Crash and Crisis or Crock of Sh$t?

Submitted by Jeff P. on February 6, 2008 - 11:11pm.

tags:

Economy
USA

This entry is an invitation to more knowledgeable folks (Rob for example) for an explanation of current U.S. economics. I have read a number of reports over the past year, including a few found here, that the greenback is bound for a dramatic nosedive in the near future. Well, we have definitely seen a downward trend as of late but no uber crash as of yet. Such reports that have found their way to my inbox, have been increasing in the past few weeks. It seems that an ever increasing number of 'experts' are cautioning us for the worst. For example, Gerald Celente's take in Christopher Ketcham's, Trends for Downsizing the US: The Bright Side of the Panic of ‘08:

"Futurist and trends forecaster Gerald Celente, director of the Trends Research Institute in Rhinebeck, NY, predicted the 1987 stock market crash, the collapse of the Soviet Union in 1989, the Asian economic implosion of ‘97, the decline of the dollar beginning in 2005, the meteoric rise in gold prices in an age of currency volatility, and the turn of events that may be the blessing of our era, the subprime mortgage crisis. Because of this habit of prescience, Celente has appeared regularly on CNN and Fox and MSNBC, his “Trends Reports” widely quoted in newsprint, on Oprah Winfrey, on Good Morning America.

Now in his Report for 2008, issued in mid-December, he carried the news every thinking American already knows. “The United States of America,” Celente pronounced, “has gone from first class to third rate.” It’s a “nation on the skids and heading down.” Celente projects economic and political crisis in the coming year. “In 2008, Americans will wake up to the worst economic times that anyone alive has ever seen,” he wrote on December 17. “Just as they didn’t see 9/11 coming and were frozen in shock when terror struck, [Americans] will be frozen in shock when terror strikes again.” He predicts “failing banks, busted brokerages, toppled corporate giants, bankrupt cities, states in default, foreign creditors cashing out of US securities…the stage is set, the big one is on its way.”"

http://www.atlanticfreepress.com/content/view/3311/81/

While this article is highly speculative, it is consistent with many other forecasts that I have read lately. What is going on here folks? If this is even remotely true, what does it mean to us in London Ontario? How will it effect international relations etc.?

PS - don't bother checking up on how this is effecting the Iranian economy. Their connection seems to be tremendously slow. what's up with that?

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I'm seeing sunspots

Submitted by Robert Logue on February 21, 2008 - 4:35am.

I honestly have no clue. How's that for an answer? (i hope that didn't come across as mean)

In the 19th century, there was a well respected economist by the name of William Devons who then hypothesized that business cycles were directly corelated to the cycle of sunspots on the sun's surface. Needless to say, he had gone a little nuts and this eventually ruined his reputation. This phrase is commonly used today by economists when someone isn't making any sense ('Seeing sunspots'). It also took on another meaning: the idea that extrinsic random variables completely unrelated to the underlying fundamentals in an economy can have an impact. Keynes talked about 'animal spirits'. Here we get into the realm of self-fulfilling prophecies - sometimes.. if everyone thinks things are going well and go out and consume, then things will go well, but if the opposite occurs...

The fundamentals tell a much more straigtforward story: the anglo-saxon economies (US and UK in particular) over consume, don't save enough, rely too much on oil, have a high propensity to war mongering, etc, etc, etc. But just because the US economy should be going sour, does that mean it will? I'm seeing so many sunspots of late, I've practically gone blind.

Can we point to any one underlying cause to the current turmoil?

Some people say we're witnessing the unwinding of the carry trades, others say its all a result of the war spending, others of consumer spending (trade defecits), others point to the subprime debacle, some blame the Federal Reserve for engineering economic bubbles in the housing and stock markets. And no one can leave out our favorite theory: peak oil. My point is there's a whole lot going on. I have a feeling its all part of some greater trend, but i can't say. I had one of my economics professors tell me this is the failure of american style libertarian capitalism. That would be nice to believe, cause then it would save you and me a lot of work trying to tear it down ourselves.

I'm sorry if I haven't really told you anything you don't already know. I haven't been on the commons for ages cause I've been desperately trying to research a paper I'm writing on this topic (comparing the investment and real estate bubble crashes at the begining of the 21st century in the USA to those experienced in Japan at the begining of the 90s - fascinating I know!). This is a pretty interesting comparison, and contains a lot of similar ingredients if any of you are interested in the topic. I'll gladly send it to anyone who's interested when I'm done or post an abridged version on the Commons.

Anyways,

Peace

'Poverty is the worst form of violence" - Gandhi

The "Subprime Primer"

Submitted by Jeff P. on February 21, 2008 - 12:43pm.

Thanks for the reply. the whole thing is bloody overwhelming. probably why capitalism has taken so long to fall. It's highly adaptive.

The way it seems to operate is like a virus, it will continue consuming everything in its path (like the T4 - multiplying at an exponential rate) until its host/food supplies run dry (ie. natural resources and/or human exploitation). Starving the beast is possible two ways that I can see. one, stop access to natural resources by all (non-violent) means necessary and two, liberation through class consciousness (people refuse to be exploited and begin participating in liberatory acts of resistance). Of course, I do believe that a cure is available in theory but the trick is not using a shotgun in place of a syringe (economic/social institution building instead of the violent overthrow of the system) . That's were economists come in. For example, Keynes figured (correctly) that a vaccination was no longer possible. At that point in time a cure for the 'Cap' virus was not realistic, so instead, much like the current medicine for T4 (HIV), he opted to control the beast in order to limit/slow its destructive capacities. Thus, keyensian theory would ultimately reduce the amount of immediate damage. Ok, that being said (for all uber reformists out there - Neil, I'm looking at you) If we don't catch the virus in its early stages, it is next to impossible to control it (also like the T4)! Which means, the eventual death of the host. So reform at this point is only damage control (and barely that) - by no means a solution.

wow, that metaphor went on a bit long eh? ha. So that brings us back to more questions. what pieces will be left over if the US version of capitalism falls...? Other countries are getting ready for a recession by enhancing social infrastructure that will pad the nasty crash. N.A. (the financial elite) is trying to fix the problem by selling off public infrastructure. Something our grandparents bought and paid for with hard work.... ahhhh, once again, I digress.

The "Subprime Primer"

A friend sent me this. I found it amusing, depressing and educating all at the same time! ha!

and yes, your paper does sound fascinating. it would be great to see an abridged version on the commons.

cheers

http://radicalblogs.org/lpps

When Harper heads for the Hills...

Submitted by Jeff P. on February 17, 2008 - 11:45am.

You know something strange is going on when Harper is looking for rocks to slither back under.

Stephen Harper - No Choice but an Election now.

http://radicalblogs.org/lpps

'economic earthquake'

Submitted by Anthony V on February 8, 2008 - 1:17pm.

I think that considering the range of recent forecasts like this one, and the evidence that we can all see with our own eyes, it is obvious that the US is in serious economic decline.

This will lead to a an 'economic earthquake' and a lurch in our realities. All of the privilege that comes with our superior posion in nearly every way will now be put in a position of risk. Combine this with the picture that the coming Peak Oil senario paints and we are in a grave position.

For many of us though, this will open a window of oportunity to make real progress with discontented people.

simultaneous ecological and economic cataclysm?

Submitted by Anthony V on February 8, 2008 - 1:38pm.

Yamada Kaiya From Tokyo Observer 15

"The Japanese mass media doesn’t release this information, but there are signs that we are heading toward a cataclysm. Among economists, as well, there are people who predict the collapse of capitalism on the same time scale. An Indian economist named Ravi Badra predicted in 1977 the collapse of the Soviet Union, but was treated like a lunatic. Now he is a best-selling author. He is now saying that international capital will reach a final stage of monopoly, will have nowhere new to go, and currencies like the dollar, yen, and mark will become more worthless than the paper they are printed on. I don’t have any savings, pension, or insurance, so I’m not overly concerned (laughs).

I will be seventy in ten years, so it’s certainly possibly I will still be alive. But what will happen if there is a simultaneous ecological and economic cataclysm? It will be the climax of human history. Anarchists won’t have to work to create chaos — we will have a real state of anarchy. In my opinion, this is when we will really need hemp. Taking a puff will allow us to avoid panic, become enlightened, perhaps, and this alone may allow us to survive."