You can’t cure a bubble by reflating it, says Bill Bonner. But that won’t stop the Obama administration from trying. Bill says we should get ready for trillion-dollar budget deficits, huge infrastructure programs, and bailouts for “brain dead” businesses. But none of this will be able to stop the economic correction that has to happen.
The record drop in consumer spending in October is clear evidence of a profound weakening of the US economy. Even President Bush think thinks the situation is bad. At the G20 summit over the weekend, he said it was conceivable that the US “could go into a depression greater than the Great Depression“.
Probably one of the craziest suppositions now is to project a 100% gain for U.S. stocks over the next few years. After all, everyone, and I mean everyone is suffering big losses in the market this year and nobody truly believes equities will start a bull market any time soon.
And this time in history we have gone one step farther down the path of True Economic Insanity (TEI) in that we not only created and spent all that money on gluttonous consumption, but we borrowed it all into existence, too! Hahaha!
Barring a massive bounce in the coming weeks, this will be the worst year for stocks since 1937, says Bill Bonner. The greed driving the market has turned to fear. And not the kind of fear that President Bush created about terrorists to push through his agenda. This time we need to be afraid…
It was January 1934. The Great Depression was five years old – but still had another five years to run.
The carnage was horrific: From 1929 to 1934, U.S. personal income plunged 44%, real output nosedived 30% and the unemployment rate soared to 25% of the American labor force.
Mainstream media is full of ‘Great Depression’ comparisons to today’s credit crisis. But Justice Litle says there are actually many similarities to be found a decade earlier. In 1919, there was a stock market crash, commodity slump, and a major bank bailout. But there is some hope: out of all that misery, the “roaring twenties” were born.
Daily Reckoning editor Bill Bonner says everything is going according to plan. An unsustainable credit-fuelled boom popped. And businesses, consumers and financial markets are left reeling. Bill says US stocks could fall much further before stabilising at a ‘normal’ level. Meanwhile, reckless money printing by the Fed will eventually take down the dollar, and light a fire a fire under gold prices.
The U.S. economy shrank at an annualized rate of 0.3% in the third quarter – the biggest decline in seven years – after businesses cut back on investments and consumer spending experienced its sharpest pullback since 1980. And though the contraction was smaller than economists expected, they are still predicting a drawn-out downturn that could be one of worst U.S. recessions since the Great Depression.
Bill Bonner says the Fed will make this slump longer and harder than it should be. Bernanke & Co are using every weapon in their arsenal to prevent deflation. But they tried this during the Great Depression. And Japan tried it in the 90s. And both times they only managed to deepen the pain.