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The Wrong Diagnosis

Thursday, May 28, 2009, 7:23 AM

I post my thoughts and insights about breaking news items and other findings every day of the week, and often on weekends too, in a forum area for enrolled members.  Below is my first post of the day, which I thought would provide a good example of what's happening over on that part of the site.


Mr Practical, who posts his keen insights at minyanville.com, has this nice summary and diagnosis of the current situation (which I happen to share 100%):

If you add up all the government bailouts, explicit and implicit, along with actual government purchases of assets (debt from banks) it comes out to a surreal $30 trillion. Markets are cheering that things have “stabilized” and “things are getting less bad”. I ask you seriously when the government throws $30 trillion at the “crisis” (one which bankers are now claiming is over), can you call that stable? That is like declaring a patient being kept alive on a heart-lung machine healthy.

Of course we have stabilized. The government has bankrupted our future to do it. The government(s) control the LIBOR market, the swaps market, the bond markets with all the “money” they are printing. They are feeding “money” to banks under the table at an alarming rate.

Those declaring the economy is now recovering do not understand (still) the problem: we are stuck with too much debt. The government’s solutions are to create more debt, as their next to be announced PPIP does. But an economy grows from production, not lending at the wrong price. This is a long term problem; the government has only addressed the short run symptoms.

The key issues are best examined at the most macro level these days.  If they do not make sense in total, then they do not make sense individually.

Does it make sense that a crisis rooted in debt can be solved with more debt?  If not, then you can safely ignore the details of the TASF, TALF, PPIP, et al., unless you are interested in tracking the theft and looting of public monies by insiders.  Then there is good sport to be had in the details.

Mr Practical continues:

Let me give you an example. Sixty to 70% of our economic growth depends on consumption. In order to “reflate” an economy (still the wrong way to do it but I will give the bulls the fact that you can drive up nominal asset prices by devaluing a currency), you need people to borrow money and spend it.

Right there, Mr Practical has named the very root of the predicament we face:  Growth comes from new spending, and new spending comes from new credit, and new credit represents more debt.  That, for better or worse, is our system.  Said another way, every dollar is loaned into existence. All money is debt.

As pointed out in the Crash Course, this means there is a problem baked right into the very system itself, because it is not possible for debt to increase exponentially forever.  Sooner or later it runs out of fuel (new borrowers, productive economy, or both) and then the system begins to unravel.  That's where we are today.

Jeff Nielson summarized this very nicely in an article in SeekingAlpha that was posted this morning.  He picks up on on one of the most-important yet least-appreciated facets of our current delusion (the fact that our GDP is padded with non-cash transactions - thank you, Jeff!) and builds towards the logical conclusion that we simply have too much debt.

As pointed out by Chris Martenson, in his own fantastic presentation, “The Crash Course”, roughly $2 TRILLION per year of supposed U.S. GDP is statistical “padding”. It is “deemed GDP”, where there are no dollars changing hands and no visible wealth being generated.

Strip away that padding along with the dramatic reduction in GDP caused by the Greater Depression, and we are left with a measly, $11 trillion/year in GDP. Please note that GDP is not the profits of an economy, merely an indication of economic activity.

Given that most U.S. debt is held by individuals and cooperations, and with long-term interest rates rapidly rising, just to service this insane mountain of debt will require something in excess of $3 TRILLION/year. This is more than 25% of annual GDP!

Obviously when more than ¼ of all economic activity is dedicated to simply paying interest on debt, then it is equally obvious that borrowing additional vast sums of money will simply make this ratio much worse. If this were not true, then no one would ever need to declare bankruptcy, they could just keep borrowing more and more and more – until eventually they “solved” their problem.

Is there anyone who still believes the Wall Street Liars, their servants in government, or the media-parrots, when they repeatedly assure one and all that increasing this debt far faster than at any time in history will “solve” the U.S.'s current economic nightmare?

The arithmetic cannot be contradicted. The “plan” of the Obama regime (and the Bush regime before that) is simply a guarantee of bankruptcy for the U.S. - with most likely a destructive episode of hyperinflation before the final, debt-implosion.

Where the US government and its Wall Street partners have decided that we suffer from a condition of too little spending, the alternative diagnosis says that we suffer from too much debt.  Given our debt-based monetary system, these are exactly diametrically opposed conclusions, and each implies solutions that are exactly in opposition to the other.

So if it turns out that we suffer from too much debt, and the wrong solution of MORE DEBT is applied, then we are making the situation worse, not better.  It would be the same as a drunk trying to drink himself sober.  

I hold the view that we are doing exactly that.  The crisis will only continue to get worse and surprise DC/Wall Street to the downside until we finally get a grip on what the actual problem is.  I am not holding my breath for that moment, as it could be a long time coming.

The hangover is going to be severe.

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28 Comments

ozzybeef's picture
ozzybeef
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Re: The Wrong Diagnosis

same as a drunk trying to drink himself sober

Seems so odvious - and never mentioned by the corrupt media.

mailpankau's picture
mailpankau
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Re: The Wrong Diagnosis

Great post Chris. Is there a chance that the Obama Regime is aware of the fact that they are driving the country towards bankruptcy? And if so, is there a possibility that they want the country to go bankrupt? And why would they do that (any positive effects of bankruptcy) ? Questions over questions...

nodebthere's picture
nodebthere
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Re: The Wrong Diagnosis

 30 trillion wow! Now there is a number we'll never hear on CNBC , ( the real comedy network).

   Great article Chris, just proves again that " figures can't lie but liars sure can figure".

                                                                         Bob

idoctor's picture
idoctor
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Re: The Wrong Diagnosis

This is what Peter Schiff has been telling the media as many laugh at him. Hope he runs for the Senate.

One has to wonder if someone is trying to ruin this economy on purpose. Once failed it will be much easier for someones new agenda to be put in place.

cannotaffordit's picture
cannotaffordit
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Re: The Wrong Diagnosis

 idoctor said:  "One has to wonder if someone is trying to ruin this economy on purpose. Once failed it will be much easier for someones new agenda to be put in place."

Yep.  You got it.   Only thing is, there agenda has been in place for a long time.

 

mailpankau said:  "Is there a chance that the Obama Regime is aware of the fact that they are driving the country towards bankruptcy?"

Yep.  Virtually everybody in the fed gov is on the same team now.  It's the "Greed, cheat, steal, get-all-you-can-for-yourself and to hell with working folks Party.  And its funded and directed by the wealthy/elite/financial cartel.

Is there any reason to still have hope, given their extreme power, and our lack of it? 

maveri's picture
maveri
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Re: The Wrong Diagnosis
idoctor wrote:

This is what Peter Schiff has been telling the media as many laugh at him. Hope he runs for the Senate.

One has to wonder if someone is trying to ruin this economy on purpose. Once failed it will be much easier for someones new agenda to be put in place.

Peter Schiff did an overview talk for Google at "[email protected]: Peter Schiff"

Erik T.'s picture
Erik T.
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Re: The Wrong Diagnosis

Fantastic post yet again, Cheif!

Suggestion: I really have a strong sense that a lot of folks don't realize how much comes with enrolled membership. These days the home page doesn't even have a direct "subscribe" link any more to sign up for paid membership, and I honestly wonder if newcomers to the site even realize there is a paid subscriber level with supported subscriber-only forum, enhanced video quality, podcasts, and all the zillions of other benefits of enrolled membership.

May I suggest that you collect a bullet list of ALL the benefits of enrolled membership and post it prominently on the sign-up page? I fear that a lot of folks out there think its just about Martenson reports, and there is so much more.

Just tryin to help...

Erik

 

Ready's picture
Ready
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Re: The Wrong Diagnosis
ErikTownsend wrote:

May I suggest that you collect a bullet list of ALL the benefits of enrolled membership and post it prominently on the sign-up page? I fear that a lot of folks out there think its just about Martenson reports, and there is so much more.

 

You have to log out to see it...

http://www.peakprosperity.com/product/chrismartensoncom-enrollment

If you log out and try to sign up for the first time, that info is given in the format you suggest.

I agree that there is ample reason to enroll. Since Chris started the "In Session" thread a few weeks ago, I often leave a browser window open to that thread while I am working for the real time updates - priceless!

 

Mr. Fri's picture
Mr. Fri
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Re: The Wrong Diagnosis

Nice post Chris.

I have a few comments:

- Your statement "All money is debt" got me to thinking. Would it be more accurate to say that the US dollars in circulation up until the time the gold standard was removed were real and the dollars created after that is debt?  I know the "real dollars" are a small percent but this is how I tend to view it.  Is that a correct view?

- I seriously doubt the Obama administration doesn't know what's going on.  I also don't think they want to see our economy implode. (Sorry gang, but I'm not into conspiracy theories).. I just think they know they can't do anything about it except put it off until the next administration.  Obama's biggest asset is his ability to speak and get people believing in hope and the future.  Since a lot of the stock market and economy is based on confidence, he might do a great job of keeping people's confidence up until he makes his impact in history and the economy is no longer his problem.

><>Larry

glosta's picture
glosta
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Re: The Wrong Diagnosis

 Hi Chris,

Thanks, as always, for your insights.

I have been reading your blog for a while and you make sense of complicated information.  I overstand that recent and current economic policies are impoverishing the masses.  Who benefits from this crisis?  Money is not disappearing;  Where is the wealth going?  Thank you kindly for your light.

Glosta

bluebird's picture
bluebird
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Re: The Wrong Diagnosis

Where does the $30 trillion come from? I thought it was appx 10.5 trillion

CNN Bailout tracker... http://money.cnn.com/news/storysupplement/economy/bailouttracker/index.html

 

 

cmartenson's picture
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Re: The Wrong Diagnosis

The $30 trillion is a world-wide number, $10-$13 trillion (depending on who is doing the counting) is a US number.

cmartenson's picture
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Re: The Wrong Diagnosis

Thanks Mr Fri -

  1. There are no "prior dollars" floating around that originated while the gold standard was in effect.  Prior to 1913 dollars had the words "US Treasury Department" printed across the top.  After 1913 they all have "Federal Reserve" printed across the top.  Under the Federal Reserve's mandate. all dollars were/are loaned into existence.
  2. I agree that the current administration is seeking a favorable political outcome, just like all prior administrations.  Whether we individually agree with or support (or not) the policies of any given administration are somewhat beside the point.  Each political party is seeking a favorable or best outcome for their point of view at any given moment in time.  The closest I will get to this conversation is to say that I think that each party is far too focused on short-term "wins" that ultimately serve to undermine our long-term interests.  And. perhaps, I will also allow that this is not a particularly new phenomenon since we can trace this exact behavior back through the millenia.  It's just that this time we've never been faced with the profound need to solve a global energy and resource depletion phenomenon - there are no more "new continents" to move off to once the current ones prove unsatisfactory. 

 

joe2baba's picture
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Re: The Wrong Diagnosis

i am open to being corrected but i think there were some dollars floating around that said silver certificate

Davos's picture
Davos
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Re: The Wrong Diagnosis

 Reading Chris's "Wrong Diagnosis" (super read BTW) and reading a lot of the comments really made me recall Greenspan's article, circa 1966.

On an aside, he signed this for Ron Paul and told Paul he still believes in it. I suppose the markets aren't the only thing that is schizophrenic these days.

Take care

 

A fully free banking system and fully consistent gold standard have not as yet been achieved. But prior to World War I, the banking system in the United States (and in most of the world) was based on gold and even though governments intervened occasionally, banking was more free than controlled. Periodically, as a result of overly rapid credit expansion, banks became loaned up to the limit of their gold reserves, interest rates rose sharply, new credit was cut off, and the economy went into a sharp, but short-lived recession. (Compared with the depressions of 1920 and 1932, the pre-World War I business declines were mild indeed.) It was limited gold reserves that stopped the unbalanced expansions of business activity, before they could develop into the post-World Was I type of disaster. The readjustment periods were short and the economies quickly reestablished a sound basis to resume expansion.

 

But the process of cure was misdiagnosed as the disease: if shortage of bank reserves was causing a business decline-argued economic interventionists-why not find a way of supplying increased reserves to the banks so they never need be short! If banks can continue to loan money indefinitely-it was claimed-there need never be any slumps in business. And so the Federal Reserve System was organized in 1913. It consisted of twelve regional Federal Reserve banks nominally owned by private bankers, but in fact government sponsored, controlled, and supported. Credit extended by these banks is in practice (though not legally) backed by the taxing power of the federal government. Technically, we remained on the gold standard; individuals were still free to own gold, and gold continued to be used as bank reserves. But now, in addition to gold, credit extended by the Federal Reserve banks ("paper reserves") could serve as legal tender to pay depositors.

 

Truth be said we could probably reword that to say: "But the process of cure was misdiagnosed as the disease: if shortage of bank reserves was causing a business decline-argued economic interventionists-why not find a way of supplying increased reserves to the banks so they never need be short! If banks can continue to loan money indefinitely-it was claimed-there need never be any slumps in business. And so Ben and Timmy printed money out of thin air and devalued the dollar causing the great second depression. But they really meant to make things better, they just never heard what Alan Bartlett said about our solutions being our problems. Oh well.

 

Ray Hewitt's picture
Ray Hewitt
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Re: The Wrong Diagnosis

Federal government stupidity staggers my mind. They have an income around $2 trillion and falling. Unfunded SS and Medicare debt of $60 ttrillion and rising. Bonded debt of $12 trillion and rising. $30 trillion in bailouts and rising. To top it off, Obama plans (for now) to spend $4 trillion for the nest fiscal year while borrowing $2 trillion to cover the defict. They are looking at over $100 trillion against $2 trillion, a debt ratio of 50:1.

They are brain dead idiots who repeat the same mistakes over and over again, only promising to try harder the next time. It is best not to look at them in isolation. No matter how I triy to warn others about this, it doesn't penetrate. Worse, they get annoyed at me for being too negative. When I urge them to buy gold and silver, they think I'm unpatriotic.

Anyway, betting against popular opinion by investing in gold and silver is the safest and most profitible investment anyone can make today. This Friday morning, I see Comex silver and gold taking off like they were shot up out of a cannon. The recoil is driving the dollar down.

On this inflation/ deflation debate, I take the position that each is half right. Dollar assets have a long way to go down because of the massive unleveraging and fraudulent imaginary assets. Commodity assets (food, metals and energy) are going up as investors unload dollars for tangible assets. It's a vice that's squeezing consumers from two sides. These are the End Times for Western Socialism.

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Re: The Wrong Diagnosis

hi ray long time no see

i agree totally w/you except for the stupidity part. reason is there are people profiting mightily from all this and it hapens to be the ones in charge.

the following is a quote form the maestro himself

" new financial products-including derivatives, asset backed securities, collateralized loan obligations, and collateralized mortgage obligations..........lenders have the opportunity to be considerably more diversifiedand borrowersare far less dependent on specific institutions for funds......they have contributed to the development of a far more flexible and efficient financial system"

this is from"greeenspan's bubbles" by william fleckenstein.

people think it is stupidity because they think the purpose of the fed and the interests of the financial institutions are the same as their own and the government is looking out for the best interests of the people. once you give up that notion you do not have to buy into any conspiracy theory you simply look at results and see who benefits.

i highly recommend the book but read it with the idea that there is no stupidity involved. these people have been at this for centuries. they know exactly what they are doing.

Mr. Fri's picture
Mr. Fri
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Re: The Wrong Diagnosis
cmartenson wrote:

There are no "prior dollars" floating around that originated while the gold standard was in effect.  Prior to 1913 dollars had the words "US Treasury Department" printed across the top.  After 1913 they all have "Federal Reserve" printed across the top.  Under the Federal Reserve's mandate. all dollars were/are loaned into existence.

Can someone help me understand the concept that "All money is debt?"  I understand that today the Fed creates money as it's loaned into existence. That concept is clear.  What I'm not sure about is why money before 1913 is debt.  (And if it's wasn't debt, what happened to it.)

My thinking is that before the Federal Reserve came into existence dollars meant something.  One piece of paper equaled X amount of gold.  Or, one piece of paper equaled Y amount of work.  The paper was carried around as a convenience rather than carrying the gold.  That seems like those dollars are representing real items, not debt. So why are they considered debt along with the new dollars created after the federal reserve took over?

 

anninvancouver's picture
anninvancouver
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Re: The Wrong Diagnosis

Actually there is something positive about bankruptcy. You get to wipe the slate clean and start all over. In the meantime you have a chance to divert money to being spent on some useful things. Not that the current stimulus package is lean or mean, but it does give a big push to a number of very critical items (renewable energy for one) that in a general austerity package wouldn't otherwise have a chance in hell of getting funded.

I had some personal experience with country wide bankruptcy, having lived in Argentina from 1988 through 2001. We went through several periods of hyperinflation/hyperdevaluation, government seizure of private savings (twice, once in 1989 (or 1990?) and once in 2001), and a change of currency to boot. Besides the fact that they have had a string of incompetent/corrupt presidents, the country continues to be a relatively functional, developed place to live.

Maybe Obama is heading in this direction. I have read other blogs that suggest that he is stringing the conservatives/BAU group along to let them completely hang themselves. Problem for him is to dodge the bullets and not get dragged down too.

Ray Hewitt's picture
Ray Hewitt
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Re: The Wrong Diagnosis

Hi Joe

 What I see is a widespread ignorance about how capital markets work. The cheerleaders think they can draw capital without thought to the consequences of taking too much. This will adversely affect the tax parasites. In essence, they are destroying themselves.

I understand the political motivation. Without money, they have no power. As their spending ran ahead of them, they found ways to create artificial revenue. Again, with no thought to the long term consequences.  (look up Broken Window Fallacy, Bastiat)

Austrian theorists know that for a long as the politicians prevent the market from correcting itself, the imbalances continue to accumulate. I think that that they have gone to such extremes to prevent the market from correcting that the pressures are building up to a systemic collapse, like a steam engine blowing or the Twin Towers collapsing.

Whether it is stupidity or not, I have to vent my frustration and horror at what I see is going to happen.

Ray Hewitt's picture
Ray Hewitt
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Re: The Wrong Diagnosis

Mr. Fri

Before the Federal Reserve, debt was drawn from savings. They are two sides of the same thing. If I deposit money in a bank, the bank loans it out to another party. There is no change in the money supply when loans are equal to savings. But under a fractional reserve system, the bank loans out money it doesn't have. That would increase the money supply. Additionally, the Federal Reserve replaces savings by creating money out of  nothing to loan to government to pay its deficits. The irony is that Fed money gives an appearance of savings when it is in fact a loan.

Before the Federal Reserve, dollars did mean something, because they were literally deposit receipts that a dollar holder could cash in for gold or silver. The inflationists argue that there is not enough gold in the world for a gold standard. But that is only if the gold prices is surpressed. There is always a price where supply and demand are in balance. If the price of gold was allowed to float, there would be no shortages. It's the reason why I think you are going to see an explosion in the price of gold and silver in the weeks and years immediately ahead.

paranoid's picture
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Re: The Wrong Diagnosis

Joe Ponzio of Seeking Alpha has an entirely different perspective. Not saying I agree, but wondered if CM or Davos have reviewed this article yet?

Why This Downturn Wont be Like 1929

http://seekingalpha.com/article/124827-why-this-downturn-won-t-be-like-1929

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Re: The Wrong Diagnosis

"people think it is stupidity because they think the purpose of the fed and the interests of the financial institutions are the same as their own and the government is looking out for the best interests of the people. once you give up that notion you do not have to buy into any conspiracy theory you simply look at results and see who benefits."

so true Joe

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Re: The Wrong Diagnosis

Paranoid wrote: 

Joe Ponzio of Seeking Alpha has an entirely different perspective. Not saying I agree, but wondered if CM or Davos have reviewed this article yet? 

Why This Downturn Wont be Like 1929

http://seekingalpha.com/article/124827-why-this-downturn-won-t-be-like-1929

Hello Paranoid:

Happy to give you my take on it. I just want to nicely point out that my affiliation with this site and Chris is nothing more than contributing/posting the best of what I read each day. In other words, just because my picture is below Chris's doesn't make me smart, doesn't mean that CM will or won't agree with my comment, in fact I'm often awed by many of the contributions I read and learn a lot from this comment section.

So here is my (personal) opinion:

"Impossible!" naysayers scream. "Unemployment is 8.1% and rising!"

Right, which means that employment is 91.9% which means that 91.9% of our consumer-driven economy can start saving more. And if unemployment rises to 15%, then 85% of Americans can focus on spending a little less and saving a little more.

Unemployment: In reality closer to 19.8% and increasing with losses of 1/2 to 1 million jobs per month. The number of unemployed workers during GDI was 25% but, if you worked one day a week you were considered employed.

Or look at it like this. Unemployed 13,700,000 Part time but trying to get full-time 8,900,000 and marginally attached and discouraged 2,100,000 for a whopping total of 24,700,000

So, in reality and I'm going to use really rough numbers here, if I recall, in 2006 (pre-GDII) there were about 80,000,000 men working and 70,000,000 women working, totaling about 150,000,000. Now we are down to about 125,000,000.

Put simply, the entire state of Texas has about 25,000,000 people in it.

So to say 91.9% are employed is erroneous. To say if it goes to 15% that 85% will focus saving more and spending less doesn't take into account systemic risk. U3 and U6 numbers of this magnitude have a systemic impact on the economy.

In the fourth quarter of 2008, personal saving exploded — from 0.4% a year earlier to 3.2%, a hell of a jump in just one year. In fact, at no other point in the past fifty years have Americans increased their savings as a percentage of disposable income as quickly as they have in the past year

If you look up the way savings rate is calculated you will see the BEA once again uses some Enronesque accounting. Also, the don't count 401k and a real property. I go by debt loads not savings. Savings should not be called savings inside the BEA.

Add income of all types, and then deduct amount of personal taxes equal disposable income. Total amount of expenditures including rent, food, clothing and trivialities deducted from disposable income equal total amount for personal savings.

 

In addition, non mortgage interest payments started plummeting, down 13% from a year earlier. In the past fifty years, the amount of non mortgage interest paid by consumers has never dropped so quickly. In fact, from 1948 to 1987 — pretty damn good years in this country— this number neverfell.

This has little to do with low interest rates. We know that credit card companies have dramatically increased rates over the past two years. So...people are saving more and paying off debt.

I'm not certain how they deleveraged. Cashed in 401k's? Bankruptcy? Sold their house paid off debt? Lost their house and didn't pay the second mortgage? I don't know. But by now the author has me questioning everything.

If you look beyond the numbers, 91.9% of American consumers have, in the aggregate, been paying off debt and saving more and more in recent months. 

One in 8 are late on home payments or in foreclosure. The Alt-A's and NINJA wave starts this summer, prime foreclosures outnumber sub-prime now with the systemic fallout wave 1 caused. Wave 2 is the same size. Credit card defaults are up, I doubt 91.9% of American consumers are in this fine shape. Is the 91.9% the number he thinks are working?

The American consumer spent $240 billion less last quarter than in the previous quarter.

And for me, this is the key. American consumers didn't borrow because their house isn't appreciating and the 401k/IRA is tanking and they are petrified by the unemployment numbers or are unemployed or underemployed. Consumers, not all, but many, felt rich, planned on selling their home and buying another and took on a lot of debt. 

I don't think we are going to ever see that again. Not for 50 years. Not until we manufacture more than we consume. Without that willingness to borrow I think we will drive older cars, eat home more, buy less stuff despite what Mr. TV tells us to buy and that is going to really slow down recovery.

 

But This Spending Is Different! It's Too Much!

In 1929, non-defense federal spending was just 0.77% of GDP. During the first three years of the Depression, the government did nothing to help curb the decay, actually paring back spending while Americans were losing jobs. Enter Roosevelt, the New Deal, and deficit government spending. (Roosevelt took the country off the gold standard to fund the recovery. Imagine what the headlines were back then!)

Roosevelt more than quadrupled non-defense federal spending to where it would ultimately become more than 5% of GDP in 1936. In essence, Roosevelt and the US Government filled the void when businesses couldn't or wouldn't put people to work. By 1942, unemployment was back below 5%, private investment was back on track, having grown tenfold since the 1932 low, and the consumer was healthy again.

One could argue that today's proposed spending is too much. I'm not going to speak to the fundamental policy changes they're proposing; but, I'll tell you this: When Joe American loses his job and can't find work, he'll gladly help the government build the high speed train from New York to LA so that he can put food on his table.

Our debt, $80,000,000,000.00 is now being paid by printing money since revenues are down. That is like someone counterfeiting money to make a credit card or house payment. That funny money devalues our dollar and makes gas, food and anything and everything else more costly.

GDP is another Enroneque number. Cooked by about 40%. Our GDP/Earnings are 1,600% of what we owe. And, oh by the way, we don't even take enough in each month to make the minimum payment, so we counterfeit it and shaft our kids and grandkids with the tab that we will never pay off. This is akin to a family earning $50,000.00 and buying an $800,000.00 house and telling the banker that his kids would have to pay what he can't and some money each month will be printed on the HP printer.

Sorry, I would not read Joe's book, visit his blog and I certainly wouldn't invest with his company. Nothing personal, just don't think he gets it.

IMHO this is and will be a depression, the likes of one this world has never seen.

Take care

 

 

DavidC's picture
DavidC
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Re: The Wrong Diagnosis

Hi Davos,

Your response to Paranoid's post has got me confused!

So have the markets. The Dow up nearly 120 points in the last 20 minutes or so today. Even with end-of-the-month settling that seems a bit odd. Or maybe we really are in the New Paradigm, the markets are back on track, the banks really are properly capitalised and there are elves at the bottom of my garden.

DavidC

RayTomes's picture
RayTomes
Status: Bronze Member (Offline)
Joined: May 20 2009
Posts: 67
Re: The Wrong Diagnosis
cmartenson wrote:

... Mr Practical says

...

Those declaring the economy is now recovering do not understand (still) the problem: we are stuck with too much debt. The government’s solutions are to create more debt, as their next to be announced PPIP does. But an economy grows from production, not lending at the wrong price. This is a long term problem; the government has only addressed the short run symptoms.

...

There is no contradiction between a short term economic recovery and there still being long term problems. These can both be true at the same time.

However I would not say that the government has addressed even short run symptoms. The economy naturally rebounds after a fall without any action. What they have done is ensure that the long term problems are far greater.

 

Davos's picture
Davos
Status: Diamond Member (Offline)
Joined: Sep 17 2008
Posts: 3620
Re: The Wrong Diagnosis

 Hello David C:

I lean to agree with what CM said as posted above by Ray. Soros says the markets are always wrong. I think if one looks at the actual numbers, how they are calculated and how they are presented in the mainstream media one gets a different picture.

But, like the housing market, markets can only be conned for a short time.

I can go back, I'll have lost a lot in taxes. I'm not losing anything if they go up becuase there are investment oppertunities that are easier to make minus the 401k and IRA.

Just my take. Simple insurance. We live in the mountains and have quake insurance even though we live on the east coast. When I flew I liked 2 engines, not one. When I went boating in the ocean 2 engines, sound and bay one. Diving, 2 tanks.

DavidC's picture
DavidC
Status: Silver Member (Offline)
Joined: Sep 29 2008
Posts: 243
Re: The Wrong Diagnosis

Hi Davos,

Having been able to see the whole of your post now makes a lot more sense!

For some reason I was seeing a list of xs with each one showing (and linking to) the original seekingalpha.com article link. Maybe I just happened to see your post as it was in the procees of being posted? Suffice it to say, looking at it now, it makes a whole lot more sense! Good responses.

DaviidC

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