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The Coming Financial Train Wreck


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The Coming Financial Train Wreck

(A Tale of Peters and Pauls)

 

by Steven Yates

 

I am not an economist. Thus I tend to leave economic matters to those who are and avoid weighing in on such issues as (for example) the "outsourcing" of jobs. But the truth is, large parts of economics are not hard to figure out – to a logical mind, that is. This is because economics is a real world application of a more basic and very powerful subject: deductive logic. As Mises showed, you may begin with a single axiom – man acts – and deduce all the fundamental truths of economic science. That these truths may be grasped a priori by the human mind and still apply to the world as general truths – not to this or that economy but to all economies – was the great discovery of the Austrian school.

 

In this case, one may deduce further that a mental fog of illogic prevails in the centers of power in America today. Occasional rays of light break through. Unfortunately, it is never enough, and it seems to me that the full revelation of our current situation and what it calls for would never be supported either by those with power or by much of today’s electorate. Perhaps I’m feeling a bit cynical today. Following a primary season will do that to you. But it seems to me we are (as my girlfriend would so eloquently put it) "in deep dew."

 

Federal Reserve chair Alan Greenspan recently announced the need to address the long-term problems faced by Social Security and Medicare "as soon as possible." He was thinking of the looming wave of future retirees: the baby boomers. He used terms such as "daunting" and "enormous" to describe the challenges to the federal government, and called for "a thorough review of our spending commitments – and at least some adjustment in those commitments …" He offered a few more euphemisms to suggest that we are rapidly approaching "difficult choices and that the future performance of the economy will depend on those choices."

 

Greenspan, whatever his role in helping bring about the mess we are in, is not stupid. He doubtless knows the truth. We need more than a few cosmetic adjustments. Otherwise we are on our way to an economic / financial train wreck that could make the Great Depression look like a bad day at the races by comparison. He doubtless also knows, though, that if he rocks the boat he can be replaced. That’s how our present political order works.

 

This has been long in the making. Let’s rehearse a little of the history. The Federal Reserve central banking system was created in 1913, ostensibly "to provide the nation with a safer, more flexible, and more stable monetary and financial system." The national debt was $2.9 billion. By 1919, with the Wilson (House) Administration having maneuvered the U.S. into what became World War I, the debt had risen to almost $27.4 billion. During the 1920s the debt actually dropped back to between $16 and $17 billion. The Fed had engaged in massive credit expansion, however. In 1929 the stock market crashed. (Recommended reading: Murray Rothbard’s America’s Great Depression.) In the 1930s, Franklin Delano Roosevelt initiated entitlements such as Social Security that soon became permanent fixtures. We saw the beginnings of "safety nets" and the intergenerational redistribution of wealth we’ve been stuck with ever since, and of the expansionist government necessary to administer the whole shebang. We also saw the beginning of the end of the gold standard and sound money. By 1935 the debt was up to a new high: $28.7 billion. During World War II it soared, and never looked back. More entitlement programs (e.g., Medicare) came about later and have continued to grow – as have their constituencies. No government program that gives people things ever shrinks. As the saying goes, any program that robs Peter to pay Paul can always count on the support of Paul. The welfare state’s dilemma: the population of Pauls grows steadily, while the population of Peters eventually shrinks.

 

To continue the history: in August, 1971, President Nixon took the country completely off the gold standard. "We are all Keynesians now," he told us. (John Maynard Keynes’s best-known pseudo-profundity: "In the long run, we are all dead.") This allowed the printing of fiat money to help government pay its mounting bills. Fiat money is currency drawing its value exclusively from its use as a medium of exchange. Backed by nothing but the smiling faces of the Arthur Burnses and Paul Volckers and Alan Greenspans, it is otherwise worthless.

 

The national debt at the end of that year was approximately $424 billion.

 

Shortly after Reagan went into office, it hit $1 trillion. When Bush the Elder was elected, it was over $2.6 trillion despite Reagan’s appeal to those who wanted smaller and less intrusive government. The situation had gotten out of control, however. The debt continued to soar through the 1990s. Republicans had always blamed Democrats for out-of-control federal spending. However, when they became the majority party in Congress in 1994, nothing changed. While the Clintonistas crowed about "surpluses" that didn’t really exist, even under the Republican-controlled Congress the federal government continued to pile on the debt, which stood at around $5.7 trillion when Clinton went out of office.

 

Approximately one month ago, the debt finally topped $7 trillion. Bush the Younger and Congress appear to have dropped all pretenses of trying to control federal spending. With huge new expenditures on everything from Medicare to boondoggles like No Child Left Behind to their foreign war in Iraq, the spending habits of the gang presently in control of Rome on the Potomac make the Clintonistas look like rank amateurs by comparison!

 

It isn’t just the feds. Just about everyone else is also swimming in red ink. During the 1990s we were told how "prosperous" we were. The truth is, it was a false prosperity powered by consumer and household debt, not productivity. Ron Paul (R-Tx) recently called this brand of prosperity "a temporary illusion based on smoke and mirrors." He added that "[t]rue wealth cannot be created simply by printing money; families and businesses cannot prosper by getting deeper in debt." Genuine prosperity, that is, is achieved through productivity, not borrowing against the future. Congressman Paul cited the recent article by economist Frank Shostak, who provided a scary account of where household debt stands. The measurement of genuine prosperity is one’s permanent assets and savings. Today’s rates of personal savings are at Great Depression levels. Yet consumers spend, spend, spend. We are told by the pundits of the mainstream media and all the mainstream economists that this "helps the economy." I’ve encountered more than one statistic on America’s total indebtedness – the combined statistic for federal, state and local governments along with corporations and consumers. One source places our total indebtedness at $34 trillion – and rising rapidly. Another places it at $45 trillion – and rising rapidly. I wonder if anyone knows the exact figure!

 

You don’t need a Ph.D. in economics to see that our present course is not sustainable. In fact, with entitlement programs the single biggest federal expenditure, assuming no fundamental, structural changes, Social Security and Medicare alone will break the bank. As 77 million baby boomers retire in increasing numbers, the stress on the country’s financial system will increase each year. Eventually it will implode, possibly the same time the fiat money time bomb goes off: as Congressman Paul concluded, "The end may come when foreign central banks realize the dollars they receive are worthless, or when they find other places to turn for income. When that day comes, interest rates will rise, perhaps dramatically. At that point not even Mr. Greenspan will be able to save the economy from the painful correction necessitated by his easy credit, easy money policies." We can probably expect this to occur during the 2010 decade, although if a new national emergency comes along (e.g., another catastrophic terrorist attack on U.S. soil, possibly in retaliation for our government’s ill-advised invasion of Iraq) it could come sooner.

 

Neither Democrats nor Republicans have the will to fix this mess. That much is clear. Democrats are having a field day blaming Bush the Younger for job losses these past three years – something that isn’t his doing, except in the extended sense that like all recent chief executives he has done nothing to cut the size and reach of the federal government. (Critics of "outsourcing" say that the "exporting" of jobs overseas is liable to turn the U.S. into a third world nation before it runs its course. But could it be that one reason jobs are being "outsourced" to countries such as India is that our false prosperity – which doesn’t exist in those places – conceals our already having become a third world nation, measured in terms of real wealth as opposed to false prosperity based on borrowing?)

 

Now remember the increasing population of Pauls. With so many Pauls now dependent in one way or another on the present system and flocking to the polls to ensure the continuation of their freebies, advocates of the deep cuts in spending needed are simply not going to be elected (rare cases like Ron Paul excepted). The Pauls will not vote for them, and are beginning to outnumber the Peters. Remember our adage above. Recipients of freebies are not going to vote to abolish the federal agencies ensuring the continuance of their freebies. We’re not talking about people exactly motivated to bite the hand that is feeding them.

 

The Peters, meanwhile, are often too busy working feeding their families (and paying their taxes) to see the big picture. They do not see that they are rapidly becoming outgunned.

 

It’s time to face an unpleasant reality: our so-called democracy – which was never intended by its founders to be such (remember Mr. Franklin’s "[a] republic, if you can keep it"?) – is broken. Late 18th century historian and jurist Alexander Fraser Tytler put it best, in the statement he is best remembered for:

 

"A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largess from the public treasury. From that time on the majority always votes for the candidates promising the most benefits from the public treasury, with the results that a democracy always collapses over loose fiscal policy, always followed by a dictatorship.

 

Tytler went on: "The average age of the world’s great civilizations has been 200 years. These nations have progressed through this sequence: from bondage to spiritual faith; from spiritual faith to great courage; from courage to liberty; from liberty to abundance; from abundance to selfishness; from selfishness to complacency; from complacency to apathy; from apathy to dependency; from dependency back again to bondage."

 

I doubt Tytler would be surprised by our present situation. Our system, focused on the next election, is structurally flawed. It encourages quick-fixes and makes strategic, long-term thinking extremely difficult for anyone on the inside. Most potentially decent politicians – making the admittedly tall assumption that that’s not a contradiction in terms – are quickly corrupted by the culture in Rome on the Potomac.

 

Is the situation hopeless? With the resources available via the Internet, the truth is getting out to the remnant. The Austrian school of economics has never been stronger, or its members more numerous. There are a lot of Libertarians out there, including – one hopes! – a lot of Peters who don’t realize they are latent Libertarians – but someday might. There is also the growing Constitution Party. What I would personally like is to see these two realize the potential for eventual collaboration – maybe not this year but surely by 2008, which will probably be the crucial year. Those seeking change don’t need to reach the majority. It was not a majority of the population that favored seceding from the British Empire in 1776, then fought a war for independence. All it was, was a critical mass. That is what we need now, and within the next four years: a critical mass of people who are both able and willing to break with the Demopublicans, with the prevailing economic philosophy of consumption and debt (and, of course, also with the mainstream media and the prevailing system of government-sponsored education), and steer themselves towards intellectual and financial independence.

 

And then they will need to brace themselves for a very rough ride – because the illogic and irresponsibility of the past several decades will exact a price. It’s not a matter of if but when. The longer it takes, the worse the train wreck will be. Not to mention the possibility of a day, once the emergency sets in or possibly sooner, when dissent may simply be made illegal in the interests of "homeland security."

 

Maybe, in addition to Austrian economics, we should be learning how to grow our own food.

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The Circus Is Back in Town

 

by Butler Shaffer

 

When I was a child and the circus came to town there was a big parade. Clowns, wild animals, and side show "freaks" teased our attentions, while jugglers, animal trainers, and trapeze artists persuaded us to come out to the big tent with promises of stunts like we had never seen. Traveling circuses are largely a thing of the past, but a similar spectacle is still available to us on television, with various carnival acts soliciting our attention. Though they may appear to be competing with one another – much as clowns, high-wire walkers, and trained-dog acts vie for our interest – they are integral parts of a greater enterprise that depends upon our fears, curiosity, and willingness to be bamboozled.

 

As with other circuses, numerous side show attractions help keep our minds focused on the bizarre and the ludicrous. The two-headed horse and the bearded lady have been replaced by the celebrity transgression feature and the murder-of-the-year trial. The O.J. Simpson circus of a few years ago was such a crowd pleaser because it managed to combine both draws into a center-ring main attraction. More recently, we have had to put up with such lesser distractions as the Jackson family's alleged indiscretions, the question of gay marriages, or the content of Howard Stern’s radio programs.

 

But it is to the center-ring that our attentions are always drawn. Men being shot out of cannons, lion-tamers, trapeze artists, and other dangerous acts attract our interest because of their potentials for death. The other rings may provide us with amusement, but we expect the center-ring to entertain us by exciting our fears. In modern society, the center ring has long been the world of politics, or what H.L. Mencken referred to as the "carnival of buncombe."

 

It has often been said that entertainment is a form of "escapism," but I believe that it is often used to reinforce social conditioning. Our social and political thinking, indeed our very identities, are wrapped up in firmly-entrenched illusions upon which we insist. We need to believe that "our" group – whatever that may be – is better than "their" group, and that "we" have been victimized by "them." The entertainment industry – of which politics is a part – feeds on such thinking, providing us with movies and television programs that bolster our worldview. They remind us of the lessons in which the schools have already trained us: that the policies, systems, and beliefs upon which our politically structured society is based are precisely what we require in order to live well. Entertainment serves the pragmatic, real-world purpose of confirming our illusions so that we may more energetically fashion the world to make it reflect our mindset.

 

How else does one account for the raging anger associated with Mel Gibson’s movie "The Passion"? I have no case to make either for or against the film’s message. I do share one trait with many of the critics and supporters of the film, however: I have not yet seen it! But judging from the irrational responses of many critics – one Israeli politician is reported to have suggested that Gibson should be criminally prosecuted for having produced the film! – it seems that Gibson’s "offense" is to have presented a movie that raises questions that may challenge an established mindset.

 

Good art often has an anarchistic quality to it, challenging the accepted rules, norms, and tastes of a culture. Art moves our eyes beyond the canvas itself, causing us to become aware of our more limited perspectives of life. A good artist is a practitioner of Heisenberg’s "uncertainty principle," which informs us that the observer is the observed. Art – like freethinking and speculative philosophy – is forever challenging the status quo, reminding us of the need to remain creative if we are to survive.

 

But the state has an aversion to inconstancy and changefulness, which is why it has always been at war with individual liberty and its social expression, the free market. The state is preoccupied with the defense of the status quo, because it is the status quo. Anything that challenges the thinking upon which its permanency is grounded – be it in the form of art, scientific discoveries, inventions, new ideas – is a threat to be opposed. This is why political systems are so inextricably tied up with the kinds of entertainment that reinforce the illusions upon which their power depends.

 

Do you ever wonder why motion picture actors and actresses play such central roles in addressing the "issues" that the political establishment would like you to mistake for important questions? Such people are as well paid as they are because they have honed the skill of pretending to be whom they are not, imaginary characters performing in scripted, make-believe situations. In a word, they are professional illusionists, just the sort of people upon whom political systems depend.

 

And why are so many of us attracted to such entertainers? Why are cable "news" networks increasingly populated with former comedians, sportscasters, quiz show hosts, and pro wrestlers, to provide social and political commentary? Why have senators and congressmen – and even a president – been culled from Hollywood sound stages? And is it a matter of coincidence that voters in Minnesota and California have selected, as governors, men whose previous entertainment careers had cast them in the roles of muscle-bound strong men?

 

Politics and entertainment both depend upon a willingness to suspend our judgments about reality, and to be distracted by sleight-of-hand tricks that cloud deceptions. Political systems are grounded in such an abundance of lies and contradictions that the speaking of truth becomes a subversive act. Lest you dismiss this remark as hyperbole, consider the plight of Martha Stewart, whose criminal prosecution was based, in part, upon her publicly denying her guilt!

 

There is a paradox in Martha Stewart – also an entertainer – being used by the political establishment as a scapegoat, to deflect attention from the falsehoods and deceptions whose revelations might be fatal to the illusions upon which state power depends. The corrupt nature of corporate-state neo-mercantilism that has long permitted some business interests to obtain advantages unavailable in a free market must remain hidden from view: let the state use Martha Stewart as a scapegoat for the "offense" of selling her own stock! George Bush can lie to the world about Iraqi "weapons of mass destruction" or connections to Al Qaeda – lies that have led to the deaths of thousands of innocent people – but it is Martha Stewart who will be the sacrificial lamb for allegedly lying to government investigators!

 

Andre Malraux has stated that "a civilization can be defined at once by the basic questions it asks and by those it does not ask." Thomas Pynchon offered the correlative observation that "If they can get you asking the wrong questions, they don’t have to worry about answers." These two commentaries tell us all we need to know about the sad state of modern society. What are the questions you bring into the world each day, and who formulated them? Are you the author, or do you allow the media to direct your inquiries, as they do other fashions?

 

As the presidential circus returns for its quadrennial road show – having already played to the bumpkins in such places as New Hampshire, Iowa, and South Carolina – those who choose to buy tickets will be treated to the same predictable acts as in prior years. The routine of half a dozen clowns exiting a tiny car was replaced by a half-dozen Democratic party hopefuls emerging from little New Hampshire.

 

And in the center ring, John Kerry, the establishment’s official challenger to George Bush, in his high-wire performance, carefully balancing himself so as to avoid doing or saying anything that might be interpreted as a fundamental questioning of state policies. Such a misstep would surely produce a fatal fall, with the circus owners having to call upon a stand-in.

 

And so, when confronting an administration whose lies and deceptions have reached sociopathic levels; whose military threats against any nation who is "not with us" – threats that might include first-strike use of nuclear weapons – make the United States a menace to humanity itself; whose police-state measures continue to expand; and whose arrogance in the employment of such measures is rendered all the more dangerous by delusions that "God wants George Bush to be president," what challenge can you expect from John Kerry?

 

The answer is "none." The truth is that Kerry has supported most of what President Bush has done, giving you some idea of the paucity of differences between the candidates. Has Kerry made any campaign promises to end the war in Iraq, or to work to repeal the Patriot Act, both of which he voted for? Has he proposed freeing the "suspected terrorists" who have been held for over two years, without a trial, by the Bush administration; or to dismantle the Department of Homeland Security; or to conduct a real inquiry into the causes of the 9/11 attacks? Kerry will propose no fundamental changes in Washington, because change is anathema to the status quo interests of the political establishment that runs the circus. In the end, Kerry and Bush will agree upon the same sort of mindless non-issues seen in previous campaigns. Should Willie Horton have been paroled? Should we have a constitutional amendment to prohibit burning the American flag? Are you for or against the "pledge of allegiance?" There will be no discussion of neocon warmongering, or of an American police state or imperialism. I suspect that the "defining issue" will be whether we should have a constitutional amendment prohibiting gay marriages. Those who dream of a third party should realize that America does not even have a two party system!

 

Whether John Kerry is "Tweedledee" or "Tweedledumber" in this year’s circus act will be up to the voters to decide.

 

But the outcome of the voting is irrelevant to the interests of the establishment that is running the circus. Their system owes its existence to the insight offered by the greatest of all circus masters, P.T. Barnum: "there’s a sucker born every minute." Millions of Americans will confirm this observation in November, as they stumble into voting booths across the nation to reaffirm their commitment to the illusions upon which the destruction of their lives and wealth depend. And these same people will proudly advertise their foolishness to their neighbors and coworkers by wearing lapel stickers reading "I voted," a message reminiscent of the high school stunt of putting a sign on a guy’s back that said "kick me!"

 

But there is some hope to be drawn from the fact of the continuing decline in the rate of voting. For whatever reason, more and more people are refusing to participate in this sham exercise. Perhaps, like the man who was fleeced one-too-many times by side show sharpies who promised wonders but delivered the ordinary, or whose "solid-gold" watches left green stains upon the wrist, more of our neighbors have managed to transcend their innocence.

 

Whatever the explanation, there might be some hope for the country if sizeable numbers of men and women decided to vote, not with ballots or voting machines, but with their feet, by staying away from a system that is designed to do nothing more than reinforce our illusions that "we" run the state. To paraphrase a slogan that arose during the Vietnam War years, "what if they gave an election, and nobody came?"

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The Circus Is Back in Town

 

by Butler Shaffer

Yes the CIRCUS is in town, and the people are the ones who are being laughed at (clowns).Year after year after year ... the people get mislead, ripped off, oppressed, mistrearted, etc. etc. But still, they will turn up to vote in hopes that THIS TIME we'll elect someone who will have the people's best interest at heart.

 

How many politicians live amongst the 'people' ? Most (if not) all politicians are millionaires or billionaires - who's interest and well being are they going to look after ? Not the people's !

 

Really though, it's the 'system'. It was VERY carefully constructed to keep the rulling class in charge and everyone else dependent on gov't for "hand-outs".

By keeping the people dependent on gov't, they don't have to bother with things like accountability, and transperancy.

 

 

 

Great post though.

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The Coming Financial Train Wreck

(A Tale of Peters and Pauls)

 

by Steven Yates

You almost have to wonder if they're deliberetly trying to run the economy into the ground. They are spending like 'there is no tomorrow'.

 

 

Do they know something and they are just not telling us ? <_<

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Ahh, but we can't bring this to light, the insecure and the hopelessly dependent among us will respond with "So what do you suggest we do? You can't do anything except participate in the circus", as some of the members of this board evidence the behavior.

 

The tone displayed in such a view, which I have heard everywhere is one of fear, fear of not having their puppet masters pulling the strings, and that they'd actually have to make their own actions and be responsible for their choices. But alas, as psychology informs us of projection, we project our fears onto scapegoats and political systems thrive off of it.

 

Sadly, while the masses are distracted by such trivial news as Martha Stewart, or Kobe Bryant, or Michael Jackson, or gay marriage, or the conflict regarding Mel Gibsons film, the real news on the state of the country, the continuing inflationary depression, the ever expanding government, the crisis in Iraq, the lies that surrounded 9-11 and Iraq, are going unnoticed and ignored, and people are caught by the distraction. This is why it is essential for the State to create political groups, be it gender based, race based, class based, as long as it has one group to pit against the other group, it can ensure divide and rule among the masses, while the true masters go unnoticed.

 

In any event, by the time people wake up it will be too late since there are three types of people:those who make things happen, those who watch things happen, and those who wondered what happened, and the masses for the most part fall in the latter category.

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Ahh, but we can't bring this to light, the insecure and the hopelessly dependent among us will respond with "So what do you suggest we do? You can't do anything except participate in the circus", as some of the members of this board evidence the behavior.

 

The tone displayed in such a view, which I have heard everywhere is one of fear, fear of not having their puppet masters pulling the strings, and that they'd actually have to make their own actions and be responsible for their choices. But alas, as psychology informs us of projection, we project our fears onto scapegoats and political systems thrive off of it.

 

Sadly, while the masses are distracted by such trivial news as Martha Stewart, or Kobe Bryant, or Michael Jackson, or gay marriage, or the conflict regarding Mel Gibsons film, the real news on the state of the country, the continuing inflationary depression, the ever expanding government, the crisis in Iraq, the lies that surrounded 9-11 and Iraq, are going unnoticed and ignored, and people are caught by the distraction. This is why it is essential for the State to create political groups, be it gender based, race based, class based, as long as it has one group to pit against the other group, it can ensure divide and rule among the masses, while the true masters go unnoticed.

 

In any event, by the time people wake up it will be too late since there are three types of people:those who make things happen, those who watch things happen, and those who wondered what happened, and the masses for the most part fall in the latter category.

Yes, I very much agree.

They just create all these diversions to keep the people pre-occupied and living in constant fear.

 

The TV is SUCH a effective and powerful distributor of propaganda that I personally don't think that there is any way to get through to the sleeping masses, as long as their beloved TV is pumping out the disinformation.

 

The TV dictates to them how they should live: what to wear, what to say (slangs) what to eat, when to eat, what to drive, WHAT TO THINK, and on and on and on ... The TV creates images and 'characters' like "soccer moms" or "nascar dads" or 'generation X'or 'hip-hop culure', etc., it does this for EVERY ethnicity. They pull the strings and the 'sheep' faithfully line up to spend their hard-earned money to live up to (fit in) these images and trends or fads that are all created and controlled by the 'puppet masters'.

 

 

The Martha Stewart case is a great example. While the sleeping masses get sucked into Martha's little few thousand dollar case, Worldcom, who stole millions from peoples life savings and retirement pensions, gets "punished" with a lucrative contract to rebuild Iraqs communication services. IN the meantime nobody gets wise about the REAL criminals, the CEOs (Lay, Skilling, others), and politicians.

 

 

It's gonna take a miracle, or something.:no::sadwalk::down:

 

At least some of us awake, though.:cheers:

Edited by GuitARA
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The TV creates images and 'characters' like "soccer moms" or "nascar dads" or 'generation X'or 'hip-hop culure', etc., it does this for EVERY ethnicity. They pull the strings and the 'sheep' faithfully line up to spend their hard-earned money to live up to (fit in) these images and trends or fads that are all created and controlled by the 'puppet masters'.

You nailed it on the head with that one. And behold how American culture is tv/entertainment culture. It pulls in all ethnicities under the umbrella of this shock culture of entertainment, and people act out their lives per what has been set by entertainment.

 

By the way, I really love Butler Shaffer's article.

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  • 1 month later...

A Terrible Foreboding

By Carl F. Worden

wolfeyes@hisurfer.net

4-17-4

 

Ladies & gentlemen...

 

Most of you familiar with my writings know that I am a financial consultant involved in just about every aspect of economic and financial proceedings, and I must tell you I have a terrible feeling of foreboding regarding the future of American prosperity. The threat is imminent, and much closer than most Americans can possibly foresee.

 

My associates from every corner of America have consistently confided to me that the primary driving force in the American economy right now is people refinancing their homes at low interest rates, and withdrawing the equity to make purchases like cars and appliances, and to pay off credit card debt.

 

Those of you old enough, and those of you who are younger, but cognizant of the historical events leading up to the crash of 1929, will recall that people were buying stock on credit credit that became immediately due and payable when those stocks lost their value. Thousands of people lost their homes put up as collateral in the ensuing catastrophe, and wound up living in cars and on the streets and in soup lines.

 

That is exactly what is going on right now. Further, there are sharp increases in home purchases in various areas of the United States, driven not by people buying homes to live in, but to purchase a home on pure speculation that they will reap a huge profit by re-selling the home a month or two later often to another speculator. Economically, it is a disaster waiting to happen, and these home speculators are playing a reverse game of musical chairs in which you do not want to have a seat (read overpriced home) when the music stops as in when the buying frenzy suddenly ends and prices drop. All it will take is a Federal Reserve announcement of an interest rate increase, and I see that coming very soon.

 

Couple this trend with the fact fuel prices are soaring, making the price of everything from groceries to basic household goods, jump substantially due to transportation costs.

 

This trend cannot go on without harsh economic consequences, including double-digit, runaway inflation -- and the inevitable rise in interest rates. If interest rates jump just one or two percent, the entire basis for our existing economy through refinancing of homes will come to a screeching halt. If the Federal Reserve refuses to raise interest rates, inflation will explode unchecked. It,s a no-win situation, no matter how you look at it.

 

What,s going on right now isn,t very different from the events leading up to the crash of 1929. People were betting on the come line that stock values would keep on rising forever, just like people of today are betting their home,s equity will keep rising forever, but this cannot continue without a drastic correction that can be brought about by any number of unforeseen events. It,s like a house of cards in a high wind, and you never know when the breeze will bring the whole delicate structure to ruin.

 

I do not understand why the Bush Administration is not trying to do something about these exploding fuel costs. $2.00 + per gallon for diesel?? Diesel is just about the most cheaply produced fuel, yet its cost at the pump is equal to or higher than regular grade gasoline here in Oregon! Clearly, the oil companies are profiteering and cooperating in illegal acts of trust with one another, yet the Bush Administration is taking no hard federal action to even investigate, let alone bring prosecutions that send a strong message. I don,t get it, and I don,t understand why there has been no massive media or public outcry for action.

 

Foreclosures and bankruptcies all across America are already spiking, despite government assurances that we,re all enjoying a growing economy and a promising job market. Those government assurances are all a big, fat lie! The unemployment figures are completely unreliable, since those dropping off the unemployment compensation rolls are no longer counted, even if they remain unemployed after their benefits run out. It,s all a big, fat lie, and I have a terrible sense of foreboding of what is to come, because this economy is not built with underpinnings that can withstand even the slightest breeze.

 

Carl F. Worden

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Mr. Worden,

 

You really are a smart man. I'm glad to see that other people are as worried as I am about the fate of the economy. I am also convinced that the Mother of all Depressions is coming up, probably around 2008. The question is: is it going to happen sooner, now that more and more people become aware of this threat?

 

By the way, I am not familiar with your writings. Do you have a website or a list of them? I am currently reading a book "Conquer the Crash'' by Robert R Prechter Jr. He basically convinces the reader that a major depression is coming up.

 

Regards.

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I am not Mr. Worden, I simply reprinted his essay. You can email him.

 

As far as a depression, we are already experiencing and are in an inflationary depression. As long as the Federal Reserve can print unbacked paper money and inflate we will have cycles of booms and busts. What I highly recommend is you follow the following link and download the fre video on the Federal Reserve courtesy of the Mises Institute. It's an 80 Meg file but it's well worth it.

 

Or you can go directly to this link and download the same above video for free, along with 3 other very informative documentaries.

 

http://www.mises.org/media/MediaCategoryLi...entCategoryID=0

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