The news has been grim from the economic front. Recession is splashed on your front page every day. Mounting losses, Countrywide being bought before bankruptcy, job losses, tight credit market, unstable sub prime loans underlying hallowed institutions, and a most horrible economic future.
Yet, the news is not noticeably different than August of 2007. Countrywide was in the news, on the verge of being purchased; banks were scrambling to bail themselves out of a tight credit market, Bernanke was dropping money by the B52 load on the economy, struggling to keep it from seizing up. As you remember, anyone saying the slightest thing about the economy having a problem was labeled a "conspiracy theorist". If you want to see what people said, go and check the Youtubes on my channel from that time.
The biggest difference now is now the big guys are out of the market. They used used up all their little tricks that kept the economy going. They wanted you to continue to buy buy buy. You've grazed all the stock grass on the plateu, you are being stampeded by the wranglers into a slaughter. Fat, dumb, previously happy, the sheeple are fattened for the harvest. Now, all the cash that was harvested out of the buy buy buy happy talk will be used to buy back the assets at 25% or more discount. What a great trick this is, how else can you maintain real growth rates of 15% per year? Yes! There is!
You can do it by saving on Taxes! Not only fattened on the sheeple, they are going to stick it to the US Taxpayer. Yes, you taxpayers are going to pay Bank of America to acquire Countrywide. How? Well, they have this really cool thing that allows you to go back in time and write off losses from this year against taxes previously paid. So, the 4 billion dollars BofA paid for Countrywide, 2 Billion or so will be recovered in taxes paid when times were good. Not only do they own your property, they will get to dip into your tax payments. Isn't it a grand scheme? Not to mention that it helps all our wonderful allies, such as China, Russia, and Iran by depleting our treasury, devaluing our dollar, and making us a nice big fat target for takeover.
What does it mean for you and I? Higher taxes. Less services. More bonds. Empty homes with more homeless people. Increase crime. Increased fraud. A more dangerous world. Just take a look at what happened to Cleveland, Ohio. (In the links)
It also means that the Chinese, with their 1.5 trillion dollars in capital reserves are going to be able to cherry pick all the good assets, banks, and other institutions out from under US control. They'll be able to take a more active role in Foreign Policy, such as declaring that they are going to occupy North Korea when it's nut ball leader loses control. Not a request, not a declaration, just a statement of fact that the US can do nothing about, the willing lapdog we have become to the trinkets that flow from their factories.
The US is on the verge of being hollow tiger, big teeth no tail. What's funny is that was exactly the concept that was planned in the 1990's about how our industry was going to work. The problem is that we need a tail in order to sustain operations. Defaulting on our IOU s isn't going to hurt the Chinese, they'll just come over and repossess our lands using US companies they own. Doubleplus Good Citizen.
Links:
http://money.cnn.com/2008/01/11/news/companies/sloan_countrywide.fortune/index.htm?postversion=2008011115
http://money.cnn.com/2008/01/11/news/companies/countrywide_personal/index.htm?postversion=2008011115
http://money.cnn.com/2008/01/11/real_estate/cleveland_lawsuit/index.htm?postversion=2008011114
http://money.cnn.com/real_estate/foreclosures/cleveland/
http://money.cnn.com/2008/01/11/news/international/china_reserves.ap/index.htm?postversion=2008011107
http://www.bloomberg.com/apps/news?pid=20601087&sid=act8mDkXaQtQ&refer=home
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1 comments:
This will unwind very slowly. You are right but America will not go quietly into the night. Even the Roman Empire took 300 years to collapse after it began to fall. We are just in our first full generation of collapse. I expect it to take at least one or two more generations to fully unwind economically. That means another 20 years or more of this as we go into a slow motion economic fall.
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