Economy’s turnaround: (part 1)

by PIM of SPAIN | March 1, 2009 at 02:44 am

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From a Macro-economic point of view: Our society is rotten to the bone. All was bogus the last two decennia, we have been living beyond our means as a result of the debt-fuelled consumer binge. Borrow and spend today, pay tomorrow, whether never ‘tomorrow’ would come. But now this tomorrow ‘better-called’ day of reckoning has come. Its arrival was clear to me at the turn of the century; it wondered me that it took that long. Policymakers have no idea where they are talking about or do understand what is going on, let alone knowing what should be done to turn the economy around.
This is very frightening!

A request to policymakers, please give liquidation a chance!

The majority of those in charge are nuts and follow their leader like sheep. Apart from the fact the last economic depression took place about 80 years ago most of today’s economists don’t even have a clue, as they should!
This crisis was already in the making for over ten years and no authority had the courage to apply self-discipline and proceed with prudence in order to save our society from financial disaster. All those derivatives, hedge funds and structured products aided to inflate the bubble and were an open invitation for a tremendous tragedy to happen. They all jumped on the bandwagon and lined their pockets with fat commissions and bonus-payments, a process that was set off by the crooks from Wall Street, and the greedy bankers whom should have known better, but greed took the upper-hand, letting them believe this was the new economic era in which things were different. The sky became the limit, which never is, as educated well thinking individuals do know.
If it goes the way Japan went and still is going, we will have this economic crisis with its nasty side effects for at least the next 20 years upon us. Anyway it will never ever be the same again as before. People now are scarred to death and starting to pay down their debts and thereafter will continue to save their money for bad times that certainly are coming. Don’t be foolish by thinking this will be over in a couple of years as Governments and policymaker let us believe. Better to prepare for the worst and hope for the best. At last it will be a far more sober and modest society, than we know.

Consumer confidence is at an all-time low. Investors don't have much confidence either in this economy that would start to grow again in 2010! After the banking system has become stabilized says Mr. Bernanke of the FED! This is nonsense. Nobody knows when the economy will begin to grow in earnest again, and if it begins to grow it won't be because the banking system is stabilized. You can stabilize a ladder and prices. But stabilizing a shoddy bank won't help the economy grow. For that you need healthy banks. And the only way a bank can be healthy is if it holds healthy assets and earn decent money when it makes a loan.
Banks aren't making loans now because they don't know who will be able to pay them back, besides it is not known what the collateral is worth, until the process of price stabilization has taken its course. But this will not happen until deflation has run its course, after prices have come down to their lowest level. That process could happen quickly, or it could take years, depending on intervening forces as bailouts, stimulation packages, etc. Company by company, country by country, the whole world will first slide into depression.
Nationalization of banks is the better approach, by taking out the toxic assets, which is already in progress, will take time. Nearly the entire banking sector is insolvent. They don’t have any money to make loans. It might become a Japan-like slump that runs by now for 2 decennia! The banking system is in shambles. The process of deflation exposes the weak foundations of the banks’ assets. Until this process is completed the economy will not going to function again. First the banks have to be cleaned out, instead of being stabilized! Better to let the market doing the job, which already is occurring. It is wrong to use taxpayers’ money to bail out insolvent banks. It has never worked in the past and it will not going to work this time. Just let toxic banks go broke is my suggestion. Let them fail let them go defunct let them be liquidated. Instead of robbing innocent people of their savings, the establishment must allow the weak banks to go bust. All what is needed to do by Governments is to protect the bank’s depositors that they will not lose anything. Then the turnaround of the economy will start, and show far more quickly improvements we are desperately waiting for.

These will speed-up the process. Surviving banks could buy up the sound assets and still come out stronger. This approach is much better than the currently (in) actions of the establishment, which only is making matters worse and prolonging the pain. Moreover, by printing insane amounts of paper money, policymakers are setting everyone up for an inflationary nightmare! One thing is for sure… before this drama ends, the viability of the U.S. dollar, as the world's reserve currency will come under question. When the U.S. dollar starts to implode, hard assets will go through the roof. Money printing is the wrong medicine as the depression of the ‘30s learned under the Weimar Republic in Germany when commodity prices went ballistic.
Give the market the chance and intervene as little as possible, this seems doing a better job, as often is experienced. (Will be continued).

Previous publication about this subject:
http://my.nowpublic.com/world/economic-crisis-ends-depression

http://my.nowpublic.com/world/economic-depression-s-consequences

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Uwe Paschen

at 03:15 on March 1st, 2009

Yes, I would say you are correct we may very well have this crisis for the next 20 years and then we will have the environmental disaster to deal with to the point that we may actually not ever get out of the downward spiral.

PIM of SPAIN

at 03:41 on March 1st, 2009

Yes Paschen it s very worrying, I would like to publish nicer stories, but reality obliges me to do what I’m writing. The end of all this is far off, policymakers are talking together without coming to the conclusion that they should not do much. And concentrate on depositors’ protection and that of the environment.

tlreed

at 23:51 on March 1st, 2009

Great story Pim, but I wonder if the governments will be able to protect the bank's depositors if they let more banks fail. It will not take long before people loose faith in the banks altogether and amke a collective run-on-the-bank so that everything is in cash or gold. Can the governments of the world "print" enough money to cover this eventuality?

Joey Live

at 03:16 on March 1st, 2009

can't wait for the second part...

PIM of SPAIN

at 03:43 on March 1st, 2009

thanks the second part is in my mind and will concentrate on business economics. Like the car industry bailouts etc.

djermano

at 05:48 on March 1st, 2009

I think there is something else going on. Banks were failing big time during the Reagan Administration. He had more bank failures than any sitting President ...more than 2,000. Bush Senior was not far behind...until Clinton came, and although he had many bank failures as well...the problem reversed and we had a surplus for the government.

This told me Bank CEO's covered up their losses to the public. By the way this information can be found in FDIC Bank failure records....or my article on The History of US Bank Failures. They covered for each other...with a sense of hope for the future, and things did get better from Bill Clintons policies.

http://my.nowpublic.com/world/history-united-states-bank-failures...

They had a trust factor....But then GW Bush came in and stole the election...and then 911 happened.....and the lie to invade Iraq and Afghanistan came. There is real significant proof 911 was an inside job commited by Bush planners. This information is not difficult to find on the internet. The WTC had charges planted inside to make it fall as in a demolition. Building 7 imploded as well, while not having a plane hit it, and this fact was covered up by not mentioning it in the 911 Commission Report. The so called plane that hit the Pentagon left only ONE 5 foot diameter hole...and so where are the other holes that should have explained where the engines hit the walls on each side of the planes entry? Things do not add up. Many Call and Put Options were exercised that day, by the very banks who are on the Bank Bailout Bandwagon.....they would know who did those trades...which would lead to them having information on pre knowledge of 911 happening.

This Crisis is about 911 and the bankruptcy of Enron Corporation. NYC financial district was attacked by Pro Bush CEO Bankers and government Bush planners upon US New York American Citizens and other Banking Institutions. The attack destroyed SEC insider trading scams and information evidence on Enron's complicity to Citigroup.....most of it being stored in Building 7 the Headquarters OEM....Office of Emergency Management where politicians, and rescue leaders operate from in the event of an emergency. Yet Rudy Guiliani was never in the building that day. I wonder why? Because he knew it was going down.

The so called trust and working together has gone up in smoke...because of 911. It has nothing to do with the derivatives , and hedgefunds, because Bank CEO's were known to work through those issues....as they did with during the Reagan years.....but 911 changed that trust......totally wrecking and smashing it to hell.

And what happens? Nobody conducts investigations, bank CEO's are rewarded with 700b dollar bailouts, no one is fired, and it looks to me....they paid Obama off to keep his mouth shut....and if he does....they will assure the passage of his 789b stimulus package, which he got!.

We think Rod Blagojevich is a bad guy for trying to sell Obama's Senate Seat....but the Bush people have done far worse and nothing happens to them. Dick Cheney even admitted to authorizing war crimes of torture on terror suspects in Abu Ghraib in Iraq and to those detainees in Guantanimo Cuba.....And still nothing from the Obama Crusaders.

The trust is gone....it is not coming back.....and to think Obama's stimulus is going to work is shoveling worthless money into a furnace.

Foreign Governments know the 911 story from truthers. I have seen documentaries from China News showing they are aware of the demolitions that happened that day...Yet we go on this false economic recovery trail.....just as we primed and got fu&#ked to go off to War against Iraq....who had nothing to do with 911......killing over 1 million innocent people...including our own soldiers.

It is the biggest crime of the Century....and instead of trying to bring trust back again, we are trying to buy people. It won't work....and the people better wake up. The only way to make it better is by taking the medicine in convicting Bush and Cheney for Crimes against America, and War Crimes to the People of Iraq and Afghanistan. Those wars were about taking control of their Oil resources for American markets. Already they have two pipelines from Iraq to Israel, where Israel sells the Oil to the US below market Opec prices...for the Oil Companies profits to keep the war pressure on in the Middle East.

If we want to see a real change ...our world countries need to step up and say they want investigations to 911...because really when we have justice brought to that....we will reclaim our markets again....The economy will improve.

Will Obama? No. He is an impediment not a solution. I think it will be longer than 20 years. If not the literal END. Once Obama's funding runs out.....what can they do?

Rev. Jermano

PIM of SPAIN

at 07:24 on March 1st, 2009

Hi Jermano,

Your message is very disturbing. I don't know the details as you do, otherwise I would be able to comment. Whatever is influencing society the politicians are just a bunch of receivers with very little or no brains. Of course Bush 2nd was a disaster together with Greenspan they have for sure initiated this credit crisis bubble. The dept of the US is that large that never ever it can be paid back. What they are doing is inflating the money by running the printing presses full speed and we as all other people have our savings flooded down the drain. It are very scrupulous individuals that I can agree with you. 20 years or more. Most likely a full blown global disaster will happen before we do have a chance to get out this mess.

Thanks for your link advice. Pim

tlreed

at 00:16 on March 2nd, 2009

So you actually buy those conspiracy theories? I have a bridge to sell in Brooklyn, cheap.

You are right that Obama is an impediment to you plan, not only that, but you can be assured that he would use the Presidentail Pardon in a heartbeat if Bush and Cheney were ever to be indicted. Remember Nixon.

Obama might not be able to pull us out of this one, but at this point there is not much anyone can do, even the President of the United States. The best thing he can do is to give people Hope, and that is exactly what he has promised to do and what he has been able to deliver. As far as Obama's policies, it is just like Franklin D. Roosevelt said "It is common sense to take a method and try it. If it fails, admit it frankly and try another. But above all, try something."

These are truly desperate times, but it is also a great opportunity to see beyond the quest for the almighty dollar and renew the search for our soul. How will future generations look at this time, will they see a bunch of cowards clinging to pieces of paper with clenched fists, or will they see a people that realized their true worth and threw the worthless paper to the ground and moved forward to a new day.

Hermes (not verified)

at 00:56 on March 2nd, 2009

Sorry, you can't be right about the bridge, I've owned the Brooklyn Bridge since the early '70's when a guy in NY sold it to me for $1......

djermano

at 04:01 on March 2nd, 2009

Ok tlreed, you believe the conspiracy from Bush....so answer the questions....about 911.

And you confirm that Obama is as much a liar as the rest of the Republican pack. I stand all amazed because you are asking me to buy a bridge I freaking paid for to have built.....with my tax dollars.

...will they see a bunch of cowards clinging to pieces of paper with clenched fists, or will they see a people that realized their true worth and threw the worthless paper to the ground and moved forward to a new day.

I like analogy.....because you can't see them as clinging to the money after the 700b Bailout, and the 789b Stimulus? What am I missing? Obama is no Roosevelt.....he's Bush's butler as Bush reassigns the White House with Orders to keep things the way he has them... No real exit from Iraq, increase troops to Afghanistan, and no indictments to their lies and crimes.

Rev. Jermano

tlreed

at 18:38 on March 2nd, 2009

I believe that it does not matter at this point who was behind 911, that is for historians to decide. There are too many "facts" out there to come up with a dinfinitive answer, but the point is moot at this point in time. The event already enabled Bush to invade Iraq, and from that moment the fate of the US economy was sealed. I dont care what happens to Bush, he is gone and is not coming back. We need to move on.

"Obama is no Roosevelt....." Let me guess, you knew Roosevelt and he was a friend of yours. In any case, the damage has already been done. This financial crisis has been building up for decades, and is a worldwide problem. Obama is a politician, nothing more, nothing less. If the American people didn't want a 789b Stimulus, if the Senate didn't want it, if the House did not want it, there would be no 789b Stimulus. Obama's job is to give people hope. The economy is much greater than he is, truly 789b will not save the economy, but the people hope it will and that hope is worth 789b. At this point I believe the economy is unsavable, it is not a matter of if, but how long before the dollar is worthless and the US government bankrupt (the largest sub-prime loan of all time). At worst Obama is speeding up this process with the Stimulus and the wars in Iraq and Afganistan that he inherited, but speed is what I hope for. I do not want the world to be in a recession for the next 20 to 50 years, lets get it over with and make the tough decisions today so that we can enjoy tomorrow. No one is saying it will be easy, but what great changes are?

PIM of SPAIN

at 01:02 on March 3rd, 2009

Yes tleerd you're right. Let's move on. Get through the mess a quickly as possible. However Politician's have their own agenda and their's is so far not contributing for a quick resolve. People are going to face very tough and hard times, millions of jobs are on he rope before it will be over, better to spend the billions on those sufferers.

The economy has to be cleaned out up-side down. We are not dealing with a recession but a severe depression. Could be even worse as the 30s. (Hope I'm wrong). But with all this democratic intervention count with at least 20 years. Look at Japan since 1989 not a glimmer of hope. People will adapt to their environment, so in Japan a quick fix is not anymore in the cards. A prolonged disaster, that could have been avoided, if the politicians had not intervened and had left the work to be done by Mr. Market.

djermano

at 04:04 on March 3rd, 2009

Tlreed you are wrong it does matter who did 911. It matters big time....because if we don't find out, then who are we as a nation? A nation who goes to war on a lie, subjecting thousands of US soldiers death on something that is not true, not to mention the million lost innocent lives in Iraq as if it doesn't matter speaks volumes about your disregard and disresepct to America. Put it this way......you want everything to be pushed aside, so there is a better tomorrow. Sorry ...life is not like that.... Because pushing it aside assures there will be no tomorrow. Pretty brilliant explanation of hope you have in Obama when you know his stimulus is not going to work....sounds more like hopelessness than hope Obama is delivering.

The idea of a depression is more of a mind set, than a reality... I think what is depressing is the fact people sense they fell for the lies of Bush....and how could this happen to America. But in time the people will come together and see they have more than the Bush crimes to deal with, as they package the new America together....You see there are a lot of other crimes that precede the Bush crimes.....and the argument can be had that because we didn't take care of those crimes in bringing Justice...gave Bush and some of those other crimes its sense of approval... We have a Vietnam War....that no one took responsibility for... We had a Mai Lai massacre....that no one took responsibility for...but those people in that village are as dead today as they were then....and no justice from America.... America plays the COP in the world....yet it is truely a bad cop...... Think of that as we beckon the worth of building a society that is based around an out of control Military Complex....No one wants to continue down that road, and yet the road that is beckoning by following the ideals to bringing Justice has not been walked upon.. Even Harry Truman should be impeached for his horrific war crimes to thousands he killed in Japan......We need to recognize those bad things, and place a verdict even though they are dead and gone.....in order to settle the issue toward whom and what we are becoming. It is a necesary step for anyone, and any group, and any nation. If America truly is the good leader in the world......that is a tremendous responsibility in seeing the honesty to that, and fulfilling that obligation.

Economies do not grow around ruthlessness, and no honesty. The soul of America needs to shine honest embers...and waves of grain...If there is ash and the precepts of blood and agony from crimes that are not brought to the mantle of Justice.....the mood and depression, and toxic assets are the result.

We as a people first need to deal with this......if we are to move forward.....Anything other, than facing this reality is false hope.......as Obama is spreading and is clearly defining. Obama is the Great False Hope.

I am sure of this......precept.

Rev. Jermano

God Bless

PIM of SPAIN

at 04:55 on March 3rd, 2009

Thanks Rev. Jermano for yr vision and thoughts. The problem is: We, you and me and many more good willing folks cannot change the corrupt Government nor bring them to justice for their ugly deeds. In a democracy the people do vote. Since the not informed mass has always the majority we cannot change anything. I agree that injustice should be corrected. But life does not work that way unfortunately.

What do you think of the killing of Diana princess of Wales. Or the famous politician PIM FORTUYN of The Netherlands who could have been of help to you and us to change the world, he was murdered by the establishment because of fear to unearth their corrupt practices. As he would have done, once installed as President which was almost 100% sure to happen!

We have to go on with live as it is, and try to make the best out of it by informing as many people as possible. But their fixed mind set most of the time cannot be changed.

djermano

at 05:31 on March 3rd, 2009

Thanks PIM.....I am aware and so is the Lord.....He gave us all the freedom to choose. Even the corrupt in government had that choice....I would think he gives them plenty of opportunity to confess, and bring themselves to see what they have done. I am no advocate of Democracy....in fact Democracy would have us believe we would vote the Lord out of office...which is preposperous....and knowing it was democracy that killed him....In fact it is a good thing the US is crashing....it means the Lord is on his way...

No politician is of help to me here nor there...Discovery of their lies and deceit is nothing new, and I am not surprised... It is why I don't join them........emphatically it is impossible for me too.....I have one destiny and its with the Lord... Count me as one who advocates for the Kingdom of God.....not the New World Order or the US government.

Rev. Jermano

PIM of SPAIN

at 06:23 on March 3rd, 2009

Like Churchill once said the worst way of Governing is by Democracy, however there is nothing better. From something bad always a good thing is born is the saying, hopefully your wish will be fulfilled......

Either way the world will become less materialized and hopefully people will become more concerned with each other as result of this tremendous crash. We aren't even half way through today.