It's my opinion, and of course, this is just an opinion, that we are about to enter into a depression of biblical proportions......all the signs are there. Of course, this won't happen all in one day.....it will be gradual process, similar to the frog in the boiling water scenario.
Ravi has been wrong as to his
when these events will happen , that's for sure..... I believe wholeheartedly, however, that nobody can really time something as complicated as the actual date of a depression. However, Batra's thesis is correct, IMHO.
He most likely now realizes that all the rabbits have been pulled out of the economic hats, and we are in for a doozie of a downturn, IMHO....and Greenspan did us no favors.
www.counterpunch.org/whitney11092006.htmlHard Times on the Way
Bush's Chernobyl Economy
By MIKE WHITNEY
In the next few months, a financial crisis will arise somewhere in the world which will jolt the American economy and trigger a swift and precipitous decline in the value of the dollar.
This is not speculation; it will happen and there is nothing that the Bush administration can do to stop it.
All of the traditional supports for the dollar have been removed by the shrinking economy, a massive $800 billion account deficit, dramatic increases in the money supply, and the reckless manipulation of interest rates.
Now, the noose is tightening. Our foreign trade partners can see that we are drowning in red ink and are refusing to buy back our debt in the form of US Treasuries. This is a death sentence for the dollar. It means that in a matter of months the once-mighty greenback will crash through the floor and free-fall through open space.
Mike Swanson of the WallStreetWindow explains the worrisome details related to last month's trade deficit:
"Just a few days ago the US Treasury reported that the net capital inflows from the rest of the world into the US fell for a 6th month in a row. Private (purchases) from abroad fell to $34.7 billion in August and from $72.9 billion in July. Asian central banks made up for the shortfall. If they hadn't the current account deficit would have exploded. The NY Times quoted Ashraf Laidi, a currency analyst at MG Financial Group as saying, "foreign central banks saved the dollar from disaster. The stability of the bond market is at the mercy of Asian purchases of US Treasuries."
Swanson poses an interesting theory, but it can't be verified since we the Fed stopped printing the M-3 (which would provide the relevant facts about the current cash inflows) and since China and Japan have slowed their purchases of UST Bonds.
Jim Willie of GoldenJackass.com, offers an entirely different theory in his recent article "Spent Dollar Momentum". Willie opines:
"Behind the scenes are the many illicit London-based firms busily buying US Treasury Bonds with freshly-printed money from the Dept of the Treasury. Their tracks are covered by the blackout on the money supply statistic. (M-3) An isolated US government with a well-oiled printing press as the primary support device makes for a dangerous currency situation."
Willie's "conspiracy theory" jives nicely with the US Treasury's figures on the "Foreign Financing of US Government Debt" (June 2006) Surprisingly, between 2005 and 2006 our friends in the United Kingdom purchased an additional $142 billion of USD bringing their stockpile of dollars to $201.4?!?
Why?
Why would UK investors suddenly stock up on dollars when everyone else in the currency market is bemoaning the greenback's systemic problems?
Could it be that banks in the UK are just hiding the paper trail for friends in America who want to forestall a collapse in the dollar until after the election?
Of course, there could be another explanation for the irregular activity in cash inflows, (purchase of US Treasuries) that is, that we're still living in a "faith-based" Wonderland where our overseas trading partners are more than willing to buy an endless supply of worthless paper from a well-meaning Goliath who is busy spreading democracy to the "great unwashed" in developing world.
This is an utter fiction. The world is backing away from the dollar and whether one accepts the conspiracy theories or not, it's clear that the Federal Reserve is trying to cover its tracks and conceal its shadowy maneuverings.
There is nothing accidental about the crisis we'll soon be facing. Officials at the Federal Reserve and the US Treasury are fully aware of the devastating effects of massive trade deficits, increasing the money supply, and self-serving interest rates manipulations. They have set the country on the path to ruin as part of a broader scheme for remaking the global-system according to well-known precedents. In truth, the plan to modify the present system has a long history; going back to the 1980s when many of the same actors in government today were in positions of power in the Reagan administration. For the last 6 years they have been patching together their strategy; producing record deficits, unfunded tax cuts, mammoth government expansion, and doubling the money supply.
How can anyone argue that they did not understand the implications of their actions?
Did Greenspan know that by lowering interest rates in 2001 to 1.5% that he would sluice trillions of dollars into the real estate market producing the largest equity bubble in history? And, if he didn't know, then how is it that the Fed provides the statistics which state precisely how large the housing bubble really is?
Didn't Greenspan read the charts and graphs put out by his own organization?
And why did Greenspan support the shaky "no down payment", "interest-only" loans and ARMs which allowed "high-risk" people to qualify for mortgages when the Fed knew, according to their own figures, that when interest rates went up, foreclosures would skyrocket?
Of course he knew; they all knew. How could they NOT know? They produce the facts and figures themselves! It's all part of a madcap scheme to shift wealth to the top 1% and drive a wooden stake into the heart of the middle class. When Greenspan saw that doomsday was approaching, he got "cold feet" and bailed out. Now the scholarly Bernancke is left to supervise the economic meltdown and face the public scorn.
Trouble Ahead
Currently, the U.S. economy is held together by the slimmest of threads; literally duct-taped together by massaging all of the crucial economic numbers, pumping as much cheap fiat-currency into the system, and by "increasingly-suspicious" maneuverings in the futures markets. After the elections, they'll be no reason to conceal the rot at the heart of the system. After all, we are not facing an unforeseen catastrophe, but a planned demolition intended to increase the disparity between rich and poor to such an extent, that democracy, as we know it, will no longer be possible.
Nothing is more repugnant to America's ruling elite than the notion that every man, however broke and insignificant, can participate in our system of government.
The Federal Reserve's bloody fingerprints are all over our present dilemma. The privately-owned Fed has never operated in the public interest. By doubling the money supply in the last 7 years and keeping interest rates artificially low, the Fed has generated a $10 trillion housing bubble while, at the same time, ignoring a $800 billion trade deficit which is sucking up American assets and crushing American industry at an unprecedented rate.
This massive expansion of debt has increased the likelihood that an unexpected event, like a bank failure or a teetering hedge fund, will cause a major disruption in the markets sending tremors through the global system. Even if nothing explosive happens, the faltering real estate market will continue to swoon, consumer spending will dry up, and the fragile economy will crash to earth. In fact, this is taking place right now; retail sales are anemic, residential housing dropped a whopping 17% in the last 3 months, and economic growth shrunk to a measly 1.6% in the third quarter. The only thing keeping the economy from collapsing entirely is the sudden drop in oil prices which "conveniently" coincided with the midterm balloting.
This won't last. According to industry analyst Matthew Simmons the world production of oil may have already peaked setting the stage for a leveling-off period before the inevitable decline. Simmons has data to show that "world supply of oil has declined to 83.98 million barrels per day in the second quarter after hitting 84.35 million bpd in the forth quarter of 2005." Oil production is going backwards not forwards.
No one believes the price of oil is going down any time soon. As energy prices rise and the housing market falls; consumer spending, which added $825 billion from home equity into last year's economy, will continue shrivel. Thus, the Fed will have to make the tough-choice of whether to loosen the purse strings and lower interest rates to keep the economy sputtering along or ratchet up rates to attract more foreign investment. (Keep in mind that the real estate market is already in retreat, even though, the full force of the Fed's interest rate increases won't be felt for up to 6 to 12 months after they have been raised. The worst is yet to come)
Most economists believe that Fed Chairman Bernancke will be forced to lower rates sometime in 2007 to try to stimulate the economy and to affect a "soft landing" in the housing market, but don't count on it.
I believe the Fed is more likely to either keep rates the same or raise them to outpace the anticipated increases in Europe and Asia. The reason for this is simple; it presently takes nearly $2.5 billion per day to cover our current account deficit. To continue to attract foreign capital, US Treasuries must offer a higher rate of return than their foreign competitors. Now that the economies in Europe and Asia are growing; naturally their interest rates are going up accordingly.(to slow inflation) That means that the only way that America can continue to expand its debt, through the exchange of fiat currency for resources and manufactured goods, is by raising the return on Treasuries. And, that is probably what Bernanke will do, even though it will skewer the struggling American worker and further damage the US economy.
The secret of running the global economic system is to control the issuance of currency and, thereby, be in a position to expand one's own debt as one sees fit. The Federal Reserve must preserve its "dollar hegemony" if it wants to maintain the greenback as the world's reserve currency. To achieve that, the dollar must stay one step ahead of its competitors (higher rates) and prove that it is on solid financial footing. This is impossible now that the US economy is contracting, so Washington has decided to do the next best thing; corner the oil market. By controlling Middle East oil US policy-makers believe that they can force foreign nations to accept the debt-plagued greenback regardless of the faltering US economy. It is no different than any other extortion racket.
If the plan succeeds the dollar will remain the de-facto international currency. But it is difficult task and the escalating violence in Iraq suggests that the results are far from certain.
Corporate Colonization
"Free Trade" is the Holy Grail of neoliberalism. It is essentially a public relations scam intended to disguise the shifting of wealth, jobs and resources from either the middle class or the public sector to the corporate and banking establishments'. Despite the zealous cheerleading of Thomas Friedman and his ilk; the basic facts have been thoroughly examined and are not in dispute. Free trade has been a dead loss for everyone except the people for whom it was originally designed; the wealthiest and most powerful men on the planet. It has served them quite well.
For example, "since NAFTA went into effect in 1994, the US has lost over $4 trillion to foreigners through its trade deficit""During that 11.5 year period , foreign ownership of US assets skyrocketed an amazing 400% from $3 trillion to over $12 trillion" "Foreign interests now own 46% of US Treasury debt, 26% of corporate bonds, and 13% of US corporate equities. Now nearly 100% of on-going borrowings by the government are funded by foreign interests.""Foreign interests also control a majority of US domestic industries such as movies, music, publishing, metal ore mining, cement production, engine and power plant production, rubber and plastics and are major owners of US industries such as pharmaceuticals, chemical manufacturing, industrial machinery manufacturing, motor vehicles, and electronic equipment and componentsIn addition, the US has lost 3 million manufacturing jobs over the last decade, real wage growth after inflation has been essentially zero," and personal debt has never been higher. (Data from Thomas Heffner EconomyInCrisis.org)
Since 1980, 13,730 major companies have been sold to foreign corporations. We no longer produce what we need to sustain ourselves.
These facts may have a mind-numbing affect on the reader, but they make a point which is simple and unavoidable. The country is being colonized by corporate predators and its main assets are being sold off to the highest bidder. This rampant carpet-bagging is taking place in full view of the American public which still clings to the spurious idea that "free trade" is generally beneficial for all. It is not, and we are about to experience its full-effects as America's "straw-house" economy topples from its loss of manufacturing-capacity and its staggering account imbalances.
"Foreign investors now own 46% of US Treasury debt" over $3 trillion dollars! The Federal Reserve and their corporate she-wolves are planning to prolong the hemorrhaging of US wealth as long as possible extracting every last farthing from the prostrate corpse of the waning republic.
Now, we are at the brink. Energy prices will go higher after the elections, manufacturing will continue to flag, and the housing Zeppelin is drifting towards the high-tension wires. To make matters worse, the American consumer; the "engine for global economic growth", is drowning in a sea of personal debt.
There's no place to go but down.
Every part of this bleak picture was anticipated by its architects. That's why they hastily slapped together the requisite legislation for a modern-day police state. After passing the Military Commissions Act of 2006 (which allows the president the arrest whomever he chooses without charges) and overturning the Posse Comitatus Act (the president is now free to deploy the military within America against US citizens) the Bush administration is as ready as they can be. Apparently, they feel like they can manage the public's shock and outrage with detention camps and water cannons.
We'll
www.counterpunch.org/whitney11092006.html