Skip to comments.Is this finally the economic collapse?
Posted on 08/12/2010 5:26:02 AM PDT by mark_interrupted
Is this finally the economic collapse? By Keith R. McCullough, contributorAugust 11, 2010: 2:07 PM ET
FORTUNE -- The Great Depression. Wall Street in 1987. Japan in 1997. Points of economic collapse are generally crystal clear in the rear-view mirror. Professional politicians in Japan have been telling stories for 20 years as to why they can prevent economic stagnation. In the US, the storytelling started in 2007. All the while, stock market and real-estate prices have repeatedly rallied to lower-highs, then collapsed again, to lower-lows.
Despite the many differences between Japan and the US, there is one similarity that continues to matter most in the risk management model my colleagues and I use at Hedgeye, our research firm -- debt as a percentage of GDP. Now that the US can't cut interest rates any lower, the only option left on the table is what the Fed just announced it would start doing -- buying Treasury debt. And that could lead the country to the brink of collapse: According to economists Carmen Reinhart & Ken Rogoff, whose views we share, crossing the 90% debt/GDP threshold is the equivalent of crossing the proverbial Rubicon of economic growth. It's a point from which it's almost impossible to return.
(Excerpt) Read more at money.cnn.com ...
I believe, in spite of the government and this administration’s ineptness, we underestimate the resiliency of the American people. Now if we can just muddle through ‘til November...
Alexis De Tocqueville, author of Democracy in America, which was published that year, seemed to warn of this day when he wrote: “The American Republic will endure until the day Congress discovers that it can bribe the public with the public’s money.”
“Now if we can just muddle through til November.”
I hope your optimism is well founded but I’ve seen rats steal election after election and I expect this one will be no different. Republicans are too sissified to beat down the bastard dems.
When the current income tax system costs around US$304 BILLION per year in compliance costs and drove almost US$16 TRILLION in American-owned liquid assets into the illegal underground economy or to offshore financial centers to keep these assets out of the hands of the IRS, no wonder why we have such a bad economy.
If we can clean up our national taxation system, we could cut that US$304 billion in compliance cost substantially, and bring back most of that US$16 trillion in liquid assets back to the US financial system--the world's largest "private bailout." That much liquidity returning to the US financial system would easily kick off the next American economic boom.
I’d have unlimited hope for the future if we had some decent leaders and a public that cared about something other than victimology and gimme. Unfortunately we have neither.
Someone brought it to our attention yesterday.
Don’t know if it is, but the imposter in the White House sure hopes it is.
Sadly but predictably, the capitation tax didn't replace anything. It ended up being imposed on top of the taxes it was supposed to replace.
“Could this be the end of ‘Little Rico’?”
Hold on...things are going to get better.
Make sure you vote on November 2nd!
The most money is made in dangerous times...the most money is lost in certain times.
The problem is that we need to “muddle through” until January, when we can seat a new Congress. Until then there is plenty more damage this crew can do before they are tossed out by the voters.
All of the rules, regulations, requirements, exemptions, deductions, and schedules that go into those 65,000+ pages of the IRS Code are the result of lobbying efforts on behalf of business, agricultural, labor and legal interests. Once again: it's not about income: it's about influence and power. And Congress today craves those things more than anything, even at the expense of our nation's economic health and productivity.
I’ve been watching the DOW trends over the last two years and I’ve been astounded at how the market does NOT reflect reality. From what I’ve seen, the market is an eternal optimist. It takes a LOT for it to start dropping. I believe that the only reason that it’s stayed this high for this long is that most trades are controlled by computers and not people.
I predict that it’ll eventually make a correction soon. If it’s overvalued by 20%, it’ll correct by twice that much, then rebound to a more realistic number. It’s overvalued and people can only be fooled for so long. There will be no “winners and losers” over the next two years - only losers. At some point, the computer programmers will make that realization.
You are quite correct. Some folks have said there is very little relationship between Wall street and Main street.
“Ive been watching the DOW trends over the last two years and Ive been astounded at how the market does NOT reflect reality.”
I got a call from a representative of an online brokerage I use asking why there had been so little activity on my account. I told him that I thought the market was acting irrationally, and being driven by sentiment rather than reality. He didnt disagree, but I think he wouldnt have disagreed no matter what I said. I’m pretty much staying out of it until market behavior makes sense.
>>...that could lead the country to the brink of collapse: According to economists Carmen Reinhart & Ken Rogoff, whose views we share, crossing the 90% debt/GDP threshold is the equivalent of crossing the proverbial Rubicon of economic growth. It’s a point from which it’s almost impossible to return.
And we are sitting at 94% [external] debt to GDP (not even counting off-the-books debt or unfunded entitlements)
January, you forget the damage they can do during a lame duck session, and it will be BAD, because they know they’ve lost control and will seek to do as much damage as possible before they go.
“The problem is that we need to muddle through until January, when we can seat a new Congress. Until then there is plenty more damage this crew can do before they are tossed out by the voters.”
We have a bigger problem than that! Even if there is the BIGGEST turnover in history this November the Obama/Pelosi/Reid gang will come back during the ‘lame duck’ session and pass the most far left agenda ever seen in the free world! They will assuredly leave everything in shambles. It will be total ‘slash and burn’ and ‘scorched earth’ politics. If you think or anyone thinks that a big loss in November will make one iota of difference in Obama and the ‘Demonrats’ present leftist agenda you need to seek professional help immediately, because I assure you that the sounds you hear are not the ‘wailing and nashing of teeth’ of the ‘Obamies’ it is the notes of El Degüello.
We follow DEave Ramsey and we’re starting Baby Step 3 in Two months. (Saving 6 months living expences).
After that we’re supposed to start investing, putting toward retirement and paying off the house early. My friend (the wonderful woman who got us started with DR) is encouraging me to invest, but I’m not feeling it. I keep telling her that we can’t loose by paying off the house early, but we can loose in the stock market right now if we take that road.
Hubby and I have decided that we’re just paying off the house and land next. If we invest in anything, it’ll be “hard” investments, like a well or a good fence line... things that will save us money in the long run. The economy is just too shaky for us to jump in now.
We’ll have the house paid off in three or four years. By then, things will (hopefully) have settled down and it’ll be time to take the plunge.
That is why so many fought the creation of a central bank. They didn’t want Congress to have control of the creation of money. It was to be in private hands.
They knew what would happen. And, it has. We are all hostage to Congress and the Federal Reserve and the private fortunes of an elite in the form of elite banks and even large corporations like GM.
We used to in America, as late as the 1900’s have hundreds of banks of all types, printing their own money. If one went down, or got corrupt, the others would survive. Just like a grocery chain, or a car company or like as if any particular business went down, others would take it’s place.
Now? With the mono culture, central planning, common unionism of the Federal Reserve? How do you escape it’s clutches?
It has us and the whole world hostage.
It’s hard to be resilient when there’s a boot on your neck.
Never see that graph in the stock broker ads.
Federal Tax Code is exhibit 1 in the evidence that we are no longer a self governed republic.
“Well have the house paid off in three or four years. By then, things will (hopefully) have settled down and itll be time to take the plunge.”
Don’t say “plunge” when talking about the stock market. :-)
Last week my wife asked me if we should pay off the house, but we’re about half way through a 5% 15 year mortgage we can easily afford, I dont see the need to do so.
I agree but I'll be damned if I will let these bunch of Socialist sociopaths bring me down. We need to grab that boot and shove it up their... well, you know where...
Go get ‘em tiger.
Overheard from Stuart Varney I think...suppose the GOP does take both houses in Nov. Then they save the Bush tax cuts. And the economy rallies so that by 2012, obozo has something good to run on and he’s re-elected....wouldn’t that stink??
I think the coming bloodbath will be too great for the Democrats to steal - definitely no hanging chads. IMO, the market, will explode in relief and hiring might begin to increase - and a year or so later it will be seen as a flash in the pan. The debt load is too great. Rather than "Double Dips", I believe we are into "Stairstep" (as in on the way down) recessions until debt is flushed from the system. What America will look like then will not re recognizable to us here.
....cloward and piven....
“What America will look like then will not re recognizable to us here”
This is certainly by design because nobody can be that economically blind and/or illiterate. Soros has his puppets in place to wreck our economy and he will bank billions in doing so.
It's not up to the Federal Reserve -- the tax system is the responsibility of Congress. Need I say anything more?
I can personally guarantee the economy will NOT rally by 2012. There is way too much debt overhand and Obama is adding to it. I don’t see the economy rallying at all, ever. I see only 2 outcomes on the horizon.
The most likely outcome is a long, grinding deflationary depression.
The dark horse outcome is a brief deflationary depression snapped back to something approaching a hyperinflation by government printing presses.
Great post. I agree with you.