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Great Recessions II - coming soon to an economy near you.

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Outline:   Intro 

Current stats

Economics theory 1A/1B

History    - S&L crisis, Great Recessions GRs I, and Great Recessions GRs II

The Fed  - protecting us from deflation and affordable housing

- Fed accounting

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Predictions

Miscellaneous additional recommendations

Sources and Footnotes

Intro

The American economy is once again a bubble intentionally created by our plutocrats and their cronies.  Our plutocrats are the flesh and blood people who own and operate our large corporations including banks.  Corporate welfare is plutocrat welfare; corporatism is plutocracy.     Our plutocrats want the instability that comes with bubbles to create opportunities for extraordinary profits.  Normal profits from a job creating, sustainable, stable economy are simply insufficient.  The Fed was created by our plutocrats not to provide stability but to facilitate and manage instability.  The Fed now has 2.5 trillion in a money creation account hidden in excess reserve deposits.  This magic money was/is used to purchase long term LT securities to keep LT interest rates artificially low and thereby facilitate the creation of another bubble economy.   

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Lower LT interest rates increase the value of bonds, increase the price earnings PE ratios in the stock market, and increase the price of housing by lowering mortgage interest.  All these markets are now volatile bubbles.  Their volatility was evident in the quick 100 basis point rise in LT rates resulting from Fed Chairman Bernanke's May announcement on future tapering - in quantitative easing QE 3/4, the Fed's current LT bonds purchasing programs. 

Unnaturally low interest rates over extended periods negatively affect other areas not normally considered.  Lower returns have contributed to growing deficits in our pension funds.  Lower returns on insurance company investments have likely increased our insurance premiums.  Low interest rates have encouraged our excessive borrowing" 

Current stats

Total domestic, nonfinancial debt is 248% of GDP - 41,431.9 B in debt to 16,695.7 B in GDP (a).  This is the highest or one of the highest debt/GDP ratios in our recorded history.  We cannot service such indebtedness.  Continued debt forgiveness with concomitant losses to creditors is unavoidable.  This annual ratio has stayed above 247% since 2009 in spite of a growing GDP and a trillion dollar reduction in household mortgages with over four million foreclosures (b).  Federal debt has seen the most growth, growing from 5.1 trillion in 2007 to 12 trillion at the end of September.  Yet, all areas but household mortgages have increased debt.  Note - this discussion is of nonfinancial debt and excludes financial debt such as debt the federal government owes itself in the Social Security trust funds.   

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http://www.dailykos.com/user/John F Scanlon

I'm a mere Irish-American and a former Marine. I have a BA in Business Economics from UC Santa Barbara, 4 years experience as a bank loan officer, 13 years experience as a bank examiner, and 50+ years of life experience. I have been politically (more...)
 

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A long but worthwhile article (which I happened to... by Scott Baker on Wednesday, Jan 8, 2014 at 12:49:37 PM
Mr. Baker 1.  The 248% is not just LT debt,... by John Scanlon on Wednesday, Jan 8, 2014 at 4:27:52 PM
Re US notes v. Federal Reserve notes, see my arti... by Clifford Johnson on Wednesday, Jan 8, 2014 at 5:10:24 PM
Ah, so public and private debt then.  Well, o... by Scott Baker on Wednesday, Jan 8, 2014 at 6:52:29 PM
The Federal Reserve doesn't have all the correct ... by Chris Hall on Wednesday, Jan 8, 2014 at 10:07:25 PM
I didn't put the title of the article I mentioned.... by Chris Hall on Thursday, Jan 9, 2014 at 12:05:09 AM
I am informing everyone, I have changed the title ... by Chris Hall on Thursday, Jan 9, 2014 at 10:44:59 PM