Now and then//1929, 2009//the coming Depression. Part X

By , November 23, 2009 7:47 pm

Now and then//1929, 2009//the coming Depression. Part XTraditional economic theory tells us that the money supply may be used to stimulate an economy and obviously this Congress and Administration not only believes that but strongly support it to levels that they themselves would never agree to if the Conservatives were in power. I’m talking about this Administration pumping more than one Trillion dollars into the economy since taking office eleven months ago; this does not include the hundreds of Billions for bailouts and government takeover of the auto industry. As of lately Obama’s team has told us that these trillions have been a success, not so much evidenced by tangible results but rather by preventing matters to get worse; I guess we’ll never know if things would have been worse but what we do know  is that are no actual positive results from the government spending.  The federal balance sheet is about 137% over what it was at the end of 2008. Yes, Obama took the deficit from 928 billion to about two trillion in only eleven months. Economic common theory dictates that we should be approaching hyperinflation but that is not the case; in fact we have been deflationary since April of this year. I have stated various reasons for this throughout this series and will not repeat them here at this time. Suffice it to say at this time that wages and wage inflation are lower than should be expected if the economy was healing due to the stimulus trillions. The signs this administration points to as evidence that the economy is on a slow rebound and that the Recession is near its end are false and nothing in the economy with any substance supports the “end of the recession”. Any indication of earnings growth is due to expense reduction instead of sales growth. Prior to the financial meltdown job growth averaged about 1% over the last three years whereas now it’s falling by over 4%. At the time of this financial meltdown, Washington told us they had to do something or the “sky would fall”, it was the end of the world as we knew it and they had to do whatever it took to save capitalism; I have to ask in all honesty, who do you think is and has been in charge of solving this “global financial disaster”, the very people and institutions that got us into this mess. When government, business and Wall Street got in bed together last fall, it was the end of the “real economy” as we entered into a “government controlled” paper economy dominated by money that does exist as GDP. In all reality the economic “boom” (growth) of 2001-2007 was partially “paper economy”, it was false growth which infused itself into our GDP but it was “counterfeit”. It was based on debt spending and not on “real” purchasing power. As the “sub-prime” debt began to unravel our elected officials should have been able to see the real problem as debt, but instead of reigning in the debt Washington started spending and has not stopped for the last 18 months. The average high school dropout knows that you cannot spend yourself out of debt. I have been saying since May of this year that we are heading towards a “Depression” and I continue to stand behind those beliefs. All of the positive indicators concerning the economy are false (not lies, just false) because they are generated and driven by the paper economy and are not supported by jobs and GDP. Just today President Obama stated that the economy is starting to grow and the recession is just about over. Consider this: after nine months of a very positive DOW and Wall Street numbers, some positive comments from some businesses and a White House speaking positively of the economic health; people start to think that the recession is coming to an end, that very thought begins to renew confidence and some people start spending again which of course generates visible signs of recovery. The accepted understanding is that recessions last about two years, so it’s easy to accept that the recession is over and recovery is ahead. The only recovery at hand is in our heads, until the government gets out of the market place, the economy cannot and will not rebound. The beginning of the 20’s were recessionary/mild depression but only lasted about four years, there was no government intervention in the economy; interest rates were cut and the top tax rate of 70% was cut to 24% in three years which result in the “roaring twenties”. Those “roaring twenties” were very much like our economic boom of 2001-2007, extreme spending on debt; the result was the “Great Depression” which lasted over ten years. It lasted that long because of extreme government intervention in the economy and social fabric of society with its many entitlement programs. The recession may in fact be nearing its end but not to the tune of a recovery. I’ll say it again; there is nothing in the economy with any substance which would point to anything but a “depression” ahead.

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