Thread: 30 reasons for Great Depression 2 by 2011

30 reasons for Great Depression 2 by 2011

New-New Deal, bailouts, trillions in debt, antitax mindset spell disaster

By Paul B. Farrell, MarketWatch
Last Update: 7:19 PM ET Nov 17, 2008

ARROYO GRANDE, Calif. (MarketWatch) -- By 2011? No recovery? No new bull? "Hey Paul, why do you keep talking about a bigger crash coming by 2011?" Readers ask that often. So here's a sequel to my predictions of 2000 and 2004, with a look three years ahead:

First. Dot-com crash

We pinpointed the dot-com crash at its peak, in a March 20, 2000 column: "Next crash? Sorry, you won't see it coming." Bulls-eye: The dot-com bubble popped. The economy went into a 30-month recession. The stock market lost $8 trillion. And today, over eight years later, the market is still roughly 40% below its 2000 peak. See previous Paul B. Farrell.

Factor in inflation and the average stock has lost well over 50% of its value. Stocks have proven to be a very big loser, a bad investment for Americans, thanks to Wall Street's selfish greed, plus the complicity and naiveté of politicians, press and public.

Second. Subprime meltdown

We reported on warnings of another crash coming as early as 2004, wrote a sequel, also titled "Next crash? Sorry, you won't see it coming." Yes, we were early, but in good company. We wrote many more warning columns. Few listened.

Subsequent events, notably former Fed Chairman Alan Greenspan's admission of his failures in congressional testimony, prove that if he and other Reaganomic ideologues weren't so myopic and intransigent about proving their free-market deregulation theories, they could have acted earlier and prevented today's colossal mess. Instead, their ideology kept the bubble blowing, delayed the pop, making matters worse.

So once again, as history proves over and over, ideology trumps common sense, reality and the facts. Greed drives ideologues to blow bubbles. They pop. Crashes happen. The public is collateral damage.

Third. Megabubble cycles

We also detailed the broader, accelerating macroeconomic sweep of cycles last summer in columns like "20 reasons new megabubble pops in 2011." We summarized a long list of major warnings from financial periodicals -- Forbes, Fortune, the Wall Street Journal, Economist -- and from the voices of Warren Buffett, Bill Gross, a sitting Fed governor and a former Commerce secretary. Multiple warnings "hiding in plain sight," beginning with a Fed governor warning Greenspan in 2000 about subprime risk.

But the big shocker came from the new Treasury secretary two years before the meltdown: Bloomberg News reports that shortly after leaving Wall Street as Goldman Sachs' CEO, Henry Paulson was at Camp David warning the president and his staff of "over-the-counter derivatives as an example of financial innovation that could, under certain circumstances, blow up in Wall Street's face and affect the whole economy."

Yes, they knew. And still both Paulson, a Wall Street insider, and Greenspan's successor, Ben Bernanke, a Princeton scholar of the Great Depression, stayed trapped in denial and kept happy-talking the public for months after the meltdown began in mid-2007. Get it? While they could have put the brakes on this meltdown years ago, our leaders were prisoners of their distorted, inflexible views of conservative Reaganomics ideology.

As a result, once again the "best and the brightest" failed America and now they and their buddies in Washington and Corporate America are setting up the Crash of 2011.

Now it's time for my 2008 update, a look into the future where things will get far worse during the next presidential term. And given human behavior, especially in the deep recesses of Wall Street's "greed is good" DNA, it seems inevitable that no matter how well-intentioned the new president may be Wall Street and Washington's 41,000 special-interest lobbyists will drive America into the Great Depression 2.

30 'leading edge' indicators of the coming Great Depression 2

Every day there is more breaking news, proof Wall Street's greed is already back to "business as usual" and in denial, grabbing more and more from the new "Bailouts-R-Us" bonanza of free taxpayer cash and credits, like two-year-olds in a toy store at Christmas -- anything to boost earnings, profits and stock prices, and keep those bonuses and salaries flowing, anything to blow a new bubble.

Scan these 30 "leading indicators." Each problem has one or more possible solutions, but lacks unified political support. Time's running out. We're already at the edge. Add up the trillions in debt: Any collective solution will only compound our problems, because the cumulative debt will overwhelm us, make matters worse:

America's credit rating may soon be downgraded below AAA

Fed refusal to disclose $2 trillion loans, now the new "shadow banking system"

Congress has no oversight of $700 billion, and Paulson's Wall Street Trojan Horse

King Henry Paulson flip-flops on plan to buy toxic bank assets, confusing markets

Goldman, Morgan lost tens of billions, but planning over $13 billion in bonuses this year

AIG bails big banks out of $150 billion in credit swaps, protects shareholders before taxpayers

American Express joins Goldman, Morgan as bank holding firms, looking for Fed money

Treasury sneaks corporate tax credits into bailout giveaway, shifts costs to states

State revenues down, taxes and debt up; hiring, spending, borrowing add even more debt

State, municipal, corporate pensions lost hundreds of billions on derivative swaps

Hedge funds: 610 in 1990, almost 10,000 now. Returns down 15%, liquidations up

Consumer debt way up, now at $2.5 trillion; next area for credit meltdowns

Fed also plans to provide billions to $3.6 trillion money-market fund industry

Freddie Mac and Fannie Mae are bleeding cash, want to tap taxpayer dollars

Washington manipulating data: War not $600 billion but estimates actually $3 trillion

Hidden costs of $700 billion bailout are likely $5 trillion; plus $1 trillion Street write-offs

Commodities down, resource exporters and currencies dropping, triggering a global meltdown

Big three automakers near bankruptcy; unions, workers, retirees will suffer

Corporate bond market, both junk and top-rated, slumps more than 25%

Retailers bankrupt: Circuit City, Sharper Image, Mervyns; mall sales in free fall

Unemployment heading toward 8% plus; more 1930's photos of soup lines

Government policy is dictated by 42,000 myopic, highly paid, greedy lobbyists

China's sees GDP growth drop, crates $586 billion stimulus; deflation is now global, hitting even Dubai

Despite global recession, U.S. trade deficit continues, now at $650 billion

The 800-pound gorillas: Social Security, Medicare with $60 trillion in unfunded liabilities

Now 46 million uninsured as medical, drug costs explode

New-New Deal: U.S. planning billions for infrastructure, adding to unsustainable debt

Outgoing leaders handicapping new administration with huge liabilities

The "antitaxes" message is a new bubble, a new version of the American dream offering a free lunch, no sacrifices, exposing us to more false promises

Will the next meltdown, the third of the 21st Century, trigger a second Great Depression? Or will the 2007-08 crisis simply morph into a painful extension of today's mess to 2011 and beyond, with no new bull market, no economic recovery as our new president hopes?

Perhaps some of the first 29 problems may be solved separately, but collectively, after building on a failed ideology, they spell disaster. So listen closely to "leading indicator" No. 30:

At a recent Reuters Global Finance Summit former Goldman Sachs chairman John Whitehead was interviewed. He was also Ronald Reagan's Deputy Secretary of State and a former chairman of the N.Y. Fed. He says America's problems will take years and will burn trillions.

He sees "nothing but large increases in the deficit ... I think it would be worse than the depression. ... Before I go to sleep at night, I wonder if tomorrow is the day Moody's and S&P will announce a downgrade of U.S. government bonds." It'll get worse because "the public is not prepared to increase taxes. Both parties were for reducing taxes, reducing income to government, and both parties favored a number of new programs, all very costly and all done by the government."

Reuters concludes: "Whitehead said he is speaking out on this topic because he is concerned no lawmakers are against these new spending programs and none will stand up and call for higher taxes. 'I just want to get people thinking about this, and to realize this is a road to disaster,' said Whitehead. 'I've always been a positive person and optimistic, but I don't see a solution here.'"

We see the Great Depression 2. Why? Wall Street's self-interested greed. They are their own worst enemy ... and America's too.

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The main cause for this depression, and the rolling recession since WWII, is a fiat based currency, coupled with fractional reserve banking.

It will do what the depression of the 1930s did. It will consolidate wealth into fewer hands, and wil be used as a propadanda piece to forward global central banking, and the tearing down of borders and national sovereignty, all in the name of peace, and un-be-knownst sevitude.

As Patrick Henry said, "Is life so dear, or peace so sweet; as to worth the price of chains and slavery?"

Until we throw off "privately" owned central banking, and restore the power of the issuance of our money to the people, through Congess as laid out in Article I Section VIII of the Constitution, this will be nothing more than whole vine of thorns in the people"s side.

And all has but to do, is look at the history of the nation under the yoke of the Federal Reserve for the last 95 years. It was promised to W. Wilson by the minions who promoted the reserve and clandestinely passed it through Congress on Dec. 23, 1913, that the reserve would stabilize the economy and money of America. It has done nothing of what it promised. For it's owners or "shareholders" as they are called, have no alleagence to America, but only to that of profit, and every dirty slimy trick will be used to advance profit, even at the cost of lives, for money is thicker than blood. What an American could purchase in 1913 with one dollar silver, cost the average American by 2007 $21.60 in fiat currency who's value is thought up out of thin air.

The argument that was made to take America off gold and silver, was the demand could not be met. Now, think, instead of getting a paycheck for let's say $500.00 a week, your equivalent in silver and gold is $23.15 (based on the above deflated rate). Of course prices would be a whole lot less to reflect this. A loaf of bread wouldn't be $3.00 for a loaf of fancy rye. Or the cheap bread that is around a dollar, would probably be around the price of 2 loaves for a penny. So in essense, we're not really paying more for what we buy, but as time marches on, and the fiat currency is devalued, and devalued again, the impression of things costing more appears tangible. But the deflation of the dollar is only part of it. The inflation of prices is the worst part of it, as this inflation is nothing more than a "hidden tax" since all money returns to the central bank, rising prices mean rising taxes, means more revenue goes back to the central bank and is paid to the shareholders as profit.

The shareholders of these central banks, since they are all in consortium together internationally, care not how profits are made, or who dies to forward this profiteering venture. The use of war thruogh monetary, economic strife is great profit maker for the central banks of the world. For win or lose, they win reguardless. It is a win / win investment venture for them. This is because the vistor of the war is the one who offers to cover the loser's debt.

So until we can throw off such ill intentioned organizations as he privately owned central bank, we will never see the light of day or the end of the tunnel to our economic woes.