Friday, February 16, 2007

What Will Trigger The Crash?

On other forums, folks have been trying to predict the economic downturn we're all expecting.

The Plunge Protection Team (PPT) appears to be doing a great job of accelerating the market past historic growth rates. Inflation has been contained for a decade , proving that gasoline, milk, bread, corn and housing prices have remained unchanged since the Clinton years. We have a balanced budget and a reduced deficit in spit of the fact that the rate of government borrowing has more than doubled since Bush took office. And there is lots of new jobs.

Ok, maybe prices are going up faster than the government will admit. Maybe the new jobs are low wage jobs for immigrants, and not Americans. Maybe there's something to the IRS panic, where they see receipts for the Middle Class dropping as wages decline.

So how long can this go on? Well in 1999, I called the 2001 downturn to the month, by watching oil availability. World oil production peaked and went into a temporary decline one business quarter ahead of the market downturn.

I tried doing it again. But my first prediction was based on the fact that the economy was not lean. I wrote about the fact that it was probably a one off event, because the first downturn would show the government how to hide the next one.

After the 2001 downturn, the EIA quit publishing oil figures in a timely manner. In fact it wasn't until oil started going back up in 2004, that they came clean on all of their 2001 data. But first they gave us falsified figures until the speeches were over, then they corrected them. Their estimated figures are always optimistic, but this time around their estimated figures were inflated when they had solid data locked away for years. There's no excuse for an honest agency to get such data wrong.

Sincethen, we've lost Dupont, DOW Chemical, much of Union Carbide, etc... On a small scale we've seen a lot of small shops that use gas, close their doors. Our manufacturing is almost gone. Its certainly a shadow of its former self.

CEOs and big corporations continue to see massively increasing profits, while overall, the IRS says wages are declining.

And what drives this? Well oil prices are up and the government is borrowing and giving away money at massive rates. the Plunge Protection Team is essentially in the business of giving away money to the biggest financial institutions for the purpose of accelerating funds through the stock market. What does this mean? Well, there are two mechanisms supporting the market. One is known as 'fundamentals'. These are stock values based on a corporation's performance. For years now, the market has been outperforming most corporations, so clearly the market is not based at the moment on 'fundamentals'. The second is the velocity of the money flow. The speed at which stocks are traded determines how inflated their values become. This velocity and increases in money flow appear to be driving the pricing of the market.

I worked once for a brokerage corporation doing 'back end' protocol work to drive trades. I was mildly surprised to learn that every minute, billions of dollars in transactions take place. Mostly performed automagically by computers. Now trades cost money. Every institution wants a cut at some point in the cycle. So changes at this rate require a constant influx of cash. After all, flipping your retirement fund to generate commissions doesn't happen for free.

You and the PPT pay for this.

And how does the PPT do this? Well taking the market so far off the beam of common sense, based on 'fundamentals' requires a constant influx of free money. It can't be coming from the common man, we don't so this kind of stratospheric numbers on our side of the economy. The only source that can produce these numbers is the Federal Government. Now you might think it must be loans to banks that are keeping this going. I can't see it. They can't afford to pay this money back. Its borrowed money alright, but its borrowed from your kids and grand kids and given away for free to the same banks that charge you big bucks every time they make an automated, computer driven 'mistake', and forget to tell you they put your paycheck on hold again.

If you look at figures for 'debt to a penny', you'll see a dramatic acceleration in Federal Debt increases, since Bush took office. That money isn't going into our side of the economy. So where is it going?

And finally, the American / Iraqi War. Lots of money there. I'm going out on a limb and I'll argue that we can maintain this house of cards, so long as the war expands. When we lose, the collapse will follow. Our leaders have no choice but to maintain war as a growth industry. As the debt increases, we need more war to stimulate spending on devices of death.

When the war ends, our economy is finished.


At 11:37 AM, Anonymous Anonymous said...

War is very good for business. Without war we have no economy. [link]

After Bushco inevitably loses this war the U.S. economy and dollar will collapse. Bush has failed at everything he has ever tried. Unfortunately he will drag us all down this time.

At 8:09 AM, Blogger Mike said...

When the war ends, our economy is finished.

Then I guess it won't be ending.

At 10:27 AM, Blogger 1988dylan said...

Its an open-ended never-ending war on a concept. Dubya says so. He won't rest until every last terrist is dead. All the terrists can never be dead, cuz they breed. But the real war is a war on terra, not terrists. Its a war on them and their concept. One man's terrist is another man's freedom fighter.

At 12:40 PM, Blogger Weaseldog said...

Britain tried to end terrorism for 400 years within the limited scope of the UK and her colonies.

And failed.

Britain couldn't even completely enslave the people of Ireland.

Finally, Britain tried a new tactic. They declared peace on Ireland. And got peace. An uneasy one, and one I'll wager can't survive Peak Oil. But it proves the point that war is no deterrant to asymetrical warfare. But peace is.

But, I suspect that Blair and friends knew this all along. They declared peace to free up resources for other colonial endeavors.

Now they fight terrorism in the jointly owned (with the US) colony of Iraq.

At 6:50 PM, Blogger confusedforeigner said...

There is a school of thought that the middle east mayhem that these clowns have created is all about defending the US$ as the world's reserve currency.

I'm not convinced that it was/is high on the list of reasons to go to war, more to do with securing oil reserves and thus be able to distort, irritate and partially conrol the economies of those nations that will never subject themselves to the US empire i.e. China and Russia.

The question is, who will blink and start selling off their $ mountains first? And where is the line in the sand regarding US aggression that Russia and China surely have, given that they know that they are the end targets and that the US can never ever repay the debt that it has racked up.

Everyone will suffer if the $ goes into freefall, but certainly the US and Israel have the most to lose.

Personally, I'd rather it happened sooner rather than later. I'd swap a few years of recession in return for not living under US military full spectrum dominance.

I've nothing against Americans as people, but the elites that run your country are as evil a bunch that ever ruled anywhere.

To call them fascists is usually dismissed as an epithet. It isn't.


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