This link came from Rasterfield. This guy Peter Schiff has been in the media for some time and has been talked down by all these pundits, but guess what? he was right. I'm sure he didn't want to be right about something so awful, but here he is having been absolutely right.
Check this out:
http://au.youtube.com/watch?v=2I0QN-FYkpw
What do they pay these other guys for? One of them was recommending Washington Mutual!! Ha!
Schiff's point is that the US has been reducing its own capacity to produce for a long time, that it failed to go through a proper recession after the tech bubble burst, and replaced it with the current property bubble which led to the sub-prime crisis, and that the government spending is what is going to prolong the coming downturn, because it won't let the proper scenarios of capitalism play out. He's clearly not into John Maynard Keynes or Helicopter Ben.
Here are more Youtube videos with Peter Schiff:
Part 1
Part 2
Part 3.
I bet it's not that much to be Cassandra as the world's economy goes and tanks. In fact, the way he feels must be the way I feel about the Australian film industry.
I do think he's over-stating the case that Americ produces hardly anything of worth to the world - it still has Hollywood and Silicon Valley and Microsoft. It's not like it isn't creating new economies where it is productive and exporting products to the world.
2. Depression, Recession, Downturn, Bummer...
Call it what you like, it's not sounding good. It's been a long time coming, and people have been calling it for at least a decade. Yet because it failed to materialise immediately, people simply ignored the people who were saying there's not enough production and too much debt.
In that spirit, Pleiades has sent in these links.
The Coming Depression as seen by Seeking Alpha.
In the last few weeks I’ve heard a lot of discussion about the Great Depression. Jim Cramer has said that if the bailout wasn’t passed, we would experience a second Great Depression. This has led me to try and assess the circumstances which existed prior to the Great Depression of the 1930’s versus the conditions today. The chart below is extremely disturbing. The most recent flow of funds data shows that total credit market debt is $51 trillion versus our $14.3 trillion GDP. Debt as a percentage of GDP is now 356% versus 260% during the Great Depression of the 1930’s. This massive buildup of leverage has just begun to unwind. If this is just the beginning of the great leverage unwind, then the pain will be tremendous when it really gets going. The conclusion that I reach when looking at the vertical takeoff of debt in the early 1980’s is that this country has been living a lie of false prosperity. The huge McMansions, luxury cars, high tech gadgets, granite kitchens homes, and exotic vacations were purchased with debt. These “assets” are depreciating rapidly and consumers and companies are desperately selling assets to pay down the debt that is strangling them. The psychology of this country has begun to change from conspicuous consumption to forced liquidation and saving.
It's pretty good when somebody calls it like they see it. The rest of it is just as blunt, but worth the read.
Gordon Brown is a Market Bear according to the Telegraph in UK.
In the past 14 months, Mr Brown has shifted his rhetoric a bit, but always in the wake of events. Rather than doing what the markets call "kitchen-sinking", and putting the whole enormous problem before us, he prefers over-optimistic forecasts, and boasts about how well placed we are. (Our household debt, by the way, is nearly twice as much as the European average.)
If it is true that he has the intellectual capacity required, why does he not share his understanding with us? In their different ways, both Jim Callaghan and Margaret Thatcher reasoned with voters about the economic crises they confronted. In this financial crisis, Mr Brown has not done so. His message is simply "Trust me, I'm a doctor". But it was Dr Brown who for 10 years prescribed the debt drug, and now his patients are dying.
If you talk to the people - banks, regulators, civil servants - who have to work with Number 10 in this crisis, after a drink or two, they all tell the same story. The objective is the headline, they say; and if you do not do what you are told, the headline (© Lord Mandelson of Hartlepool and Foy) makes sure that you get the blame. There is no more trust among those dealing with the problem than there is in the financial system itself.
Which shows, I suggest, that the Government does not really believe that Everything Is Different Now.
The consequences are already bad enough. They could be truly terrible. There could be a complete collapse of the banking system, many millions unemployed, a return to barter, "self-sufficiency" (a Green word meaning poverty), extremist riots, looting. It seems an odd thing to say to our joke-free Prime Minister, but please, Mr Brown, get serious.
That doesn't sound too good.
Naked Capitalism
In particular, check out this bit:
"We are now starting to see the contagion effects of the current liquidity crisis feed through to the real economy...
The recent 93 percent collapse of the obscure Baltic Dry Index – an index of the cost of chartering bulk cargo vessels for goods like ore, cotton, grain or similar dry tonnage – has caused a bit of a stir among the financial cognoscenti. What is less discussed amidst the alarm is the reason for the collapse of the index – the collapse of trade credit based on the venerable letter of credit.
Letters of credit have financed trade for over 400 years. They are considered one of the more stable and secure means of finance as the cargo is secures the credit extended to import it. The letter of credit irrevocably advises an exporter and his bank that payment will be made by the importer's issuing bank if the proper documentation confirming a shipment is presented. This was seen as low risk as the issuing bank could seize and sell the cargo if its client defaulted after payment was made. Like so much else in this topsy turvy financial crisis, however, the verities of the ages have been discarded in favour of new and unpleasant realities.
The combination of the global interbank lending freeze with the collapse of the speculative, leveraged commodity price bubble have undermined both the confidence of banks in the ability of a far-flung peer bank to pay an obligation when due and confidence in the value of the dry cargo as security for the credit if liquidated on default. The result is that those with goods to export and those with goods to import, no matter how worthy and well capitalised, are left standing quayside without bank finance for trade.
Adding to the difficulties, letters of credit are so short term that they become an easy target for scaling back credit as liquidity tightens around bank operations globally. Longer term “assets” – like mortgage-back securities, CDOs and CDSs – can’t be easily renegotiated, and banks are loathe to default to one another on them because of cross-default provisions. Short term credit like trade finance can be cut with the flick of an executive wrist.
Further adding to the difficulties, many bulk cargoes are financed in dollars. Non-US banks have been progressively starved of dollar credit....
The ramification of the credit crunch may be that the entire system of food import/export around the globe might stop, and then there will be whole parts of the world that will starve as a result. Talk about a total disaster scenario.
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