Doomed to an Economic Depression?

Lots of bad news out there, today – US unemployment rate rose to 8.2%, Eurozone unemployment rose to 11% (ours is probably right there, too, but the Eurocrats haven’t, it seems,  figured out how to fudge numbers as well as Obama’s Bureau of Labor Statistics has), a host of bad news out of China indicates a possible “hard landing” for that economy, which will take Australia and Canada (major commodity suppliers to China) down with it, what amounts to a bank run in Greece and the start of one in Spain…and, yesterday, I read an article which I hope was a bald-faced lie because it says the derivatives market (something I don’t fully understand but from what I can gather it is nothing but a bunch of ponzi scheme garbage) is leveraged to 10 times global GDP…and there’s simply nothing to back all that garbage up.  So, are we doomed to a Depression?

The answer is “yes” and, also, “it started in 2008″.  For you liberals out there, this will provide you a bit of comfort:  Obama is not at fault for it.  On the downside, though, just about everything he has done has ensured that it not only won’t get fixed, but will actually get worse.  He hasn’t been alone in this, of course – Ben Bernanke at the Federal Reserve (as well as other central bankers around the world) has piled on the harm with all his money printing.  The problems of the global economy are as follows:

The world uses fake money – money just printed up by central banks and backed by nothing.  Fake money allows insolvent banks and governments to keep themselves afloat but it works out to the systematic stealing of the money of wealth-creators.  If you work hard today and earn a dollar what will happen is a 100th of a penny of it will be stolen tomorrow…that 100th of a penny isn’t so bad, but after 10 years it works out to quite a lot of the dollar you earned.  Fake money essentially allows failure to be masked – what is economically counter-productive can be kept going because you can keep passing fake money through it.  That you are all the while eroding the entire economy does not show up for a while, but show up it will.

We allow governments to pile up debt.  Government debt is not an “investment”.  An investment is when you take some of your own money and provide it to someone else who has worked out a plan to generate more wealth than was put in to it.  So, I have $100,000.00 and I see some guy in a garage with what I think will be a great product and I give the $100,000.00 to him to start up manufacturing – next year, the guy in a garage is a guy in a factory and he pays me back $125,000.00 while he, himself, is worth $250,000.00.  Government spending can provide some useful things, of course, but even when it does it isn’t like that.  A road facilitates commerce but it doesn’t actually return money on the money spent.  If the government spends a billion dollars building a new road its not like the government will get 1.5 billion dollars back on it next year.  True, the economic activity stimulated by the good road will result in a broader tax base but its still not an “I loan you money for your wealth-producing enterprise and I get paid back with interest while your wealth-producing enterprise just goes on and on making more and more wealth”.  So, even in the best of circumstances (a needed road), government spending is not an investment; even less so is government spending an investment when it goes in to things like high paid bureaucrats, subsidies to favored groups, welfare, etc, etc, etc.  It still might be something desired overall but it isn’t an investment.

Even worse, though, when the government spending is not out of current revenues but is borrowed against future revenues.  When we spend tomorrow’s money today on government we are not only not investing but we are de-investing…because every cent borrowed by the government is a cent which can’t be borrowed by persons and enterprises in the private economy who would use that borrowing to create new or expanded sources of wealth creation.  Whatever benefit you might get from such borrowing will be short lived, at best, and may actually harm the economy because the money borrowed by government is all too often to be wasted by the sundry sorts of graft common to government.

What started in 2008 and continues to this day – masked by a gigantic amount of fake money and government debt – is the logical and easily predicted outcome of a system which has at its bottom fake money and government debt.  I’m only astounded that it has kept going as long as it has.  Shows the power of people to blind themselves to reality – and our short-sightedness.  We listen with amusement to tales of what prices used to be…never thinking for a moment that, hey, the reason prices used to be lower is that our money was worth more and what the heck happened to our money?  It is when we create wealth that we get prosperous – when, that is, we make, mine and grow things.  Nothing else does it.  10,000 law degrees, 100 government departments and bureaus and the next 50 social media sites – not a single bit of wealth being created.  The next time a farmer plants a corn crop?  Wealth created.  The next time a miner digs in the earth?  Wealth created.  The next time someone makes a pair of pliers?  Wealth created.

In order for this wealth creation to happen we mush have three things:

1.  Investment money for wealth-creators to start up or expand their wealth creating enterprises.

2.  Reliable money which holds its value over time so that investors can safely invest for long term wealth creation (fake money, on the other hand, moves investors to protect their wealth by looking for the highest rate of short term gain).

3.  A tax and regulatory system which encourages money to flow in to wealth creating enterprises while laying the burden of proof for new regulations upon those who would impose them (not, as now, simply imposing them and then asking the victims to prove they aren’t necessary).

Investment money will primarily come from paying down government debt.  We’ve got $15 trillion of potential investment money sitting in the form of US government bonds.  Entirely wasted there – we need to balance our budget as swiftly as possible so that each year more and more of the $15 trillion becomes available to the private economy.

Reliable money would best come from returning to the gold standard but people have been so relentlessly propagandized against such currency that it would be a hard sell.  Our best option, for now, is to require Congressional action for increasing the supply of money – whatever we do, don’t leave in the hands of central bankers to go “cntrl-p” whenever their Bankster buddies are in trouble.

As you can easily see, neither of those things can be fixed as long as liberals have any say in the matter, let alone any real efforts to tackle tax and regulatory reform.  Essentially, fixing the problem requires a clean sweep of our liberal Democrats – though even if we did that we’d have no end of trouble from the RINOs.  What needs to be done to fix things, after all, is the gutting of a politico-economic which the current beneficiaries don’t want to let go.  A long, hard war is required – but we take each battle as it comes.  The first one comes on November 6th – then we can start actually fixing our economy and emerging from the Depression.

 

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33 thoughts on “Doomed to an Economic Depression?

  1. tiredoflibbs

    “Obama is not at fault for it.”

    On the contrary, obAMATEUR’s and the rest of his party’s ideology is at fault for the cause of this economic disaster and the failure of this recovery.

    Of course, there will be drones that will ask the question again… How?

    The answers have been stated and sourced here dozens of times but they choose to ignore the FACTS and continue to be the dupes that they are and follow the pResident – “it’s Bush’s fault”, “… due to the tax cuts for millionaires and billionaires” and other such dumbed down talking points.

    obAMATEUR and the democrats want to focus on Bain capital. Fine let them. Bain capital and Romney have more successes and create real jobs where the government spending by the left have resulted in fostering FAILURE, killed jobs and wasting tax payer dollars.

    It is generally accepted that it costs somewhere in the range of $120,000 to $150,000 for the private sector – that’s the evil capitalist, free enterprise sector – to create one job.

    Government spending (ie stimulus spending – obAMATEUR’s and democrats’ ideology) according to the CBO:

    GDP was increased by between 0.1% and 1%

    Unemployment was lowered by between 0.1% and 0.8% (Not even a 1% reduction)

    The number of people employed was increased by between .2 million and 1.5 million.

    Now the ranges there are rather wide … so the estimate of the amount of stimulus money spent for each new job is correspondingly wide. Here you go:

    Under Obama’s stimulus bill – actually written by Nancy Pelosi – it cost anywhere from $540,000 to $4,100,000 for each job created. The private sector does this for $120,000 to $150,000 … but for government the cost is, at best, four times that … and up …. Way up. If you just go for the median you’re spending over $3 million for each job produced.

    Who do you think does a better job of creating jobs?

  2. GMB

    “The first one comes on November 6th – then we can start actually fixing our economy and emerging from the Depression.”

    Agreed but what is the next step? What is the plan afterwards? The repubs have shown no interest in ending even the smallest of progressive programs like npr, pbs, and the likes.

    How do you propose do get people to battle when hey show no willingness to fight?

    1. neocon1

      you go bankrupt, the whole system collapses, there are riots and violence in the streets….then things begin over.

    2. Cluster

      GMB,

      NPR and PBS are small potatoes compared to what else needs to be done, so I just hope, for his first term anyway, that Romney focuses on repealing Obamacare, and putting together sensible entitlement, tax and regulatory reforms.

      1. GMB

        Sure they are. A lot of small problems add up to one big problem right? Add it all up and it starts to real money. You have to sart somewhere. If you are unwilling to address the small issues because of whatever percieved backlash, there is no way any big issue will ever get addressed in a way that solves anything.

        I rember when half a billion dollars used to mean something. Does the republican party?

  3. Bob1

    I don’t believe that most “children” know where money comes from or how to wisely spend it. And these “children” are not just “liberal democrats”. What evidence is there that there are enough mature wise “adults” in this country to make an intelligent decision on Nov. 6th that will give economic power to our popularly elected President and the legislators who spend our money? The current political debates are focused on the question regarding which one of the apparent candidates for the office of President knows how to fix our economy, and there is no general widespread consensus that either one really knows how to do this. And this question of real economic wisdom is often not even being addressed to legislators at various levels of government. It is fairly easy to create a “battle” of words between “children” who both want a “favor” from a parent, but that doesn’t mean that a “fight” would be the intelligent or productive way to resolve the conflict or to meet the needs of all of the people in the situation. We don’t need more “political fighting”; we need more “political intelligent” leadership and fiscal responsibility!

    1. neocon1

      bub1

      1. STOP SPENDING
      2. CUT SPENDING.
      3. STOP SPENDING
      4. CUT SPENDING
      REPEAT X1000

    2. GMB

      The progressives will use every dirty trick in thier arsenal to “fight” any ending to any of thier pet causes. The repubs have meekly went along with this. Do I need to quote Boehners remarks on who he would work with in congress again?

      Do you remeber the 100 billion dollar promise? Do you remember the promise to defund barky care?

      The repubs have shown no interest what so ever to cut spending and and to stop spending, as Neo puts it his plan.

      I do have hopes that they might change after Mitt is elected but I will not bank on it.

      The repubs are to used to collaborating with the enemy and old habits are hard to break. That is why I think that if Mitt is unsuccesful at least on the economic front, he will be the last Grand Old Party President.

      There are too many people out here that expect something to be done and the old excuses have worn thin.

  4. Jeremiah

    Yes, I believe we will have a depression. Obama is cutting jobs, and more jobs.
    When the economy collapses, there’ll be no more 401ks, no pensions, no social security, no welfare, and your loaf of bread will be the price of a bar of gold!

    At that point, be prepared to protect your personal property because the looters will be out in force.

  5. Retired Spook

    Well, at least the War on Poverty is finally working. At least, according to liberal, static, zero-sum logic, there were 129,000 poor people who were lifted out of poverty last year.

    If we keep destroying wealth at the present rate, we’ll complete obliterate poverty in my lifetime. FOUR MORE YEARS — FOUR MORE YEARS — FOUR MORE YEARS — FORWARD — FORWARD — HOPE WE CAN STILL BELIEVE IN — A CHICKEN IN EVERY POT (NO POT TO PISS IN, THOUGH) — OH WELL, CAN’T HAVE EVERYTHING!!!!!!!

    1. tiredoflibbs

      Compared to other parts of the world, our “poor” and “impoverished” are priviledged and upper middle class.

      Where else in the world could the “poor” and “impoverished” have flat screen TVs, cell phones, a car, jewelry, etc. etc. ???

  6. tiredoflibbs

    Princess Pelosi – the hag of Haite Ashbury: “We face two tasks: One is to promote growth and create jobs; the other to reduce the deficit. Our proposal achieves both goals.
    Democrats are committed to moving the process forward by asking the wealthiest to pay their fair share through the expiration of tax cuts for those earning over $1 million a year. Democrats are committed to using the significant savings to reduce the deficit.”

    More of the same “fair share” mantra… for the government educated drones.

    More of the same “pay down the debt by taxing the “millionaires”. It has been proven that there tax proposal only pays down the debt by $1 trillion over 10 years!!!! Soooooooooo, it will take over 50 years to pay off obAMATEUR’s massive spending that did nothing for the economy and improve health care as he promised.

    1. GMB

      It has been proven that there tax proposal only pays down the debt by $1 trillion over 10 years!!!!

      Except it won’t do even that. That extra trillion will get spent on something else. Probably to buy more votes for the donks.

      1. tiredoflibbs

        Right! What was I thinking?!?

        I assumed that the Democrat looters would do what they said they were going to do!

        I forgot to add the “IF”s where applicable.

    1. tiredoflibbs

      Make things…. create jobs!!!

      Sure as long as those things are not ATMs, kiosks, etc. According to the obAMATEUR, they are the reasons for the still high unemployment rate and why the stimulus is not as working as well as he predicted.

    2. Amazona

      My favorite of the comments: “The Obama Admin will be releasing its 5-Year Plan for Green #Thingamajig Innovation. If only we were mining enough absurdium…”

    3. Amazona

      Of course the administration could only “invest” a few hundred billion $ of OPM in thingamajig research and development if the owners of the companies donate lavishly to his campaign.

    4. Amazona

      Another good one: “I bought one of those new eco-friendly thingamajigs from Chevy but it burst into flames.”

  7. Raging Bull

    zerobama’s election is a true indictment on the american educations system…and he right now it’s a toss up for his re-election. anyone with half a brain can see he should be tossed out on his big ears. thingamig???? really???

    1. neocon1

      What a Fn Moron

      As Twitchy reported earlier, the Smartest Man Alive was floundering during a campaign stop when he had to talk about jobs. Jobs are hard! So is common sense and reality, evidently. President Obama said that Americans need to buy more “thingamajigs” and stuff and things and such. To make jobs. Or something.

      What, no thingamabobs? Bob-ist.

  8. Pingback: Doomed to an Economic Depression? « Blogs For Victory | Wealth Building Tips

  9. Amazona

    I think there is a lot of investment money that could be made available quite quickly, given a change in the economic climate.

    As I have said here before, I have personal experience with trying to get a small business loan. Every bank we went to said pretty much the same thing: This is a great business plan, this is definitely going to make money, this is exactly the kind of business we like to get involved with, some even have clients in the same business who have proved to them how profitable it is. But they said the regulations were hogtying them. Twice we had loan approval and then a new set of regs came it and it fell through. I had been bemoaning the real estate downturn that had made it impossible to sell some land, but in this case was glad I had it as I just used it for collateral on a real estate loan, to get our business started.

    The bank was so happy to be able to lend us the money, and our banker said that the regs on the real estate loan were far less restrictive than on small business loans, where they are essentially forbidden to loan money to anyone who needs it and can only lend to those who don’t.

    I believe a quick change in the regulatory policies of lenders will free up a lot of money that can and should go directly to small business creation and growth. Credit is the lifeblood of small business, and removing the Obama tourniquet will let money flow again.

    I also think that a new attitude toward business will free up money that people are, right now, just plain afraid to invest. They can’t get more than 1 per cent or so through banks and banking instruments, they are being threatened with doubling the taxes on return on investment, and the entire flow of private money is throttled. We can’t raise interest rates to make banking instruments more attractive, because of what that would do to the national debt payment—remember, when we talk about our debt load and crippling interest payments we are talking about today’s nearly zero interest rates. If interest were to go up even one point, the effect on our debt service would be disasterous, so we need to concentrate on getting tax revenues up through increased business creation combined with slashing the debt burden before we can think about raising interest rates.

    But it shouldn’t take long to get the existing money flowing again—a predictable income tax rate, without the threat of having personal income taxes going up at any time, plus freeing up lending and getting back to sound lending practices, will do a lot to create a very energetic attitude toward business.

    1. neocon1

      we need both houses and the Presidency in 2013

      time to fire reidtard and piglowsey once and for all.

      1. neocon1

        I hope mittens has the balls to come into office and CLEAN HOUSE, fire all the tzars, fire the racist holder and ALL the DOJ attorneys,
        fire anyone who is left over from the Ubama regime, revoke all executive orders………. fire the heads of the EPA, the homosexuals in charge of DOE………..and fumigate the WH

    2. Retired Spook

      But it shouldn’t take long to get the existing money flowing again

      It’s my understanding that that’s the whole catch 22 in this mess we’re in. It’s pretty clear that we’re in a de-leveraging phase right now, and the only way to avoid massive inflation is to keep the velocity of money as low as possible. I’m with Mark in that I never thought they could keep it going this long. If the Fed weren’t buying such a high percentage of our debt, I don’t think they could.

      1. Amazona

        Spook, I am the first to admit a lack of understanding of the interrelated aspects of finance. Why would increasing the velocity of money over the next year or so, if that money is invested in business creation and expansion, lead to massive inflation?

        Remember, keep it simple, me being a Fly-Over Country cow-chasin’ wrong zip-code person and all.

      2. Retired Spook

        Why would increasing the velocity of money over the next year or so, if that money is invested in business creation and expansion, lead to massive inflation?

        Amazona,

        I’m not nearly as good at explaining economic phenomena as the Count is. I tried to find an article that explains it in layman’s terms, and this is as close as I could come.

        “Hyperinflation starts when the public is unwilling to hold the money for more than the time it is needed to trade it for something tangible to avoid further loss. A good indicator that Hyperinflation has started will be a sudden increase in the Velocity of Money. [ P = M x V ]. This alone can increase the general level of prices. Even with a falling M3!”

        There’s been lots written on the subject. If you want to read more, just Google “velocity of money + inflation”.

      3. Retired Spook

        Amazona,

        Here’s an even better explanation. Notice in the accompanying chart how M1 (the most restrictive, short term aspect of the money supply) has come down since 2008. Now look at the other extreme measure of the money supply, M0 or the monetary base, during the same time frame. http://research.stlouisfed.org/fred2/series/BASE/

        The lion’s share of the money in M0 is on deposit in the vaults of Federal Reserve Banks. They can’t loan it out because that would increase the velocity of money and increase inflation, resulting in an increase in interest rates, which, as you note, would cause the carrying charge on our horrendous debt to skyrocket. As I said, a catch 22.

        I did a post back on March 6th about how major banks and investment companies are using these essentially free funds. Interestingly, the first comment in that thread was by you.

  10. Retired Spook

    I don’t often put much stock in economic and financial market predictions because, well, because they’re so often wrong. Here’s one, however that stands a good chance of being right:

    Monday’s trading will be the first opportunity stock investors in the U.S. will have to act on a major technical violation that occurred at Friday’s close: The breaking of the 200-day moving average.

    This could result in an avalanche of sell signals hitting the market at Monday’s open, since many technical analysts use the 200-day moving average as the dividing line between bull and bear markets. They consider the primary trend to be up so long as the market is trading above its 200-day moving average, and that this trend turns to bearish whenever the market closes below this average—and that is what happened at Friday’s close.

    Though the market doesn’t always fall off a cliff upon breaking the 200-day moving average, that certainly is what happened the last time the market broke this key technical level.

    That occurred last Aug. 2, on which day the S&P 500 closed at 1,251.46. At its intra-day low just one week later, on Aug. 9, the S&P stood 150 points lower at 1101.54—an extraordinary decline of 12% in just five trading sessions.

    Traders beware.

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