I have made mention many times that the U.S. was the White Knight to the world in 2008. We were kind enough (shoved down the populace’ throats) to open up our Treasury to the tune of $700 billion, the Fed lent out a hidden $17 trillion while the other acronyms ponied up a trillion of dollars or two more. Did it work? Did anything actually get fixed? As in structurally fixed? No. Did we “grow” economically from there? Actually we have bottom bounced on a lower plateau as many economic numbers have been massaged and actually changed in the way they are “counted.” A perfect example is that “R+D” used to be considered an expense…now it is considered an asset.
So here we are 5 full years out from 2008 and the very same storm winds seem to be blowing again. Retail sales are slowing, the banks hold an 8 million “shadow inventory” of homes that one day must either be sold for a loss or actually torn down. Automakers are channel stuffing like never before and the “unemployed” that cannot find a job are simply washed out of the “numbers” after their benefits run out. State and federal debt levels and ratios are at all-time highs (and lows) while the derivatives markets have never been smaller or less “important” to the “pricing” of things as they are today. In a nutshell, we are riper today for a 2008 financial event than we were back in 2008. The only differences that I can see are that this time around the sovereigns themselves are broke AND the sheeple sleep more soundly now…even after being sheared, skin and all back then.
This may “look” and feel like 2008 but it’s not. It’s not because another, bigger TARP plan:
1. Wouldn’t be big enough
2. Would never pass public approval (yes I know, it did not the first time either)
3. Would actually destroy rather than embolden confidence.
As I just wrote earlier, the problem is that there is no longer enough “unencumbered” collateral that can be leveraged. This is a problem because the only “way out” is to reflate again but there is nothing left to reflate with or “upon.”
This is not 2008 because central banks no longer have the room to expand their balance sheets and the sovereigns themselves have little ability to issue more debt. From another angle, will anyone believe (for more than a few weeks) that bank deposits will be “guaranteed 100%” as they were in 2008? Or, what will the reactions be when “bail ins” rather than bailouts are used? If over a week or a weekend, balances are suddenly “pilfered” to save the bank itself…what will be the reaction by market participants?
What I am saying here is that 2008 and afterwards was the “haymaker” that should have (according to conventional theory) “knocked out” the financial crisis. It did not. The only thing that it did do was buy some time…and make each and every problem that led up to 2008 that much bigger and badder! I would also like to say that the fraud that led up to 2008 was never addressed and no one (less than a handful) went to jail. The fraud actually flourished and spread further! The fraud not only flourished but has become “business as usual” which is another reason…we are now on shakier ground than 2008.
As bad as 2008 was, I think what will happen this time around will be worse, much worse. “Worse” as in our greatest fears back in 2008 will become the reality. I might also mention that as bad, overbearing and “non Constitution is following” as the Bush administration was, the current administration makes that look like child’s play. Can you imagine the outrage (not just by the media but by the populace) were an agency under Bush to have amassed 2 billion rounds of ammunition? Or any of the multiple current scandals that are just “laughed off” and ignored? The country sleeps…
Very seriously, the tent WILL come down because it is meant to come down. There is no way that any of the choices made or policies used over the last 10 or 20 years were done for “our benefit.” Nearly everything over this timespan has had an element of “the hollowing out” of America. America once was “industry.” It was a working class country…a self-sufficient working class country! Ideas and ideologies have changed dramatically over the years…”policy” has helped facilitate many of these changes.
I wrote back in 2008 that “no one could be this stupid” to have done what was done…therefore “it had to be planned.” I still believe that what I wrote back then is true and that the last 5 years has been a “propping up” so that the very last crumbs could be swept off the table and pilfered …while dumbing down the public further. You may note a different “tone” in my writing…and you would be correct. I am scared stiff and truly fear how this whole thing is going to play out. Will the coming meltdown result in riots? I think this is a given, what we don’t know is what the response will be from government. Will this result in some sort of revolution? What will the “sides” be? On which side will the military stand? Or even your local law enforcement? Will it be quick of dragged out? Will we still have our Constitution or will it be “suspended” (more than it already is)?
The scariest part is that while this is not 2008, “we” as a society don’t even resemble the 1930’s. We are no longer self-sufficient in any manner to grow food or to hunt, fish or to even find clean water. More importantly, the “goodness” of Americans who helped those who couldn’t help themselves in the 1930’s has been severely eroded. Besides, the numbers are far more lopsided today and the “entitlement mentality” may have already become the majority. We have gone from a “we” mentality to a “me” mentality, when the “benefits” are cut off…who will the “ME’s” turn to? Whatever direction they turn I’d be willing to bet that “peaceful” will not be the descriptive word.
I am sorry for being so negative. I normally say “I’m not being negative, I am simply being a realist and stating the facts (or truth as I see it) but I think that we are very close to a breaking point. A “breaking point” where logic (and probably law) might not prevail. This scares me greatly because I make my decisions based on logic…and the logic based on laws…laws that make good sense and are enforced. I fear that as this biggest financial bubble of all time unwinds, lawlessness will prevail while new and nonsensical (and self-serving) laws are passed…and enforced.
Am I scared because the stock market is down over 1,000 points in a month? No, that’s not it but it is a “sign,” a sign that control is being lost. The danger of anything that is “controlled” is when control is lost…you are watching it happen right now. Whether you appreciate it or not, we live in and are witnesses to the greatest “interesting times” in all of history (this saying by the way is meant as a Chinese curse upon someone).