July 18th Musings
Guppy over at CNBC has been squaking about the parallels between the Great Depression and Depression 2.0 (which he refers to as the "financial crisis") today said that the DOW may crash to 7500 if it can't breach 10,600. Read it all here.
I don't think the DOW can hit or, more importantly, sustain 10,600 in this economic climate. Where are the profits or even the good economic news to propel the market upward? Consumers are worried so they have put away the charge card. All of this democrat talk about letting the Bush tax cuts expire while the economy is slowing and health care reform kicks in just makes people worry. Even people who don't pay attention are aware of the huge deficits and debt that are piling up. People are starting to feel like something is very wrong with the economy.
Look for the printing presses to fire up before the election as Quantitative Easing 2.0 goes into high gear. But it won't help the DOW or the economy. The damage is done.
Elsewhere
Some commenters at BC think the democrats are about to go extinct because we are broke. The scenario goes something like this, without income to generate taxes the democrats won't be able to buy votes by paying off the race-class constituencies that put them in power so they go extinct and are replaced by a responsible party.
I'm not so sure. With half of this country reliant on government spending as their sole means of support, what will happen when the spigot runs dry? Will people just calmly accept this reality and wait to go to the polls to vote for responsible representatives? What politician will be elected on a platform of canceling social security, medicare, medicaid and furloughing 2/3 of government employees?
I think the democrats will borrow, print and spend until foreigners say no more. It will be hard for foreigners to do so because it will harm them as well. But eventually this ponzi scheme will stop because it just can't go on.
Fuel and food will be the international flash point. Many nations rely on american grain to feed their populations but in order to grow the grain, we need oil. When the dollar becomes worthless, how can we trade grain for oil? How can we trade anything with anybody when our currency has less value than toilet paper?
Suddenly nations in famine start looking at US cropland and thinking that they could plant those fields and feed their people. War starts looking like a necessity to survive. Just because nobody has ever successfully invaded this country doesn't mean it can't happen.
Meanwhile what's this country going to look like with the poor and elderly starving and dying from wont of medical care in this country. With half the population unemployed, people are going to become desperate. Large urban areas will become lawless with rioting and crime.
In six months, half our population could be dead and the cities a ruin. We could be under invasion by one, or more, coalitions sanctioned by the UN to restore global order. Then, I suspect that the responsible party that would be selected would look a lot like Hitler or Stalin. A dictator that would suspend the Constitution to restore order. He may even cut a deal with the UN and invaders to rule what is left of america. Would it even be possible to retore the Constitution in the future?
Unfortunately we have boxed ourselves in with no way out. Rome found itself in the same trap when it couldn't expand to pay for it's vast patronage system. The elites abandoned Rome and setup smaller shops in friendlier locales of the former empire. Westerners refer to this period as the Dark Ages.
Our forebears survived the Great Depression by tightening their belts, pulling together then fighting and winning a war. I don't believe that we are made of the same stern stuff that our forebears were. And the world is a far different place. I think that the conclusion of Depression 2.0 might not be as auspicious as the conclusion of the Great Depression for our descendents.
I don't think the DOW can hit or, more importantly, sustain 10,600 in this economic climate. Where are the profits or even the good economic news to propel the market upward? Consumers are worried so they have put away the charge card. All of this democrat talk about letting the Bush tax cuts expire while the economy is slowing and health care reform kicks in just makes people worry. Even people who don't pay attention are aware of the huge deficits and debt that are piling up. People are starting to feel like something is very wrong with the economy.
Look for the printing presses to fire up before the election as Quantitative Easing 2.0 goes into high gear. But it won't help the DOW or the economy. The damage is done.
Elsewhere
Some commenters at BC think the democrats are about to go extinct because we are broke. The scenario goes something like this, without income to generate taxes the democrats won't be able to buy votes by paying off the race-class constituencies that put them in power so they go extinct and are replaced by a responsible party.
I'm not so sure. With half of this country reliant on government spending as their sole means of support, what will happen when the spigot runs dry? Will people just calmly accept this reality and wait to go to the polls to vote for responsible representatives? What politician will be elected on a platform of canceling social security, medicare, medicaid and furloughing 2/3 of government employees?
I think the democrats will borrow, print and spend until foreigners say no more. It will be hard for foreigners to do so because it will harm them as well. But eventually this ponzi scheme will stop because it just can't go on.
Fuel and food will be the international flash point. Many nations rely on american grain to feed their populations but in order to grow the grain, we need oil. When the dollar becomes worthless, how can we trade grain for oil? How can we trade anything with anybody when our currency has less value than toilet paper?
Suddenly nations in famine start looking at US cropland and thinking that they could plant those fields and feed their people. War starts looking like a necessity to survive. Just because nobody has ever successfully invaded this country doesn't mean it can't happen.
Meanwhile what's this country going to look like with the poor and elderly starving and dying from wont of medical care in this country. With half the population unemployed, people are going to become desperate. Large urban areas will become lawless with rioting and crime.
In six months, half our population could be dead and the cities a ruin. We could be under invasion by one, or more, coalitions sanctioned by the UN to restore global order. Then, I suspect that the responsible party that would be selected would look a lot like Hitler or Stalin. A dictator that would suspend the Constitution to restore order. He may even cut a deal with the UN and invaders to rule what is left of america. Would it even be possible to retore the Constitution in the future?
Unfortunately we have boxed ourselves in with no way out. Rome found itself in the same trap when it couldn't expand to pay for it's vast patronage system. The elites abandoned Rome and setup smaller shops in friendlier locales of the former empire. Westerners refer to this period as the Dark Ages.
Our forebears survived the Great Depression by tightening their belts, pulling together then fighting and winning a war. I don't believe that we are made of the same stern stuff that our forebears were. And the world is a far different place. I think that the conclusion of Depression 2.0 might not be as auspicious as the conclusion of the Great Depression for our descendents.
posted by lugh lampfhota at 6:45 PM
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