I am a simple soul, at heart. I look at this and see a car engine! What is it?// You have two, maybe three, generations who are helpless in the art of self-reliance and caved to popular bs culture.// You are your tatoo or t-shirt? You are a screaming audience? Sorry. I am cooking like crazy-real food- and not some dribble of art work on a plate for a fortune.//Jackson was an interesting man but violent and probably suffering from lead poisoning from that bullet unextracted. We may see his White House re-enacted.
On Oct 13, 11:07 pm, "M.A. Johnson" <[EMAIL PROTECTED]> wrote: > The Perfect Storm – Our Great Depressionby Jim Quinn"Gentlemen, I have had > men watching you for a long time, and I am convinced that you have used the > funds of the bank to speculate in the breadstuffs of the country. When you > won, you divided the profits amongst you, and when you lost, you charged it > to the bank. You tell me that if I take the deposits from the bank and annul > its charter, I shall ruin ten thousand families. That may be true, gentlemen, > but that is your sin! Should I let you go on, you will ruin fifty thousand > families, and that would be my sin! You are a den of vipers and thieves. I > intend to rout you out, and by the eternal God, I will rout you out."-- > President Andrew Jackson 1832Contrast the words of President Andrew Jackson > who had a strong moral compass and a firm grasp of right and wrong to the > words of our current President, George W. Bush."The bipartisan economic > rescue plan addresses the root cause of the financial crisis – the assets > related to home mortgages that have lost value during the housing decline. > Under the Emergency Economic Stabilization Act, the federal government will > be authorized to purchase these assets from banks and other financial > institutions, which will help free them to resume lending to businesses and > consumers. I know many Americans are worried about the cost of the bill, and > I understand their concern. This bill commits up to 700 billion taxpayer > dollars, because a large amount of money is necessary to have an impact on > our financial system. However, both the non-partisan Congressional Budget > Office and the Office of Management and Budget expect that the ultimate cost > to the taxpayer will be far less than that. In fact, we expect that over > time, much – if not all – of the tax dollars we invest will be paid back."Mr. > Bush fails to realize that the root cause of the financial crisis is not the > housing decline. The root cause is the greed of Wall Street CEOs, including > his current Treasury Secretary, the failure of government to enforce existing > rules to protect consumers and the greed and recklessness of Main Street USA > as they attempted to borrow their way to prosperity. In the classic > Washington fashion, the banker bailout bill was repackaged by Washington PR > maggots into the Main Street Rescue bill. This is what constitutes progress > in Washington. A three-page fascist-like bill proposed by Hank Paulson grew > to a 450-page goliath pork-laden bill in less than one week. The bill that > passed bought off every constituent in the U.S. with pork for rum producers, > toy arrow makers, and film producers, while adding an additional $120 billion > to the national debt. President Bush signed the bill before the ink was dry. > The market immediately proceeded to decline 450 points in minutes, declaring > that it will not work. Not to worry. Another bailout bill will be on its way > shortly. > President Jackson was at war with the bankers who had taken undue risks and > caused much pain in the country. He was willing to allow short-term pain on > American families, rather than let these bankers inflict much more damage in > the future. President Bush and his cohorts at the Federal Reserve and > Treasury have attempted to reverse the natural capitalist cycle of boom and > bust during his entire eight-year administration. The reduction of interest > rates to 1%, tax rebates, excessive deregulation, and encouragement by the > President and Federal Reserve to speculate and spend have led to our > financial crisis today. A President with a backbone and moral compass would > be telling the American people that our bankers have ruined this country and > have caused the coming deep recession. He would explain that it is a painful > lesson that must be faced now so that future generations would not have to > pay for the sins of today. Instead, he urged the American people to support > an $820 billion banker bailout which will attempt to push off pain far into > the future. He has clearly failed the test of leadership and doesn’t deserve > to be in the same company as "Old Hickory." > In the last few weeks I’ve heard a lot of discussion about the Great > Depression. Jim Cramer has said that if the bailout wasn’t passed, we would > experience a 2nd Great Depression. This has led me to try and assess the > circumstances which existed prior to the Great Depression of the 1930’s > versus the conditions today. The chart below is extremely disturbing. The > most recent flow of funds data shows that total credit market debt is $51 > trillion versus our $14.3 trillion GDP. Debt as a percentage of GDP is now > 356% versus 260% during the Great Depression of the 1930’s. This massive > buildup of leverage has just begun to unwind. If this is just the beginning > of the great leverage unwind, then the pain will be tremendous when it really > gets going. The conclusion that I reach when looking at the vertical takeoff > of debt in the early 1980’s is that this country has been living a lie of > false prosperity. The huge McMansions, luxury cars, high-tech gadgets, > granite kitchens, 2nd homes, and exotic vacations were purchased with debt. > These "assets" are depreciating rapidly and consumers and companies are > desperately selling assets to pay down the debt that is strangling them. The > psychology of this country has begun to change from conspicuous consumption > to forced liquidation and saving. > > The psychology of the country has taken longer to get to this point than I > thought it would. Real median household income in the U.S. is $50,233 today. > It was $50,577 in 2000 when George Bush took office. The government has added > over $4 trillion to the national debt during this time. This proves that most > people in this country have not been able to generate enough income to keep > up with inflation. And this is using the fake CPI numbers put out by the > government. Using inflation rates in the real world would make the situation > dire for the average household. The only way people have been able to > maintain their lifestyle has been to borrow against their house and run up > their credit cards. That is a phony improvement in lifestyle. The country has > been living a lie for the last twenty years. It is now time to pay the piper. > Even more disturbing is the fact that the top 20% of households showed real > increases in income. The bottom 50% lost income during the Bush years, with > the bottom 20% losing 6% of income over this time frame. No wonder there is > so much anger in the country regarding this bailout for the top 1%. Fifty > million households make less today than they made 8 years ago. The criminal > CEOs on Wall Street collected $30 million annual salaries while their > companies have lost $500 billion in the last year. The average American is > living paycheck to paycheck and can’t maintain a lifestyle without borrowing. > The unwinding of this unbelievable debt load could lead to the next Great > Depression. > Coming Depression? > There is no absolute consensus regarding the causes of the Great Depression, > but some common themes become clear. I will try to evaluate today’s > environment versus the conditions that existed in the 1920’s.Expansion of the > money supply by the Federal Reserve during the 1920’sAccording to the > Austrian School of economics, the Great Depression was mainly caused by the > expansion of the money supply by the Federal Reserve in the 1920’s that led > to an unsustainable credit-driven boom. Both Friedrich Hayek and Ludwig von > Mises predicted an economic collapse in early 1929. In the Austrian view it > was this inflation of the money supply that led to an unsustainable boom in > both asset prices (stocks and bonds) and capital goods. Ben Strong, the head > of the Federal Reserve, attempted to help Britain by keeping interest rates > low and the USD weak versus the Pound. The artificially low interest rates > led to over-investment in textiles, farming and autos. In 1927 he lowered > rates yet again leading to a speculative frenzy leading up to the Great > Crash. By the time the Federal Reserve belatedly tightened in 1929, it was > far too late and, in the Austrian view, a depression was inevitable. The > artificial interference in the economy was a disaster prior to the > Depression, and government efforts to prop up the economy after the crash of > 1929 only made things worse. According to Murray Rothbard, government > intervention delayed the market's adjustment and made the road to complete > recovery more difficult. Alan Greenspan reduced interest rates to 1% for over > a year in 2003. This act led to a speculative frenzy in real estate, $3 > trillion of equity withdrawal by consumers and tremendous overconsumption > built upon a foundation of debt. This speculative frenzy was exacerbated by > the "Masters of the Universe" on Wall Street with their CDOs, MBSs, and other > magic potions that made bad loans appear good. The Bush administration’s > decision to not enforce any existing oversight of the banks also contributed > greatly to the current situation. Realistically, the current conditions are > worse than they were prior to the Great Depression based on the speculation > that has occurred in the last eight years in stocks and real estate. Debt as > a percentage of GDP is now 356% versus 260% prior to the Crash of > 1929.Excessive use of debt which led to a false prosperityAccording to author > Jeffrey Kaplan, consumerism took hold of America during the 1920’s. "By the > late 1920s, America’s business and political elite had found a way to defuse > the dual threat of stagnating economic growth and a radicalized working class > in what one industrial consultant called "the gospel of consumption"the > notion that people could be convinced that however much they have, it isn’t > enough. President Herbert Hoover’s 1929 Committee on Recent Economic Changes > observed in glowing terms the results: "By advertising and other promotional > devices . . . a measurable pull on production has been created which releases > capital otherwise tied up." They celebrated the conceptual breakthrough: > "Economically we have a boundless field before us; that there are new wants > which will make way endlessly for newer wants, as fast as they are > satisfied."By 1929, the richest 1% owned 40% of the nation’s wealth. The top > 5% earned 33% of the income in the country. The bottom 93% experienced a 4% > drop in real disposable income between 1923 and 1929. The middle class > comprised only 20% of all Americans. Society was skewed heavily towards the > haves. By 1929, more than half of all Americans were living below a minimum > subsistence level. Those with means were taking advantage of low interest > rates by using margin to invest in stocks. The margin requirement was only > 10%, so you could buy $10,000 worth of stock for $1,000 and borrow the rest. > With artificially low interest rates and a booming economy, companies > extrapolated the good times and invested in huge expansions. During the 1920s > there were 1,200 mergers that swallowed up more than 6,000 companies. By > 1929, only 200 mega-corporations controlled over half of all American > industry.There are some disturbing parallels between what was happening > during the 1920s and what has been happening in America in the last 10 years. > Today, the richest 1% own 21% of the nation’s wealth. The bottom 50% has > experienced a 4% drop in real disposable income in the last eight years. > During the dot.com boom of 1998–2000, small investors used massive amounts of > margin debt to speculate in companies with no earnings. When this bubble > collapsed, a lesson should have been learned that would last a lifetime. > Instead, Alan Greenspan lowered interest rates to 1% and encouraged everyone > to take out an Adjustable Rate Mortgage. The speculation in real estate > reached phenomenal heights by 2005. The downside of that speculation is now > only half finished. Stabilization of house prices is at least another year > away and another 20% to the downside. That would still leave prices high on a > historical basis. Home prices did not fall on a national level during the > Great Depression. In the last ten years, there have been hundreds of mergers, > particularly in the financial industry. The repeal of the Glass-Steagall Act > in 1999, spearheaded by Senator Phil Gramm, allowed the massive consolidation > in the industry. This is why our financial institutions have become too big > to fail and are on the brink of collapsing the world economy.Excess > speculation by a small group of wealthy investorsThe administrations of > Warren Harding and Calvin Coolidge are considered the most corrupt in > American history. Coolidge’s administration was committed to laissez-faire > non-regulation government. He announced to all Americans, "The business of > America is business." The top tax rate was lowered to 25% in 1925, the lowest > top tax rate in any decade since. Exports boomed due to the low value of the > Dollar versus the British Pound. The ruling elite of society were the Wall > Street speculators. Only 1.5 million people out of an entire population of > 120 million invested in the stock market. Ben Strong, attempting to help > Britain, reduced rates in 1927. This ignited a speculative frenzy in 1928 and > 1929. Margin loans increased from $3.5 billion in 1927 to $8.5 billion in > 1929. Stock prices rose 40% between May 1928 and September 1929, while daily > trading rose from 2 million shares to 5 million shares per day. The market > reached a peak of 381, with a PE ratio of 23 based on normalized earnings, on > September 3, 1929. > > Source: John Hussman > Ben Strong died in October 1928. Therefore, he did not witness the terrible > pain inflicted upon Americans by his reckless policies. Alan Greenspan has > not been so fortunate. He is able to witness how his reckless interest rate > reductions have resulted in a worldwide financial collapse. He continues to > defend his actions, but his legacy will forever be linked to this disaster. > These low rates caused a speculative frenzy in stocks and then housing. The > Bush administration’s belief in allowing free markets to regulate themselves > led financial institutions to take ridiculous risks using massive amounts of > debt. Despite two ongoing wars and growing budget deficits, the Bush > administration decreased taxes on the wealthy. The dollar declined > dramatically in the last eight years, resulting in increased exports. The PE > ratio of the market reached an astronomical 38 in 2000, before crashing below > 20 by 2003. Currently, the PE ratio of 25 exceeds the level at the peak prior > to the Crash in 1929. The stock market declined to 41 by 1932, an 89% decline > in three years. The PE ratio of the market declined to below 5 by the mid > 1930’s. The market did not return to its 1929 level until 25 years later, in > 1954. As the market began to fall, prominent Wall Street CEOs did their best > to prop up the market. Charles Mitchell of National City Bank on October 21, > 1929, a few short days before the crash, said, "I know nothing fundamentally > wrong with the stock market." George Harrison, the new Federal Reserve > Chairman, provided tremendous amounts of credit to the banking system in 1929 > and early 1930, attempting to keep the party going. In the last few months, > how many times have we heard Hank Paulson, John Thain, and other Wall Street > cheerleaders tell us the banking system is safe and sound? Ben Bernanke has > reduced interest rates dramatically, pumped money into the banking system, > and taken bad assets onto the Fed balance sheet. So far, this does not appear > to be working. The market has declined 30% from the peak, but is overvalued > on a historical basis with profits about to plunge during the coming > downturn.Government responding with tighter credit, higher taxes and higher > tariffsBen Bernanke, a self-proclaimed expert on the Great Depression, > concluded that missteps by the Federal Reserve in 1930 and 1931 resulted in > the financial crisis becoming a depression. After the stock market crashed, > speculators began selling dollars for gold in 1931. This caused the value of > the dollar to plummet. The Federal Reserve raised rates and reduced the money > supply by 30% to try and prop up the dollar. Investors began to withdraw > their dollars from banks, and banks began to fail. By the end of 1932, 9,000 > banks failed. People hid their cash under their mattresses. Bank deposits > were uninsured, so when banks failed, people lost their life savings and > businesses failed. Panic and fear gripped the nation. The remaining banks > hoarded their cash, refusing to make loans to businesses. Treasury Secretary > Andrew Mellon declared, "Liquidate labor, liquidate stocks, liquidate real > estate, values will be adjusted, and enterprising people will pick up the > wreck from less competent people." The failure to stimulate the economy with > increases in the money supply was a huge mistake, according to Ben Bernanke. > The United States had the flexibility to stimulate the economy. At that point > in history the U.S. was the biggest creditor in the world, with a trade > surplus of $638 million. Instead of stimulating the money supply, the > government attempted to protect American businesses by passing the > Smoot-Hawley Tariff in June 1930. This bill increased taxes on imports which > led to retaliation by other countries and contributed greatly to the > worldwide downturn. World trade declined 67% by 1933. Herbert Hoover > increased the top tax rate from 25% to 63% in 1932. All of these government > missteps led to a downward spiral in the economy. In 1930 the GNP declined > 9.4% and unemployment rose from 3.2% to 8.7%. In 1931 the GNP declined a > further 8.5% and unemployment surged to 15.9%. The worst year of the > Depression was reached in 1932 with GNP declining 13.4% and unemployment > reaching 23.6%.After the election of Franklin Roosevelt in 1932, his New Deal > programs made people in the country feel like progress was being made, but > unemployment remained above 14% throughout the 1930s. Roosevelt’s plans to > redistribute wealth from the rich to the poor prompted millionaire > businessmen Du Pont and J.P. Morgan to plan an overthrow of Roosevelt by > military coup and installation of a fascist government. They tried to > convince General Smedley Butler that they would provide an army of 500,000 > and unlimited funding. The plot was foiled when the general reported it to > Congress. Desperate times sometimes lead to desperate measures. The > Depression did not truly end until 1939 when the U.S. borrowed $1 billion to > begin rearmament in preparation for war.Thus far, in this current financial > crisis no one can accuse the Federal Reserve or the Administration of not > responding with injecting liquidity into the system or reducing interest > rates sufficiently. The discount rate has been reduced from 4.75% to 2% in > the past year. The Federal Reserve has increased their balance sheet by over > $1 trillion in the last 9 months. The government has committed in excess of > $1.3 trillion of taxpayer money to keep the financial system from imploding. > The question that has yet to be answered is whether these actions are just > pushing on a string. Are the current conditions so extreme that we are > destined for a severe recession or possible depression? The country has a > national debt of $9.6 trillion, annual deficits of $600 billion, unfunded > future liabilities of $53 trillion, a trade deficit of $600 billion, > inflation of 6%, two wars costing $12 billion per month, and a weak currency. > Therefore, we have not entered this extremely dangerous period with strong > economic fundamentals.In the last few years Congress has become much more > protectionist. The sale of U.S. ports to an Abu Dabai company was blocked. > The acquisition of a U.S. oil company by a Chinese oil company was also > blocked. Worldwide trade negotiations recently broke down with no agreement. > Free trade is being threatened. In 4 weeks the country will likely elect > Barack Obama President and Congress will be overwhelmingly in the hands of > the Democratic Party. Mr. Obama has made it clear that he will increase taxes > on those earning more than $250,000 and corporations. His plans include > health coverage for all Americans and major spending initiatives on education > and infrastructure. With colossal deficits, a protectionist Congress, tax > increases coming, and gigantic spending initiatives, the next four years are > setting up to be exceptionally difficult for the U.S. economy. The parallels > to the early 1930s are eerie. The next administration could easily make > policy mistakes which would cause a 2nd Great Depression.Boundless Morass of > Uncertainty > The $820 billion bailout package will not fix what is wrong with this > country. Hank Paulson will buy bad assets from any financial institution in > the entire world for some yet to be determined price. Many smart people, > including John Hussman, Nouriel Roubini, and Chris Whalen have concluded that > the plan will not work. The banks need a direct infusion of capital to begin > their recovery process. This entire exercise in futility will be overwhelmed > by events in a matter of days. The American taxpayer will never see a dime of > that $820 billion paid back. When was the last time a government program > actually worked? Corrupt politicians, Washington bureaucrats, Wall Street fat > cats, and clueless commentators have failed to realize that the gig is up. > Our entire financial system has been built upon deception, lies and debt. The > only thing keeping the system afloat has been blind faith in our government > and financial leaders to do the right thing. The whole world now has seen > that these leaders were lying and the blind trust has been shattered into a > billion pieces. > There is currently a worldwide run on the banking system. The pictures from > the Great Depression show people standing in line to get their cash out of > the banks. We are in a different age that allows bank runs to occur in > seconds rather than days. Companies and wealthy people in the know are > pressing buttons and transferring billions in cash out of dangerous shaky > financial institutions. With leverage of 30 or 40 times their cash balances, > banks are collapsing around the globe. The average American does not see this > happening and is being kept in the dark by the all-powerful lords of finance. > The market hailed the investment by Warren Buffett last week in General > Electric. Of course, no one from CNBC would ask why GE would sell stock at a > 10 year low price after buying back billions when the stock was in the $30’s, > pay 10% interest to Mr. Buffett when market rates are 4%, and stop dividend > increases after decades of increases. GE is in much worse shape than anyone > is willing to admit. Governments throughout the world are desperately trying > to stem the tide of defaults, but confidence in the Ponzi scheme has been > destroyed. Behind the scenes, Ben Bernanke and Hank Paulson are scrambling to > provide enough liquidity to keep the system from imploding. A worldwide > coordinated, reduction in interest rates will occur soon as a last ditch > effort. > For the 1st time in many years I saw something that shows promise for our > country’s future. Despite the rhetoric from President Bush, Hank Paulson, Ben > Bernanke, Nancy Pelosi, Barney Frank, all CNBC commentators, and various > ultra-rich Wall Street shills, the American public was firmly against this > bailout bill. I sense that the "ME GENERATION" is finally ready to accept the > consequences of their selfish lifestyle over the last 30 years. The > materialistic frenzy that has been the hallmark of the Baby Boom Generation > is coming to an end. It is being forced upon many, but will be the choice of > many more. The worldwide deleveraging will lead to a new mantra for this > generation, frugality and living beneath your means. The psychology of the > whole world has changed in a fortnight. Our leaders are so consumed by their > own agendas that they have not realized the implications of this > psychological change. Chaos and turmoil reign in the markets today. The > population of the U.S. will turn inward and seek comfort in more simple > pursuits. This will ultimately be a beneficial change for our society. But, > the immediate result will be wrenching for the country. > The Catch-22 of our current economic system is that if everyone in the > country lives within their means, the economy will collapse. The spending of > money we do not have is what has driven our "Great" country for the last > three decades. We can always count on Government to not live within its > means, so deficit spending will continue and most likely accelerate. But, > consumers have been dependent upon the stupidity and recklessness of banks, > credit card companies, retailers, and auto makers to help them live above > their means. This part of the American Dream is lying in shambles. Banks will > not lend, credit card companies are cancelling credit lines, retailers are > closing stores, and auto makers have stopped financing cars. Part 2 of our > economic crisis has just begun. Having worked for a big box retailer and a > major public homebuilder, I have witnessed first hand that faulty > pie-in-the-sky assumptions about growth will lead to dreadful strategic > decisions that have huge negative financial consequences to those companies. > The coming Holiday season will be the worst for retail in decades. Most > retailers generate 50% to 75% of their profits in November and December. > Early in 2009, the avalanche of retail bankruptcies will begin. The big box > retailers who built their expansion plans upon demand that was a debt-induced > fallacy, will experience tremendous losses. They will begin to close stores > by 2010. Automakers will continue to see sales decline to levels never > thought imaginable. All three major U.S. automakers could go bankrupt by > 2010. House prices will continue downward. Two or three major homebuilders > will go bankrupt by 2010, while hundreds of small builders will collapse. > Mall developers and commercial developers have taken on billions in debt in > the last decade. As tenants go bankrupt and the rents dry up, hundreds of > large public developers will declare bankruptcy. These losses are not > factored into the numbers of the 8,500 banks in the U.S. By the time this > crisis is finished, we are likely to be left with 5,000 banks or less. The > official unemployment rate will easily surpass 7% and possibly reach 8% by > 2010. Based on the unemployment calculation used during the time of the Great > Depression, we already have unemployment of 15%. This could conceivably reach > 20%. The PE of the market is still above 20. Profits will plunge in 2009 and > irrational pessimism could propel the Dow to its 2002 low of 7,200. That > would be 28% below today’s levels and almost 50% below the all time high of > 14,000. > Even if we somehow avoid a true depression, the next few years will be > extremely painful. The question is whether we come out the other side as a > stronger Nation or a weaker declining Nation. The words of Congressman Ron > Paul should be the rallying cry for our great country."The issue boils down > to this: do we care about freedom? Do we care about responsibility and > accountability? Do we care that our government and media have been bought and > paid for? Do we care that average Americans are being looted in order to > subsidize the fattest of cats on Wall Street and in government? Do we care? > When the chips are down, will we stand up and fight, even if it means > standing up against every stripe of fashionable opinion in politics and the > media? Times like these have a way of telling us what kind of a people we > are, and what kind of country we shall be."It is time for our citizens to > accept the bitter medicine of bad times, but to learn from our mistakes and > put this great nation back on course as the beacon of democracy that our > Founding Fathers envisioned.http://www.lewrockwell.com/orig9/quinn10.html --~--~---------~--~----~------------~-------~--~----~ Thanks for being part of "PoliticalForum" at Google Groups. For options & help see http://groups.google.com/group/PoliticalForum * Visit our other community at http://www.PoliticalForum.com/ * It's active and moderated. Register and vote in our polls. * Read the latest breaking news, and more. -~----------~----~----~----~------~----~------~--~---
