Archive for September, 2009

Are we turning this recession into the next Great Depression?

Monday, September 28th, 2009

It is necessary to revisit an article I wrote last January.

This pertains to a correlation between our current economic situation and the outset of the Great Depression.

There are many disturbing similaritiess, and the critical time line is getting too close.

Read and see if some of these actions taken by FDR sound chillingly familiar.

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I have been telling you a shortened version of how Hoover and Roosevelt managed to turn a bursting speculative bubble, and a moderate recession into THE Great Depression.

In A previous article I gave you some unemployment data,based upon a Vedder & Gallaway  statistical study in their book “Out of Work”.

 Unemployment in November 1929 , was just over 5% almost two  months  after the market crash .

Unemployment hit a high of 9% + in December 1929, but gradually dropped to mid 6% by the beginning of Summer 1930.

 President Hoover and later FDR began tampering with the economy . They attempting to reduce unemployment  by  imposing  protectionist  tariffs.

This intervention resulted in double digit unemployment , but it was more than a year after the crash.

The more they attempted to fix the economy, the higher the unemployment numbers became.

F D R interfered with the economy more than any President to that time. Previously, it was not considered the business of the Government to  intervene in economic cycles.

The more Roosevelt tried to use government spending to help the economy, the higher the unemployment rates soared.

The methodology which he used , involved putting people to work!  Sponsoring Publick works! Rebuilding and improving the infrastructure! All honorable intentions.

However, let me explain.

Everyone knows the expression,” the road to someplace is paved with good intentions.”

Here is whar Franklin D Roosevelt and several other well intentioned leaders have done, or are about to do.

For clarity, lets shrink everything down to a small parable.

Lets say the President has $ 1 million available to stimulate the economy.The money was from the Treasury , and had come via taxes collected.

He looks at the pile of bills.” Not bad,” He thinks. This is quite a large pile. I should be able to help a great many people with all this money.

He scratches his chin,” My citizens are hurting. Unemployment keeps going up. The people are hungry.”

“What should I do?”

OPTION #1

“I know what I have to do.” He picks up the phone. “Mr Secretary, we must do the right thing. The safe thing.  The Politically expedient thing .”

He holds the phone away from his ear. The voice on the line is speaking loudly.

Finally the President becomes impatient. ” Listen” He says, ” Do you want to help the country, or do you want to get reelected?’

There was silence on the other end.

“We must get money and stimulus directly to the people.” He continues,” We will take our $1 million and create public works jobs .Our people will build bridges, repair roads, construct  hydro electric plants and wind turbine farms.”

” Of the $ 1 Million, $400,000 will go to administer the programs, maybe $250000 will go towards advertising and Public Relations, so that the voters know who created all these jobs.The rest will go directly to the people  to put bread on their tables.” 

 The plan was implemented. The money was spent. The people were put to work… For 1 year…Then what?

In this scenario, which is what happened under FDR, the unemployment rate went up to over 20% and stayed there with a few short term exceptions, for over 4 years.

We had created new dams and new roads, but no new jobs, no new industry, and no new wealth.

OPTION #2

The President takes the $ 1million and calls in CEO’s from 5 small but successful private buisnesses.

” Gentlemen,” He says.” Our Nation is in trouble. The economy is in a slide, and unemployment is growing. “He looks around the room.

“We need your help. Your Country needs your help.

Here is $1million. Taxpayer money. A precious public trust.

I want to give it to you Gentlemen to invest.

Take the money, go back to your businesses and invest this public money. Use it to expand your business. Enter new markets, create new wealth.”

THE GREAT DEPRESSION ENDED IN 1932. A GENERATION OF PEACE AND PROSPERITY ENSUED. A WORLD WIDE VISION OF CORNICOPIA BECAME A REALITY. A LITTLE KNOW RADICAL GERMA, ADOLPH HITLER WAS LAUGHED OFF THE WORLD STAGE.THEY DIDN’T NEED HIM, THEY HAD PROSPERITY.

The Nurse Practitioner, The New M D in Socialized Medicine

Thursday, September 17th, 2009

All the commercials running on Television advocating getting the new Swine Flu vaccine which will be administered by Nurse Practitioners  appears to be a subtle yet insidious move by the Health Department , to get us used to the idea of being treated by these Nurse Practitioners.

The nurse practitioner will be a cheap alternate to the , medical school trained M D .

An R N with an extra 6 months of training will be an inexpensive  replacement for doctors.

The plan will make it easy for existing  nurses to up grade their license to practitioner nurse. This is destined to   become the standard for supplying  medical treatment to the Universal Healthcare  version of socialized medicine.

 Fast, quick, cheap, inferior replacement for the formerly respected profession of medical doctor.

This is one way they are going to accommodate 40 million new patients on government created health care insurance.

The care might be more generic, and the quality will certainly suffer, but the cost savings will certainly be worth the potential down grading of the U S medical system.

It will work, as long as the politicians and their loved ones are not stuck in the same inferior circle of health care.

The Good, the Bad, and the Really Ugly,

Tuesday, September 15th, 2009

Fed Chairman Bernanke announced today that the recession is over as of the 3rd quarter of 2009.

3rd quarter? Now? Where? When?

How did I miss this miracle recovery ?

The 3rd quarter of this year?

Pinch me so that I can wake up and smell the roses along with the rest of the country.

Excuse me. THERE IS NO RECOVERY!!!!!!!!

Its all a fake aimed at making Americans feel less uneasy about the future.

If we see the truth of how bad the economy truly is, then all of those $ trillion social engineering programs will never get done.

The motivating factor this summer concerning the town hall protests, and the recent tea party express shows the politicians that Americans are afraid of their economic situation, and truly petrified at the direction  in which  disappearing  former prosperity is heading.

Let me be perfectly clear. If you talk to the average American small businessman, you will know that there is no recovery. We are hurting and no one especially the government is helping  small business.

All the improvement is directly the result of bailouts. Nothing, not a cent is generic growth, either sustainable or recurrent. NADA!

When subsidies go away, so will the sales. We have used up probably the next 7 or 8 months of auto sales with the cars for clunkers promotion. Great, they were able to get rid of some inventory, and of course auto labor unions were able to keep their members happy, but the general recovery will end with the stimulus.

Our economy is beginning to look similar to the Japanese economy of the past 15-20 years.

When they entered their recession in the early 90’s the Japanese government lowered interest rates to almost 0 % to encourage borrowing. The Japanese people had just come off a disastrous economic fall wiping out almost 50% of their wealth,on their speculative bubble and they did not want to borrow. They wanted to save instead for retirement.

Instead of helping the Japanese people, the net effect of this fiscal policy of low interest rates and economic stimulus , was to encourage speculators from around the world to come to Japanese banks to borrow money at close to 0% interest.

They then used the cheap money to build a factory in China or Brazil or speculate in oil or other commodities.

Japan became the financier of speculation around the world, yet 20 years later their markets and real estate values are still down over 50%.

American banks have plentiful cheap money which they won’t lend to average Americans , who don’t want to borrow and spend anyway. Americans are interested in saving for retirement.

We can only hope that 20 years from now the American fiscal policy won’t be compared to the Japanese fiasco.

A Walk through the Graveyard of American Commerce

Wednesday, September 9th, 2009

On Thursday I brought my puppy to work.

I am CEO of a company that imports slate, quartzite sandstone and limestone in tiles and slabs.

We would supply our dealers, and specified corporate projects throughout the United States. At least we used to be active distributors, but the recession/depression has seen our sales shrink by over 60% as the economy slides deeper and deeper into economic stagnation.

Our 10000 sf offices and distribution wareouse  is located in an industrial complex in Western Nassau County, Long Island.There are approximately 15 square blocks of what used to be an eclectic assortment of commercial  industrial businesses that called the area home .

On street parking was always scare, and the roar of large delivery trucks and interstate haulers caused  the buildings to vibrate.

That is all past tense.

There is plenty of on street parking.

The roar and vibrations of large haulers is no longer background noise.

Perhaps the most discouraging sight comes at the end of my day, when i take my puppy for a walk through the industrial park.

Everywhere there are signs of abandonment and stagnation.

Building available.

Property for rent.

Available sale or lease.

Available, will sub divide.

PLEASE BUY OR RENT MYCOMMERCIAL BUILDING. I CAN’T FIND ANY NEW TENANTS, AND THE OLD TENANTS CAN’T PAY THE RENT, OR THEY ARE OUT OF BUSINESS.

The signs of neglect are everywhere.

The lawns are shaggy.

The bushes are growing somewhat wild.

Pot holes remain for months.

The aftermath of a storm remains for weeks.

Where in the past the plants worked multiple shifts, with management staying till 6:30 or 7:00, now the streets are empty by 5:05.

I see this as a  microcosm of American small business.

The banks that hold commercial mortgages on these warehouses and small manufacturing businesses have to be in real jeopardy of  defaults and foreclosures .

The roar of the underwater commercial loans is beginning to glub!glub! GLUB!

The Good the Bad and the Ugly, how about some makeup

Wednesday, September 2nd, 2009

Over the years, I have learned to become suspicious of  government facts, financial reports, and financial data.

Economists are polled about their opinions.  The resultant “guesses” are factored together to reach a consensus.

Depending upon the governments agenda, the results are added and subtracted, published and publicized then interpreted to reflect a positive or negative slant, with conflicting opinions excluded as irrelevant, if they do not support the desired agenda.

Last week, ( the end of August 09) the Gross Domestic Product( GDP)  for the 2nd 1/4  of  ’09  fell , according to the government,  by 1%. The polled economists had predict a 1 1/2 % fall. 

The market was encouraged by this ” less bad” news , took it as a sign of improvement, and  continued the rally which had been underway since March.

Ben Bernanke, was hailed as savior of the economy, by President Obama, during his  reappointment a Chairman of the Fed.

The truth is that they are attempting to create a new bubble to pull the economy out of the recession. Sadly the balloon has sprung several leaks, and the only way to keep the bubble inflating, is by pumping air at record deficit rates.

Don’t stop pumping or the bubble will deflate faster than it did  in October of 2008.