On the 12th of June, the White House released a letter Obama sent to congressional leaders of both parties asking for nearly $50 billion in emergency aid to state and local governments to fend off "massive layoffs of teachers, police and firefighters" and to prevent a possible double-dip recession. He didn’t get the money. “People think we’re becoming a Third World country,” said Ms. Sims, 55. “They don’t understand.” It’s a story that’s being repeated all across California – and throughout the United States – as cash-strapped state and local governments grapple with collapsed tax revenues and swelling budget gaps. Mass layoffs, slashed health and welfare services, closed parks, crumbling superhighways and ever-larger public school class sizes are all part of the new normal.
The "recovery" is mostly PR because, for some reason, the political apologists who masquerade as economists think this is all a matter of psychology, not reality. They believe if you think everything’s going to be all right, everything will be all right. So, they put out happy PR. – Doug Casey
Now Vice President Biden has joined White House spokesman Robert Gibbs at a regular news briefing to talk about what he calls the "Summer of Recovery." A week before it was Obama on the bull horn saying that the economy was getting stronger each and every day. Billionaire investor George Soros differs from the President saying, “we have just entered Act II” of the crisis as Europe’s fiscal woes worsen and governments are pressured to curb budget deficits that may push the global economy back into recession. “The collapse of the financial system as we know it is real, and the crisis is far from over,” Soros said recently at a conference in Vienna. “Indeed, we have just entered Act II of the drama.”
The time left to take the appropriate actions is running out as new waves of crisis are beginning to beat against our collective hulls. I truly pity those who are hanging on Obama’s verbal hallucinations. On its long journey to the land of bankruptcy, the Western world is twisting and turning trying to avoid the inevitable but it’s doing no good as the inevitable looms up in our faces. The European Central bank has realized that the Americans are mad to expand their debt by trillions more so they are slamming on the breaks. Less government spending will equal more economic growth, the European Central Bank asserted in the middle of June 2010 in an effort to keep up the pressure on less-troubled countries like Germany to cut their budgets.
There is no point pretending that everything is going to be all right when it simply isn’t. It is actually dangerous to pretend and live in make believe land. It is time we grow up and realize that one of the key truths of our modern world translates into – when we borrow too much money life becomes unmanageable and our choices become unpalatable. Much of the chaos and unpleasant happenings today are resulting from the attempt to keep alive the illusion of solvency and hope of renewed economic and credit expansion. But this only insures theft on an increasing scale and a greater and deeper crash and resultant depression.
Llewellyn H. Rockwell, Jr writes, “The stakes are impossible to overstate. Fiat paper money is destroying civilization right now. It has fueled the predator state. It has destabilized markets. It has wrecked balance sheets and distorted financial markets. It has wrecked the culture by leading the whole world to believe that prosperity can come as if by magic, that stones can be turned into bread. It might yet unleash a ravaging inflation that will be welcomed by dictators, despots, and cruel tyrants. How important is sound money? The whole of civilization depends on it. We must accept no compromise. Down with government plans. Down with international commissions. Down with attempts to manipulate and control that always end in robbing us and making us poorer than we would otherwise be.”
Eric Janszen writes, “Central bankers worldwide are in the awkward position of needing to profess 100% confidence in a hopelessly flawed and outdated international money standard while simultaneously hedging its potential demise with a reserve asset that they claim to have abandoned nearly 40 years ago. On the one hand they are all-in on global monetary system based on a fiat currency issued by a single nation with a declining global output share, an unsustainable structural fiscal deficit, $60 trillion in total contingent liabilities, and dependence on asset price inflation for economic growth, with no path out of any of them under a political system dominated by special interest.”
Since late 2007, personal incomes plunged while food prices, after a brief decline, continued to rise — no wonder we have 40 million Americans on food stamps. Today’s inflation is experienced more by lower income groups rather than society as a whole. The people at Automatic Earth say, “There are many things that -still- function today, but once a trickle becomes a flood, will cease to function. Bank runs are the most obvious example – as soon as more than a handful of people withdraw their deposits, banks close their doors. Those who expect to be bailed out by deposit insurance are in for a nasty surprise, as deposit insurance won’t be worth the paper it’s written on in a systemic banking crisis. It’s all merely a confidence game in the first place – a mechanism to convince you that there’s actually nothing to worry about.” In their most recent essay they make a good case for either declaring bankruptcy now or getting out of debt for they predict that collection agencies will only get more aggressive and already some are finding themselves in prison for reasons of not paying a debt.
Many governments, including those of the US, Japan, and most euro-zone countries, have made extremely costly promises to provide entitlements to their citizens and to repay their creditors. These promises will be broken because they are promises that simply cannot be kept. Have you ever had someone owe you money (which you desperately need) and they promise and promise and you wait and wait and nothing?
“The “When hope turns to Fear” moment is unfolding as we speak, as the tides of insolvency sweep over the social welfare states and financial systems of the developed world. It is the next leg down in the global financial crisis and what will come to be known as the greatest depression ever is commencing ?? we are fascinated and astonished at what the main stream media is reporting and failing to report. The greatest transfer of wealth from those that hold it in paper to those that don’t is under way. Wait until the BIG money PANICS. An economic bloodbath approaches. Catastrophe looms, courtesy of the chosen one and his minions in congress. This is not DOOM and Gloom, it is reality, learn to deal with it and prosper, fail too and learn the lessons of history in REAL time,” writes Ty Andros, one of my favorite writer thinkers.
“The ‘recovery story´ has hit a wall. The widespread perception (or hope) that things are improving fundamentally and sustainably is being dismantled by reality, by the economic and financial facts that are pushing through to the surface. The trillions spent on keeping the recovery fiction alive are quickly turning into what we knew they were from the beginning: paper money and debt, wasted to create a false image of safety and improvement, to buy an expensive scheme of smoke and mirrors. The masses will of course be disappointed. Their governments are not in control after all. The implications are ugly. The recent bear market rally is coming to an end, as more and more investors are realizing that the crisis is returning, or even just swinging into full motion. I would not have expected this. Not this quick. Not so soon,” writes Frank R. Suess.
Bernanke recently said before Congress that while the budget cannot be balanced immediately, lest Congress risk undoing the nation’s budding economic recovery, the government must demonstrate that it has a plan for returning the nation to fiscal sanity. “Economy in a funk? Forget the real cause. Stimulate it! We can worry about the real problem “after the economy has recovered,” writes Paul Krugman in The New York Times. You can’t pull levers nor turn screws to stop a correction. Like old age, the best you can do is to endure it with good grace; the alternative is worse. In the present instance, instead of robbing Peter to pay Paul, the feds judged it prudent to borrow from Peter. But Peter is no dope. First, he turned his eyes on Greece. Then, he noticed all the other peripheral players in the Eurozone… Then, he put his wallet back in his pocket. It became obvious that the jig was up. As Nouriel Roubini put it, we reached the point where “austerity is not optional,” writes Bill Bonner.
Former Federal Reserve Chairman Alan Greenspan said the U.S. may soon face higher borrowing costs on its swelling debt and called for a “tectonic shift” in fiscal policy to contain borrowing. “Perceptions of a large U.S. borrowing capacity are misleading,” and current long-term bond yields are masking America’s debt challenge, Greenspan wrote in an opinion piece posted on the Wall Street Journal’s website. “Long-term rate increases can emerge with unexpected suddenness,” such as the 4 percentage point surge over four months in 1979-80, he said. “The federal government is currently saddled with commitments for the next three decades that it will be unable to meet in real terms,” Greenspan said. The swing in demand toward American government debt and away from euro-denominated bonds is “temporary,” he said.
“Vegas is a microcosm of the economic nightmare that has gripped the entire nation. When the subprime mortgage crisis stuck, no major U.S. city was more devastated than Las Vegas. When the recession went from bad to worse, Americans decided that they really didn’t need to gamble so much and casino revenues plummeted. Suddenly unemployment started to increase dramatically in Vegas and even today it continues to soar. Like so many other cities that are highly dependent on tourism and entertainment, Las Vegas has gone from boom to bust. Local officials are hoping that the worst will soon be over, but the truth is that the worst is yet to come. As the U.S. economy continues to unravel, average Americans will be spending what little money they do have to put a roof over their heads and to feed their families, writes The Economic Collapse.
The Burning Platform writes, “The next leg down in this Greater Depression will thoroughly discredit those who have promoted a money culture over those virtues that will benefit society in the long run. The current Crisis will require personal sacrifice, renewed community spirit, public consensus, and truth. Failure could prove fatal for our nation. The best of human nature must win out over greed, ignorance, and love of power. Our future hangs in the balance.”
Doug Casey says, “The Greater Depression began, I believe, in 2007, and will get much worse because not just the US government, but every major government in the world, has been doing not just the wrong things but exactly the opposite of the right things. The right thing would be for these governments to get totally out of the picture. What they are doing instead is inserting themselves further into the economy. I expect the Greater Depression is going to last quite a while, and it’s going to turn a lot of what you see today completely upside down, things are going to be very different. I think the world is going to re-organize itself in ways that are going to impress people in the future as very different than what we have today.”