Slouching toward the 1930s (American Thinker)

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October 31, 2011

 

By Monty Pelerin

The current economic crisis rivals the one of the 1930s. Despite shameless propaganda by government and its cronies in the media, people understand that the situation is getting worse. Consumer confidence continues to decline as does confidence in the future.

We are headed for an event that history will record as worse than the Great Depression. It is unavoidable.

The Level of Debt

The principal reason for the dire prediction is the level of debt outstanding. Current debt levels are simply not sustainable. Assets and cash flows cannot support or service this debt.

No economic recovery can occur without massive debt reduction. As shown below, current debt is much higher than the 1930s:

As a percentage of GDP, debt is at an all-time high. Immediately prior to the Great Depression US debt was about 200% of GDP. It rose briefly to 300% as a result of massive government interventions to combat the Depression.

At the beginning of the current downturn, debt was about 370% of GDP. It is about 400% currently.

Eyeballing the chart from 1870 forward, debt levels are generally in the range of 150% of GDP. That appears to be the norm for the last 140 years. Only in the 1920s and recently did debt exceed 180% of GDP. Even funding World Wars I and II did not drive debt above 180%.

To return to 150% requires a reduction of about $30 Trillion in debt. That represents about two full years worth of GDP!

The Political Myths

After the 1930s politicians convinced themselves and the public of two things:

1. Free markets need government interventions to produce a healthy economy.
2. Keynesian pseudo science provided the tools necessary to manage the economy.

Both beliefs were false, but both aided politicians' insatiable drive for power and control. Once the public came to believe these myths, government owned the economy. Any economic problem became a political one. Economic slowdowns were no longer politically acceptable.

"Don't just stand there, do something" drove economic policy. It was politically impossible to allow an economy to correct on its own. Political action was required, even if such activity was ultimately harmful. Politicians had to do something, anything! Their constituents demanded it.

The "government is responsible" attitude quickly spread. Today, virtually any perceived problem or inequity is assumed to be fixable by government. Government readily took on responsibility for virtually every aspect of our lives.

The madness is evident. It is assumed that government creates jobs, educates kids, designs toilets and light bulbs. It is necessary to provide mortgages, retirement benefits and healthcare. "Green energy" and other new technologies are assumed impossible without the assistance of government.

This litany of the presumed need for government could continue for pages. Virtually all these presumptions are false. Worse, many in the public still believe that these "services" are "free."

Economic Reality

Every swing in the business cycle, no matter how mild, became the responsibility of government. Government was to step in and "fix" economic problems. Seventy years of such "fixes" preceded our current problem.

Economic downturns are both normal and necessary. Individual and business mistakes are remedied via economic slowdowns. Misplaced capital and labor is freed up for more productive uses. When this cleansing does not occur, an economy becomes less efficient and grows at a slower rate. The mistakes remain in place and are perpetuated.

Government intervention is not corrective. It is a cover up of prior mistakes. The phrase "pretend and extend" describes what happens. Instead of allowing the economy to correct, government attempts to avoid the correction and the pain by covering up the mistakes. That has been the history of much of the last 80 years. Continued interventionism brought the economy to this crisis point.

The artificial boom that began decades ago is exhausted. Response to the dot-com stock market bubble was the last coverup that "worked." The system was flooded with credit and one bubble was replaced with another. Now the housing bubble has burst, marking the high point of "pretend and extend."

Credit expansion since 2008 has been impotent. The real economy has stopped responding. Economists who advocate more stimulus or credit are either ill-trained or have political motives. Governmental stimulus and credit expansion created the problem. Recommendations for more of the same qualify as insanity per Albert Einstein's definition.

A Worldwide Problem

The US is not unique. Most of the developed world is burdened by excessive credit and government spending. Easy credit enabled governments to grow too large and individuals to take on too much debt. The point where markets are unwilling to provide more debt has arrived.

The position of the US, thought to be stronger than other countries, is not, as shown in this chart:

Rumors of another US credit downgrade circulate for good reason.

Governments everywhere are trying to prevent a massive economic and financial correction, but they will not succeed. In order for economies to return to health, debt must be liquidated. De-leveraging must occur. Debt will be paid down and/or defaulted upon. Normal economic growth cannot resume until excess debt is removed from the system.

The Problem With De-Leveraging

Reducing debt is known as de-leveraging. The ramifications of de-leveraging are not widely understood. Ray Dalio of Bridgewater Associates discussed the process on the Charlie Rose show (full transcript):

I think it's important to understand that we're going through a deleveraging. So we have to understand the big picture is -- there's a deleveraging. Three big themes: first there's a deleveraging; secondly we have a problem with monetary and fiscal policies are running out of ammunition; and thirdly we have an issue in terms of people most importantly who are at each other's throats politically and globally in terms of having a problem resolving those.

So then we begin the process in reverse as you can't spend as much you -- somebody else's income falls. And that process works in reverse.

Imagine you earned $100,000 a year and you didn't have any debt. You can go to a bank and borrow $10,000 a year. You can spend, therefore, $110 a year. When you spend $110,000 a year, somebody else earns $110,000 and they can go to a bank and there's a self-reinforcing process in which your debt rises in relationship to your income.

And that goes on for a long time and that goes on for 50 or 75 years through history. We've had 50, 75-year cycles and then you reach a point where you can't anymore get more debt and the process starts to change. And you can't leverage up. Traditionally the private sector leverages up, we leveraged up then we got to a point in 2007 where we had a bubble and that same sort of bubble that happened in Japan, same sort of bubble that happened in the Great Depression, meaning we reached our debt limits. Europe's reached its debt limits.

The current credit bubble is bigger than the one that preceded and caused The Great Depression. Consumer and government balance sheets are worse than they were eighty years ago. Income is incapable of supporting current debt levels.

Reducing debt to manageable levels will produce another Great Depression, likely greater and more painful than the original. Debt reduction requires lower spending and higher savings. Large amounts of debt will not be paid and will be liquidated via defaults.

Until now, governments have done everything to prevent this natural process from occurring. According to Dalio, governments have "no more tools in the tool kit."

Some governments and private companies will experience bankruptcy. Harrisburg, PA just did so. National government defaults will occur with Greece most likely be the first. When the economy begins to shrink, private companies will follow.

The Other Alternative

There is no other alternative cure for the economy other than de-leveraging.

Governments around the world will attempt to avoid de-leveraging because of the associated pain of a Great Depression. Unfortunately, that is not possible as Ludwig von Mises pointed out:

There is no means of avoiding the final collapse of a boom brought about by credit (debt) expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit (debt) expansion, or later as a final and total catastrophe of the currency system involved.

Prior attempts to avoid corrections got us to this point. Now the supply of credit has been exhausted and taxpayers deeply indebted. Another coverup is not possible.

The simple summary of what years of governmental intervention accomplished is the impending economic and financial tragedy. Politicians from the past may have gleaned benefits. Our generation is left to pick up the pieces.

A printing press is available to most countries. It is no solution to the underlying economic problems, but is the method that the political class will try once again. Doing so will make the situation worse. It steals purchasing power from the private sector. In extremis, it will cause hyperinflation, effectively wiping out the value of savings and fixed contract obligations.

Credit creation cannot prevent de-leveraging. It merely defers it and impoverishes the citizens of a country prior to the onset of a Depression. Will the US government engage in such chicanery? Based on past history, the answer must be an unqualified Yes! Jon Hilsenrath, sometimes referred to as the unofficial trial balloon holder for the Fed, has reported:

Federal Reserve officials are starting to build a case for a new program of buying mortgage-backed securities to boost the ailing economy, though they appear unlikely to move swiftly.

Steve Englander of Citibank describes how Europe will be set up as an excuse for more credit creation:

Policymakers in the US, UK and elsewhere are using the euro crisis as cover to ease policy. For example, the FRBNY's Dudley yesterday characterized even the improved US numbers as disappointing and pointed to further measures if growth did not improve. Chinese growth targets and policy maker comments imply that measures might be taken if there is any sign of slowing. The BoE has already expanded it QE program.

That a Great Depression lies in our near future is not at issue. Whether we are forced down the route of hyperinflation before the correction occurs is unknown.

Our best outcome is a Depression tomorrow. Better sooner than later. That is what politicians have provided. Hopefully they will not "do something" but "just stand there." The economy needs to be left alone. Their help is killing us. Hyperinflation will truly destroy.

Monty Pelerin blogs at Monty Pelerin's World.

Page Printed from: http://www.americanthinker.com/articles/../2011/10/slouching_toward_the_1930s.html at October 31, 2011 - 07:29:17 AM CDT

OWS (And Everyone Else): Pay Attention To Greece (The Market Ticker)

 

The Market Ticker ® - Commentary on The Capital Markets

Posted 2011-10-16 14:06
by Karl Denninger
in Editorial

OWS (And Everyone Else): Pay Attention To Greece

The politicians are now reduced to begging:

(Reuters) - Prime Minister George Papandreou pleaded for patience from Greeks growing increasingly angry with relentless austerity efforts, telling a newspaper his government was struggling to prevent a financial "catastrophe."In an interview with the weekly Proto Thema newspaper, Papandreou said the government was fighting to stop Greece defaulting on its debts but the road ahead was hard.

"I would very much like to guarantee everyone an immediate solution, a better life today," he told the newspaper in an interview which hit newsstands Saturday.

"I would be the happiest man in the world if I could do that but I can't and I have a duty to be honest and tell this truth to every Greek citizen," he said.

Finally, the truth.

Here are some realities for everyone to think about and (hopefully) understand:

Government cannot expand faster than domestic economic output does. That is, if you want government to get bigger, the economy must get bigger to support it.

Growth in the economy must come from economic surplus, not borrowing. Economic surplus is what you have left after you (1) labor, and (2) pay for all of the things you must buy with that labor. Whether your payment is direct (e.g. you pick strawberries and get to keep X% of your output) or indirect (you are paid a wage in "dollars" and then spend that money) the fact remains that economic growth can, in the long run, only come from economic surplus.

The process by which economic surplus is turned into economic expansion is called capital formation. Capital formation is not borrowing; borrowed funds are fungible (that is, interchangeable) with formed capital but they are not the same thing. Only capital formation produces lasting prosperity. Replacing formed capital with borrowed funds produces bubbles; these are inherently pyramid schemes in both concept and execution and thus must eventually burst.

Due to inefficiency in all things, including the markets, when a bubble bursts you're worse off than if it had never occurred in the first place. This is the principle known simply as "there's no such thing as a free lunch." It's true in thermodynamics and it's also true in economics.

Trade deficits are self-correcting phenomena without explicit and intentional acts by the government and monetary authority to cover up their natural effects. Specifically, a trade deficit causes capital to drain from the deficit nation to the surplus nation. This in turn makes their currency balance shift and shuts down the cycle all on its own. Only intentional and willful distortion, in this case by injecting "credit" to replace capital, allows it to continue. Yes, the Chinese are responsible for what has happened in this regard with offshoring, but so are our politicians and Federal Reserve! Any actual means of addressing this problem must include all guilty parties.

Politicians turn to producing bubbles when they want to promise you something they cannot pay for via voluntary taxation. And make no mistake on this point: All taxation is voluntary. Greece is showing us this fact in stark relief. The people can withdraw their consent to taxation any time they'd like. Sure, they have to go on a general strike to do so, which is the inhibiting factor - it results in personal pain. But it's the correct, non-violent and legal means to tell the government to stuff it when it comes to their tax policies.

There are only two means to compel a government to act when it becomes co-opted by minority interests, such as what happened with the bailouts, banks and similar foolishness. One is lawful and the other is not. The unlawful means comes through violence. In the "common name" we call these "riots" when they're localized and small (e.g. looting, etc.) When they're not we call them "Revolution", and the legal term for inciting one is "Sedition." The key point to remember about the latter is that on a historical basis you have a very low probability of success through revolution -- most of the time what comes out of a revolution is worse than what you started with. Keep that in mind before you go pining for it, because you are much more likely to get a Hitler out the other end of that process than a George Washington, and the outcome is generally not under your control.

The lawful means of compelling a government to act is called a "General Strike." It is a refusal to work, and it is effective because it is work that is taxable. If you perform none then there is nothing to tax; ergo the government's finances collapse. This is what is happening in Greece.

Beware, however, that if you demand that which is impossible, you won't get it - no matter whether you press that demand through a General Strike or through unlawful means. That's simply because that which cannot happen won't.

There is no such thing as a Unicorn that craps out pretty colored candies.

In the case at hand in the United States we have a government on both sides of the aisle that has made promises that are mathematically impossible to keep. That same government conspired with The Fed and with Wall Street to blow a series of bubbles that led you to believe, over the space of 30 years, that you could have more than you can actually pay for with your work output. This claim was a lie and it infested virtually every area of our nation. Housing, education, medical care - all were used as a means to blow up the bubble to larger and larger dimension whenever it threatened to collapse and expose the frauds.

These claims were active frauds as anyone who examined them with any sort of critical eye toward the mathematical realities of the claims knew they were crap and could never happen.

As just one example of dozens the claim that "house prices are expected to increase 10% a year for the foreseeable future" was interpreted by many as "it's safe to finance the purchase of a house and then withdraw the claimed increase in value as this will go on forever" (see the foreseeable future words for justification in the common man's reliance.)

The lie is the mathematical impossibility of this. A $150,000 house that appreciated at that rate for 10 years would be worth $389,000. But over 30 years that same $150,000 house would be "worth" $2,617,410. Nobody ever asked the obvious question: Exactly how was a "middle class" person going to afford to buy a $389,000 house, say much less a $2,617,410 one?

They couldn't, of course, but this was the lie that was run.

In College education land the same lie was run. It led to an outrageous increase in college costs that dramatically outstripped earnings for degree-holding graduates. This in turn made college a bad deal nearly across-the-board and as it occurred colleges and lenders lobbied Congress to change the law so that when your kid got rooked by this scam they couldn't file bankruptcy and force those who blew the bubble to eat the loss.

We did the same thing with Medical Care. By providing "free" (or nearly so) care to Seniors and illegal immigrants, with the former being told "they paid for it" through Medicare taxes (a bald lie as on average they only put in 1/3rd in inflation-adjusted dollars as to what is spent on them) and the latter being simply told "you deserve it" the increase in medical insurance costs has run approximately 9% annually and will continue until and unless policies are changed. This means that the $700 a month insurance policy for the reasonably-healthy 50 year old ($8,400 a year) who has been promised "no reduction in his Medicare" will cost $171,477 a year by the time he's 85 with no adjustment for the higher expense that comes with age. That is, today's 15 year old will be forced to pay $171,477 a year for his medical insurance when he reaches 50. Obviously, he won't as that amount is more than three times today's median family income and even if we allow a 3% inflation rate (which we should not) it will be more than 100% of the median family income in inflated dollars! Since you can't pay more for something than you earn in total, what the politicians are telling you they will do cannot happen.

This, fundamentally, is the problem.

The slams and frankly slanderous lies coming from the so-called "Tea Party" jackasses are just as bad as those coming from the Soros mouthpieces. They're all lies.

As an example:

I am saying that no matter what your reasoning is, beyond Pensacola Florida's limited provincialism, or that of other small city's, the VAST MAJORITY of the OWS crowd, its organizers and "friends" (ACORN, SEIU, UAW, AFL-CIO, Ayres, Dohrn, Obama & Co. underwritten by George Soros who certainly never made a dime on Wall Street), are NOT OUR FRIENDS.

THEY ARE THE ENEMY!

Well, yes. Now prove that the VAST MAJORITY of the "OWS" crowd on a national basis is affiliated with or paid for and/or underwritten by George Soros and those others who you claim have done so.

Prove it. And do so under the rules of strict proof, because this sort of claim is an extraordinary one. I didn't see any evidence of it - at all.

There was one table that was clearly union-oriented. It contained members of the local transportation union trying to get a petition going against Veolia, a foreign company that the local area apparently hired to run the city buses. Is their complaint legitimate? I don't know; I haven't looked at it yet. I did take their flier and will see what I can find out. It will be a feature article later this week, I suspect.

But there was no hidden agenda here; these were clearly people asking for a redress of grievances. Isn't that what you're supposed to do when you have grievances?

They are generally the crowd of entitlements and breaking America down, dumming America down, LEGALIZING ILLIGALS, and making what made America wealthy in the first place - capitalism - into something evil, into something it isn't and never was.

Oh really? What "Capitalism" is present in making student loans non-dischargable, so that the student who does a dumb thing in taking them goes bankrupt and is hounded for life while the lender and their cronies can double - or more - the debt owed and lose nothing? These same so-called "Capitalists" include the Mortgage Bankers Association who strategically defaulted on their own building mortgage, a common (and perfectly legal) tactic in the business world, yet they tell people it's immoral to do it themselves, and when possible these same "capitalists" get the laws changed so you, the people, cannot do what they did and do themselves!

Capitalism? Where, may I ask? The penalty for making bad loans is you go bankrupt!

When you change the laws so that the other guy goes bankrupt and you get to keep the loot the word for that is not capitalism, it is THEFT.

Where are the so-called "Tea Party" people that should be arguing for the REVOCATION OF BANK AND CORPORATE CHARTERS when they steal in this fashion? Isn't that the same thing at a corporate level as imprisonment is at a personal level? It sure is!

Now explain the so-called "Tea Party's" utter refusal to demand that Wachovia have its charter revoked for drug money laundering, something they admitted to doing, or shall we talk about the drug company that got caught twice committing the same criminal offense of marketing for unapproved purposes with the second offense occurring as they were negotiating a trivial FINE for the first one!

The so-called "Tea Party" is "for" the drug war, but refuses to demand that the penalties enforced against PERSONS who participate in the distribution of drugs be applied against CORPORATIONS that are part and parcel of the same offense!

They are the Politics of Envy, of DISTRIBUTING of OTHER'S PROPERTY. Of other's sweat and blood; of other's future, the eventual and certain diminishing of the quality of lives of our children. And equal society where the LCD's run things for the LCD's benefit. Where excellence is punished, stupidity and commonness rewarded.

Again, oh really? What's Capitalist about Citifinancial who had their former chief risk officer testify under oath that the firm was selling on loans that they knew did not meet underwriting guidelines - that is, they knew they were defective and not what was represented to buyers. This isn't conjecture and it wasn't a "small number" either - he testified that 80% of the loans they made in 2007 were defective.

Is it "capitalism" when I sell you a car showing 50,000 miles on the odometer but I rolled it back from 150,000, or is that theft and fraud when you buy said car and discover later that the engine and transmission are basically worn out, and thus you paid $10,000 for something that was worth $2,000? I ****ed you out of the other $8,000 - I stole it - and in every other area of business when I do that it's illegal.

That is not capitalism - it is theft. THAT is what you are supporting.

Reducing the ability of our nation to defend itself. That is what it's about. It is redistributing the nation's revenues from defense to various social programs (green energy and glabal warming concerns) under the phake and phoney flag of blaming banks and "banksters" for everything that went wrong with the economy and the human race. The irony never sparks in their minds that the banks allowed 99% of Americans to own a home in the first place.

Oh, "reducing our ability to defend ourselves", eh? This is why after 9/11, when we knew that the majority of the people who did it came from and were funded by Saudi Arabia, we did not act against them?

What are we "defending", may I ask? Oh I don't have to: We're defending "access" to cheap oil. We're promulgating a failed foreign policy that has now turned to propping up literal Kings and Dictators (Chavez anyone?) so we don't have to face the fact that we didn't do what was required to have a secure and thermodynamically sound energy policy for 30 years.

What went wrong, and why the unions are out in force, is the FACT the $85/hw wages the UAW now takes for granted cannot compete with $2-5/hr wages in Korea, Taiwan and China and the $1 TATA Motors pays in India to manufacture low end cars in second and third world countries in Asia and Africa - the only global sector that is actually growing.

And what is your solution?

My solution is to stop the stupid, including but not limited to those who want to promote mathematically bankrupt and therefore stupid policies in the monetary, economic, trade policy, tax policy and energy realm.

We cannot have illegal aliens in this nation at the behest of so-called "capitalists" who are simply exploiting effective slaves, smug in the knowledge that not only can they not complain when abused (lest the INS get called) but that when or if they get hurt, have a baby, or send their kids to school they will get to force, literally at gunpoint, everyone else to cover those costs they shoved up everyone else's ass. The bleeding heart liberals are bad enough, but it is the hard-core right that has serially pandered to the "demand" for illegal labor for the farmers, home builders, lawn services and poultry houses across this nation! I stand for ejecting every illegal immigrant from this nation right now!

We cannot have a Federal Reserve that believes in "2% inflation" when the law says STABLE PRICES. A 2% increase is not stable; over the average man's working life of 45 years that leads to prices that are 244% of where they were when he was 20. This makes it impossible for him to save for retirement; he either "takes risk" or winds up with literally 1/3rd of what he saved when he was 18. This is theft and fraud; the value I earned and that represents my economic surplus is mine and when you steal it whether you do it a penny at a time or all at once you're still a thief.

We cannot have a Federal Government that spends more than it takes in via taxes for so-called "social programs" - or anything else, including "defense." Compound growth - the very nature of exponents - makes such concepts, irrespective of where you try to run them, literally impossible to sustain over the long haul. This rock we call "Earth" is of finite size, mass and resource. Those resources are vast but the "dominionists" who believe they are infinite are factually wrong. The House, Republican controlled, has not put forward a budget containing one dollar in actual spending reduction and they continue to pass "continuing resolutions" to permit continued increases in spending despite the Senate's refusal to follow The Constitution and pass a damn budget! Republicans support "The Rule of Law" my ass.

We cannot have an economic system where debt grows faster than output does. The fundamental nature of exponents -- mathematical law -- guarantees that any such attempt will fail. Those who argue otherwise are doing the equivalent of persecuting Galileo, are just as evil, and should be tried and imprisoned for their crimes that they intentionally and willfully inflict upon society with their factually bankrupt and morally evil stupidity.

You want to know what I stand for?

THAT is what I stand for.

It is why I started writing The Market Ticker in 2007, when I saw the exact same wingnut crap being run by Bush and company after seeing the same bull**** run by the lefty redistributionist Clinton and company in the 1990s with his willful and intentional refusal to deal with obvious frauds in the Internet space that led to the Nasdaq market collapse. I gave interviews at the time (1998/99) stating exactly this. It was a known fact that the claimed "doublings" were not happening yet they were reported in so-called "Earnings" reports. Literal thousands of people knew this was a lie and yet not one person was indicted or imprisoned for these intentionally false statements. When I saw evidence of the same crap again in 07 I decided that it was not going to happen to the public a second time without me raising hell about it.

It was that fact and the fact that the so-called "conservatives" in fact had stolen the wealth and futures of people from infants to young adults who they scammed into taking unpayable loans for "college" while changing the laws so they could not petition for bankruptcy and blew an intentional housing bubble while offshoring our jobs at the same time, thereby guaranteeing both a monstrous bubble and the ensuing bust that led me to this publication.

It was the fact that McCain and his advisors knew damn well that this was theft and fraud yet he suspended his campaign to bail out the thieves that led me to publicly denounce him and everyone involved in it.

It was the fact that instead of focusing on this where The Tea Party began with both my call for tea bags to be sent to Congress and Santelli's scream, which was focused on exactly the same scams and theft, the so-called "Tea Party" instantly turned to "Guns, Gays and God" and gave a complete and utter pass to the intentional theft that led us to where are now, and has to this day refused to demand that those who participated in that theft face the music for their acts and that the stupid lenders go bankrupt right next to the stupid borrowers who must be afforded the same opportunity, including students who were scammed into taking unpayable loans with ridiculously rosy and intentionally false projections of job prospects that the math PhDs at those colleges had to know were factually impossible.

It is the fact that despite claiming to be for "fiscal responsibility" The Tea Party folded with many of its members voting Yes to the debt ceiling increase, refusing to publicly denounce the Ryan and McConnell plans that do not cut one single dollar of federal expenditures; they in fact both RAISE federal expenditures. Worse, both plans contain projections (such as Ryan's "5% growth rates") that have never been sustained on a forward basis over the time projected in the history of the nation once one subtracts out additional systemic debt. In other words these plans are knowing and willful frauds upon the public and the Tea Party is supporting them. Even the CBO, which has historically always projected a too-rosy future on a fiscal basis (they projected in 2000, remember that the nation would have no debt whatsoever by 2010!) says these plans rely on unreasonably-rosy projections into the future.

You want to know why I said "**** the Tea Party", called it out before the 2010 elections as a bunch of bull**** artists playing the same tired "Guns, Gays and God" song that the Catholic Church ran against Galileo oh so long ago?

THAT is why I did so and will continue to do so right up until people just like you who claim to be "affiliated" with that "movement" (which you stole from one Sam of some 200+ years ago; you no more own it than I do as it's an idea, not a person or organization) quit perverting that idea and*****ing on the graves of men who actually were great, actually had sound ideas, and gave us this nation - a nation you seek to destroy through utterly bankrupt and knowingly-fraudulent promises just as do the hard-core leftists.

Incidentally, the Catholic Church eventually apologized for what they did. The Tea Party has not.

PS: You want to know why I should have not had to write Leverage? It's found right here - it is the willful and intentional refusal to understand what you learn in fifth grade, which is the subject of a rather dry academic lecture you can find online. It is this willful and intentional refusal to deal with these fundamental mathematical facts that led to the outright theft and fraud in our economy and government, and until the so-called "Tea Party" comes to face mathematics you're just as much a part of the scam as is the left. Period.

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OccupyWallStreet vs. Bill Whittle

I know who my money’s on: Bill Whittle delivers yet another awesome Afterburner, taking to task the Wall Street Whiners.

 

America's Children Come Home to Roost (American Thinker)

 

By Stella Paul

Do you think the young gent from Occupy Wall Street who defecated on the cop car got an A in "Dialectics of Hegemony"?

The hordes of pathetic, dead-eyed pagans pustulating through our cities with Occupy Wall Street are the crowning achievement of America's academy.

Thousands of vampires with PhDs labored for decades to perfect the art of sucking the souls from America's trusting young, and then hustling them into the slavery of terminal stupidity.

How obedient these foul-smelling young wretches are! How touchingly eager they are to please! They sit on the ground in kindergarten formation, obligingly parroting whatever hellish nihilism oozes from the "microphone leader's" lips: "Everything is possible! You can have sex with animals!" Up go the "happy hands" in dutiful response. They so want to be good!

A British paper informs us that Bard College students are gracing the Occupy Wall Street throngs in New York, playing hookey on their $57,000 a year classes. Or are they? I suspect they're apple-polishing for extra credit. Last year, that towering intellectual, Bard's Leon Botstein became the first college president to welcome the International Solidarity Movement (ISM) as an official campus organization.

Attention Bard parents, who thought you were shelling out a fortune to put a little artsy sheen on your precious darlings! Actually, you were thrusting them into the hands of the ISM, a terrorist-enabling group awarded a gold medal by Hamas for all their lovely help.

President Botstein now explicitly funnels campus funds and resources to ISM, which trains students on Bard's idyllic grounds to take "direct action" against Israel. "The training was led by 3 Bard students. 14 trainees were present," notes Bard's ISM website. "Many were headed for December's Gaza Freedom March to break the Israeli siege of Gaza."

Those eager, painfully naive Bard students smelling up the streets of New York aren't being transgressive! They're trying to be virtuous like their hero, student activist Rachel Corrie, who was ferreted to her death in Gaza by the very same ISM. After all, "direct action" is what all those lavishly credentialed grown-ups keep telling them to do.

In case you're worried about Leon Botstein's paying a price for his outrageous antics, let me assure you that destroying young people's souls is lucrative work. George Soros -- imagine that! -- just donated $60 million to Bard College for international work under the aegis of the brand-new Bard College Center for Civic Engagement.

Civic engagement, indeed!

Let us now place an urgently needed cordon sanitaire around the pigsty of New York's Zuccotti Park, where Occupy Wall Street holds forth, and fly to Occupy Boston.

There, in America's college town, we'll find our dewy-eyed innocents rallying on behalf of accused terrorist Tarek Mehanna. But of course! Who better to pour out their sympathies to than a PhD pharmacist who allegedly plotted to machine gun shoppers in New England malls? No one can accuse Tarek Mahenna of lacking "civic engagement."

Perhaps the Occupy Boston mob feels a collegial warmth for Mahenna, who's one of five New England Muslim college graduates either arrested for or convicted of terrorist acts. For the record, alumni donors, their colleges were Northeastern, MIT, U Mass, Boston and Brandeis University. Holy Che Guevera, what are they teaching there?

Oh, just the usual "America is an imperialistic war-monger in thrall to the ethnic cleansing Zionists" shtick. Just look over to the Big Campus in Town where Harvard's Stephen Walt is patiently explaining the evils of America's Jews in his legendary effluvia, The Israel Lobby and US Foreign Policy.

(Does anyone else find it disconcerting that the German translation works out as Die-Israel Lobby?)

The $20 million the Saudis gave to Harvard goes a long way to buying young minds. You need a strong academic infrastructure to get students so inspired they surge through the streets on behalf of terrorists planning to kill them. But Allah willing, with the help of "scholars" like Sara Roy of Harvard's Center for Middle East Studies, all is possible. The tireless Dr. Roy specializes in instructing impressionable youngsters on the moral beauty of Hamas and other terror groups, in her unofficial capacity as "the ringmaster of Harvard's bash Israel circus."

The nationwide scenes of robotic debauchery, moral confusion and nihilistic violence are searing my heart. This Yom Kippur, I read a tale of a Hasidic master whose disciples asked him, "What is the worst thing a person's evil impulse can achieve?" His answer: "to make him forget that he is the child of a King."

America's children were born into the blessings of Constitutional freedom and endowed by their Creator with certain unalienable rights. Life, Liberty and the pursuit of Happiness should be theirs for the taking. Instead, they obediently wallow in the muck of anarchy, as their academic pagan priests taught them. May this tragic farce playing out on our campuses and main streets mark the bottom of our descent, before we begin to rise again.

Stella Paul can be reached at Stellapundit@aol.com

Page Printed from: http://www.americanthinker.com/articles/../2011/10/americas_children_come_home_to_roost.html at October 14, 2011 - 07:33:09 AM CDT

California, the Example of What the Nation Could Become (California Political Review)

 

October 10, 2011 By Tom McClintock 4 Comments

I want to welcome this groundbreaking scientific expedition to the savage lands of the Left Coast.  You are here in California to answer an important theoretical question and now you have your answer.

Yes, this is what Barack Obama’s second term would look like.

Study it.  Fear it.  And then go home and make sure that it never happens to the rest of the country.

Of course, in spite of all of its problems, California is still one of the best places in the country to build a successful small business.  All you have to do is start with a successful large business.

Laugh if you will, but as you whistle past this cemetery, do heed the medieval epitaph:  “Remember man as you walk by, as you are now so once was I; as I am now so you will be.”

Mark that well, because if we lose this struggle for the future of our country, you too someday will live in a California – only without the nice climate.

Bad policies.  Bad process. Bad politics.  Those are the three acts in a Greek tragedy that tell the tale of how, in the span of a single generation, the most prosperous and golden state in the nation became an economic basket case.

When my parents came to California in the 1960’s looking for a better future, they found it here.  The state government consumed about half of what it does today after adjusting for both inflation and population.  HALF.  We had the finest highway system in the world and the finest public school system in the country.   California offered a FREE university education to every Californian who wanted one.  We produced water and electricity so cheaply that some communities didn’t bother to meter the stuff.  Our unemployment rate consistently ran well below the national rate and our diversified economy was nearly recession-proof.

One thing – and one thing only – changed in those years: public policy.  The political Left gradually gained dominance over California’s government and has imposed a disastrous agenda of radical and retrograde policies that have destroyed the quality of life that Californians once took for granted.

The Census bureau has reported for the better part of the decade that California is undergoing the biggest population exodus in its history, with many fleeing to such garden spots as Nevada, Arizona and Texas.  Think about that.  California is blessed with the most equitable climate in the entire Western Hemisphere; it has the most bountiful resources anywhere in the continental United States; it is poised on the Pacific Rim in a position to dominate world trade for the next century, and yet people are finding a better place to live and work and raise their families in the middle of the Nevada Nuclear Test Range.

I submit to you that no conceivable act of God could wreak such devastation.  Only acts of government can do that.  And they have.

We conservatives espouse principles of individual liberty, free markets, constitutionally limited government, fiscal responsibility, the protection of natural rights – not out of some slavish devotion to ideology, but because all human experience has shown these principles to be the most certain means to achieve a prosperous and happy society.  If you want to see the opposite of that – come to California.

James Madison said the trickiest question the Constitutional convention confronted was how to oblige a government to control itself.  History records not a single example of a nation that spent, borrowed and taxed its way to prosperity; but it offers us many, many examples of nations that spent and borrowed and taxed their way to economic ruin and bankruptcy.  And history is screaming this warning at us: that nations that bankrupt themselves aren’t around very long, because before you can provide for the common defense and promote the general welfare and secure the blessings of liberty – you have to be able to pay for it.

California may not have invented deficit spending but we certainly refined it into a science.  Before the crash of 2008, when California was taking in more money than ever in its history, it was already running a nine billion dollar deficit, under a Republican governor elected on the pledge to “cut up the credit cards.”

Federal spending increased 26 percent in the last three years literally consuming and squandering the wealth of the nation at the worst possible time.  Yet consider this: from July of 2005 to July of 2008, California increased its spending by 31 percent, under a Republican governor elected on the pledge to “stop the crazy deficit spending”.  You can see how well that’s worked for us.

If stimulus spending, massive deficits and burgeoning government bureaucracies were the path to economic prosperity, California should be leading the nation from the top rather than from the bottom.  After we lost the nation’s triple-A credit rating this summer specifically because of chronic deficit spending, it should surprise no one that California suffers the lowest bond rating in the nation for precisely the same reason.

Our regulatory burdens are also years ahead of the rest of the nation – we’ve had our own version of Cap and Trade on the books for five years now, and even though the bulk of these restrictions yet to take effect, investors make decisions every day anticipating their impact.

This has already proven utterly devastating to energy generation, cargo and passenger transportation, cement production, construction, wine making, agriculture and manufacturing.  When he signed this legislation, Gov. Schwarzenegger promised that this would produce a cornucopia of new green jobs.

How’s that working out?  Up until the autumn of 2006, California’s unemployment rate tracked fairly steadily with the national unemployment numbers.  But beginning in that quarter, California’s unemployment rate moved steadily beyond the national numbers.  Today it stands at 12.1 percent – three full points above the national rate.  You can’t blame the national economy for that – you have to find something specific to California that occurred in the autumn of 2006 to explain this divergence.  I submit that the only significant event in that period was the signing of AB 32.

And I should note that although we’ve devastated California’s once recession-proof economy with these ridiculous regulations, the Earth stubbornly continues to warm and cool as it has for billions of years.

I mentioned water and electricity so cheap that some communities didn’t meter the stuff.  There’s a reason for that: California had embarked on an aggressive program of hydroelectric and nuclear power construction that promised an era of clean, cheap and abundant electricity.  But beginning with the first “small is beautiful” administration of Jerry Brown, these programs were abandoned in favor of “green energy.”  We now have the most stringent renewable energy requirements in the nation.

Which helps explain why California is the home to such stunning green energy success stories as Solyndra.  We have among the highest electricity prices in the continental United States.  We have the lowest per-capita electricity consumption in the nation as well.  And every day, our government spends part of our sky-high electricity bills to lecture us to conserve more.

We completed our last major dam in 1979.  Last year, environmentalists diverted 200 billion gallons of water from central valley agriculture for the enjoyment and amusement of the Delta Smelt – a three-inch long minnow that has become the environmental left’s pet cause.  This single action destroyed thousands of jobs and laid waste to a half million acres of the most fertile farmland in America.  It is no coincidence that four of the ten metropolitan areas suffering the highest unemployment rate in the country are all in California’s Central Valley.

Meanwhile, up north on the Klamath River, California has found a new partnership with the Obama administration as they proceed to tear down four perfectly good hydroelectric dams capable of producing 155 megawatts of the cleanest and cheapest electricity on the planet — enough to power 155,000 homes.  This is due, we are told, to the decline of the salmon population.  The Iron Gate Fish Hatchery on the Klamath produces 5 million salmon smolts each year – 17,000 of which return as fully-grown adults to spawn – but they don’t include them in the population count.  To add insult to insanity, when the Iron Gate Dam is destroyed, we will lose the Iron Gate Fish Hatchery.

We have the most aggressive mass transit program in the country – although we have not added significant capacity to our highway system in a generation.  Californians consistently pay among the highest taxes per gallon of gasoline in the country and yet make among the lowest per capita expenditures on our roads.  And what a surprise: we also have among the highest congestion rates in the country.

We have the largest population of illegal aliens in the country, consuming somewhere in the neighborhood of $10 billion in direct state expenditures. A few years ago, the Los Angeles County Sheriff reported that fully 25 percent of the jail inmates were illegal aliens.  For years, California has provided in-state tuition for illegal aliens at the expense of California taxpayers – and with the signing of the California Dream Act four days ago, they will also have access to taxpayer-financed grants.  Meanwhile, CSU has increased tuition 22 percent in just two years.

I’ve noticed a few of you on your cell phones no doubt checking to be sure that your return reservations are confirmed.

But I need to remind you that the Obama administration is pursuing exactly the same policies nationally – and so far with the same results.  When you step off the plane back in your home state, just remember that all your plane trip will buy you is a couple of years if we lose the fight in 2012.

The second act of this morality tale is how bad process accommodated and amplified bad policy.

The Left loves to throw the term “dysfunctional” at our governing institutions.  In the last week, the Democratic governor of North Carolina seriously opined that we ought to postpone congressional elections so that congressmen would “do the right thing.”  Peter Orzag this week wrote of wanting to shift even more decision-making from our elected representatives to elitist boards appointed by our betters.

We have reached this point not because of a failure of our republican institutions, but because of a failure to respect those institutions.

Again, California is a pioneer, but the rest of the country is fast catching up.  In the 1960’s, California’s legislature was respected throughout the country as the model for others to follow.  It was professional, it respected process, and it worked.     It did a few things, but it did them exceedingly well.  It left local schools, local governments and local revenues in local hands. But beginning in the 1970’s this began to break down.

The humility that kept Sacramento from sticking its nose into the business of local governments gave way to the hubris that the state knew better what was important to local communities than those communities themselves.  The appalling breakdown of federalist principles at the national level now geometrically compounds this problem.

But at the core of this breakdown was the abandonment of our basic republican structure of government – and it began right here.

Our parliamentary institutions have evolved over centuries to distill diverse viewpoints to a common direction within constitutional boundaries.  When this process is applied, it works extremely well.

For a quarter of a century, I watched as these brilliant checks and balances that had produced reasonably punctual and reasonably balanced budgets for over a century, and nurtured the most prosperous economy in the nation, were gradually abandoned in the name of liberal efficiency.

Slowly, inexorably, decision-making that had been done broadly and independently by the two houses of the legislature — involving the active participation of every elected representative — was usurped by an extra-constitutional abomination called the “Big Five.”

See if any of this sounds familiar:  The “Big Five” is essentially a super-committee that meets behind closed doors outside the scrutiny of the public, sidelining the legislature, short-circuiting the independent judgment of the two houses, and then in the eleventh hour drops its decision into the laps of the legislature for a take-it–or-leave it vote that cannot even be amended.

I know I don’t have to connect the dots for anybody here.  Ladies and gentlemen, it does not work.  California’s plague of chronically late and chronically unbalanced budgets coincides quite clearly with the disintegration of the legislative process and the replacement of parliamentary institutions with handpicked super-committees.

Which brings me to the third act of this Greek Tragedy – bad politics.

Last November, while the rest of the country was celebrating historic Republican gains (including a shift of 63 U.S. House Seats, six U.S. Senate Seats, 680 state legislative seats, 19 state legislatures and six governors), the statewide Republican ticket in California – despite massively outspending the Democrats in the best Republican year since 1938 – lost every statewide race and even lost ground in the state legislature.

Republicans nationally now hold more state legislative seats than in any year since 1928.  In California, they hold fewer than at any time since 1978!

That is not because the voting population of California has lost its collective mind and it is not because the state is divinely ordained to be run by morons.

It happened because Dick Armey is right: “When we act like us we win, and when we act like them we lose.”

Republicans lost the 2006 and 2008 elections not because voters abandoned Republican principles, but because they looked at the Republicans and concluded that the Republicans had abandoned Republican principles.

During the Bush years, Republicans had increased federal spending at twice the rate of Bill Clinton; they left our borders wide open; they approved the biggest increase in entitlement spending since the Great Society and that turned record budget surpluses into record deficits to launch this brave new era of stimulus spending.

I last visited with the CNP in Washington in May of 2009.  What a depressing meeting that was! Obama enjoyed 66 percent public approval.  The week before, a conference of self-appointed Republican leaders had concluded that “we had to put the Reagan era behind us” and we had to be “mindful and respectful that the other side has something and that we have nothing and you can’t beat something with nothing.”  (I won’t mention names, but his initials were Jeb Bush.)

Thank God House Republicans didn’t take that approach.

In the aftermath of that debacle, House Republican leaders resolved to restore traditional Republican principles as the policy and political focus of the party and they achieved something no one at the time thought possible: they united House Republicans as a determined voice of opposition to the Left and they rallied the American people.

Republicans rediscovered why we were Republicans, and Republican leaders rediscovered Reagan’s advice to paint our positions in bold colors and not hide them in pale pastels.

The result was one of the most dramatic watershed elections in American history.

California Republicans did exactly the opposite, and ended up replaying the disaster of 2008 while the rest of the country was enjoying one of the greatest Republican landslides ever recorded.

In California, the Democrats attacked Republicans for imposing the biggest state tax increase in American history.  The Democrats attacked Republicans for obstructing pension reform to protect the prison guards union.  These attacks had the unfortunate element of being true.

Meanwhile, the Republican ticket attacked Arizona’s immigration law.   Republicans attacked the Proposition that would have stopped AB 32 – California’s version of Cap and Trade.

The sad truth is that we were more like the Democrats than the Democrats.

A few days after the election, a Republican leader whose mission in life has been to redefine the Republican Party in the image of Arnold Schwarzenegger said he just couldn’t explain the results.

I can.  We didn’t need to redefine our principles.  We needed to return to them.  House Republicans did.  California Republicans did not.  Any questions?

Great parties are built upon great principles and they are judged by their devotion to those principles.  Since its inception, the central principle of the Republican Party can be summed up in a single word, Freedom.

The closer we have hewn to that principle, the better we have done.  The farther we have strayed from that principle, the worse we have done.

In 1858, Abraham Lincoln warned the nation that two incompatible and irreconcilable philosophies, freedom and slavery, competed for our future and reminded us that “a house divided against itself cannot stand.”  “I do not believe the house will fall,” he said, “but I do believe that it will cease to be divided.  It will become all one thing or all the other.”

Today two incompatible and irreconcilable philosophies — freedom and socialism — compete for our nation’s future and the stage is set for one of the greatest debates in the history of the American Republic.

We are winning that debate.  But we have to stand firm.

What has happened to California and now is threatening our country is the inevitable consequence of bad policy, bad process and bad politics – and the good news is, that’s all within our power as a people to change.

I believe that if Californians rediscover these self-evident truths, Jerry Brown will be to California what Barack Obama has been to the rest of the country – a giant wake-up call.  And if Americans rally behind these truths, together, we will write the next great chapter of the American Republic: that just when it looked like America would fade into history as just another failed socialist state, this generation of Americans rediscovered, revived and restored those uniquely American principles of individual liberty and constitutionally limited government, rallied under a bold banner held high by the traditional party of freedom, and from that moment America began her next great era of expansion, prosperity and influence.

(Congressman Tom McClintock delivered these remarks to the Council for National Policy.)

Bad Financial News Keeps Pouring In: 14 Facts That Just Might Scare The Living Daylights Out Of You

Full Article Here

 

Will the bad financial news ever stop?  A lot of people in the financial world were hoping for a much better fourth quarter after an absolutely disastrous third quarter.  Well, if Monday was any indication, October could end up being a really rough month for global financial markets.  So much bad financial news keeps pouring in that it really is a challenge to try to keep track of it all.  Greece seems to get closer to defaulting on their debts with each passing day, and it appears that Germany is not going to contribute any more bailout money beyond what they have already committed to.  Major banks on both sides of the Atlantic are on the verge of collapse, and investors all over the world are afraid that we may have another "Lehman Brothers moment" soon.  Shares of American Airlines dropped a staggering 33 percent on Monday as rumors that they will soon be entering bankruptcy swirled.  Yes, things certainly are getting interesting.  Back in 2008, the governments of the western world saved the financial system with gigantic bailouts that were absolutely unprecedented.  If the financial system crashes again at some point in the coming weeks or months, will the political will for more bank bailouts be there?  If not, what is going to happen to the banking system?

On both sides of the Atlantic, the big banks are highly leveraged, they have taken on a ton of risk and they are very deeply exposed to derivatives.  It is as if virtually nobody learned any lessons during the financial crisis of 2008.  Once again we are facing a situation where if a couple of financial dominoes fall it could send dozens of others tumbling to the ground.

Some very significant things happened on Monday.  But the media has gotten so used to reporting on tremendous financial instability that Monday's events mostly got brushed to the side.  Instead, Amanda Knox captured most of the headlines.

But the reality is that some really, really monumental stuff has been going down.

The following are 14 facts that just might scare the living daylights out of you....

#1 On Monday, the Dow was down 258 points.  Lately it seems as though the Dow has been going up or down by several hundred points almost every single day, and that much volatility is not a good sign for the health of the financial system.

#2 Shares of Wall Street banking giant Morgan Stanley fell by another 8 percent on Monday.  Overall, shares of Morgan Stanley have declined by more than 50 percent since February.

#3 Bank of America stock dropped down to $5.53 a share on Monday.  Just a few years ago, it was trading for more than $50 a share.

#4 There are reports that Goldman Sachs may actually show a loss for the third quarter of 2011 and that yearly bonuses for employees may be slashed to next to nothing.  Yes, not too many people are going to have sympathy for Goldman Sachs, but this just shows how bad things are getting out there for the big Wall Street banks.

#5 Normally Goldman Sachs is quite upbeat, but lately they have been coming out with some really frightening reports.  For example, a new report from Goldman Sachs declares that there is a 40 percent chance that we are entering a "Great Stagnation".

#6 Shares of European banking giant Dexia plunged by about 10 percent on Monday on rumors that it will soon need a significant bailout.  The stocks of major banks all across Europe have been getting absolutely hammered for weeks.

#7 Shares of American Airlines fell by 33 percent on Monday on rumors that the airline is about to enter bankruptcy.  Amazingly, trading in the stock was stopped 7 different times on Monday.

#8 It is being reported that approximately 240 pilots for American Airlines have retired in the last two months alone.  All of those pilots are retiring so that they can shield their pensions from the upcoming bankruptcy filing.

#9 Nearly the entire airline industry got hit really hard on Monday.  Shares of United Continental, U.S. Airways and Delta were all down more than 10 percent.

#10 Overall, U.S. stocks fell by 14 percent during the third quarter of 2011, and now the fourth quarter is off to a very rocky start.

#11 The incoming head of the European Central Bank, Mario Draghi, has publicly admitted that major European banks are having "funding problems".  Just like back in 2008, we are rapidly heading for a giant "credit crunch".

#12 A shocking new Bloomberg survey has found that approximately one out of every three international investors expects a "global economic meltdown" within the next 12 months, and 70 percent of them believe that the global economy is "deteriorating".  Perhaps they have been reading The Economic Collapse Blog too much.

#13 Financial markets in Europe were rocked on Monday when it was revealed that Greece is not going to hit the deficit reduction targets set for it either this year or next year despite all of the severe austerity measures that have already been implemented.  Needless to say, a lot of financial authorities in Europe were very displeased by this news.

#14 German Finance Minister Wolfgang Schaeuble is publicly declaring that Germany will not contribute any more money to the European bailout fund.

The truth is that the political will for more bailouts has totally dried up in Germany.

The recent vote by the Bundestag to approve money for the European rescue fund should not be misinterpreted.

That vote simply approved money that was part of a deal that was agreed to over two months ago.

What is more important is what many major German politicians said after the vote.  Essentially, the overwhelming consensus is that Germany is done contributing money.  Once the money is gone from the current bailout pool (which is not anywhere close to what is really needed), there will be no more money from Germany.

That means that the era of the bailouts in Europe is drawing to a close.

In a recent editorial, Ambrose Evans-Pritchard described the situation in Germany in this manner....

The furious debate over the erosion of German fiscal sovereignty and democracy – as well as the escalating costs of the EU rescue machinery – has made it absolutely clear that the Bundestag will not prop up the ruins of monetary union for much longer.

Horst Seehofer, the leader of Bavaria’s Social Christians, said his party would go "this far, and no further".

Let that last phrase sink in.

Basically, what politicians all over Germany are saying is that Germany has now done all that it is going to do.

The implications of this are huge.

Ambrose Evans-Pritchard recognized this in his editorial.  In fact, the usually reserved journalist actually used all caps for six straight sentences and broke out some very strong language that is very uncharacteristic for him....

Repeat after me:

THERE WILL BE NO FISCAL UNION.

THERE WILL BE NO EUROBONDS.

THERE WILL BE NO DEBT POOL.

THERE WILL BE NO EU TREASURY.

THERE WILL BE NO FISCAL TRANSFERS IN PERPETUITY.

THERE WILL BE A STABILITY UNION – OR NO MONETARY UNION.

Get used to it. This is the political reality of Europe, since nothing of importance can be done without Germany. All else is wishful thinking, clutching at straws, and evasion. If this means the euro will shed some members or blow apart – as it almost certainly does – then the rest of the world must prepare for the day.

Basically, this is his way of saying that "the sky is falling" and that the financial system of Europe is doomed.

If you have followed the writing of Ambrose Evans-Pritchard for any length of time, then you know that he is one of the most respected financial journalists in the world and that he is not prone to indulge in much "doom and gloom".  For him to say what he did is very significant.

But even if there were no financial problems in Europe, the United States would probably be slipping into another recession anyway.

Right now our economy is a total mess, and all kinds of people are coming out of the woodwork and are trying to take credit for "calling" the upcoming recession.

Some of the pronouncements are so bold that you would think that some half-crazed blogger wrote them.  For example, just check out the following quote from a report recently put out by the Economic Cycle Research Institute....

"Here's what ECRI's recession call really says: If you think this is a bad economy, you haven't seen anything yet."

But do the American people really need some experts to tell them that we are going into another recession?

The American people know what is going on.

According to one recent poll, 90 percent of the American people believe that economic conditions in the United States are "poor".  According to another recent poll, 80 percent of the American people believe that we are actually in a recession right now.

So perhaps the American people are actually ahead of most of the so-called "experts".

In any event, economic conditions in the United States continue to get worse.  The average American family is having a harder and harder time getting to the end of each month.  According to a Harris Interactive survey taken near the end of last year, 77 percent of all Americans are now living paycheck to paycheck.  In 2007, the same survey found that only 43 percent of Americans were living paycheck to paycheck.

At least Barack Obama is not talking so much about an "economic recovery" these days.  When asked recently if Americans are better off today than they were four years ago, Obama said the following....

"Well, I don't think they're better off than they were four years ago."

Finally, something that we can all agree with Barack Obama about.

Sadly, things are about to get even worse.

Pay close attention to all of the bad financial news that keeps pouring in.

Just like in 2008, something really big is happening.

When the current bailout fund in Europe runs out in a few months, things could really start to unravel.

If Greece (or any other eurozone nation for that matter) defaults, it could set off a chain of financial events so catastrophic that it just might scare the living daylights out of all of us.

Let us hope for the best, but let us also prepare for the worst.

Tremendous fear and panic has gripped the financial world, and the underlying problems causing this crisis are not going to be solved any time soon.

We are about to enter unprecedented territory.

Hold on tight.