Get serious folks. We had a 30-month recession not long ago. Eight years later the market's still barely at its 2000 peak, a loser. Worse, we're back in a new recession. But Washington politicians are keeping it a secret, feeding us doctored feel-good statistics as legendary political historian Kevin Phillips wrote in "Numbers Racket: Why the Economy is Worse Than We Know."
So we blindly refuse to bite the bullet and stop our out-of-control spiral into collapse. America needs a big wake-up call ... and it's coming soon, whether you like it or not!
Last November we posted "17 reasons America needs a recession." Today it's far worse, and getting worse still. See previous Paul B. Farrell.
Most economists predict it'll take till 2010 to burn off our excess housing inventory. RGE Monitor say Fannie and Freddie bailouts aren't working; they'll soon be "profoundly insolvent" and need to be "nationalized." Treasury Secretary Henry Paulson has no long-term plans, he's a caretaker, plugging holes, anxious to get back to Wall Street's money machine, running out the clock till he turns over the catastrophe he enflamed to a new bunch of politicians and their armies of 42,000 greedy lobbyists.
Lessons learned? Zero. Why? Wall Street, Washington and Corporate America are a one-trick pony with one narrow-minded strategy: Economic g-r-o-w-t-h, bull markets, megabonuses. In good times they tout "free markets." But when greed bombs, these big babies throw free market "principles" under the "Reagan Revolution" bus as their lobbyists go whining to Congress for megabillion taxpayer bailouts and access at the Fed casino's discount window to siphon off more taxpayer money. What hypocritical wimps!
Wall Street and its co-conspirators are doing such a miserable job, America needs a new strategy: Stop all the short-term "hole-plugging." Let go and let an old-fashioned "Good Depression" do the job that our happy-talking leaders refuse to do. Let it clean house and reawaken America to basic values. Otherwise a "Good Depression" will turn into a new "Great Depression."
Here are seven strong reasons favoring
this alternative strategy:
1. Yes, an honest diagnosis: soul sickness in American capitalism
America's problems are not the economy, not markets, nor even politics. The endless bickering campaign is distracting us from facing our real long-term problems. Yes, our economic pains are real, but they're just symptoms. Since 2000 America has seen had a relentless, sickening overdose of bad news: stupidity, deceit, corruption and even evil behavior. Americans are n-u-m-b, suffering post-traumatic shock syndrome.
The real problem is our thinking, our brains -- something deep in our cosmic soul, says Jack Bogle's "The Battle for the Soul of Capitalism." We lost our values, our moral compass.
2. Yes, time to admit this really is like the 1930's Great Depression
Comparing today with the Great Depression has become common sport. In a Newsweek special "Seeing Shades of the 1930s," Daniel Gross writes: 75 years ago "Wall Street, after two terms of a business-friendly Republican president, self-immolated on a pyre of greed, incompetence and excessive optimism."
Like Dr. Scott Peck says in "The Road Less Traveled:" "Life is a series of problems. Do we want to moan about them or solve them?" We need to grow up, stop whining, roll our sleeves up and solve real problems.
3. Yes, a Good Depression would reveal self-destruct bubble-thinking
In a recent Atlantic article "Irrational Exuberance" author Robert Shiller warns: "Bubbles are primarily social phenomena. Until we understand and address the psychology that fuels them, they're going to keep forming."
Housing inflated 85% in a decade: "Historically unprecedented ... no rational basis for it." Today there's a huge excess housing inventory, higher-credit mortgages are now in jeopardy, the write-offs are now projected at $2 trillion -- on top of a $3 trillion war, $10 trillion federal budget, and more.
Bubble-thinking is contagious; it will trigger a pandemic. Shiller says "few people seem immune to boom thinking. The recent bubble grew so large partly because the very people responsible for the financial system's oversight came to share the general public's rosy expectations."
Unfortunately our leaders are still ignoring the underlying problem: Nothing is being done about "our psychological vulnerability to bubble-thinking."
Shiller then warns of a new megameltdown: "We recently lived through two epidemics of excessive financial optimism. I believe we are close to a third episode, only this one will spread irrational pessimism and distrust -- not exuberance ... our economic problems will become much worse than they need to be, and our social problems will multiply."
READ MORE: http://www.marketwatch.com/news/story/seven-reasons-america-needs-good/story.aspx?guid=%7BE8E9E137%2D3375%2D41D0%2D9601%2DFA4D14601140%7D&dist=TNMostRead
America needs a 'Good Depression'
August 13th, 2008 at 07:33 pm
August 13th, 2008 at 09:04 pm 1218661460
Comparing the current economic environment to 1929 is niave. The fincial instituation are vastly different then what they are. Last time I checked, I could take money out of my bank.
Unemployment isn't even close to 1930, 1980, or even 1990. We have great industries emerging: alt energy, biotech.
It's true that banks have had to write off 100 billions on bad loans, SIVs, CDOs, and ARS. That's what happens when you don't access your risks properly, so banks pull back on lending.
You have some infaltionary pressures, but lately, commodities have been falling, as the dollar strengthens. The fed has signalled the next move to be a rise in prices. This shoudl continue to stremgthen the dollar.
Also, summer blend is pretty much done. And hurricane season should be mostly over in another 6 weeks, so I would be looking for gas to drop further.
August 13th, 2008 at 09:32 pm 1218663137
From what I've seen on the stock market, it isn't behaving as though it's in a free-fall anymore. Even the financials have found their bottom a little while back I think. There's still weakness to be sure, but most of the write-offs should be behind us. What remains once the dust settles is hard to say, though it's likely not going to be the glory that it once was.
And that's fine. That's just the way the economy works I think. As we talk about the fall of one sector, another takes its place. Everything in a constant state of movement.
As merch noted, Bernanke also held steady with the interest rates twice, which allowed the dollar strengthen a bit, which lead to a pull back of oil from its peak. Market sentiment rose along with it.
Of course, I don't know what's going to happen next, but I don't think we're in that bad of a shape. We're just not in a good shape either. Seems like we're currently in limbo, but some could look at that say call it bottom too.
August 13th, 2008 at 10:02 pm 1218664934
March 1st, 2019 at 10:36 am 1551436568