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The Coming Economic Apocalypse
Economics / Great Depression II Jun 28, 2009 - 12:00 PM
By: Roy_F_Grieder
www.marketoracle.co.uk
  Astonishing
to me is the fact that no one seems to understand the ultimate result of the current policies and practices of Washington D.C. and the Federal Reserve Bank, the Fed. I have studied our economic situation for about 3 hours per day for the last 8 months and conclude we are bankrupt. Think about the facts.
Certainly most of the automobile industry, the airlines, 37 out of 50 states, are bankrupt. The lending industry, Fannie Mae, Freddie Mac are bankrupt. Insurance giant AIG, bankrupt. The Pension Benefit Guarantee Corporation, or PBGC, the Federal Deposit Insurance Corporation, or FDIC, Social Security including Medicare and Medicaid are rapidly approaching insolvency.
In 1929 personal and corporate debt had risen to 365% of Gross Domestic Product, or GDP, before the Crash. We are now at 375% of GDP. So all of this excessive credit got us into this mess in the first place, right?. And the government and Fed solution to this mess is to print up an extra trillion dollars or so, give it to the lending industry and yell “Lend!, Lend!”. That should work, right?.
Remember TARP?, the money given to the banks and others to remove their “Toxic Assets” (sorry too harsh, let’s rename them “Troubled Assets.) Well, the toxins still remain. They exist in the form of Financial Derivatives, Credit Default Swaps, or CDS, and Collateralized Debt Obligations, or CDO. These financial instruments sound complicated, and they are. They are the inventions of Wall Street wunderkinds, the ones that get paid a couple of millions per year for their “brilliance“. The worldwide market (if you could call it that) or value of CDS is in the neighborhood of 600 trillion dollars, or 10 times the entire Worlds yearly economic output. How the banks and insurance giants are to clear their balance sheets of these toxins is no mystery . They cannot. Was it wise to take TARP
money, 20 billion dollars, give it to General Motors when their market cap (the value of their common stock) was 985 million?. Will they pay us back?. No. They are bankrupt. The TARP was a fraud from the start, but it has bought the powers that be some time. Time, time for what?
There is a fever pitch rush to consolidate control over us by the government and the Fed. Look what they are doing to the banks, insurance, lending institutions, auto industry, airlines. Let’s now add health care. By the way, let’s appoint czars and give them power not granted by the Constitution. Why?, what’s the rush? To gain control before we go “out of control”?.
And now 37 out of 50 bankrupt states need to raise fees and taxes, and so does our federal government to pay for “free” healthcare. Raise taxes during a deep recession?, worked great in the early 1930’s, right?. Are these people idiots? Yes they are. Why not have a 2 trillion dollar deficit this year, and run up the national debt to 20 trillion dollars in a few years. Interest on the debt would only be 1 trillion a year at 5 per cent. Chump change. Government borrowing on such a massive scale will compete for the money in the open market and will make overall interest rates rise . Rates already rose a few weeks ago during a large treasury auction. Watch this carefully, mortgage rates will respond by going up. Think what this will do to the already very ill housing market.
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