Predictions – 2010 The worst economic year in US history
More Interesting Quotes From Notable People:
1881 – James A. Garfield – President of the United States 1881
“Whoever controls the volume of money in any country is absolute master of all industry and commerce… And when you realize that the entire system is very easily controlled, one way or another , by a few powerful men at the top, you will not have to be told how periods of inflation and depression originate.”
American Bankers Association 1891 – On September 1st, 1894, we will not renew our loans under any consideration. On September 1st we will demand our money. We will foreclose and become mortgagees in possession. We can take two-thirds of the farms west of the Mississippi and thousands of them east of the Mississippi as well, at our own price… Then the farmers will become tenants as in England.
1916 – Woodrow Wilson – President of the United States 1913- 1921
“I am a most unhappy man. I have unwittingly ruined my country. A great industrial nation is controlled by its system of credit. Our system of credit is concentrated. The growth of the nation, therefore and all our activities are in the hands of a few men. We have come to be one of the worst ruled, one of the most completely controlled and dominated Governments in the civilized world – no longer a Government by free opinion, no longer a Government by conviction and the vote of the majority, but a Government by the opinion and duress of a small group of dominent men.
The Great “Under” Employed:
Then there’s the issue of unemployment and the under-employed. When housing prices drop, there will be even less demand for those in the construction, lending, and real estate industries as there is now. The impact on banks will almost certainly tighten lending abilities and standards further, trickling down to small businesses and their employees.
The impact of the suspected commercial default crisis will only exaggerate that problem, as well as lead to more job loss in the commercial real estate market. It is estimated that approximately nine million jobs are generated or supported by commercial real estate including jobs in construction, architecture, interior design, engineering, building maintenance and security, landscaping, cleaning services, management, leasing, investment and mortgage lending, and accounting and legal services.
Then there’s all the state funded jobs that could be cut as tax revenue shrinks, as well as the societal impact of the lack of teachers on our country’s ability to compete in the global economy in the coming generations.
There’s also the gradual crumbling of public infrastructure to be considered – deterioration of roads & city parks, increases in crime and vandalism due to lack of police, fire and other public services funded by tax revenue.
Many Americans got used to two income households. Now with U-6 unemployment, which means the “under employed” at 18% you can pretty much count on 1 in 5 people needing much more income. That doesn’t even take into consideration people who have had hours cut, those who rely on overtime and others who’ve had their wages lowered.
America Is Bankrupt But Has An AMEX Card With NO Limit… Or Is There?
And then there is the 800 lb gorilla in the room named “National Debt”. How, as our economy crumbles around us, can we as a society possibly contemplate paying back a national debt that has a dollar number bigger than the amount of US dollars in circulation IN THE ENTIRE WORLD?
According to the “Washington Post,” China became the largest foreign creditor to the U.S. in November 2008. Because of this, China has great influence over the American economy. Should China choose to stop buying U.S. debt, it would cease one of the largest in-flows of capital into the country, making it harder for businesses to obtain loans and raising interest rates and commodity prices for consumers. If China were to begin selling U.S. debt–essentially cashing in its government bonds–it would actually remove money from the U.S. economy, creating an even more dire situation.
China just sold off $34 Billion worth of US government bonds. Chinese economists recently said: ”The main worry of Chinese officials has been that American efforts to fight the current economic downturn will result in inflation and erode the value of American bonds”
If the USA were to sell every asset, building, road, park, liquidate everything, America would not be able to pay what we owe.
According to the former US comptroller general David Walker:
“What threatens our future is not the current deficit; what threatens the future is the glide path of spending and the huge gap of what people have been promised and the revenues that we have to deliver on those promises,” he said. “The so-called off-balance sheet obligations—that’s the ice under the water that could sink the ship of state.”
It is clear that our current economic policy is unsustainable. What will be done to fix it?
The Economic Collapse Of The Roman Empire & Other Great Empires
Consider: America Is Rome On Fire
Economist Roger Babson became famous for warning that America faced “the worst business depression that our generation has ever experienced.” That was in 1920 and early 1921. When he predicted it, people were amazed because America was cruising down the inner grove of prosperity. Babson knew something they didn’t.
“The test of a nation is the growth of its people—physically, intellectually and spiritually,” Babson said. “Money and so-called ‘prosperity’ are of very little account. Babylon, Persia, Greece, Rome, Spain and France all had their turn in being the richest in the world. Instead of saving them, their so-called ‘prosperity’ ruined them.”
Historian J.P. Bauzon, in his book Roman Civilization, notes that in Rome, by “the third century, the silver coins had become copper pieces washed in silver, and issues of gold had virtually ceased.” Little by little, the Roman emperors cheated their citizens and creditors, paying bills and debts with coins that had reduced precious metals content. Debasing the coinage ruined the prosperity of its citizens.
By the time of Claudius II Gothicus (268-270 A.D.) the amount of silver in a supposedly (100%) silver denarius was only .02%. This led to or was severe inflation, depending on how you define inflation. See Mapping History’s chart of silver content and soldiers’ wages.
America is doing the same thing today. Just look at the dollar. It has lost 90 percent of its purchasing power since the establishment of the Federal Reserve in 1913. America is debasing its currency to pay the bills too. Every time you hear a politician use the term stimulus, or bailout, or borrowing, or monetizing, or more debt,what it means is that the government is devaluing the currency a little more. Every dollar of debt makes the greenback worth a bit less. The dollar’s purchasing power is being compromised. When the current short-term dollar rally runs out of steam, expect the price of commodities and other imports to jump again.
In America, just like how it was in Soviet Russia, King Louis xvi’s France, 11th-century China, and the empire of Rome, prosperity is no longer synonymous with actual wealth. Prosperity goes by an entirely different name today: DEBT!
Getting Ready For Another Run On The Banks
Reported by John Carney over at the Business Insider website, Citigroup is sending the following information to customers along with their bank statements.
“Effective April 1, 2010, we reserve the right to require (7) days advance notice before permitting a withdrawal from all checking accounts. While we do not currently exercise this right and have not exercised it in the past, we are required by law to notify you of this change.”
This can be read on page 23 of Citbank’s Client Manual effective January 1, 2010, here from Citibank’s own website.
“We reserve the right to require seven (7) days advance notice before permitting a withdrawal from all checking, savings and money market accounts. We currently do not exercise this right and have not exercised it in the past,” states the manual.
It’s very scary knowing that the Federal Deposit Insurance Corp., which guarantees deposits, only has about $50 billion to “insure” about $1 trillion in assets across the nation’s financial institutions.
Conclusion
I know these 3 posts have been sobering and somewhat depressing (no pun intended), however it was once said, “Those who cannot remember the past are condemned to repeat it”
No one knows what will come of this, and the more & more we learn the more it looks like this is only the beginning. Will the end be akin to the original Great Depression, people jumping from windows, rationing food & resources, etc? Who knows… all that can be said for certain is that there is definitely a case that can be made that we could still be at the very beginning of what could be the worst financial crisis in our country’s history, and that fact needs to be considered when watching the nightly news or reading the paper and someone says “The worst is behind us”. Maybe we should we be looking over our shoulder making sure that if it is behind us, its not gonna sneak up on us while were not looking and steal the wallet out of our back pocket…
Jon Maddux
CEO
www.YouWalkAway.com
