We are far from out of the recession unfortunately

Trying my best to stay afloat.

-Ryan

First, populations of the great consuming nations are aging. As people age we tend to spend less. We keep the car and the appliances a few years longer. We trade down or shut down parts of the house that are no longer in use.

Additionally, the debt burdens (taxes and personal debt) is significantly higher and income significantly lower of the generations following the Boomers.

The economies of the great consuming nations are contracting and will continue to contract simply because fewer people earning fewer dollars spend less.

Secondly, our business and economic models are all based on the inaccurate assumption of scarcity. Recessions don’t occur because of a scarcity of goods and services. Recessions are the result of a vast abundance of goods and services for which there are no buyers.

Third is that power is no longer vested in the nation state but to corporations absent any loyalty to any flag, save their own. We are in fact, regressing to a form of feudalism known as corporatism. Think of this as the Golden Rule, He who has the gold, rules. Nation-states are broke or bankrupt. Successful corporations are self-financing and as a result self-sustaining.

As a direct result of this power shift, economic policy of nation-states is designed to benefit the largest economic interests as opposed to the People’s interest.

Perhaps the best recent real world example is health care reform (HCR). By now most employees have received notice of this year’s increase in health insurance premiums and copays. These increases were negotiated by your employer and your health insurance provider.

Neither you or anybody representing your interest was anywhere near the room when the deal was cut and YOUR money was spent. According to Senator Dodd, HCR, such as it is, is now officially on hold. Speaker Pelosi announced Friday that she doesn’t have the votes to pass the watered down Senate bill.

For those reasons, the economy is contracting due to demographics, inaccurate assumptions in economic modeling and the power shift from nation-state to corporate governance; this recession will not end in the lifetimes of the Boomer Generation.

Frankly, I see it getting worse before it gets worse.

Everything else, from the Energy Crisis now in it’s 37th year, to currency devaluation to the credit crunch is merely a symptom of one of the above primary causes.

That my friends is an anecdotal narrative. I’m quite able to back it up if challenged.

Is the recession over? No – it’s just beginning. But the experts said…they also said the economy was strong during the bubble. They said it would be a soft landing. They are either liars or fools. Here is why – and I don’t need an economics degree – common sense and an analytical mind is all that is needed.

The recession 10 years ago was delayed by dropping interest rates to historic lows of around 8% at that time fueling borrowing and housing sales and subsequently housing prices. People can afford a whole lot more house at 6% or 8% fixed rate than they can at 10%, 12% or higher. Plus we of course had all reasonable, ethical and moral loan rules thrown out giving loans to anyone for any amount with no documentation, no reasonable expectation of being able to pay it back, and arm loans, neg amort loan, etc.. that guaranteed future defaults on the majority of those loans. This easy money so to speak drove the demand for homes sky high, nnd the cost of homes was no longer limited by what people could actually afford to pay resulting in skyrocketing housing prices – hence equity. So everybody borrowed on equity lines and spent like money grew on trees. This consumer spending on borrowed money is what fueled the economy out of the recession 10 years ago and kept it going until the bubble burst.

Anybody with any sort of analytical mind could and should have foreseen this – I did more than 5 years ago, but I’m a nobody. The government of course had no interest in rectifying the matter by tightening up the loans, because the second they did so – the wheels would stop turning. The buying frenzy would cease, prices would fall, equity would dry up, spending would stop, economy would shrink, unemployment would rise, and the inevitable crash would occur. It was only the consumers’ belief in the illusion and there deficit spending that sustained the bubble and delayed the inevitable recession year after year. And like a cancer, the longer it is ignored the worse it becomes when finally addressed.

We have never left that path and how did the government address the problems when everything finally crashed? Did they let the worst offenders and weakest links (banks, companies, individuals) crash and burn so our country could rebuild on a solid foundation? No, they did not. They printed more money and gave it to their rich friends – truly seems like the rich rewarding the rich for their failures, while laughing at us peon workers. Did they allow interest rates to return to a normal level? No – they reduced them even further to the lowest possible rate – creating an even new historical low – that is being sustained through today – BUT IS UNSUSTAINABLE. They are repeating all the same mistakes. And why, because the other choice – to actually let the house of cards collapse and so they can rebuild in a responsible manner is unpalatable to them. Mainly because the voters are so short sighted, so much like lemmings that simply follow, they do not comprehend anything deeper than their next paycheck, their next payment, etc… and won’t take responsibility for their part in all this – that being their spending and living beyond their means for over a decade!

So what is going to happen? I’ll tell you. Interest rates will rise at some point – when? Who knows – the bubble lasted 2-4 years longer than I expected. But when they do, once again the housing market will see its second crash. Home prices only leveled off because people are getting 5% interest rates and the banks are hoarding their inventory of defaulted homes. Once rates go up to 8% (still an incredibly low rate historically) or 10% or 12% (the rate when I bought my first house) the housing prices will drop proportionately. This means many more people will be upside down and walk away. Many who are barely hanging on will lose their homes. A whole second wave of foreclosures, defaults, etc…

Consumer spending will drop again as deficit spending will become even more expensive and inflation soars. As the economy slows further unemployment will rise again. Of course the experts touted on every news and chat show will never say this – because they will be accused of insighting fear and damaging the precious consumer confidence thereby causing the downturn. But it is unfounded consumer confidence that has caused so many of our problems! So instead they parade out these smiling faces with this happy talk of hitting the bottom, etc… and the politicians just B.S. us as long as they can, hoping they either term out or somehow the problem just fixes itself before the next big crisis – unless you are a conspiratists and believe they manipulate the crises to further the transfer of wealth. I don’t think they are that smart.

Is this the end of America – of the good times? No – not if sound reasonable conservative principles (not republican but truly conservative principles like your grandma admonishing you to save 10% of your income, turn off the water, the lights, living responsibly type conservative principles) are followed. Let the worst offenders go under – the world won’t end. Stop bailing out these mega corporations – rather they should be broken up and downsized into smaller companies under anti-monopoly laws. Move away from the socialized health care now being proposed and increase competition by allowing out of state purchases, etc… Competition is the one sure way of improving products, cost and efficiency. Instead of giving tax money to the rich corporations to be given out in mega bonuses to those already wealthy, had that money been given back to consumers in a onetime mega dispensation – mortgages could have been paid down, car loans paid off, bills reduced, etc… or give permanent tax breaks so consumers have more money to spend thereby creating true and sustainable demand. It is all so obvious – yet for some reason, mainly shortsightedness and entitlement mentality people just think they all deserve to spend, buy, consume as much as they want even though their monthly paycheck doesn’t justify it. And that is the bottom line – aside from the people within the bubble industries – did the majority of workers’ incomes increase proportionately to the increase in consumption and housing prices? The short answer is NO – not by a long shot – hence the unsustainable and artificial bubble. And that is still where we are and where we are headed until true balance is restored between people’s incomes, their spending, government spending, taxes and interest rates.