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THE OBAMA STIMULUS / FACTS AND FICTION
The Obama stimulus plan is attempting to inflate the same credit bubble that just burst and it will fail because our whole economic system must be overhauled ~ starting with our insolvent banking system which still hasn't delt with $175 Trillion in Derivative debt: Allen L Roland
The stock Market nose dived today almost 300 points because Wall Street is well aware of what Obama does not want to face ~ the whole world economy is going down and there is nothing to hold it up.
The fiction is that Obama's stimulus plan is going to stimulate the credit bubble that just burst.
Here are the facts ~ The major factor behind the current business cycle was and is a worldwide housing bubble and bust ~ based on loose and devious credit and driven by the speculative surge in mortgages and equity loans.
What you may not know is that, according to former Fed Chairman Alan Greenspan, that bubble accounted for 50% to 70% of GDP growth in recent years.
Talk about having all your eggs in one basket ~ So it was no surprise that as soon as the mortgage and equity loans bubble burst, consumption and GDP took a major hit and distorted the entire structure of the U.S. economy ~ which is still in major shock along with a growing number of European countries who were equally infected by our malignant speculative cancer.
Martin Weiss, Money and Markets, who has been spot on for the past five years on where we are and where we are going writes yesterday of The Obama Stimulus: Truth and Consequences .
Excerpt: " Most important, let's not waste our breath debating whether the plethora of government actions and programs since 2007 are philosophically right or wrong. The fact is, they have failed. These efforts were designed to stimulate the economy, avoid a housing bust, restore public confidence, contain the credit crunch, reduce the danger of a global debt collapse, and shore up sinking banks. But based on the overall net results to date, every single one is an outright, unambiguous, proven failure:
The economy was not stimulated. Quite the contrary, it plunged at an annual rate of 3.8% in the fourth quarter and is expected to shrink by a whopping 5.2% in the first quarter, according to a survey of economists published last week by the Philadelphia Fed.
The housing bust was not avoided; the S&P-Schiller Index of average home prices in 20 metropolitan areas has been falling nonstop for 28 months, with the most recent declines the worst on record. (See S&P's home price spreadsheet, column W, rows 237-266.)
Public confidence was not restored; it has been sinking nearly nonstop ... with the University of Michigan's Consumer Sentiment Index now hovering close to its lowest level in 28 years.
The credit crunch was not contained; we've seen the biggest contraction in credit availability in recorded history — new home mortgages shrinking at an annual rate of $327.5 billion, commercial mortgages shrinking $56.7 billion, commercial paper tumbling $272.6 billion, and corporate bond financing plunging $291 billion. (See Federal Reserve's Flow of Funds, pdf page 18.)
The danger of a global debt collapse was not reduced; it has actually gotten far worse. The evidence:
- The nation's 25 largest banks have upped their bets on the single most dangerous form of derivatives ~ credit default swaps. (See OCC's latest report on derivatives, page 1, fourth bullet.)
On average, the nation's five largest banks ~ JPMorgan Chase, Bank of America, Citibank, Wachovia and HSBC ~ have increased their exposure to defaults. At yearend 2007, their average credit exposure to derivatives was 264% of their capital, already extremely dangerous. Nine months later, it had risen to 317% of their capital. (OCC, pdf page 12, bottom line.)
Similar risks are rising dramatically in Western Europe, Japan and emerging market economies.
In other words, a global debt collapse is even more likely today than it was before the U.S. government began its massive interventions " http://www.moneyandmarkets.com/the-obama-stimulus-truth-and-consequences-2-29735
And there you have it, we are not even close to being out of the woods yet in what will be eventually seen as the worst depression of our lifetime ~ and fueled by a credit crisis of gargantuan proportions which will effect not only millions of Americans but also the world. http://blogs.salon.com/0002255/2008/10/25.html
Fasten your seat belts, it's going to be a rough ride but out of it may eventually come genuine change and needed regulation of the credit markets ~ but it won't be painless nor soon.
Allen L Roland http://blogs.salon.com/0002255/2009/02/17.html
Freelance Alternative Press Online columnist and psychotherapist Allen L Roland is available for comments, interviews, speaking engagements and private consultations ( allen@allenroland.com )
Allen L Roland is a practicing psychotherapist, author and lecturer who also shares a daily political and social commentary on his weblog and website allenroland.com He also guest hosts a monthly national radio show TRUTHTALK on www.conscioustalk.net
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