Six Examples of Economic Contraction In Action

Six examples of a continued contraction in the economy; i.e., more deflation on the way:

1. Houston is bankrupt and so is California and Oregon.

2. Is there anymore taxpayer money for more bailouts? GMAC Financial Services Inc. is asking for a $2.8 billion lifeline.

3. Nation's largest commercial-real-estate lender filed for bankruptcy protection in Delaware. Who? Capmark Financial Group Inc., owned by Goldman Sachs Group Inc. and KKR & Co.

4. People are mad. First, at banks, as shown during the Showdown in Chigago where "Thousands of people gathered in Chicago today in front of the American Bankers Association annual convention to protest what they consider to be the group's long history of resistance to financial reform."

Second, at banks again, as shown by Ann Minch who in a YouTube video, that has had 41,804 views, asked Chase Bank "Are you stupid?" after it raised the interest rate on her credit card to 21.24 percent.

And third, at loan-modification agents, who were beaten and tortured by an angry couple in Los Angeles.

5. The Federal Reserve Bank of Atlanta makes a case for a jobless recovery, which we think is hopeful given that there may not be a recovery.

6. To conclude, consider Detroit's housing catastrophe. "After five hours of calling out a drumbeat of "no bid" for properties listed in an auction book as thick as a city phone directory, the energy of the county auctioneer began to flag. "OK," he said. "We only have 300 more pages to go."

Posted via web from deflationtimes's posterous

Protect Yourself: Read How to Survive the Economic Depression Report Today

As Bloomberg has recently reported, economists are now nearly unanimous that the ‘recession’ is over.

But what if it is not?

Here at The Deflation Times our purpose is to inform the public that being ready is the best antidote to a spiraling deflation, which is riding in on a continued contracting economy.

As such, download and read the How to Survive the Economic Depression report right now. With its 10 tips it will assist you in navigating the current, turbulent economy and surviving the coming economic depression.

 

Posted via web from deflationtimes's posterous

The Federal Reserve System and Social Mood

Did you know that Andrew Jackson ended the Fed in 1836? 'On July 10, 1832, President Andrew Jackson sent a message to the United States Senate. He returned unsigned, with his objections, a bill that extended the charter of the Second Bank of the United States, due to expire in 1836, for another fifteen years. As Jackson drily noted, the bill was presented to him on the Fourth of July, a day freighted with portent.'

Are you aware of Ron Paul’s “audit the Fed” bill, H.R. 1207, the Federal Reserve Transparency Act of 2009? H.R. 1207 is 'A bill that would require the Fed to disclose what it did with more than $2 trillion in loans to banks and other financial institutions... originally co-sponsored by Ron Paul and Alan Grayson, one of the most conservative and one of the most progressive members of Congress. Due to public pressure, it now has more than 270 co-sponsors.'

Have you heard about the Showdown in Chicago on October 25-27, 2009, "when thousands of Americans - retirees, farmers, workers, homeowners, renters, students, clergy, and small business owners - come together on the streets of Chicago to demand a banking system that puts the American people first and a Congress that makes it happen"?

The H.R. 1207 bill and the Showdown in Chicago demonstrations are examples of the change in social mood, which is the transformation from spending to saving, that we've discussing in our posts. This social mood change is the primary driver that's taking our feelings of pessimism towards the bank bailouts, the bankers who brought on the economic contraction, the Federal Reserve, and the ever-increasing national debt to new levels, further and deeper into feelings of disgust and outrage.

Thanks to the bailout programs put in place last fall, most of the country's major banks, who are sharing their wealth but only with their top executives and high performers, are back to the same old tricks that got us in this mess. We look around at the effects of this economic contraction and it does not seem fair that when the taxpayer is paying for the bank bailouts and bankers' bonuses there are only 3,500 vouchers available for housing assistance when thousands more need them, as Detroit has come to recently find out.

Detroit's pains were exharberated by the inadequate response from Washington as shown by the high-demand for assistance by the people of Detroit. The Homelessness Prevention and Rapid Re-housing Program provides utility payments, rental, moving and legal assistance for low-income people who are at risk of losing housing. But it does not go far enough: within less than three minutes, 25,000 applications were filled out for only 3,500 available vouchers!

Additionally, a recent study by the Brennan Center concluded that homeowners are losing their homes because they can not navigate the landscape of lending laws and too few people are ever able to obtain qualified legal guidance.

And what about Karen King, who owes nearly $36,000, more than she's ever earned in a year, and the other thousands of people that are in the same situation.

It is clear that there are many people suffering due to the financial crisis and as failed solutions to fix the problem mount the social mood will continue to deteriorate, to the point where disgust and outrage will be manifested in ways we had not expected.

 

Posted via web from deflationtimes's posterous

Social Mood During Economic Depression

Two very important questions come to mind when thinking about the current economic contraction and how it affects you:

1. Who should we believe and turn to for more accurate information and analysis about the current state of our economy?

2. Who should we believe and turn to for solutions that will work in getting us out of the current economic deflationary spiral?

Important questions indeed because it is baffling that the same leaders (Greenspan, Bush, Obama, Bernanke, Geithner...) and institutions (The Federal Reserve, Goldman Sachs, JP Morgan, General Motors...) that told us that there was nothing to worry about are the same leaders and institutions who are saying the recession has ended. I don't know about you, but we think they have been lying to us and been wrong all along.

We only have to take a look at the effects of the current deflationary spiral to realize that as the economy continues to deteriorate the social mood of the country continues to change, from optimism to pessimism, which in turn reflects a continued economic contraction. It's simple, during times when social mood is positive or optimistic people will buy and during times when social mood is negative or pessimistic people will not buy.

However, it is not just spending habits that change.

A social mood change is also reflected in other areas of our lives:

- Individuals and social groups (including economic, political, religious, genders and classes) are polarizing and splintering, both internally and with respect to opposing groups, by becoming increasingly more militant and intentionally more destructive.

- And relationships at all degrees are becoming more strained and violent while suspicion and hatred, which is increasing, is the new attitude.

Here are a couple of real life examples:

1. The process of political pandering, which rewards the politicians and the institutions that should have failed, at taxpayer expense, is outrageous. Instead of leaders working together with the people that elected them to develop solutions that will get us out of this mess what we have are polarized, splintered approaches where radical solutions such as the U.S. Government paying mortgage servicers billions while homeowners suffer are just not right.

2. In Detroit, the social mood change was made manifest when tens of thousands of people sought assistance of up to $3,000, as part of a $15.2-million federal allocation program. 'After the applications ran out, some scam artists were selling photocopies of the originals for $20 each. They were doing a brisk business, even though the white original forms state clearly on the bottom: 'Do not duplicate -- Must Submit Original Application.' Volunteers from the city of Detroit Planning and Development Department eventually handed out yellow photocopies themselves.' As Detroit's mayoral spokes person Karen Dumas observed 'We saw a microcosm of the challenges that people are facing around the country.'

So who should we believe and turn to for more accurate information and analysis about the current state of our economy?

Well, do not believe or turn to the politicians nor the main stream media outlets.

Who should we believe and turn to for solutions that will work in getting us out of the current economic deflationary spiral?

Again, do not believe or turn to politicians for the right solutions.

Posted via web from deflationtimes's posterous

Dow Reaches 10,000 Again

For the first time this year, since the unfolding of the credit crisis, the Dow has reached 10,000. Many investors and economisits are hailing the recession as over, and this as latest proof.

But it's not over yet, and the worst is yet to come.

Unbelievably banks and financial institutions are creating new and complicated repackaged debt instruments, part of the process that got us into all this mess, again!

Toxic assets are still toxic. With unemployment and foreclosures still rising, the economy has had only a bear market rally, not a recovery.

Just because the Dow has reached 10,000 does NOT mean it's all over.

Posted via web from deflationtimes's posterous

Obama Receives A Nobel Peace Prize - Optimism Reigns Extreme

Obama has won the Nobel Peace Prize.

A man leading a country at war, who has increased the number of military personell sent to combat, has won the Nobel Peace Prize.

It seems he has been given the Nobel Peace Prize for his talk, and not his actions. From the NobelPrize.org: 'Obama has as President created a new climate in international politics. Multilateral diplomacy has regained a central position, with emphasis on the role that the United Nations and other international institutions can play. Dialogue and negotiations are preferred as instruments for resolving even the most difficult international conflicts. The vision of a world free from nuclear arms has powerfully stimulated disarmament and arms control negotiations. Thanks to Obama's initiative, the USA is now playing a more constructive role in meeting the great climatic challenges the world is confronting. Democracy and human rights are to be strengthened.'

So, he has 'dialogue' and 'vision', yet he is still at war, sending more troops into combat. As for Obama's human rights record, he has not closed Guantanmo Bay as promised which still holds 223 inmates, and still uses 'state secrets' excuses to prevent classified information being discussed in court trials where the treatment of detainees involves torture. Prisoner abuse at Bagram Prison in Afghanistan continues. But the Nobel Prize is awarded because he says democracy and human rights are to be strengthened.

The only explanation for awarding a person the Nobel Peace Prize based upon promises and talk, and contrary to deeds, must be sheer optimism. Optimism that a politician will actually do what he says, and optimism that talk can solve the worlds lack of peace while concurrently waging war with guns. This is optimism at its most extreme.

This extreme of optimism despite the physical reality fits with the personality of a sucker rally, such as the one seen in 1929 during the Great Depression. Things were so bad during the 2008 credit crunch, countries like Iceland and Pakistan were on the verge of declaring bankruptcy. Now we have an upturn in the economy and social mood, and people are so hopeful that all the bad news is over despite record unemployment and home foreclosures. This type of optimism precedes a great fall, for Obama from public favour and for the rest of us economically.

The very extreme degree of optimism must mean we are at the end of the economic upturn recently experienced.

Posted via web from deflationtimes's posterous

Credit Crisis and Deflation Devaluation

Do you find it perplexing that the same people and institutions that told us that there was nothing to worry about, that the financial fundamentals were fine, and that there was no reason to be concerned about an economic crisis are the same people who are saying the worst is over, the recession has ended, and that their solutions to the crisis have worked?

We too feel completely baffled by this to and from. Who are we to believe?

When foreclosure rates rises another 17 percent, reflecting a continued negative (deflation) trend, and U.S. credit card defaults rising to record levels while at the same time the FDIC's Deposit Insurance Fund is now negative (did you know that in 2008 and 2009, 121 banks have failed?), how is it possible to say that the recession is over?

It is not. The second round of deflation is heading this way and it will continue its control of downward pressure over all aspects of our economy.

So instead of listening to the same people we've listened to before we should start paying attention to people like Nobel Prize winner and Columbia University professor Joseph Stiglitz, who warns that, "Deflation threatens the U.S. economy and that could be dangerous." Or Bill Fox, Senior Bonds Analyst at Elliott Wave International, who says in his article 'Inflation? Disinflation? In Your Dreams', "deflation will likely continue to exact its toll over the coming months as money supply and credit keep evaporating (along with hope)."

Posted via web from deflationtimes's posterous

Recession or Depression?

It may seem an odd time to be calling the current economic climate a developing depression, but we here at The Deflation Times do not believe mainstream economists are particularly good at predicting economic trends. The vast majority of mainstream economists and media did not see the credit crunch coming. We will let our track record speak for itself.

During the Great Depression of the 1930's America's stock markets saw several bear market rallies. We firmly believe we are at the end of a bear market rally at this moment, and that all markets have just begun to turn downwards again. Bear market rallies during depressions are traps for the unaware. People think the worst is over and it's time to get back in. This desire to re-enter the market is at its greatest right before the rally ends, leaving many peoples savings open to yet another round of major deflation as markets plunge again, to new lows.

A recession is defined by the National Bureau of Economic Research as a 'significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales.'

A depression has no official definition, at least not from the NBER. Unofficial definitions of economic depressions include a decline of GDP by more than 10%, or a decrease in economic activity that lasts for longer than three years. So, a depression is different from a recession in how bad it gets, and how long it lasts .

One of the most commonly used lay definitions of an economic depression would be unemployment rates. The Great Depression saw unemployment peak at 24.9% in 1933, giving rise to images of jobless people lined up over many city blocks, looking for work. Today the picture is less clear, with official statistics widely understood to be less accurate than in the 1930's, unemployment in the United States may already be close to 20%, and climbing. So, by this basic and most common measure of how the economy affects people, we are in another Great Depression. Certainly, these figures are too large for this current financial crisis to be termed a recession.

Another distinguishing feature between a recession and a depression is the cause of the financial downturn. Depressions are characterised by 'a bursting asset and credit bubble, a contraction in credit, and a decline in the general price level' according to Saul Eslake, chief economist at ANZ bank. Currently, the 'credit crunch' has been undoubtedly caused by a credit bubble, which burst, leading to a contraction in the supply of credit which the Fed is trying to loosen. So, by this definition too, we are in a depression, not a recession.

The vast majority of economists were still predicting year upon year of economic growth, right up to the beginning of the 'credit crunch' in 2007. Even Ben Bernanke at the Federal Reserve was predicting in February 2006, that the US economy would expand for the following two years.

There is one economist who did foresee the 'credit crunch' and resulting global economic mess. Robert Prechter wrote 'Conquer the Crash' in 2002. This book predicts in detail the events now unfolding. Most unsettling of all, it predicts that worse is yet to come. However, it helpfully outlines practical steps you can take to prepare yourself and minimize the harm to you and your family.

Who would you rather listen to? Mainstream economists, like those at the Fed, who predicted the opposite of what has happened, or someone who's accurate record we will let speak for itself?

Posted via web from deflationtimes's posterous

On the Edge with Max Keiser - Janet Tavakoli Deflation Interview (pt2)

Janet Tavakoli thinks "Regarding the outlook, my analysis is grim. I am not a doomsayer, I follow the cash, and so far, I’ve been correct, and the government has been wrong. Here’s the situation. We are at greater risk of a total meltdown due to a deflationary collapse than we were in 2007. After the greatest Ponzi scheme in the history of the capital markets, we’ve seen history’s greatest fiscal and monetary expansion, but it hasn’t worked. Debt levels of consumers and business exceed the capacity to repay."

Posted via web from deflationtimes's posterous

On the Edge with Max Keiser - Janet Tavakoli Deflation Interview (pt1)

Janet Travakoli, author of 'Dear Mr. Buffett', makes the following points about deflation:

- Our fundamental financial and economic problems, i.e. overleveraging, lack of transparency, have not been solved.

- Since 2008, capacity utilization has plummeted; businesses have no pricing power; U.S. lost 6.7 million jobs but numbers are underreported; personal income tax receipts are down 21%; corporate tax receipts are down 58%; U.S. deficit will exceed $1.8 trillion; govt. spending is now 185% of tax receipts; 13% of mortgages are seriously delinquent and/or in foreclosure; huge decrease in personal net worth; 15 million mortgages exceed the home value.

- We’re on a massive debt spending spree. Income on all levels is not sufficient to make debt payments.

Posted via web from deflationtimes's posterous