“It's almost worth the Great Depression to learn how little our big men know.”
- Will Rogers
Known as a "Bear Market Rally," market crashes are often followed by a period of "recovery." As the vast majority of people did not see the depression coming, there are still plenty of people who think a depression won't last and buy up assets at "reduced" cost. This is where we are right now. Maybe we're not at the top of a Bear Market Rally yet (B), but the bottom will fall out eventually (C).
Of course This Crash is different then all others before it, just like all others before it. The boom/bust cycle is quickening. Bubbles grow larger and pop with larger global waves. The fundamental structure of our economy is unstable and failing. We are in a downward spiral that must hit a breaking point.
-26% of home mortgages are now under water, this is expected to rise to 48% by 2011. The rise out of the dot-com bubble was financed by increasing home values and the credit availability it caused. Decreasing housing values is a self-feeding cycle. The more people that are under water, the more people that must enter foreclosure to move. More foreclosures, lower housing values. Lowering housing prices put more people under water. Americans are going to have to pay back all the money borrowed, and then some. This is going to cause a fundamental shift in our economy as GDP must fall to reflect lower spending. Lower GDP = less jobs = more foreclosures = lower housing prices = Lower GDP...
Link
About half of U.S. mortgages seen underwater by 2011
http://www.reuters.com/article/newsOne/idUSTRE5745JP20090805
http://news.yahoo.com/s/nm/20090805/bs_nm/us_usa_housing_deutschebank
-The "Green Shoots" are only changes in the second derivative. Things are not getting better, things haven't even stopped getting worse, they're getting worse at a slightly lower rate. The government is printing money like the Weimar Republic, and all we've seen is an improving rate-of-change of the rate-of-change. News is reported as positive only because of changes in this second derivative. Fortunately the internet as empowered people to receive news outside of standard corporate channels. Namely the Zero Hedge blog has received a lot of attention for highlighting Goldman Sacks' control of Washington.
-Of the $863B in income growth seen after the dot-com bubble, only 5% was distributed to the bottom 90%. Capitalism enables the rich to get richer. Capital managers are rewarded with more capital. Successful capitalism always results in a growing divergence of the social-economic classes. This divergence is very threatening to social stability.
-The current decline has hasten the collapse of American Manufacturing. June's decline was the 17th decline in the last 18 months. As is the case with so much of our economy, manufacturing is suffering from "excess" capacity. In other words: there are not enough buyers for all the sellers. Same can be said for housing, the American consumer is not buying enough. The jobs where shipped overseas because the American consumer needed lower prices, feeding our downward spiral.
"Much is also due to the decades-long stagnation of wages, which has made it impossible for Americans to purchase their own production through wages alone. This phenomenon, referred to as the wage-productivity gap, has been offset by the increase in debt-financed purchasing power—due to decades of increasing credit availability."
"People who are out of the labor force tend to lose their skills and their connection to the labor force. When the economy recovers, they may not even be employable," Bernanke said in testimony in June.
"It was French economist Jacques Rueff who revealed the scam more than half a century ago. The whole idea of Keynesian stimulus, he explained, was to cause inflation…which would reduce the real price of labor. In a modern democracy, politics prevents wages from falling. But in a correction, if wages don’t fall people don’t get jobs. Keynes’ didn’t mention it, but the only reason his stimulus works is because it pulls the wool over the eyes of the working classes – reducing their wages by inflation so employers can afford to hire them again. Ergo, no inflation…no recovery in the job market. No recovery in the job market…no recovery in the economy."
-Inflation also acts to drive the lower 90% into financial oblivion. A government report released Tuesday says a middle-income family with a child born last year will spend about $221,000 raising that child through age 17. The foundation of the American economy is slipping away but those in power could care less. It requires an ego-maniac to run for elected office, but it takes a special type of hypocritical, corrupt, well-connected ego-maniac to get elected.
Some other tidbits:
American Incomes Head Down, Threatening Recovery in Spending.
The Second Wave of the Credit Crisis is quickly approaching.
Audience Laughs After Geithner Tells China Its Dollar Assets are Safe
Any attempts from the Fed to prevent the imminent hyper-inflation will kill government hopes of recovery.
Showdown With the Bond Vigilantes
England's national debt is now up to 81.8% of GDP, and the US will not be far behind.
More proof of pay-to-play in Washington
The military industrial complex is continuing to bankrupt this country.
Banks are continuing to fail.
More and more banks are having trouble paying back TARP money.
The FDIC has been issuing cease and desist orders to banks because of their continued reckless behavior.
The Fed Bought Last Week's Treasury Notes effectively printing money to finance a ballooning federal deficit, while at the same time Federal tax revenues plummeting. This is an indication of the future of state tax revenues as well. The sheer magnitude of the tax decline, however, points to the deep recession that is reducing incomes, wiping out corporate profits and straining government programs.
No comments:
Post a Comment