Archive for April, 2009

The Recession spelled Depression Part II

Friday, April 24th, 2009

Why is a Fed policy of almost 0% interest rate, and a $13 trillion bailout package not going to work?

Answer:

Because we broke the game.

When the market crashed, and real estate  continued to fall, the American consumer was faced with massive layoffs, and a dwindling net worth both in IRA’s 401K’s and value of their real estate and other tangible property.

Americans have begun to look at their new SUV every year, the $6000 vacations, and the garage and basements loaded with unwanted stuff , and have come to the realization  that they have too many possessions , and less and less money to pay for them. 

Consumers have stopped buying on credit, they are reducing debt at a record pace, and are saying no on new purchases.

The basic formula which has driven our economy for the better part of the last 60 years is grinding to a halt, and has begun to unravel at an increasingly rapid pace.

After WW II and well into the 50’s and 60’s, we were a nation conditioned to save.We increased our bank accounts on a regular basis, and the idea of credit cards and borrowing to purchase was approached with temerity.

We would spend our savings to raise our families, and  educate our children, We were a lender nation.

In the 70’s Nixon took us off the gold standard. Instead of being backed by gold reserves, our currency was backed by the promise  and faith of the government.

The recession in the 70’s , spurred on by OPEC, turned into the stagflation of the late 70’s. The government attempted to fight the recession with large spending, and massive(at that time) increases in the money supply.

The influx of newly printed cash into a stagnant economy resulted in massive inflation and interest rates in the upper teens and low 20’s

Reganomics and the increased intervention by the Fed under Volker and Greenspan turned us into a nation of borrowers and shoppers. .We became a debtor nation.

By the 90’s, we were spending more than we made, riding every economic bubble and market excess to new heights of deficit spending.

By the 00’s, we had stopped saving entirely, making shopping the national pastime .

Every recession has been cured with easy credit and the ever expanding money supply/

This never ending credit increase led to the creation of more and more insidious lending instruments, leveraging  our homes as engines for credit, and making it easier and easier to purchase our homes without ability to pay for them.

Part III to come.

The Recession spelled Depression

Thursday, April 23rd, 2009

During the past 50 years, the United States and the Free World economy has survived several notable recessions.

This expansion/ contraction cycle is a normal factor in our economic system. The excesses during expansion times have resulted in economic bubbles, which inevitably burst when they become too excessive.

These expansion and contraction cycles have been analyzed , dissected, and  critiqued with the hindsight of 20/20 vision.

Each recession that has resulted from an economic bubble, has been mitigated and softened by the active manipulation of interest rates and money supply by the Fed.

Why isn’t it working now?

Why does it feel like this is different and much more serious?

The answer is sadly obvious. We have broken the system.The game was too rich and easy, and the Bulls and Bears became PIGS.

When the economy began entering a  recession in early 07, the government was in denial. The Fed slowly began to lower interest rates; however,  Wall Street continued to telegraph a strong economy and good resiliency, and most economists ignored, or totally missed the growing danger signs.

The Dow Jones hit its high in late Summer,08, then dropped dramatically as Summer turned into Fall.

First Bush and later Obama began throwing $Trillions at the banking system and other stimulus and bailout targets in a reactive attempt to stave off the recession which threatened to spiral out of control.

For the past almost 60 years, lowering interest rates and massive spending has cured our recessionary problems, with certain notable exceptions. i.e. the late 1970’s early 80’s, which was only cured by a painful dose of Reganomics.

This time the historical response is failing.

The Fed has lowered interest rats to almost 0%, and the Politicians have thrown unprecedented $trillions  in bailouts.

The TARP, AIG, Auto, Insurance, and huge spending appropriations, have been sucked down a deep bottomless hole, with very little visible effect on the economy. 

What Has Changed?

The housing bubble which burst has exposed the shaky house of cards which our banking system was built upon.

As house values dropped, and people lost their jobs, the banking system subprime lending fiasco began to come into sharper view.

Our greed for instant gratification and always expanding profit margins led to the creation of many lending assets which quickly became toxic.

With the largest number of Americans in history ,unemployed, and our major middle class asset proving to be a falling rock rather than a soaring balloon, Americans became frightened..and… stopped spending money they didn’t have.

MORE TO Come Later

The Recovery Lie, How they play with the numbers to fool us.

Friday, April 17th, 2009

Many years ago a President of the United States made the classic statement” You can fool all of the people some of the time, some of the people all of the time, but you can’t fool all of the people all of the time.”

We are immersed in a political and economic reality which feels surreal all of the time. The detachment from reality is disconcerting, and the brazen lies and misdirected disinformation  is creating a simmering anger which appears to be spreading like wildfire through out the U S population.

The TEA parties on April 15th are a case in point.

Across the United States, tens of thousands of average citizens, congregated and raised their collective voice in anger. This is a very rare phenomenon.

Sure protests are a fact of life

.Pro gay marriage!

Anti war protests!

Pro Palestinian!

Pro and anti Israel!

Sure passionate causes evoke the more militant to rise in protest. But when was the last time that middle class Americans took time off from their jobs, grabbed their young children, and rallied for a cause in such numbers all across the country.

When has the duplicitous and biased so called journalists ben exposed as such agenda driven twirps. A blonde bimbo who “works” for CNN reveals her lack if class, stupid bias, and disgusting disregard for what used to be a noble profession , by giving her opionions during an interview, and shouts down a protester standing in the rain with his 2 year ol daughter.

I cringe when I hear this type of hateful bias.

What happened to freedom, free speech, and a reporter actually reporting, and not trying to be so clever, making the news about her. With her lack of couth, one wonders how many men and women she had to sleep with to get and keep her pathetic job,

The people are speaking, and this is just the beginning of a torrent in birthing.

G-d Bless America.

Who said we aren’t a Judea Christian Nation.

Stimulate This- What a Joke

Wednesday, April 1st, 2009

I just don’t get it. We are in a recession, sliding  inexorably towards a Depression, and out leaders are fiddling while “Rome” burns.

Things are not getting better. In fact things are getting worse. The economy is continuing to slow down despite the optimistic dribble that the reporters and pundits are spewing.

It almost feels like our leaders want things to get worse, so that they can further tamper with the social structure of our society. That Rom Emanuel “don’t let a good crisis go to waste” ,quote feels like he and his Boss are encouraging the crisis to come in such rapid succession, that the American people are numbed and not paying attention.

Lets talk about the “Stimulus” package.

New York State is receiving $6+ Billion as part of the stimulus package. What great economic stimulus projects is New York rushing to implement, to help our troubled and unemployed people. I’m sure there are great projects starting next week .

WRONG, the new New York budget which was short by billions , has increased by 9% over last year. The “pork” is still there, and the billions in stimulus money is going to fill in the budget shortfall.

How is that stimulating the economy?

It is business as usual. The Feds are printing inflationary money non stop, and all they are doing is recycling the money to cover “BUSINESS AS USUAL” on the state level.

There are no capital projects.

No new business.

No help for the economy, only social engineering  and more redistribution nonsense.

At this rate, everyone will work for the government, or for a favored labor union, and we will have one great big STAGNANT morass.

The end of the greatest place on earth.