Prepare for decade long depression
By Mike Stathis
Despite attempts made by Greenspan and Bernanke, there is no way to avert the payback period that has been building for over two decades. Over this stretch, America has consumed much more than it has produced. As a result, both consumer and federal debt have ballooned to record levels. And now, the payback period is upon us. The http://www.wvwnews.net/story.php?id=4964.” I expect the airlines to also receive some form of a bailout as well.
But Greenspan and Bernanke have not been alone in what will surely be remembered as America’s Financial Apocalypse – the eventful period ushering in a decade-long depression, as predicted in my 2006 book by the same title. Certainly, President Bush did not create these trends. But his financial irresponsibility has accelerated their magnitude. In less than eight years, he has managed to increase the national http://www.wvwnews.net/story.php?id=4057 cool down. No one else is talking about these issues because they’re wrapped up in the daily drama. But save this article and others I’ve written because I’ve been mentioning the longer-term problems ever since writing my book. In a few years, more people will begin to address these issues once they are transformed into daily drama.
President Bush’s attempts at a recovery have been so horrendous they’ve actually led to the current recession, which will turn out to be the worst in decades. I would venture to guess he is desperately pleading with officials to come up with even more gimmicks to hide the full realities of the economy so the worst will be reported only after he leaves office. But I will guarantee you if Washington and the Fed continue this reckless game of applying band aids instead of letting things play out, we will see a much bigger crisis down the road, similar to what happened after Greenspan tried to mitigate the dotcom collapse. You can bet this is going to happen because Washington does not understand the meaning of preemption.
Altogether, we have had eight years of no gains in real median wages, flat stock market returns, and minimal net new jobs. Despite what you have heard, after adjusting for debt spending, population growth and realistic adjustments to the GDP deflator, there have only been 3 or 4 quarters of GDP growth since 2005. If you adjust for military, government and minimum wage positions – i.e. jobs funded by tax payers and jobs that don’t pay anything – there have been absolutely no net new jobs. Bush’s largest gains have been with inflation, oil and food prices, debt, trade deficits, bankruptcies, foreclosures, and healthcare costs. If an assembly of the world’s leading economic strategists were to design the most destructive economic disaster possible, they could not match the results of Bush’s tenure. Even the most loyal Bush supporters will admit he has been an absolute disaster – that is if they’re being honest. America is now more dependent on foreign nations than ever – not only for oil, but also credit and manufactured goods.
America ‘s “Resilient” Economy
Many of the pundits flood the propaganda networks with repeated denials of the problems, boasting how resilient the U.S. economy is. You know who they are. I’m not quite sure what they’ve been smoking. But it appears to be some sort of hallucinogen because they seem to expect Superman to bend the economy back into shape. Ladies and Gentlemen, in case mommy never told you, there is no Santa Claus and there is no Superman. And if you think Bernanke’s printing presses have an endless supply of ink and paper, just wait until the real crisis appears. So you had better get ready because it’s coming. It is virtually inescapable. And it’s going to cause devastation around the globe. Of course I’m taking about the likely implosion of the CDS market.
Let’s take a look at America ‘s “resilient economy.” Already there have been over $500 billion in bank losses, with over $1 trillion more to come. Over one dozen banks have failed, with hundreds on deck. A handful of large hedge funds have blown up, with hundreds more on the way. Already, over $1 trillion has been transferred from the Fed to the banking cartel. But I estimate another $1.5 trillion will be needed to maintain liquidity as banks de-leverage over the next few years. Unemployment is now over 6% and inflation is over 5%, even with Washington ‘s manipulation of the data. Virtually every metric in the housing market is at multi-decade lows, except for foreclosures which are hitting new highs.
Taxpayers are now on the hook for billions of dollars of potentially worthless debt held by Fannie and Freddie. It’s now official. America ‘s free market economy is really a socialist system for corporations. One could argue this to be a form of Fascism. My best estimate for losses due to the Fannie and Freddie taxpayer bailout are between $200 to $500 billion. The worst case scenario would be $800 billion. If this economy is resilient, I can’t wait to see how it magically bounces back. When Superman fails to show up, Washington might consider giving David Copperfield a call. But this would be one illusion he won’t be able to pull off. Get the popcorn ready.
The Economy Under a Microscope
Let’s take a closer look at the economy. America imports oil, credit, and manufactured goods, while exporting jobs, junk bonds and inflation. That doesn’t sound like the type of trade policy that would support claims of a superpower, unless you’re only counting the number of nukes. Surely Washington is beginning to wonder how much longer Asia and Europe will continue fueling America ‘s credit bubble. They’ve already faced massive losses from sub-prime securities with much more carnage to come.
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