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Economic Crisis - McCain says everything is Great & Reviewing my Predictions

By   Follow Me on Twitter     Message Steven Leser       (Page 1 of 2 pages)     Permalink    (# of views)   4 comments

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I’ve been writing about the coming economic crisis for the last 8 months and what I have expected has finally started to materialize. I have never been so unhappy to see my predictions come true. I hope my readers don’t mind me taking them back through some of the things I wrote previously before coming up to date.

Some of my previous articles on the economy can be seen at these links:

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One of the concepts to which I would like to reacquaint readers is that I look at five key components to determine how bad any negative economic cycle will be. Those five key components are:

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1. Consumer savings and spending/ability to spend
2. Corporate income, health and spending/ability to spend
3. Government financial health and ability to spend
4. The lending and banking system and its ability to extend credit
5. Inflation & scarcity of resources

As I have written several times before, for the first time in American history, all five of these components are in a horrible condition. Please note the inflationary component of our current crisis. The stagflation of the late 1970s was the only other time when the US has experienced an economic downturn accompanied by rising inflation. That makes the problems exponentially worse and harder to solve.  My predictions for what was to come were as follows:

I see a Dow in the 7000-9000 range, the S&P 500 struggling to stay over the 1000 mark and a NASDAQ in the 1400-1600 range. I see unemployment and inflation both between fifteen to twenty five percent. I see many consumers defaulting on their credit cards and the major crisis in the banking and lending industry will be compounded by hordes of consumers defaulting on their credit cards. As a result of these credit card defaults, more banks will fail and major banking insurers will fail as a result as well as investment funds and securities that are based on credit card debt. I believe there will be consumer and corporate bankruptcies on a massive scale

When I made these predictions, the DOW was at 12825. The DOW is now nearing 10917 so it is halfway to my expected range of 7000-9000. Inflation was at around 3.94% (it is now 5.64%) and the unemployment rate was 4.9% (it is now 6.1%). There are no major or minor efforts underway to deal with any of these issues. In fact, the Federal Reserve is about to make another major mistake and lower interest rates again which for inflation is like throwing gasoline on a bonfire. I stand by my prediction of 15% or more in both of these measurements as the five components act in concert to drag the economy down into the abyss.

Getting back to the five components:

1. Consumer savings and spending/ability to spend
2. Corporate income, health and spending/ability to spend
3. Government financial health and ability to spend
4. The lending and banking system and its ability to extend credit
5. Inflation & scarcity of resources

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The great depression was cured by government spending. That is not possible today. The government is running at an annual deficit of nearly $500 Billion dollars already. In addition, because of the fact that this crisis has an inflationary component, any money thrown at the situation is going to cause additional inflation and make the problems worse. Consumers are hurting, businesses are laying people off, and the banking industry is on life support.

One of the most surprising things in all of this is that John McCain started off yesterday parroting the Bush administration that everything is great and the financial system is sound. I’m wondering which of his ten (or is it twelve?) houses he was in when he said that? Talk about someone who is out of touch with what is happening to the typical American worker and American family. I wonder if McCain’s houses are on this planet or if he lives in another galaxy. At the beginning of the great depression, Henry Ford said something similar. He later realized that the depression was something serious but do we want to elect someone who so clearly doesn’t get it?

We can easily see that the fundamentals of this economy are not strong and that if something isn’t done soon, the economy will collapse completely. Maybe McCain really believes what his chief economic advisor said that the recession is a mental one and that America is a country of whiners. Speaking of Phil Gramm, McCain’s chief economic advisor, Phil Gramm is the main architect of a lot of the banking deregulation that caused the current crisis when he was the head of the Senate Banking Committee from 1995-2000.  This is the guy McCain has chosen to advise him on economic matters.

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A political blogger for the International Business Times, Steve Leser is a hot national political pundit. He has appeared on MSNBC's Coundown with Keith Olbermann, Comedy Central's Daily Show with Jon Stewart and Russia Today's (RT) Crosstalk with (more...)

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