American prosperity, bonds, caught off guard, central bank, central banking, charity, collateralized, credit markets, dubious loans, economic analysts, equities, false image, Federal Reserve, fiat cash, fractional reserve lending, free money, global economy, globalization, happy-go-lucky, interest rates, life support, naive, QE, shelll shocked, US credit base
In the years 2006 and 2007, the underlying stability of the global economy and the U.S. credit base in particular was experiencing intense scrutiny by alternative economic analysts. The mortgage-driven Xanadu that was the late 1990s and early 2000s seemed just too good to be true. Many of us pointed out that such a system, based on dubious debt instruments animated by the central banking voodoo of arbitrary fractional reserve lending and fiat cash creation, could not possibly survive for very long. A crash was coming, it was coming soon, and most of our society was either too stupid to recognize the problem or too frightened to accept the reality they knew was just over the horizon.
The Federal Reserve had cheated America out of an economic reset that was desperately needed. The 1980s had brought us utter destruction disguised as “globalization.” Our industrial center, the very heart of the American middle class that generated enormous wealth and decades of opportunity, had been dismantled and shipped overseas to the lowest bidder. It was then that the U.S. economy actually died; we just couldn’t see it. From that point forward, Americans were fully dependent on the charity of central bank money creation and international bank lending standards. The collapse that should have occurred in the 80s was delayed and thus made more volatile as the Fed artificially lowered interest rates and allowed trillions upon trillions of dollars in dubious loans to be generated. Free money abounded, and average citizens were suckered royally. Their greed was used against them, as they collateralized homes they could not afford to buy more crap they didn’t need. Of course, you know the rest of the story.
Today, credit markets remain frozen. Lending is nowhere near the levels reached in 2006. The housing market is showing signs of life; but that’s only because most home purchases are being made by banks, not regular people, for pennies on the dollar, as bankrupt properties are then reissued on the market for rent rather than for sale. If you are lucky, maybe one day you’ll get to borrow the keys to the house you used to own. And millions of higher-paying full-time jobs have been lost and then replaced with lower-paying part-time-wage slavery. The image of American prosperity carries on, but it is nothing but a farce; and anyone with any sense should question how long and false image can be given life before the truth dawns.
The novice will question why it is necessary to re-examine all of this information. Is it not widely known? Am I not simply preaching to the choir a message heard over and over again since the crash of 2008? Maybe, or maybe it is time for us to finally apply some foresight given our knowledge of the recent past.
Why did 2008 creep up on so many people? Weren’t there plenty of economists out there “preaching to the choir” back then? Weren’t there plenty of signals? Weren’t there plenty of practical conclusions being made about the future?
The truth is human beings have a nasty habit of ignoring the cold, hard facts of the present in the hopes of using apathy as a magical elixir for future prosperity. They want to believe that disaster is a mindset, that it is a boogeyman under their bed that can be defeated through blind optimism. They refuse to believe that disaster is a tangible inevitability of life that pays no heed to our naïve, happy-go-lucky attitude. The American people allowed themselves to be caught off guard in 2008, just as they are setting themselves up to be caught off guard again today.
Again, the reality is clear; the Federal Reserve has propped up equities and bonds using money created out of thin air — so much so that both markets have become totally reliant and disturbingly addicted to fiat injections. The distribution of this fiat threatens the continued dominance of the dollar as the world reserve currency and will invariably lead to currency collapse and hyper-stagflation. This process is much more likely to climax in the near term given the accelerated rate of quantitative easing within our system to date and the accelerated rate at which our primary lenders (namely China) are dumping the dollar in bilateral trade with each other. The endgame is obvious, yet I still fear millions of people within this country and around the world will be shell-shocked once again by a renewed crash.
The argument is always the same: “Yeah, things might get dicey, but it won’t be as bad as all the doom-mongers claim, and probably not for many years.”
Similar statements were made by naysayers before the Great Depression and before the 2008 crash. So why are the skeptics wrong again this time around?
The Stimulus Fantasy
Let’s put this in the simplest terms possible: Stimulus is now the lifeblood of our economy. There is nothing else sustaining our Nation. Period. Stimulus in the form of bailouts and QE are keeping the stock market and bonds afloat. And now, in recent weeks, the Fed is announcing its intentions to shut down the life-support machine and let the patient drown in his own fluids.
Day traders and common investors are not very bright, but they do understand well that no stimulus means no stock market and no bond market. In response, indexes have become erratic, shifting on the slightest rumor that the central bank might continue QE for a little longer. Pathetically, the Dow Jones now rallies upward whenever bad financial news hits the wire, as insane investment groups pour in money in the hopes that dismal economic developments might cause the Fed to extend the bailout bonanza.
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