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BIG QUESTION ANSWERED / J SHAPED DEPRESSION
Up until a few months ago the Bush administration was not willing to admit we were even in a Recession. Now the Obama administration will not admit that the present economic downturn has all the earmarks of a J shaped Depression that can't be flushed and is stopped up with stagnant cash: Allen L Roland
Here's the problem in a nutshell. No one trusts Wall Street, No one trusts the government and Washington does not trust the American people because they are not telling us the truth.
The truth, which I have shared for some time, is that the same credit bubble that just burst cannot be re-inflated again. Despite
the feds efforts to increase the money supply and attract further credit ~ Americans are up to their eye balls in debt, have lost trust in the financial system and in particular, Securitization, and are saving their rapidly diminishing funds instead.
Remember, Personal consumption accounts for 70 percent of gross domestic product ~ so while the Fed bails out Wall Street ~ Main Street is getting angrier by the moment and refuses to play the same credit game the Fed wants them to play.
As Mike Whitney correctly writes ~ " Homeowners just lost 28 percent of their home equity in the last two years and more than half of their retirement (401K). They are much poorer than they thought and they need to increase their savings fast ."
Thus we have the current J shaped Depression where the Fed is stuffing the banking toilet with stagnant cash which can't be flushed through the system because the system is permanently broken. Until the financial system is fixed or replaced ~ the economy will not recover for some time.
Mike Whitney, who has been right on the money for the past three years, sums up this horror show ~ which is going into its final act. Here are some excerpts and then I have Jon Stewart's 8 minute VIDEO rave against the TV pundits, particularly, CNBC, who have completely missed the boat on this rapidly accelerating economic crisis.
When Securitization Blew Up; So Did the Economy
Excerpts:
" One thing is certain, this isn't a normal recession. In a normal recession aggregate demand declines, economic activity slows, and GDP shrinks. While those things are taking place now, the reasons are quite different. The present slump wasn't brought on by a downturn in the business cycle or a mismatch in supply and demand. It was caused by a meltdown in the credit system's central core. That's the main difference. Wall Street's credit-generating mechanism, securitization, has broken down cutting off roughly 40 percent of the credit that had been flowing into the economy. As a result, consumer demand has collapsed, inventories are growing, and manufacturing has contracted for the 13th consecutive month. The equities markets are in freefall and all the economic indicators are pointed south. The so called "shadow banking system" which provided wholesale funding for mortgages, car loans, student loans, and credit card debt, has stopped functioning entirely..... The financial sector now represents 40 percent of GDP, which is to say that the exchange of paper claims to wealth is the driving force behind economic growth. The production of useful things, that actually improve people's lives and raise the standard of living, has been replaced by the trading of complex debt instruments and opaque derivative contracts. Securitization is at the very heart of Wall Street's Ponzi-finance scam. It creates profits by transforming liabilities into "cash flow" which can be sold at market. Bottom line: Factories and manufacturing are out. Toxic paper and garbage loans are in.... The economy is now caught in a deflationary downdraft. The sharp decline in asset prices is making it more difficult for businesses to roll over loans. Without financing, tens of thousands of businesses will default. Bernanke assumed it would be easy to reflate the bubble economy by increasing the money supply. Now he knows he was wrong; the printing presses haven't worked. The Fed's trillions are sitting in stagnant pools on bank balance sheets rather than churning through the credit markets. Monetary policy has failed; velocity is down and capital injections have not stabilized the financial system... The TALF and "public-private partnership" is just more grasping at straws; another attempt to stop the debt deflation by trying to rev up securitization. It won't work. Bernanke and Geithner still don't understand the main problem, which is the explosion in private debt. Consumers are tapped out and easy credit won't help. Homeowners just lost 28 percent of their home equity in the last two years and more than half of their retirement (401K). They are much poorer than they thought and they need to increase their savings fast ... As Barak Obama stated last week, "Credit is the economy's life-blood". It should distributed through government-owned and regulated financial institutions that operate as public utilities. Credit is everyone's business. It shouldn't be controlled by speculators."
IF YOU'RE NOT ANGRY, YOU'RE ON LIFE SUPPORT
Allen L Roland
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
Cartoon courtesy of Tom Toles / Washington Post | 
