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Are We in the Middle of What Will Prove to Be the Deadliest Financial Cycle Ever?

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Fed chief Ben Bernanke continues to add a crucial disclaimer to his promise to avoid further money-printing:  He promises that he'll print like there's no tomorrow if the economy slows.

But the economy IS slowing -- right here, right now!  Last Friday, we learned that the economy slowed dramatically in the first quarter of 2012.  The March jobs report, released in April, was a major disappointment.  And yesterday the Dallas Fed reported that manufacturing activity has worsened and that assessments of likely future manufacturing activity also plunged.

To make matters worse, the sector that triggered this crisis in the first place -- real estate -- is still in trouble.  Home ownership rates have fallen to their lowest levels since 1997.  More than 18 million U.S. homes are now vacant.  Growing numbers of them are being vandalized and stripped of their copper wiring and plumbing, thereby driving down the value of every house in the neighborhood, putting ever more homeowners "underwater" in that they too can no longer sell their homes for enough to pay off their mortgage.   Meanwhile, it remains unclear who actually owns many of these abandoned homes.  Why?  Because Wall Streeters packaged the loans into investment securities that were then sliced and diced into parcels that could be sold to gullible investors around the world.  Then, without government supervision, the real estate industry created an organization called MERS (Mortgage Electronic Registration Systems) that was supposed to keep track of all this, but which has failed spectacularly in this self-appointed responsibility.  As a result, no one knows who owns millions of American homes. 

The gruesome result of all this:  According to the National Association of Realtors, sales of previously-owned houses in March fell for the third time in four months.  Demand for new homes also dropped in March.

Meanwhile, the official unemployment rate is still stuck at 8%, and given the economic news we've seen lately, it looks as if it could begin rising again.

So how much more of this steady drumbeat of bad news is it going to take before the Fed begins printing money again?   Especially now, in an election year, with the Fed chairman's boss's job -- and quite possibly his own job -- on the line?

When push comes to shove, the Fed will have NO CHOICE but to crank up the money printing presses again -- to fight the economic slowdown and also to make it possible for Washington to repay its otherwise UNpayable trillions in debts with much cheaper dollars!

Problem is, this orgy of money printing has programmed the economy for massive inflation.  Skeptical that this is true?  Consider the following facts:

    In the 1970s, the Fed created $83 billion out of thin air -- about $332 billion in today's money.

    RESULT: Inflation -- the Consumer Price Index soared just under 15% per year.  Food prices doubled ... then tripled ... and then quadrupled.  Gas prices more than quintupled.

    But in just the past few years, the Fed has printed nearly $2 trillion -- nearly SIX TIMES MORE!

What to make of this?

Well known financial analyst Martin Weiss and his family have been tracking speculative bubbles and busts for 80 years.  They've personally witnessed 12 recessions, two depressions, five stock market crashes, three real estate busts, three bank failure epidemics, and two of the most vicious inflationary spirals of all time.  But now they are telling us that nothing has prepared them for what we're seeing now!

First, look how dramatically the world has changed since 2000:

In prior years, we occasionally saw some individual countries -- Germany in the 1920s and Brazil in the 1970s -- run giant budget deficits and finance them with truckloads of paper money.  But until now, we have never seen a situation like today's, in which EVERY MAJOR COUNTRY in the Western world doing it in unison!

In prior years, sometimes the financial disasters were caused primarily by reckless behavior in government, and sometimes by reckless behavior among banks.  But until now, we had never seen BOTH MAJOR GOVERNMENTS AND MAJOR BANKS take such unprecedented risks at the same time!

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Several years after receiving my M.A. in social science (interdisciplinary studies) I was an instructor at S.F. State University for a year, but then went back to designing automated machinery, and then tech writing, in Silicon Valley. I've (more...)
 

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1.  That all of the bailout funds have been r... by Richard Clark on Wednesday, May 2, 2012 at 10:34:00 AM
Here is a reprint of page 3 of the article: ... by Richard Clark on Wednesday, May 2, 2012 at 12:12:20 PM
Yes, we are in the middle of the deadliest financi... by Patricia Gray on Wednesday, May 2, 2012 at 12:44:49 PM
Nobel prize winning economist Paul Krugman answers... by Richard Clark on Wednesday, May 2, 2012 at 4:57:07 PM
The Obama administration arrived in Washington in ... by Richard Clark on Wednesday, May 2, 2012 at 9:00:41 PM
This review is from: End This Depression Now! (Har... by Richard Clark on Wednesday, May 2, 2012 at 9:27:27 PM
Aren't these boom-bust cycles are a means of inten... by Jack Flanders on Wednesday, May 2, 2012 at 10:49:25 PM
That's always been my suspicion too, Jack.  T... by Richard Clark on Wednesday, May 2, 2012 at 11:22:09 PM
On July 5th 1932, in the middle of the Great ... by Richard Clark on Thursday, May 3, 2012 at 11:02:32 AM
Very interesting. The 'returned to 30 percent unem... by Jack Flanders on Thursday, May 3, 2012 at 8:25:05 PM