What happened to all of the doom and gloom economic threads?

[4est_4est_Gump]

How come you didn't fix it in Spanish then?

 

[4est_4est_Gump]

the 1930s. Despite shameless propaganda by government and its cronies in the media, people understand that the situation is getting worse. Consumer confidence continues to decline as does confidence in the future.

We are headed for an event that history will record as worse than the Great Depression. It is unavoidable.

The Level of Debt

The principal reason for the dire prediction is the level of debt outstanding. Current debt levels are simply not sustainable. Assets and cash flows cannot support or service this debt.

No economic recovery can occur without massive debt reduction. As shown below, current debt is much higher than the 1930s:

http://www.americanthinker.com/2011/10/slouching_toward_the_1930s.html

As a percentage of GDP, debt is at an all-time high. Immediately prior to the Great Depression US debt was about 200% of GDP. It rose briefly to 300% as a result of massive government interventions to combat the Depression.

At the beginning of the current downturn, debt was about 370% of GDP. It is about 400% currently.

Eyeballing the chart from 1870 forward, debt levels are generally in the range of 150% of GDP. That appears to be the norm for the last 140 years. Only in the 1920s and recently did debt exceed 180% of GDP. Even funding World Wars I and II did not drive debt above 180%.

To return to 150% requires a reduction of about $30 Trillion in debt. That represents about two full years worth of GDP!

The Political Myths

After the 1930s politicians convinced themselves and the public of two things:

Free markets need government interventions to produce a healthy economy.

Keynesian pseudo science provided the tools necessary to manage the economy.
Both beliefs were false, but both aided politicians' insatiable drive for power and control. Once the public came to believe these myths, government owned the economy. Any economic problem became a political one. Economic slowdowns were no longer politically acceptable.

"Don't just stand there, do something" drove economic policy. It was politically impossible to allow an economy to correct on its own. Political action was required, even if such activity was ultimately harmful. Politicians had to do something, anything! Their constituents demanded it.

The "government is responsible" attitude quickly spread. Today, virtually any perceived problem or inequity is assumed to be fixable by government. Government readily took on responsibility for virtually every aspect of our lives.

The madness is evident. It is assumed that government creates jobs, educates kids, designs toilets and light bulbs. It is necessary to provide mortgages, retirement benefits and healthcare. "Green energy" and other new technologies are assumed impossible without the assistance of government.

This litany of the presumed need for government could continue for pages. Virtually all these presumptions are false. Worse, many in the public still believe that these "services" are "free."

Economic Reality

Every swing in the business cycle, no matter how mild, became the responsibility of government. Government was to step in and "fix" economic problems. Seventy years of such "fixes" preceded our current problem.

Economic downturns are both normal and necessary. Individual and business mistakes are remedied via economic slowdowns. Misplaced capital and labor is freed up for more productive uses. When this cleansing does not occur, an economy becomes less efficient and grows at a slower rate. The mistakes remain in place and are perpetuated.

Government intervention is not corrective. It is a cover up of prior mistakes. The phrase "pretend and extend" describes what happens. Instead of allowing the economy to correct, government attempts to avoid the correction and the pain by covering up the mistakes. That has been the history of much of the last 80 years. Continued interventionism brought the economy to this crisis point.

The artificial boom that began decades ago is exhausted. Response to the dot-com stock market bubble was the last coverup that "worked." The system was flooded with credit and one bubble was replaced with another. Now the housing bubble has burst, marking the high point of "pretend and extend."

Credit expansion since 2008 has been impotent. The real economy has stopped responding. Economists who advocate more stimulus or credit are either ill-trained or have political motives. Governmental stimulus and credit expansion created the problem. Recommendations for more of the same qualify as insanity per Albert Einstein's definition.

A Worldwide Problem

The US is not unique. Most of the developed world is burdened by excessive credit and government spending. Easy credit enabled governments to grow too large and individuals to take on too much debt. The point where markets are unwilling to provide more debt has arrived.

...

Governments around the world will attempt to avoid de-leveraging because of the associated pain of a Great Depression. Unfortunately, that is not possible as Ludwig von Mises pointed out:

There is no means of avoiding the final collapse of a boom brought about by credit (debt) expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit (debt) expansion, or later as a final and total catastrophe of the currency system involved.

Prior attempts to avoid corrections got us to this point. Now the supply of credit has been exhausted and taxpayers deeply indebted. Another coverup is not possible.

The simple summary of what years of governmental intervention accomplished is the impending economic and financial tragedy. Politicians from the past may have gleaned benefits. Our generation is left to pick up the pieces.

A printing press is available to most countries. It is no solution to the underlying economic problems, but is the method that the political class will try once again. Doing so will make the situation worse. It steals purchasing power from the private sector. In extremis, it will cause hyperinflation, effectively wiping out the value of savings and fixed contract obligations.

Monty Pelerin
Radical right-wing blogger who has been right all along at The American Thinker

 

[JAMESBJOHNSON]

I believe this about most human activity: People know what theyre doing, people dont know what theyre doing, or people are trying to fuck you.

 

[4est_4est_Gump]

Oh-kay...




:shuffles feet:

 

[rosco rathbone]

good read:

http://pragcap.com/the-global-government-put

In the last few years we’ve witnessed unprecedented government intervention at every twist and turn. We’ve seen massive fiscal stimulus, endless monetary stimulus, QE2, Euro plans, etc, etc. It’s been an endless parade of government “fixes” that don’t appear to have really fixed anything. And if you’ve been an investor in this market, there is one clear cut lesson from all of this government intervention – don’t fade government intervention. If you’ve shorted government intervention in the last few years you’ve had your face smashed into the pavement time and time again.

 

[4est_4est_Gump]

Eventually they run out of credit for fixes.

 

[koalabear]

Stocks drop as Europe euphoria fades
US stocks follow global markets lower as doubts grow over Europe's plans to expand its debt rescue fund. Japan intervenes to keep the yen from rising. The New York Fed suspends MF Global. Gold and oil prices fall.


http://data.moneycentral.msn.com/scripts/chrtsrv.dll?symbol=%24US%3AINDU&width=298&height=160&c1=3&ce=0&cf=0&d2=0&d3=0&d4=1&d5=0&e8=1&legend=0&banner=5&af=2&palette=2

 

[koalabear]

http://data.moneycentral.msn.com/scripts/chrtsrv.dll?Symbol=$us:INDU&width=300&height=200&E1=0&D4=1&Legend=0&AF=2&Banner=5&palette=2&C1=3&E8=1

 

[MeeMie]

http://media.townhall.com/Townhall/Car/b/kn102811dAPC20111028104528.jpg

 

[unregistered]

 

[unregistered]

 

[mercury14]

Where's Merc to tell us all is well with the bailout?

The Dow jumped about 8.5% in October even with today's dip and you're going to sit here and bitch about it being a bad month? And how the Eurozone moves were meaningless?

What's wrong with you?


(let's not mention the fact that the markets fell when MF Global filed for bankruptcy today)

 

[koalabear]

The Dow jumped about 8.5% in October even with today's dip and you're going to sit here and bitch about it being a bad month? And how the Eurozone moves were meaningless?

What's wrong with you?


(let's not mention the fact that the markets fell when MF Global filed for bankruptcy today)

You never heard of MF Global in your life Idiot.

Dow falls 276 on Europe, economic worries
October ends with a big boo as fears grow that the EU debt plan won't work. Japan pushes the yen lower to protect its exports. Oil and gold fall. MF Global files for bankruptcy protection.

 

[unregistered]

 

[mercury14]

I told you this bailout wouldn't hold, but you said otherwise. Your seeing the precursor of failure right now.

We're on page 444 of failed predictions. You're saying that after all this you're finally going to get one right?

 

[unregistered]

 

[RightField]

Like the one where Obama said "We're the ones we've been waiting for" ....

and "Hope and Change"....

Those failed predictions?

 

[mercury14]

All I'm saying is, you're wrong.

Put a date on your failure then. No open-ended AJ-style predictions that you don't ever have to be accountable for. When will it be? You just said a few months. January?

 

[RightField]

8%....how about that one?

 

[RightField]

Democrat "management".... ROTFL..that is a good one too.

 

[RightField]

Time to get to the front door to feed kids candy....

 

[unregistered]

 

[mercury14]

I didn't predict anything as to a date. I posted what your hero thought...three months.

Okay well that really doesn't do a lot for your case that I think Soros is my hero, does it?

Pick a date please.

 

[unregistered]

 

[mercury14]

My case was and is the question of where the money was coming from. I see no source of funds that make any sense, especially sense credit default swaps have not been triggered, and without such protection for bond holders, who's crazy enough to loan any of these governments any money?

Date? I don't know, but it seems the market is becoming aware of the flaws in the deal. So it may never get off the ground to start with.

So when you said we should bookmark this and return later on, what you really meant was that you want terms where we can come back if you're right.... But never come back and say I was right since your prediction will remain open indefinitely? How brave of you.

You realize that it's very likely that what will occur is something between our positions, right? A managed default or partial default? It kind of already happened.