- Economic meltdown comes in stages. Recognition takes
longer. Tout TV pundits stay in denial longest, calling crisis conditions
a normal correction.
- Reality suggests otherwise with US unemployment approaching
23%, home foreclosures multiplying, and poverty levels double or more official
distorted numbers that artificially hold them down.
- Longtime market expert and regular Progressive Radio
News Hour guest Bob Chapman says Eurozone countries are collapsing.
- They're "in a state of contagion with six of its
sovereign members in serious financial trouble....The creators of the EU,
euro zone, and ECB have a failing monstrosity on their hands," an
out-of-control debt bomb.
- "There is absolutely no way a financial crisis can
be avoided," and it's already been unfolding since 2008. No combination
of countries can bail out others in crisis "without destroying themselves.
Can 21 nations find $4 to $6 trillion to bail out six?"
- Impossible! "Fragile isn't the word for it. Neither
is contagion. The operative (word) is abject failure," heading for
- Economist David Rosenberg sees "imminent" Greek
default. In mid-September, its one year treasury yield exceeded 100%, telling
intrepid investors it already happened for those willing to buy worthless
- At a dismal 57.8 reading, University of Michigan consumer
sentiment also spells trouble.
- In comparison, it was 70.3 in September 2008 when Lehman
Bros. collapsed, 81.8 in September 2001 after 9/11, 97.4 in October 1998
after Long Term Capital Management faced imminent bankruptcy and Russia
defaulted on its debt, and 89.3 in October 1987 when Wall Street had its
largest ever one day decline (22.6%).
- On September 16, Global Europe Anticipation Bulletin's
(GEAB) latest economic update headlined, "Global systemic crisis -
Fourth quarter 2011: Implosive fusion of global financial assets,"
- Over many months, nearly $10 trillion and 15 trillion
in "ghost assets....have gone up in smoke. The rest (and probably
much more) will vanish in" Q 4.
- GEAB sees a "perfect storm" coming "that
will make the summer problems look like a slight sea breeze." Six
elements, in fact, already are apparent:
- (1) America's congressional "super committee"
won't resolve budget austerity tensions.
- (2) As a result, automatic cuts required will cause a
political crisis. Moreover, this "automatic function (will) generate
major disturbances in the functioning of the state system" because
it amounts to executive and congressional abdication of decision-making
- (3) Other credit rating agencies will join S & P
in downgrading US credit. Diversifying out of Treasuries will follow.
- (4) Federal Reserve money printing can't go on forever.
At some point, it'll have to resort to jawboning and market manipulation,
but those tactics have short to intermediate-term shelf lives.
- (5) America's debt will keep increasing dramatically
"as tax revenues are already in the process of collapsing..."
- (6) Like his 2009 jobs plan, Obama's new one won't work
even if Congress approved it which it won't.
- The combination of the above elements "will trigger
(a) major financial shock," perhaps much greater than in 2008.
- Financial expert and investor safety advocate Martin
Weiss agrees, saying:
- "We stand on the threshold of one of the most dramatic
financial disasters of our lifetime."
- Greece's imminent default "threaten(s) the largest
economies in the history of civilization - the European Union and United
- Financial analyst Claus Vogt believes growing numbers
of German politicians and European central bankers realize "Greece
is long past the point of no return."
- It's bankrupt but hasn't said so. Soon enough others
will. It's not a liquidity problem. It's a solvency crisis too far gone
- All the bailouts and quick fixes piled on more of them
won't put Greece back together again. And behind it comes Ireland, Portugal,
Spain and Italy. It's just a matter of time.
- In fact, Greek default alone is more serious than Lehman's
2008 collapse that triggered market mayhem. It's because Western banking
and its entire financial system never recovered, so is much more vulnerable
to economic shocks now than then.
- Even though G-7 countries promised to save weak ones,
who'll save them when they fail? Who'll save America, especially Main Street
mired in Depression with baked in the cake austerity assuring worse ahead,
- Already credit is tight. Expect further tightening with
interbank lending freezing up at any price. Private credit markets also
with small and intermediate size businesses as well as consumers unable
to get loans.
- As bad as conditions are now, expect worse ahead. It
doesn't matter how much money is printed. Job markets have collapsed with
no effective policy initiatives to revive them. Rhetorical promises substitute
for meaningful initiatives to stimulate growth. They're not forthcoming
so expect decline.
- In America, virtually everything points down, including
business and consumer sentiment, production, retail sales, employment,
housing, credit, and growth.
- Rosenberg compares today's credit contraction crisis
to the 1930s and Japan in 1990 when its equity and real estate bubbles
collapsed. Subsequent downturns were protracted. Recoveries were "fragile
and soon aborted."
- A major difference between conditions now and Japan then
was its 20% saving rate that let households "hold together as housing,
commercial construction, and capex (capital expenditures) collapsed."
- In contrast, Americans are way over-leveraged enough
to require years more needed to reduce it to normal levels. As a result,
household purchasing power will be greatly restrained.
- Pent-up discretionary demand is absent to reduce debt
and interest payment burdens. Rosenberg calls it a "secular downsizing
- Moreover, despite zero interest rates, banks aren't lending
and consumers aren't borrowing as they're up to their ears in debt. They
need less, not more. As a result, it'll keep receding for years. It represents
a generational semi-permanent shift, promising protracted negative or weak
- Rosenberg also calls it "the movie of (past decades)
in reverse: savings growth (replacing) discretionary spending."
- Frugality is in, frivolity out. From the early 1980s
through 2007, debt surged, leaving household balance sheets way overstretched.
- Declining demand and supply of credit ahead has "profound
implication for interest rates, inflation, economic growth and corporate
- The only positive is one day the pain will end. So far,
it's nowhere in sight as economic contraction continues.
- Expect angry Americans to react. Perhaps they'll replicate
disruptive protests across Europe.
- Trends analyst Gerald Celente explains that when people
lose everything and they have nothing else to lose, they lose it.
- As America sinks deeper into Depression, perhaps that
day of reckoning approaches.
- For long-suffering households, it can't come a moment
- Stephen Lendman lives in Chicago and can be reached at
- Also visit his blog site at sjlendman.blogspot.com and
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