There is no mystery regarding our economic woes.

 
  1) The 14 trillion dollar (and growing) national debt, many billions more debt in the form of State and Muni Bonds, and many billions more in consumer debt have a lot  to do with the real estate  boom and bust.

  2) The 100 trillion dollar unfunded debt in future pension payments, social security and medicaid are factor.

  3)  Forcing lending institutions to make billions of dollars in sub-prime housing loans has been a factor.

  4) The greed of the middle-class buy and flip mentality was a factor in causing more houses to be built than the market could absorb.

  5) QEI and QEII and the additional billions in currency the Fed pumped into an already bloated money supply is a factor in slow job growth.  People actually do produce so that they may be consumers; they don't consume so that others might produce.  If you want apples you had better grow oranges.


 5)  The Yuan is pegged to the U.S. Dollar because the Dollar is the reserve currency used by China to back the Yuan.  As the value of the Dollar falls China, in order to maintain parity, is forced to infuse Yuan into the Chinese economy, which cause prices to rise for Chinese consumers.  But it does keep prices cheap for American consumers.  This is about to end.  China is no longer going to monetize U.S. debt by warehousing IOUs and printing Yuan to pay domestic producers.  China is going to start spending those trillions into our American market.  Ouch!  This of course could cause other creditors to loose faith in the mighty dollar and send them home too.  If you thought QEI and QEII were brilliant you're going to love all the dollars our trading partners are going to flood our markets with.  You see we haven't really been trading we have been buying on credit.  The bills are about to come due.  The imbalance of trade is about to be balanced.  Trouble is we are no longer a manufacturing nation,  we have been busy baby sitting each other's children, washing cars and moving electronic zeros and ones around in cyber-space.  China will be after commodities.  Metals, oil and food are about to get very expensive.  As these commodities become more expensive American consumers will have less to spend on cars, dinners out, movies, home improvements, and just about anything else. This of course will lead to even more unemployment.

 6) The Fed has forced interest rates to zero.  The banks aren't hording the bailout money, they are lending to the U.S government, making a fortune in the carry between 0% and about .25%.  The Fed is frozen out of any interest rate manipulations, you can't have a minus interest rate, except through more inflation.  But then lenders  "buyers of debt" will quit lending altogether.  Interest rates can only rise from zero,  they are, and will continue to rise.  This will put extreme pressure on City, State, County and U.S. bonds which roll over on average about every three year.  An ARM for government debt.   Remember that the value of a bond is the inverse of the bond interest rate.  The next bubble to burst is going to be the bond bubble.  As interest rates rise bond holders will be forced to cut their losses and dump bonds, forcing interest rates even higher. State and Muni defaults are an inevitable consequence of higher interest rates.   Of course all this debt will eventually default, either through actual restructuring or through inflation repudiation.

   
 7) Banks are reluctant to allow foreclosures as they should because the value of the assets they carry on their books will  be re-valued in the process, exposing them as bankrupt. Better batten down the hatches, as they say, we are in for a rough ride.
 
This short list is just part of a much longer list of monetary and fiscal blunders and bombs ready to explode.

  Ed Waggoner Sr.

Everyone has to remember:

There is a duality in the economy today.


On the one hand, the Stock Market is rising, because the Fed is pumping easy money into the system, which ends up in the hands of well-to-do people, who of course buy stocks and other investments, since they certainly don't need it for groceries!

Meanwhile, on the street, the average person is suffering longer hours, more work, part-time employment, underemployment, less benefits, higher cost of living, and a very high real unemployment rate. This is the REAL economy, and here is where there's no sign of relief.

When I say it's the Greater Depression, I'm referring to the REAL economy, not Warren Buffet's World.

Remember: Not everyone suffered in the first Great Depression either! A few well-informed, well-funded, and well-prepared tycoons bought things for pennies on the dollar; indeed some fortunes were MADE during the Depression.

Matthew