real eye-opener, isn't it: Through April of this year, the credit crunch had already caused more monetary harm than any of the notable financial crises of the past two decades, including the proverbial stock market crash of 1987 and the dotcom bubble!
One estimate for the damage from the ongoing liquidity crisis says that, "The global financial crisis could lead to losses of 1,600 billion dollars for financial institutes." (SonntagsZeitung)
By Vadim Pokhlebkin
Fri, 29 Aug 2008 11:00:00 ET
http://www.elliottwave.com/freeupdates/archives/2008/08/29/
Did-You-Ever-Think-A-Financial-Crisis-Would-Feel-Like-This.aspx
The credit crunch has already been more damaging than any of the financial crises of the past two decades.
But it's amazing how fast the seeming normalcy of our present situation disappears once you scratch the surface. Just try typing "great depression" into Google News. Then, you get:
"Slowdown echoes Great Depression, says Bank's deputy chief."
"S&P on track for 4th-most volatile year since Great Depression."
"...the US housing market currently suffering the worst downturn since the Great Depression."
And these are just the most recent news reports. On top of that, take a look at this chart The Economist published in its May 15 article, "Paradise lost":
http://www.economist.com/specialreports/displayStory.cfm?story_id=11325347
It's a real eye-opener, isn't it: Through April of this year, the credit crunch had already caused more monetary harm than any of the notable financial crises of the past two decades, including the proverbial stock market crash of 1987 and the dotcom bubble!
One estimate for the damage from the ongoing liquidity crisis says that, "The global financial crisis could lead to losses of 1,600 billion dollars for financial institutes." (SonntagsZeitung)
Wednesday, August 13, 2008
Credit Card Debt: This Popping Bubble Is Really Going to Hurt
Credit Card Debt: This Popping Bubble Is Really Going to Hurt
By Danny Schechter, AlterNet
Posted August 12, 2008.
http://www.alternet.org/workplace/94701/
While many eyes are focusing on the housing meltdown and its hugely negative effect on an economy clearly moving into recession, few are paying attention to the next bubble expected to burst: credit cards. You would never know it by watching those slick VISA card ads on the Olympic TV broadcasts.
Combined with the subprime losses, such a credit card nightmare has the potential, experts say, of bringing down the entire financial system and global economy.
You and your credit card have become key players in the highly unstable financial crunch. Mortgage lender cupidity and bank credit card greed wedded to financial institution deregulation supported by both political parties, have been made manifestly worse by Bush administration support-the-rich policies. It has brought us to a brink not seen since just before the Great Depression.
By Danny Schechter, AlterNet
Posted August 12, 2008.
http://www.alternet.org/workplace/94701/
While many eyes are focusing on the housing meltdown and its hugely negative effect on an economy clearly moving into recession, few are paying attention to the next bubble expected to burst: credit cards. You would never know it by watching those slick VISA card ads on the Olympic TV broadcasts.
Combined with the subprime losses, such a credit card nightmare has the potential, experts say, of bringing down the entire financial system and global economy.
You and your credit card have become key players in the highly unstable financial crunch. Mortgage lender cupidity and bank credit card greed wedded to financial institution deregulation supported by both political parties, have been made manifestly worse by Bush administration support-the-rich policies. It has brought us to a brink not seen since just before the Great Depression.
Sunday, August 3, 2008
Will Europe Collapse Before the United States?
Will Europe Collapse Before the United States?
John Hoefle
Executive Intelligence Review
July 25, 2008
http://www.larouchepub.com/other/2008/3529europe_collapse_b4_us.html
We are not arguing that the European economy is in worse shape than that of the U.S., for both are caught in the grip of the failure of the global financial system, and both are bankrupt. What gives the United States an advantage over Europe is the superior features of the U.S. Constitutional system, which gives the U.S. Congress control over the emission of credit. In the parts of Europe dominated historically by the Venetians and the Anglo-Dutch Liberal system, private capital has always dominated governments. In the British Empire it is not the British government which rules, or even the Queen, but the City of London, and the financier slime mold which controls the City.
The U.S., on the other hand, has all the authority it needs under the Constitution to reign in these private flows of capital, giving it powerful tools with which to keep the imperial parasites at bay. Franklin Roosevelt, for example, used the power of government to break the back of the bankers during the Great Depression, paving the way for the New Deal. The hearings into the causes of the banking crisis and the legislation which followed, delivered a blow to the British-controlled House of Morgan from which it never fully recovered, sending a signal around the world that the U.S. was not only capable, but determined, to defend itself and its people.
John Hoefle
Executive Intelligence Review
July 25, 2008
http://www.larouchepub.com/other/2008/3529europe_collapse_b4_us.html
We are not arguing that the European economy is in worse shape than that of the U.S., for both are caught in the grip of the failure of the global financial system, and both are bankrupt. What gives the United States an advantage over Europe is the superior features of the U.S. Constitutional system, which gives the U.S. Congress control over the emission of credit. In the parts of Europe dominated historically by the Venetians and the Anglo-Dutch Liberal system, private capital has always dominated governments. In the British Empire it is not the British government which rules, or even the Queen, but the City of London, and the financier slime mold which controls the City.
The U.S., on the other hand, has all the authority it needs under the Constitution to reign in these private flows of capital, giving it powerful tools with which to keep the imperial parasites at bay. Franklin Roosevelt, for example, used the power of government to break the back of the bankers during the Great Depression, paving the way for the New Deal. The hearings into the causes of the banking crisis and the legislation which followed, delivered a blow to the British-controlled House of Morgan from which it never fully recovered, sending a signal around the world that the U.S. was not only capable, but determined, to defend itself and its people.
Central bank body warns of Great Depression
Central bank body warns of Great Depression
http://www.bankingtimes.co.uk/09062008-central-bank-body-warns-of-great-depression/
by Gill Montia
June 9, 2008
The Bank for International Settlements (BIS), the organisation that fosters cooperation between central banks, has warned that the credit crisis could lead world economies into a crash on a scale not seen since the 1930s.
In its latest quarterly report, the body points out that the Great Depression of the 1930s was not foreseen and that commentators on the financial turmoil, instigated by the US sub-prime mortgage crisis, may not have grasped the level of exposure that lies at its heart.
According to the BIS, complex credit instruments, a strong appetite for risk, rising levels of household debt and long-term imbalances in the world currency system, all form part of the loose monetarist policy that could result in another Great Depression.
http://www.bankingtimes.co.uk/09062008-central-bank-body-warns-of-great-depression/
by Gill Montia
June 9, 2008
The Bank for International Settlements (BIS), the organisation that fosters cooperation between central banks, has warned that the credit crisis could lead world economies into a crash on a scale not seen since the 1930s.
In its latest quarterly report, the body points out that the Great Depression of the 1930s was not foreseen and that commentators on the financial turmoil, instigated by the US sub-prime mortgage crisis, may not have grasped the level of exposure that lies at its heart.
According to the BIS, complex credit instruments, a strong appetite for risk, rising levels of household debt and long-term imbalances in the world currency system, all form part of the loose monetarist policy that could result in another Great Depression.
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