The Economic Collapse: I Hate to Say I Told you So

I have argued for many years that stock market crashes are part of the nature of the beast. Speculative bubbles will always end the same way, unless we change the system by eliminating speculation. The stock market should be for the purpose of investment. I have already offered my solution. But it could be late to prevent what seems an inevitable economic collapse as happened in 1929. The politicians (including Obama and McCain) have failed us, again. It is time for the people to take over. The alternative is economic abyss.

Here are my previous posts predicting economic collapse:
March 17, 2006:

The Congress and Bush have given us the biggest prize of all: historic debt and deficits. The problem with all this debt is that eventually someone will come around demanding payment. Since we have no savings the money has to be borrowed. This raises interest rates which makes of our currency more vulnerable. Take your choice hyper-inflation or recession (depression). Then what?

You can't have a disastrous war while running historic deficits. It didn't work during the Vietnam War. It won't work now. The only difference back then is that we didn't have a destroyed manufacturing base. Its all being shipped abroad; everything is being imported. We are broke as a nation. We are also broke morally as well since we have allowed criminal politicians to put us in this position.

July 4th 2006:

We could be on the verge of a financial collapse in the United States. As interest on the national debt continues to rise this could mean a collapse of the dollar causing a defaulting on our massive debt problem. This was the conclusion of Robert Scott, an economist at the Economic Policy Institute think tank, who appeared on C-Span this morning.

[...]It is a terrible and disgraceful mess that we've gotten ourselves in. And where is the outrage. Where are the politicians and the media (apart from C-Span) in sounding the alarm. Already we've seen our national savings rates at the lowest levels since the Great Depression. There is that word -- depression. We are already seeing repercussions in the case of the government shutdown in New Jersey. Expect to see more of that. We have a President and Congress running up obscene deficits to pay for the quagmire in Iraq. There is nothing left over to pay for essential services. We are already seeing a rise in the crime rate because there are less police and prisons to go around. Our roads and bridges are going un-repaired. And if we have another Katrina disaster (not to mention terrorist attack), which is likely, we won't be able to help the victims. This is the awful reality on this July 4th. I fear for my country.

February 1st, 2007:

The reality is that we are going broke as a nation. And its only a matter of time before the whole thing comes crashing down as it did in the 1930s.

February 28th 2007:

Is This 1929 all Over Again?

[...]We did not learn from Vietnam War and so we are repeating the same mistake. In July of 2001 this blogger (I was not a blogger then, but I did have a message board) warned about a "disaster" without realizing what exactly would happen. I have argued since 9-11 that we have not learned from that terrible day. We are still a decadent society, a nation of spectators. We sit around and watch a disastrous war on TV started by a President who has stepped on constitutional freedoms. It is happening with little protest or outrage. Now we could be facing a crisis that was inevitable: a stock market crash. And its happening because we didn't think about it (just as with 9-11). But history tells us stock markets crash. And since we learned nothing from 1929 we are doomed to repeat the same mistake.

December 16, 2007:

Greenspan: U.S. Moving Closer to Recession[...]I'm more worried about a depression.

January 16, 2008:

It is getting very dangerous. This could easily snowball into a panic (I won't use the d-word). We need to wake up. There are very serious problems with the U.S. economy, and that impacts the rest of the world markets.

- There is only one solution. Only 'We The People' can solve the problem. We have a political system that works on behalf of small economic/political elite. It is up to you to take back what belongs to you. The alternative is to perish. Begin today to fight back.

Bush Wall Street Bailout will Cost U.S. $1 Trillion

While most Americans are left to fend for themselves after the current financial collapse, powerful Wall Street investment bankers and big business get saved. This proves once and for all that a government that is supposed to represent us doesn't. And despite the rhetoric to the contrary, the corporations aren't against socialism as long as they are the beneficiaries.

FEDERAL OFFICIALS and congressional leaders will hash out a bailout of the nation's financial system this weekend that, with measures already taken, could add $1 trillion to the national debt, by some estimates.

The plan, under which the government would buy defaulted mortgages from distressed lending institutions, is intended to help prevent a financial services industry meltdown, improve the availability of credit and stave off further deterioration of the overall economy.

"This needs to be big enough to make a real difference and get to the heart of the problem," Treasury Secretary Henry Paulson said Friday.

Paulson would only say that the cost of the rescue plan could run into the hundreds of billions. Some in Congress and on Wall Street are concerned that the new plan and other recent financial industry rescues could add alarmingly to the national debt - now $9.7 trillion.

We have to pay for the excesses of the financial industry and the failure of the lap-dogs-of business to regulate them.

Sen. Richard Shelby, the senior Republican member of the Banking Committee, talked about the overall pricetag this morning on ABC's Good Morning America.

"I figure it'll be at least a half a trillion," Shelby says. "But when you look at what the Fed has already done, and the extension of power to Treasury to deal with Fannie Mae and Freddie Mac, I believe we're talking about a trillion dollars."

But it is not clear whether the "rescue plan" will even work. Remember how the government response to the housing collapse was to give the public a tax rebate check. That obviously didn't amount to much while driving up the debt/deficit even further. This from a British perspective.

This is what we might call the $1trillion question. That's $1,000,000,000,000, by the way. It is a little like surgery. The US government has amputated the gangrenous leg of the banking system to save the patient. But it is now preparing to graft the infected limb on to the body politic of America. The US taxpayers will be lucky if they do not feel distinctly unwell as a result of this little experiment.

The truth is that simply buying the banks' worthless securities has been an option, if an unpalatable one, for the authorities since the credit crunch began a year ago. All the plans to lend against these assets, such as the Bank of England's Special Liquidity Scheme, and other "injections of liquidity", were temporary solutions, born out of a hope, if not an expectation, that the crisis would not be prolonged.

We know better now. What the American authorities have done is the only sure way to protect the banking system against further destabilisation. Short-selling or not, left to their own devices, the markets would sooner or later force more banks into the arms of the taxpayer anyhow. It is a sad day when hard-pressed citizens find themselves subsidising private banks for their stupid mistakes. But that is what's happening in the US, and it will surely be done here. The Bank of England hates the notion; but Gordon Brown may well feel that he has no choice.

So for the banks and their shareholders and staff, the US rescue plan is already working, and it will save the wider economy from yet more damage. It is less clear whether it will end the credit crisis or preserve America's fast disappearing economic hegemony.

We are in a Recession. Are We Headed for a Depression?

Today on Morning Joe, Mark Haynes, pointed out why we are in a recession (stock market down 20% from highs, 400,000 applications for unemployment insurance). When do we start worrying? When have the candidates mentioned the crisis? Or even used the word, crisis? What is the Congress doing? Forget Bush. He don't care. Wake up, folks.

Employers cut payrolls by 62,000 in June, the sixth straight month of nationwide job losses, underscoring the economy’s fragile state. The unemployment rate held steady at 5.5 percent.

The latest snapshot of business conditions, released by the Labor Department on Thursday, showed continued caution on the part of employers who are chafing under high energy prices and are uncertain about how long the economy will be stuck in a sluggish mode, reflecting fallout from housing, credit and financial troubles.

Heavy job losses in construction, manufacturing and financial services, along with cutbacks in retailing, eclipsed job gains in education and health services, leisure and hospitality, and government.

[...]The jobless rate spiked to 5.5 percent in May. That marked the biggest over-the-month increase in two decades and left the rate at its highest since October 2004.

Job losses in both April and May turned out to be considerably deeper than had been thought. Payrolls dropped by 67,000 in April, versus the 28,000 previously reported. And, losses in May came to 62,000, rather than the 49,000 initially estimated.

So far this year, the economy has lost a total of 438,00 jobs, an average of 73,000 a month.

But the crisis isn't limited to the United States, eventhough it began here. We need a global consensus on what to do. We have to stop the collapse of the U.S dollar. And, of course, something has to be done about oil prices. Why isn't the government(s) doing something about runaway prices?

Global stocks fell Thursday as the price of oil rose above $145 a barrel for the first time.

Investors were unwilling to make major bets as they awaited an interest rate decision from the European Central Bank and an important employment report from the United States.

“Rising oil prices aren’t good for anyone,” said Steven Vanneste, an economist at Fortis in Brussels. “In addition to the higher energy costs that businesses face, employees are going to be asking for wage increases, which will double the cost burden on companies.”

U.S. crude oil futures for August delivery rose $1.80 to $145.37, beating the record of $144.57 a barrel set Wednesday in New York.

The situation in Japan is particularly disconcerting:

Japan's key stock index extended its sell-off to an 11th straight session Thursday — its longest slide in 54 years.

[...]The Nikkei has lost more than eight percent of its value over the 11-day fall, which is the longest losing streak since the index stumbled for 15 straight trading days starting April 28, 1954.