Thursday, April 16, 2009

Back to the Future

One doesn't want to be a wet blanket, and one doesn't want to presume that the Chair of the Federal Reserve and the President either don't know what they are saying or are hoping that you will believe what they know to be nonsense, but I have been unable to suppress my incredulity on hearing President Obama say the end of the recession may be in sight. Then the Ben Bernanke hologram spoke up too about the light at the end of the tunnel and I have been in a daze ever since.
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Our leaders acknowledge the pain that will have to be borne but we will come out the other side and pretty soon too they say. In his weekly grumble Jim Kunstler argues the one point I've not heard debated by the people who says things are returning slowly to normal. In his blog "Clusterfuck Nation", Kunstler asks the question with no answer:
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Does it mean that American "consumers" (so-called) are awaited momentarily in the flat-screen TV sales parlors with their credit cards fanned-out like poker hands, ready for "action?" Not too likely with massive non-performance out in cardholder-land, and half the nation's electronics inventory wending its way onto Craig's List.
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Are we expecting more asteroid belts of new suburbs carved in the loamy outlands of Dallas and Minneapolis, complete with new highway strips of Big Box shopping and Chuck E. Cheeses? Go to banking's intensive care unit and inquire (if you can) among the flat-lining production home-builders and the real estate investment trusts on life support when they expect to rev up the heavy equipment.
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The idea that we're about to resume the insane behavior that induced the current epochal malaise of economy is so absurd it will only be heard in the faculty dining halls of the Ivy League. And if America is not picking up where it left off eighteen months ago -- the orgy of spending future claims on wealth unlikely to accrue -- then what is our destiny?
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It seems our destiny as a middle class is to shrivel up, burdened with left over debt, deprived of jobs and health insurance, the public treasury raided for short term props that end up recycling our credit into the hands of the banksters that gambled our futures away. It is bizarre that this is happening in front of us and we have no response. None.
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The banksters are claiming to have profits to show for the first quarter of this year and their profits have come on the heels of billions of dollars in payouts from the public treasury. Well, there's a trick- give me ten thousand dollars and I will find it easy to say my investments have returned a return higher by ten thousand dollars. At the same time these banksters got payouts from AIG under the table and they are now using that money to announce cheerfully they will pay back some of the bailout with their "profits." And the stock market reacts by going up and the President intones cheerfully that the end of the recession is in sight. And let's not forget the money AIG payed out secretly to try to cover some of it's impossible obligations, was tax money from the Treasury!
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On Bob's Sanity Blog, Bob O'Brien calls it redistribution of wealth, the former wealth of the middle class being slowly but inexorably redistributed to the New York Banksters. O'Brien says that for the time being the bail out monies paid to the banksters get's hoarded making the money we the people hold, become a smaller portion of all the money in circulation, thus debasing it's value. Then by leaking the hoarded money back into the system when deflation has killed asset value, the holders of our tax dollars get our assets at bargain basement prices:
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What happens when that unknown trillions of dollars lent/scammed goes into circulation - provided it ever does as anything but buying deflated assets for pennies on the dollar? What is the only result of increasing the number of dollars in circulation by double digit percentages? With stagnant or shrinking GNP, isn't devaluation of the currency the only outcome possible? More dollars backed by the same or smaller GNP. Hmmmm.
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I think we'll continue to see an effective shrinking of the money supply in use, even as all the pundits and economists pretend that's mystifying or difficult to grasp. My hunch is that the end run is to crunch liquidity via this tax and hoard mechanism to the point where asset values collapse over time (deflation), and then those hoarding all the dollars can buy assets for pennies on the dollar; sure, there's some inflation at that point, but that is all consistent with debasing the currency. As in the Depression, one must crush the middle class in order to confiscate their wealth, and that doesn't happen overnight. It takes many years before someone is willing to sell their house to feed their kids today. Redistribution takes time, and requires patience.
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Maybe I'm just paranoid. But that's exactly what happened in the Depression, and I see the signs in this as well - lawlessness on the part of the money trust, a wholly captured government kowtowing to the will of a few NY interests, a broken market system, plunging home values, constrained money supply via tax and hoard....
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The problem with this scenario is that it leaves us no way out and thus it is unpalatable to contemplate. In the same way that no one seems to want to acknowledge that continuing the great debt spiral is no way out of this crisis, no one wants to envisage generations of self improvement being wiped out by a cadre of Goldman Sachs alumni in government. It seems as reasonable to me as anything the dying mainstream media offers as a vision for the future, and much more plausible than President Obama's rosy view of a return to the past.

2 comments:

The Traveler said...

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Pete R. Pan said...

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