The truth about our burgening economic collapse

The Chinese have a curse: ‘may you live in interesting times’. Humans seem very bad at recognizing historic events at the time, only seeing it in retrospect. If you don't already know, let me tell you: we are living in interesting times. Here's a quick hit list of problems we get to live through:

1. The government lies to us about inflation. The CPI (headline inflation) doesn't include housing, energy or food. That's why they can claim low inflation when the cost of living (e.g. gas prices doubling in 6 years) is soaring. Inflation eats savings and destroys purchasing power – it’s the hidden tax.
   http://www.shadowstats.com/article/56
2. The media is now so consolidated that everything you see on network or cable news has been approved by a tiny group of mega-corporations. It has and will continue to fail its crucial job in a democratic state.
3. Let’s be honest. The government lies to cover its own ass. You can’t sit back and take everything they say like gospel.
4. By cutting interest rates to a level below the inflation rate, the Fed spurs more inflation and allows investment banks to make money out of thin air.
   http://moneynews.newsmax.com/money/archives/articles/2007/9/24/173009.cfm
   http://www.dailyfx.com/story/topheadline/Fed_Cuts_Rates_by_75bp__1205864962139.html
   http://elainemeinelsupkis.typepad.com/money_matters/2008/04/httpwwwohwycomh.html
5. The dollar is also destroyed by these artificially low rates, going from being worth $.90 to $.72 in less than 2 years. Luckily it only makes imports more expensive, it’s a good thing we don’t buy any of those! You can watch the horror show unfold yourself:
   http://quotes.ino.com/chart/?s=NYBOT_DX&v=d12
6. We are, right now, in a recession. The only question is whether it turns into a full-on depression.
   http://www.bloomberg.com/apps/news?pid=20601087&sid=aZi6pAy35zW4&refer=home (note the date on the article – 12/3/07) the recession is old news.
7. This is a housing-led recession, as unavoidable as all the other recessions that have followed housing downturns in America. How far do house prices have to fall? This graph isn’t comforting:
   http://market-ticker.denninger.net/uploaded_images/schiller-house-index-746493.png
8. By allowing Enron-style off-balance sheet BS and other games, our government has completely failed in their role as cops. There is no way for an investor to tell if Citibank or any other publically traded bank is even solvent. That’s why every quarter banks write off more and more – there is no transparency.
9. Oil is pegged to the dollar. When the dollar falls, oil costs more. The price of oil in gold hasn’t changed in 6 years. The soaring prices of both are signs of inflation and a falling dollar.
10. Global demand is ramping up. Usually in a recession demand drops and so do prices. Oil and other commodities are traded on a global market, and our demand for them is ever-shrinking compared with India, China and others. The prices for food & oil will not be getting cheaper just because we’re in a recession. Welcome to stagflation.
11. Trillions of dollars of ‘wealth’ was created during the housing bubble, and it’s being destroyed now. Those responsible for this whole mess have siphoned off hundreds of billions through fees, moving the money offshore to tax havens and leaving investors holding the bag. By bundling mortgages and selling them off, the loan writers had no incentive to make good loans, the only incentive was to make as many as possible. The ratings agencies all shared in the lies, by rating the garbage AAA, or just as safe as government bonds, which have never defaulted.
12. The US savings rate is now negative for the first time since 1933.
    http://www.msnbc.msn.com/id/11098797/
13. Our government is $9 trillion in debt and piling on billions every month.
14. We are permanently quagmired in Iraq. It will be a drain on our lives & money for decades at best.
15. Governments print tons of paper to pay off wars when they’re over. Read up on the 70’s and good ol’ stagflation if you want to see into the future.
16. Americans are fat, dumb and lazy. They have been taught they are entitled to big screen tvs and McMansions, regardless of little details like being able to pay for it. Personal debt is skyrocketing in this country, as people roll their credit cards into home equity loans then run them up again.
17. Our democracy is dominated by extremists. Only 40% even voted last election. As long as the majority of Americans are apathetic about a system that depends on participation, corruption and crime will run rampant. If more people voted, the small & vocal minorities wouldn’t wield so much influence.
18. Most people have no clue what is happening in our country or economy, or why.

So what can be done? How about acting like there’s some democracy in this country?

1. Campaign finance is the root of all evil. As long as it costs tens of millions to get elected, the people with the most money to donate will make all the decisions for our government. Only a fool would expect otherwise.
2. Every one of the post-depression safeguards have been removed from our financial system. Transparency, reserve requirements and market manipulation rules are either gone or not enforced.
3. Above all else, make your opinions known to your reps. Don’t wait for an election, call/write/visit them and raise some hell.
   http://www.visi.com/juan/congress/
4. By being personally involved in a government bailout of a non-bank, Bush has violated the constitution (is that even news anymore?). He must be impeached
   http://financialpetition.org/petition-impeach.shtml
5. Educate yourself. Here are some of the sites I follow:
1. http://elainemeinelsupkis.typepad.com/money_matters/
2. http://www.financialsense.com/index.html
3. http://market-ticker.denninger.net/
4. http://calculatedrisk.blogspot.com/
5. http://www.minyanville.com/
6. http://www.oftwominds.com/blog.html
6. If you have any money in the stock market, please read this:
   http://ticker-classics.denninger.net/2008/03/long-term-investment-timing-signal-that.html
   It’s the only investment advice you need, if you are long-term. Turns out it’s pretty easy to spot bear & bull markets, in spite of all cnbc would have you believe (hint: it’s a bear market).

Now I’m not a total gloomy gus. Here’s what we have going for us:

1. The Internet is free, and is now too big to be regulated. All attempts to control it have failed (except in China). You can pick any news topic you want, go to news.google.com and see hundreds of articles on it from around the world. The lies and convenient omissions of big media are constantly being exposed for anyone who cares to look – like http://www.crooksandliars.com/
2. Technology creates wealth by increasing efficiency, and no matter what happens to our ethereal paper money, real stuff will keep being made and sold. Times will be tough but humans are resilient when pressed.
3. Congress does what they’re told. Right now they’re doing the bidding of their campaign donors. With enough public outcry, we can count on these spineless people to do what we demand. The only way it will happen will be if they are flooded with calls, emails and letters.

If you disagree with anything I say, please feel free to write me and discuss.