(8 am. – promoted by ek hornbeck)
This is not a joke.
The U.S. government and the Federal Reserve have spent, lent or committed $12.8 trillion, an amount that approaches the value of everything produced in the country last year, to stem the longest recession since the 1930s.
Yes. According to Bloomberg News tally, 90 percent of America’s GDP is now promised toward filling the financial black hole.
New pledges from the Fed, the Treasury Department and the Federal Deposit Insurance Corp. include $1 trillion for the Public-Private Investment Program, designed to help investors buy distressed loans and other assets from U.S. banks. The money works out to $42,105 for every man, woman and child in the U.S. and 14 times the $899.8 billion of currency in circulation. The nation’s gross domestic product was $14.2 trillion in 2008.
Hat tip two roads in OND.
Our leaders in Washington keep throwing good money to down the black hole as if they were making sacrifices to an angry volcano god.
This economic pit is threatening to consume our entire economy, but still none of the high priests who worship at the fiery furnace of American capitalism will admit their god is dead. They have sacrificed even the value of the dollar to the pit, but that just makes the chasm grow larger. Our dollar is now so comprised the nations of the world no longer wish to use our dollar as a reserve currency.
Meanwhile, more money flows into Wall Street while Americans are sacrificing their jobs, their homes, their healthcare, their children’s future, the future of this country to preserve American capitalism. And for what?
Every excuse from Washington to why we cannot afford single-payer healthcare, better schools, better transit, renewable energy programs, high speed rail, and so on has been proven by this financial meltdown to be a lie. They money was there all along, but the high priests of capitalism reserved the benefits of good healthcare, schools, and what not for themselves.
Now, there is only 10 percent left of the GDP to throw into the volcano… down into the deep, black hole. Will another few trillion make the angry volcano god happy? The high priests do not know for sure.
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If we were devoting this $12.8 trillion in digital fiat money to modernizing power grids, public transport, green energy production, and education and to providing universal health care–i.e., to stimulating the real economy of goods and services–there could be some reward at the end of the rainbow.
But this $12.8 trillion is merely being pumped into the balance sheets of high rolling gamblers who made bad bets in the $1.1 quadrillion dollar Derivatives Big Casino, of which somewhere between $58 and $64 trillion (i.e., 4 times the U.S. GDP) of the bets were on credit default swaps, including naked credit default swaps with no underlying capital assets at all–just notional values measured by index numbers. The $12.8 trillion dollars in bailouts and guarantees are intended to cover these gambling losses of the looting class.
And so the looting continues. Meet the new finance sector bosses and regulators–the very same as the old finance sector bosses and regulators. This will all end very badly.
The Brits seem inclined to do the same thing: pump fiat digital money into the system to avoid deflationary collapse, thereby of course essentially monetizing sovereign debt–just like Argentina or the Weimar Republic. While pumping trillions of dollars and pounds into the financial system to bail out the losing gamblers, at the same time the U.S. and U.K. are calling for relatively modest “stimulus” packages of a few hundred billions of dollars or pounds in feeble efforts to try to prevent the collapse of the real economy.
Germany and France, whose finance sectors are not in nearly so bad shape as ours, but whose real economies are under tremendous pressure because of the collapse in world trade, seem on the verge of panic, for they realize that the trillions of dollars in digital funny money underlying the U.S. bailout efforts inevitably will dilute and likely rapidly devalue the U.S. dollar, the current international standard of value. A collapse in the dollar will make it even more difficult for German and French (and Chinese and Indian) industry to recover and recapture export markets, to boost demand for commodities, and to revive demand for industrial and agricultural goods.
While the Germans, especially, express doubts about the utility of “stimulus” in addressing the current crisis, they seem really to be doubting primarily the efficacy of the deficit spending required by the bailouts. We will likely see clarifications of the German position in this week’s G20 meeting in London.
Absent a miracle in London, the G20 countries will stumble along on separate courses mapped out to serve their individual national interests. It will be a race to the bottom for one and all, as each tries to outdevalue the others in order to give a boost to domestic industries and national exports–while at the same time reducing inflows of imports and and trying to reduce deficits in their balance of payments accounts. A simultaneous return to old-fashioned mercantilism by one and all, together with multiple rounds of competitive devaluations, may end up making the disastrous aftermath of Smoot-Hawley protectionism in the 1930’s seem like a golden age of trade and prosperity by comparison.
So what can we mere innocent bystanders do? My personal choice (having pulled out of the stock market in 2007 a few months before the peak and having moved everything to money market cash) is to diversify into a few money market and insured bank accounts. And now I’m personally stimulating the economy by buying all of the “stuff” that I think I’ll need in the next few years while I can still afford it (i.e., before the dollar completely tanks as a measure of value). Examples: comfortable shoes, clothing, iPods and accessories, and radios to spread throughout the house. I’m planning more foreign travel than usual in the next year, when tour prices are down and the dollar will still likely be worth something. I’m looking at the real estate market closely with an eye to buying a rental property perhaps in early 2010, when prices may approach bottom but before hyperinflation sets in. This year may even be a good time to buy a new car–especially if Congress passes a tax bill granting credits for buying hybrid or fuel efficient vehicles and while desperate car companies are offering huge discounts.
When will this dollar devaluation and accompanying domestic inflation–double digit and perhaps even hyperinflation–hit with full force? It is hard to guess. The CPI is already rising, though with a collapsing economy we should still be in a deflationary spiral. The trillions of dollars in fiat digital money may already be having an impact in driving down the perceived value of the dollar. I would not be surprised to see substantial devaluation of the dollar and substantial domestic inflation by the end of 2009 (except, perhaps, for home prices) and double digit inflation by the end of 2010.
Finance capital seems essentially to have co-opted the political structure in the U.S. The finance sector does not serve the public; the public serves the finance sector.
And so the looting will continue until further notice.
Looks like Tom Ferguson nailed it back on March 25…
We have a serious problem.
in search of an alternative.
Searching…..