Friday, October 30, 2009
The Recession is NOT Over
Mainstream economists, and many in the mainstream media, have declared that the alleged 3.5% third quarter growth (the first in over a year) means that the recession is now over.
Did you get that? It's over! Thank God, it's finally over!
How many Americans really believe that? According to this story, there are plenty of disbelievers, and this comes from the mainstream media.
How much do you want to bet that this report will revised in the weeks or months ahead?
Any economic growth was exclusively the result of absolutely massive deficit spending by the federal government – not by US businesses and consumers.
The US deficit for 2009 has reached $1.42 trillion. Adjusted for inflation, it is the largest deficit since 1945. Federal tax receipts are down 17%, while spending is up 18%.
No nation has ever borrowed its way to prosperity. The government is sacrificing our future prosperity for false, contrived, growth.
The recession is by no means over.
Job losses continue to mount and foreclosures will spread through 2010 and 2011. US banks have failed at a rate of 2.5 per week so far this year.
The truth is, we haven't even seen the worst of it yet.
Job creation for this entire decade is negative, resulting from 7.6 million lost jobs that will need to be made up. In addition, the government says that 1.3 million jobs need to be created every year from 2006-2016 just to keep up with the growing labor force.
The hole is very deep. Experts note that it will take years to reverse these massive losses.
Currently, there are 2.8 million active interest-only loans nationally, worth a combined total of $908 billion. In the next 12 months, $71 billion of interest-only loans will reset. Even after mid-2011, another $400 billion will reset. That means there will be a massive number of additional defaults over the next two years.
Amherst Securities estimates that 7 million housing units are destined to default, only to be seized by lenders. That number represents well over a year's worth of home sales. When this "shadow inventory" eventually hits the market, prices will be pushed further downward.
Household credit has utterly collapsed, experiencing a year-over-year decline for the first time on record (since 1953). Simply put, we are not going to spend our way out of this recession.
The Consumer Confidence Index now stands at 47.7 on a scale of 100, the lowest level in more than a quarter century. Americans are rightfully worried, even scared.
But the government has to spin the story. They have to control the message. Most of all, they have to control public fear, anxiety and even the possibility of outright panic.
We've seen this movie before. But most Americans are too young to remember it.
However, our government made these same rosy forecasts, completely detached from reality, during the Great Depression.
Does any of this seem familiar, or similar to the present?
"We will not have any more crashes in our time." - John Maynard Keynes, 1927
"There will be no interruption of our permanent prosperity." - Myron E. Forbes, President, Pierce Arrow Motor Car Co., January 12, 1928
"There is no cause to worry. The high tide of prosperity will continue." - Andrew W. Mellon, Secretary of the Treasury, September 1929
"Stock prices have reached what looks like a permanently high plateau." - Irving Fisher, Ph.D. in economics, Oct. 17, 1929
"Secretary Lamont and officials of the Commerce Department today denied rumors that a severe depression in business and industrial activity was impending, which had been based on a mistaken interpretation of a review of industrial and credit conditions issued earlier in the day by the Federal Reserve Board." - New York Times, October 14, 1929
"This crash is not going to have much effect on business." - Arthur Reynolds, Chairman of Continental Illinois Bank of Chicago, October 24, 1929
"...despite its severity, we believe that the slump in stock prices will prove an intermediate movement and not the precursor of a business depression..." - Harvard Economic Society (HES), November 2, 1929
"The Government's business is in sound condition." - Andrew W. Mellon, Secretary of the Treasury, December 5, 1929
"President Hoover predicted today that the worst effect of the crash upon unemployment will have been passed during the next sixty days." - Washington Dispatch, March 8, 1930
"The spring of 1930 marks the end of a period of grave concern... American business is steadily coming back to a normal level of prosperity." - Julius Barnes, head of Hoover's National Business Survey Conference, Mar 16, 1930
"While the crash only took place six months ago, I am convinced we have now passed the worst and with continued unity of effort we shall rapidly recover. There is one certainty of the future of a people of the resources, intelligence and character of the people of the United States - that is, prosperity." - President Hoover, May 1, 1930
"The worst is over without a doubt." - James J. Davis, Secretary of Labor, June 29, 1930
Gentleman, you have come sixty days too late. The depression is over." - Herbert Hoover, responding to a delegation requesting a public works program to help speed the recovery, June 1930
"We have hit bottom and are on the upswing." - James J. Davis, Secretary of Labor, September 12, 1930
"President Hoover has summoned Colonel Arthur Woods to help place 2,500,000 persons back to work this winter." - Washington dispatch, October 21, 1930
"I see no reason why 1931 should not be an extremely good year." - Alfred P. Sloan, Jr., General Motors Co, November 1930
"The depression has ended." - Dr. Julius Klein, Assistant Secretary of Commerce, June 9, 1931
"I believe July 8, 1932 was the end of the great bear market." - Dow Theorist, Robert Rhea, July 21, 1932
"All safe deposit boxes in banks or financial institutions have been sealed... and may only be opened in the presence of an agent of the I.R.S." - President F.D. Roosevelt, 1933