"The U.S. might really have to look at a default on the bankruptcy reorganization of the present financial system" and the bankruptcy of the government is not out of the realm of possibility, Hennecke said.Many on the left would applaud such a measure. At one time, I might have myself. But a power vacuum might open the way for far worse actors.
"In the United States there is already a funding crisis, and they will have to sell a lot more bonds next year to fund the bailout packages that have already been signed off," Hennecke told CNBC.
In order to solve or stem the economic slowdown, Hennecke suggested the US would have to radically reduce spending across all sectors and recall all its troops from around the world.
As for a stimulus package, there is not much of an industry left to stimulate back into life, Hennecke said.Tell us how you really feel, Marty.
Here's what Hennecke was saying in September:
"We already have $3 trillion of debt, as far as the U.S. government is concerned. These debt figures across the U.S. economy are rising very sharply."He is predicting both Depression and hyperinflation. That leaves me wondering: Won't inflation solve the sub-prime mortgage problem by forcing housing prices back up?
When the government can no longer pass the United States' "immense debt" on to taxpayers, it will turn to the holders of U.S. dollars, leading to the eventual downfall of the currency, Hennecke said.
Let's put this bleak forecast into perspective. Hennecke has a rep as a doom peddler. His analysis may lack objectivity because he is heavily tied into Asia, especially the Chinese economy, which he considers fundamentally strong. But China is facing troubles of its own, and has decided on a stimulus package of $600 billion -- the equivalent of a $3 trillion stimulus to the American economy.
I don't think the situation in America is as bad as Hennecke says. Still, it is bad indeed. Look at what W inherited, and look at what he left! What a falling off was there. Could such an epic disaster have occurred by accident, or did the pilot intend to crash the plane?
6 comments:
Thanks for the information, Joseph! This reminds me not only of the beginning of the US Great Depression, but Russia's collapse in the 80's. Except we did this to ourselves.
Supposedly, the people who made out in the Depression were folks who had stocks which paid dividends.
Of course, with an economic mess this big, it may be hard to figure out which companies can continue to do that. I plan to buy more gold. And single malt Scotch.
djmm
I agree that I just don't think things are that bad. We have a strong, capable work force. American workers are probably the most productive in the world. What we need is a strong government to protect us. They need to just come out and demand that these huge multi-national companies bring our manufacturing jobs back. If they don't then maybe we should think twice about allowing them to sell their junk in our country. We could also invest heavily in new companies big and small that make products here and build jobs here. We could also stop outsourcing our military manufacturing as well. Just with a few tweaks we could usher in a new era of prosperity. In the last 30 years they've closed all the steel mills, all the textile mills, all the electronics factories, etc. Bring 'em back. Use incentives, use threats, use whatever means necessary. Everything else will take care of itself.
Hyperinflation is unlikely in the US. Finance capital doesn't want it; it wipes out the value of its main assets: debts.
As well as ratings by S&P, those by the Bank of International Settlements (the "bank for central banks") are also worth watching. The BIS has warned that those who run things in China risk making the same mistakes as their counterparts in Japan in the 1980s.
The US is China's biggest export market by far: twice as big as Japan, five times as big as Germany. When the American economy tanks, China's, although it's far stronger (because it's based on producing stuff) will be badly hit.
During the Great Depression, the US economy contracted by a third. This time, what do we reckon: a third, a half?
An interesting comparison is with Russia 1990. Expect those with huge moveable assets (or an ability to get their hands on some) to start getting them out.
I heard someone from Iceland on the radio describe how when the Icelandic economy went kaput recently, she heard all the private jets whooshing over her house, as their owners got them out of the country fast.
b
b, great points. And you are correct: it was Russia in 1990, I was thinking about.
djmm
Regarding Saturday 15 Nov. summit without an agenda, on a crisis without an agreed cause, in a country without a functioning government, here's an interesting approach:
The G-20’s Secret Debt Solution
If you think this weekend’s G-20 meetings in Washington are only about designing short-term fixes to the financial system and regulatory reforms for banks, hedge funds, brokers, mortgage companies and investment banks … think again.
Behind the scenes, a far more fundamental fix is being discussed — the possible revaluation of gold and the birth of an entirely new monetary system.
I’ve been studying this issue in great depth, all my life. And given the speed at which the financial crisis is unfolding, I would be very surprised if what I’m about to tell you now is not on the G-20 table this weekend.
...the G-20’s motive for a new monetary system: It’s driven by and based upon this very simple proposition …
“If we can’t print money fast enough to fend off another deflationary Great Depression, then let’s change the value of the money.”
more...
http://www.moneyandmarkets.com/the-g-20s-secret-debt-solution-27996
I don't think that will come out of this meeting, but we may see it happen in the future.
I would tend to agree with Joseph's last line--the engineer intended to crash the train. Why crash the train? So it can be rebuilt according to whomever is behind the crash. Who's doing it? What is the agenda?--A new currency? Further ownership and control of our entire system? Perkins' book "Confessions of an Economic Hit Man" keeps coming to mind. What has been done to the third world is perhaps now being done to the first world.
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