Friday, January 11, 2008

US Economic Breakdown Eminent

US Economic Breakdown Is Eminent

“Just as viruses mutate to become resistant to lower level antibiotics, we are now seeing new types of recessions brewing that will no longer respond to the usually prescribed ‘treatment’ of lower interest rates. Under normal circumstances, recessions can be temporarily alleviated and even turned into another boom by injecting more ‘credit’ (debt) into the economy. This is done by lowering interest rates, and central banks have a number of ways of achieving that. But when banks don’t trust each other and stop loaning money to each other, that’s when you have a real problem on your hands. If they don’t trust each other, you can bet that they trust their customers less. We are already seeing mortgage lending standards tightening up - and that is happening even though interest rates have been lowered 75 basis points since the credit crunch hit this past summer, and further significant rate cuts are expected.” Credit 'Crunch' - or Credit Collapse?

Even the mainstream corporate media disinformation apparatus anticipates a significant US economic recession during 2008. Some economists and analysts are saying we are already in one. The problem for working folks is, the corporate media’s primary objective is to fool, distract and bamboozle us so we think up is down, evil is good and war is peace. At any given time we are being lied to or at the very least given enough misinformation to create a distorted reality whereby the ruling elites can easily manipulate our orientation and behavior. Someone once remarked, “They treat us like mushrooms, they keep us in the dark and feed us manure”. So it’s no coincidence most AmeriKKKan are clueless about the real economic situation this country is in or the precarious economic situation of the West.
The economic situation facing AmeriKKKa today is extremely dire yet most people think it only impacts their immediate household budget, that is, they realize it is harder to make ends meet, because from their experiences, the ends are getting farther apart. Consequently we tend to think it’s just us and maybe our social circle. In truth it’s systemic, the whole system is teetering on the brink of implosion. The supreme irony of the predatory US capitalist system is that it is anchored in “trust”, meaning for the system to work the majority of its’ investors, bankers and business people must believe the system works and that it is essentially an ethical and transparent operation.
But the reality is this system is neither ethical nor transparent. It is predatory and exploitative in nature. But the ruling elites through their values instilling institutions (education, organized religion entertainment etc) keep the masses believing there is a homogeneous, fair and ethical system at work here. Just as you had slave holders, murderers and rapists spouting off about “life liberty and the pursuit of happiness” while they brutally attempted to dehumanize our ancestors, slaughtered the indigenous inhabitants of this hemisphere and eventually set up a giant Ponzi scheme called the “stock market”, their modern hypocritical heirs are now scrambling to prevent the collapse of their whole system. The primary reason it is unraveling is because the element of trust between the main actors (the bankers, financiers and their flunkies in government) has dissipated due to their greed and reprehensible practices. In prior years the elites at least tried to maintain a veneer of class solidarity, but now they are so greedy they have wantonly sown the seeds for their own destruction and the crippling of their vaunted system. “The banks, though, have now finally shot themselves in the foot. Their quintessential need to get more and more people into debt so that the banks themselves can prosper, has led them to generate more and more creative ways of finding more and more potential borrowers. Their last resort was to make loans to home buyers who really didn’t qualify for a mortgage. They felt constrained to loan to people who really didn’t demonstrate the requisite future productive power they could pledge in return for the ‘credit’ the bank created on their accounts. So, when times eventually got a little tougher as interest rates rose, they began to default on their mortgages - in growing numbers. Those borrowers didn’t have much to lose. They got their homes for zero or near-zero down payments, based on fictitious ‘stated income’ figures which the mortgage brokers were encouraged to dream up for them in order to make it look on paper as if the loan was justified. The loan broker’s supervisor closed both eyes, issued the loan, and bagged his bank-sponsored bonus vacation for having found yet another sucker who would go for this gambit, and the world kept spinning. These mortgages are now the epicenter of the so-called credit crunch. But they are no different in nature than the very ‘money’ that everybody earns and spends, the very money that governments, banks, and businesses now fear may one day stop flowing as abundantly as it has so far. The sad truth is that both the mortgages and the money they are supposed to be repaid with are nothing more than - debt.” Credit 'Crunch' - or Credit Collapse?
In the past banks and mortgage companies would resell your home mortgage to another bank or mortgage company so they could spread out the income from your interest payments to their colleagues and generate even more debt (income for themselves via fractional lending) from the sale of your mortgage. In recent years the Fed and investment bankers devised ways to make even more money by bundling shaky loans as “bonds” and exotic sounding entities like collateralized debt obligations (CDO) or structured investment vehicles (SIV) then selling them around the world. The problem is the shaky loans, adjustable interest rates, overextended credit, bogus bond ratings and fraudulent bookkeeping on the part of the bankers have caused the shriveling of trust amongst bankers because so many banks both large and small are on the verge of insolvency. Or they have massive amounts of defaulting loans, devalued CDOs and SIVs on their books. Now these banks are scrambling to remain solvent because they are overextended in bad loans and devalued investment packages. As a result, they are not revealing their true fiscal situation. Now the banks don’t even trust each other. Things are so bad they won’t lend to each other for fear the borrowing bank(s) will default or be victimized by a run on their funds like what happened in 1929!
“Normally, banks fear that individual or business borrowers won’t be able to repay them in time. Now, they are afraid of each other because no single bank knows what the other’s real exposure to the credit crunch really is. You have read about the gargantuan losses of the biggest financial houses in the world. Some of these losses go into the tens of billions of dollars. Smaller banks have similar problems albeit on a smaller scale. Knowing this, and knowing that these losses stem from banks’ exposure to disappearing mortgage assets, no bank in its right mind would loan to the other money that the lending bank itself sorely needs to fund its own operations. That little problem has made the interest rate at which banks loan each other money shoot straight up. By now, not only subprime mortgages are at risk, but even prime borrowers with sterling credit are defaulting. Their mortgages (debt) were sold by the originating lenders to other outfits called “SIVs” or ‘specialized investment vehicles’ - a fancy term for what boils down to sham corporations set up to buy the mortgages.” ibid
This lack of trust, liquidity and credit are forcing the Fed and other private central banks around the world to bail out insolvent investment banks, commercial banks and mortgage companies just to keep the sham going! The Federal Reserve Bank is a privately owned banking cartel that is not part of the US government. It alone dictates US monetary and credit policy and creates money (debt) out of thin air. Its’ policies created this monetary/credit mess and its policies along with collapsing internal trust levels within the global banking (and shadow banking) communities are setting the economy up for an inevitable meltdown. “The $4.6 trillion already vaporized in the 2001 Wall Street crash—and the trillions more which are now at risk because of the housing bubble burst--constitute the life savings of tens of million of working people in America. Millions of workers are discovering that their 401(k) plans, which have become a widespread substitute for guaranteed pensions, will no longer sustain them in a decent retirement because of recurring stock market collapses. Three-quarters of the funds held by 401(k) plans, about $1.7 trillion, are invested in the stock market. If you don't believe Americans have allowed themselves to be cannibalized, talk to the millions who've lost savings set aside to buy a new home, finance their children's college education, or protect against the threat of a major illness. American workers are living on the edge of disaster.” Economic Cannibalism
A collapse is coming and it will not be pretty. Despite the efforts of the Fed and bankers to forestall an implosion, one is coming. In some ways it may resemble the one in 1929; while in most areas it will be a whole new experience. Think of Katrina on steroids only nation wide without the hurricane and the flood. Once the glue that holds the whole system together (trust) evaporates; its all over but the shouting. Keep an eye on the financial news, seek out reliable sources like or Be on the lookout for stories about banks, hedge funds and derivatives earnings, folding, merging, going belly up or having to write off massive losses. When (not if) that becomes more frequent, its all over.



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