Tag Archives: economy

Financial Crisis is an ‘Inside Job’.


Having now experienced a confirmed Hindenburg Omen in the last week that portends a stock market decline, we may again try to turn our attention to the Financial Crisis that began in 2007. Inside Job is a documentary by Charles Ferguson that unequivocally reveals to us that the GFC was not an accident. Those who benefited from it foremost were all in on it and new full well what they were doing and what it would lead to.

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The Marginal Productivity of Debt.


The key to understanding the problem is the marginal productivity of debt, a concept curiously missing from the vocabulary of mainstream economics. Keynesians take comfort in the fact that total debt as a percentage of total GDP is safely below 100 in the United States while it is 100 and perhaps even more in some other countries. However, the significant ratio to watch is additional debt to additional GDP, or the amount of GDP contributed by the creation of $1 in new debt. It is this ratio that determines the quality of debt. Indeed, the higher the ratio, the more successful entrepreneurs are in increasing productivity, which is the only valid justification for going into debt in the first place.

Porn deflation.


In a punny way of things the pron industry is deflating in unison with the rest of the US economy.

Q3 2009 private sector credit collapsed at – $1.81 Trillion annual rate.


The ONLY major player still borrowing money in big amounts was the United States Treasury Department (line 3), sopping up $1481.2 billion of the credit available — and leaving LESS than nothing for the private sector as a whole.

Overall total credit in the economy shrank at an unprecedented annual rate of -$275.6 billion.

Private sector credit fell at an astonishing – $1.8098 Trillion.

Treasury Three-Month Bill Yields Turn Negative.


When you have US Treasury yields sitting at historic lows at prolonged periods of time and across the entire yield curve, it only means one thing – delfation is here and anywhere you look on the horizon. But when you have yields turn negative, which really means investors paying privately owned Federal Reserve to hold their money as it has become the only safe place to keep it, this is a sign of a crash or some impending credit event which is also deflationary. Someone somewhere knows something. Only indication we, the common folks get of an impending crisis, is the sharp jump in excess reserves held with the Federal Reserve banks by other financial institutions. The excess reserves rose by almost $250 Billion between July of 2009 and November 2009, while the stock market has been setting yearly highs and “recovery” has been gathering pace, or so the powers that be would want us to beleive. Add to this the November 19th, 2009 delay in release of “Reserve Bank credit H.4.1 weekly report” and you get a shiver down your spine that something is about to hit the proverbial fan.

FDIC wisdom from 2005 – U.S. Home Prices: Does Bust Always Follow Boom?


This analytical research piece from FDIC from February 10, 2005 makes quite interesting and amusing read now in September of 2009. The main premise of this article is that booms are not always followed by a bust. We now know it is nonsense. What goes up must come down, especially if it is not based on fundamentals. The laws of physics have already proven the quasi educated Federal clowns to be wrong, but that is not stopping them from trying to blow another bubble, or rather reflate the one that just burst in pretty much every asset class.

Total US Debt has reached at least $60 Trillion as of Q1 2009!!! Debt to GDP ratio 425%!!!


By that measure if we were to take the Q1 2009 reported US GDP of $14,097.2 billion and divide Q1 2009 total US debt level of $60 Trillion by that GDP number we would get an astonishing record Debt to GDP ratio of 425%.

Does the world have the courage to deal with its debts?


Quite a sensible article from an MSM source, Telegraph of UK, that aptly discusses the real state of things on the Central Banks’ front of deflationary fighting and suggests several solutions out of this global economic crisis. I, however, do not agree with the proposed solution ouf of indebtedness problem that we the people should pay down the debts as the author puts it “very slowly, by sweat and toil”. This contradicts the very natural economic self-interest of the majority of hundreds of millions of people that were either duped into borrowing by financial wizards or had to do it as they saw no other way of being able to afford things as the wages stagnated for decades. No, I propose to default on all the debts, walk away and let the owners of this world financial system have it. I in essense call for a debt revolt, stick it to them and let them be crushed under their own debts.

Swiss consumer prices post sharpest fall in 50 years.


As we can now clearly see devaluing one’s currency, as it was done a few months ago by the Swiss National Bank, did nothing to stop CPI from falling. And the sooner the prices fall the sooner will this prolonged slump end. This is economics 101, but the Central Bankers don’t want to admit it and keep tinkering with interest rates and quantitative easing policies.

In a snub to ECB’s denial of deflation European Prices Fall 0.6%.


The question is now when will the European Central Bank finally admit that there is deflation in Eurozone?