Skip to comments.The Economic Headwinds Just Became A Hurricane
Posted on 03/11/2011 5:04:14 AM PST by blam
The Economic Headwinds Just Became A Hurricane
Mar. 11, 2011, 7:09 AM
The party is over. The major factors facing the economy and the market that we have been discussing in past comments (please see archives) are coming to a head as the reality of a post-credit crisis economy becomes more and more apparent in the period ahead.
The massive monetary and economic stimulus that saved us from another great depression and led to the current weak economic recovery is now creating more problems than solutions and there is no way out that does not involve some economic pain.
Virtually all of the problems facing the economy today are a result of the massive increase in household debt over the last few decades, particularly the last two. For years we have staved off the problems by keeping interest rates near zero for extended periods of time and using fiscal and monetary policies to pump up housing.
Consumers are overburdened with record debt loads at a time when income is stagnant and house values are dropping. As a result the government has substituted government debt for private debt in the hopes of getting the economy to grow on a self-sustained basis. The problem is that increasing the federal debt much more places the nation in great jeopardy, and we are rapidly reaching the breaking point.
At the risk of oversimplification, modern economies need rising amounts of credit (debt) to grow, and we are faced with problem of reducing debt instead. At best, this means slow growth for years to come interspersed with more frequent recessions. At worst, it means outright collapse into another great depression.
Currently the federal government is facing a deficit of $1.5 trillion while the states
(Excerpt) Read more at businessinsider.com ...
So, you’re saying that cutting $4B a month will be insufficient?
That would result in 50 billion a year. Fedgov is short 1,600 billion a year. So Fedgov would only be 1,550 billion short. This year. And then there is next year, and the year after.
Are you saying ‘hopeless’? It’s too late to change?
Hopeless and changeless?
That was all the BS I needed to read...
Drop in the bucket.
It's like a couple with $30,000 in credit card debt. The Republican wife decides to solve that problem by not going to Starbucks everyday, and the Democrat husband is outraged that their lifestyle is being totally devastated.
Naw, it just is what it is.
I remember reading Barbra Tuchman’s, ‘The Guns of August’. Were the thought at the time stability of interlocking defense agreements would prevent a European war. Instead it insured it.
Today, via world wide central bank and fiat money printing, we have the same grand thinking.
I get the feeling that the system is collapsing in upon its self and is the agent of its own destruction.
Obama, and company are not the disease. They are the symptom of the disease, like green phlegm is to pneumonia.
Other than that, I’m pretty happy.
“..result of the massive increase in household debt over the last few decade”
So Federal debt has NOTHING to do with it?!!
Stagflation, if we're lucky. An inflationary depression if we aren't.
There was a documentary made a few years ago called "The Commanding Heights" which I found quite compelling. In part, it looked at the global economy of about 1910. Great industrial nations buying and selling goods. Italian marble? Brazilian mahogany? Chinese silk? International trade was king. Through telephones, telegraphs, and the beginnings of radio, global communication was established. The whole thing really felt like a description of the world we live in today.
But they screwed it up. The competition and complex inter-locking agreements guaranteed a world war, and the bloody events of the 20th century all flowed downstream from the events of 1914.
One might argue that with the fall of the Soviet Union, the world finally began to come out of that shadow. And we saw a glorious global economy take off all over again. The internet came along to make communication even better, and goods streamed across all the oceans.
But we (again) built a house of cards, and I think it is all about to collpase all over again.
Then as is now, world business had done miracles. I’m still not sure how the first WWI started. It just seemed so auto-pilot, and in my opinion destroyed Europe right up to the fall of the wall.
There is no telling for the world, what the increase in wealth, science, material and other progress would exist now if not for two massive wars and a warping cold war, all for near five generations in Europe.
Maybe printing money, which spreads sacrifices to all, isn’t the worst of options.
I believe that human psychology could be a great field with really good advances. But we went down a road with people like Freud and Kinsey and Foucault and it seems to me that our conception of psychology is no where near what it could be.
Similarly, Bastiat understood economics very well in 1850. Today, because of Marxist ideology, a lot of what people like nobel prize winner Paul Krugman know about economics, simply isn't so.
History, Literature, Art -- these are all cultural areas that have been degraded by cultural Marxism. We've been going down a dead end road for many decades. At some point, the scales will fall from our eyes and we shall have a Renaissance. But I don't think it will happen within my lifetime.
Good example - sometimes seems the UN - by stopping normal takeovers of the corrupt and weak by the stronger and better organized - is doing the same thing. Might be unintended consequences to being a 'dictator protection agency'... Same with the dollar... don't know that we know enough about how money works to be messing with it as much as we do...