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alstry (34.92)

Anatomy of a Zombulated America

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August 01, 2009 – Comments (11)

FACTS:

Between 2000 and 2008...Americans borrowed TENS OF TRILLIONS OF DOLLARS with mortgages, home equity loans, auto loans, credit card loans, corporate loans, and municipal loans.

These loans were encouraged by the FED and the banking system with little regard for the borrowers ability to repay infecting our nation with an unsustainable debt burden..

By loaning out massive amounts of money to anyone with a pulse, a buying frenzy ensued and the price of real estate skyrocketed.

Tens of Millions of Americans borrowed tens of trillions of dollars to purchase real estate at unsustainable values and much of America's real estate became massively leveraged.

As a result of rising property values and a huge number of transactions, government generated trillions of dollars in property taxes, capital gains taxes, sales taxes, and income taxes.

Heck, 75% of the Class A office space in San Francisco turned over between 2005 and 2007.

THEN:

Then the FED raised interest rates 17 times, made it more difficult to declare bankruptcy, and started restricting lending.

Property values crashed, businesses shut down, millions of jobs were lost, tens of millions more suffered wage cuts, and tax receipts evaporated.

Thousands of finance/mortgage companies went out of business.

Businesses, Citizens, Municipalities and Wall Street Banks were going insolvent due to an inability by millions to service their debt.  Instead of restructuring the debt, The Fed took the debt off the Wall Street Banks books and left the burden on the American Economy.

Now, the Wall Street Banks are solvent and the American Economy is crashing at an accellerating rate due to very little credit being extended.   The FED knows relatively few Americans qualify for credit anymore and those that do have no use for it.

Wall Street sold this debt to our pensions, mutual funds, and nations around the world.  It was this selling, packaging, and insuring the debt that drove finanical profits in America accounting for over 40% of the earnings at peak.

Without stimulating the economy with excessive credit, business earnings are gone and will likely never return under the current Zombulation policies.  Without credit, sales are evaporating in practically every industry and not much prospect for recovery unless the government prints money that doesn't exist.

If the government prints, due to the excessive amount of debt, our money will eventually become practically worthless and few will be willing to work for worthless money.

Where Alstry sees things going in the short term:

In the very near term, 60 days or less, you will learn the following:

!.  The Stock Market Trading was manipulated by computers utilizing High Frequency Trading improper behavior was supported by the SEC.

2.  The revenues to Federal, State, and Local government will continue evaporating contracting our economy even further.

3.  Tens of thousands of police officers and firefighters will lose their jobs.

4.  Substantial budget cuts will materially impact the poor of America causing massive hardships and potentially a rise in crime rates.

5.  The only reason the economy is not in a severe Depression is because President Obama is spending hundreds of billions of extra dollars the nation does not have driving us deeper into debt.

6.  Any hopes for second half recovery will be dashed by millions of Americans losing their jobs and suffering massive wage cuts.

7.  Over 1 million Americans will lose access to unemployment benefits even though they have still not found a job by the end of the year.

8.  Commercial Real Estate defaults will skyrocket and distress in the commercial market will grow unprecedented levels.

9.  Residential delinquincies will shock even the most bearish of prognosticators and housing prices will continue to crash...regardless what the government reports.

10. It will be clear that America is on a path where 50% or more of its municipalities are on a path to declaring bankruptcy within 12 months.

The above assumes continuation of the Fed's current Zombulation policies.  My next blog will outline the solution.

11 Comments – Post Your Own

#1) On August 01, 2009 at 7:05 PM, PSU69 (90.58) wrote:

Alstry (close to astray)...your score has fallen from 7500 March 1 to 4440 ....a drop of 3000.  So your negative thinking is tanking? 

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#2) On August 01, 2009 at 7:09 PM, alstry (34.92) wrote:

The Institute of Alstrynomics forecasts the sharp decline in revenues to government will be the catalyst for what could be the sharpest slowdown of the American economy in history.

Never before has government been such a significant percentage of GDP.

Never before have revenues to government slowed like this....

Put the two together and we will likely see massive cuts to healthcare, welfare, public safety, and other services driving or economy into its deepest Depression in history.

It is not the end of the world, and there is an easy solution if the Fed wants to solve the Zombulation contagion it has created.

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#3) On August 01, 2009 at 7:21 PM, alstry (34.92) wrote:

In addition to the above, it is very possible that a war, pandemic or market collapse could happen and dislocate our economy as the disconnect between perception and reality gets wider.  I have no special insight into any of the above, but any would be a reasonable distraction so the sheeple never find out the true cause is the Zombulator.

Aug. 1 (Bloomberg) -- Russia accused Georgia of firing at South Ossetia and warned that its troops may fight back, as the countries prepare for the first anniversary of the war over the separatist region. Georgia denied the claims.

Georgia launched mortars and grenades at observation posts near Tskhinvali, South Ossetia’s capital, over the past four days, Russia’s Defense Ministry said on its Web site today.

“The August 2008 event developed along similar lines,” the ministry said. If civilians or troops are threatened, “the Russian Defense Ministry reserves the right to use all forces and means at its disposal.”

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#4) On August 01, 2009 at 7:31 PM, alstry (34.92) wrote:

PEOPLE ARE SIMPLY NOT PREPARED FOR HOW SEVERE THINGS WILL BE.........

California's biggest state worker union has given its leaders permission to call a strike, the union announced this afternoon.

Service Employees International Union Local 1000 said that 74 percent of the ballots cast by its members supported actions up to and including a strike, if necessary. The local wouldn't say how many members voted.

The local, which represents 95,000 state workers, has been upset with Republican Gov. Arnold Schwarzenegger for failing to rally his own party to ratify a new labor pact negotiated in February. The deal includes several protections and several concessions, including one unpaid day off per month. Schwarzenegger is furloughing most of the state workers under his authority three days per month.

"This is about our contract," SEIU President Yvonne Walker said in a press statement announcing the vote. "Whether it is through litigation, negotiations or any other actions that are necessary, we're in this for the long-haul to right this wrong to our members. We negotiated in good faith, we have offered cost-saving solutions, and we need our contract to be ratified."

http://www.sacbee.com/topstories/story/2075111.html

What the union fails to realize is that there is just no money...and in a few weeks they will learn there is even less.

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#5) On August 01, 2009 at 7:33 PM, PrestonCheek (31.99) wrote:

I wouldn't question his score because he can make both either way, this is just the way he has chosen to go.

I can tell you for sure that even though he speaks doom and gloom their is alot of truth to what he is saying, even now the government is propping up the auto industry with CFC, I don't say prepare, I just say listen and don't criticize.

At one time in my business we had a large forecast for next year, number of craftsmen needed, dollars to be spent, but that has changed. It's not that bad but it's not as good as it was.

It's to the point now that the cream of the crop will have a job, but thats normaly the case in any sector right. But, the ones that can only get a job when there is so much work that people are knocking on their door and begging them to go to work is going to be scarce next year.

 

 

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#6) On August 01, 2009 at 8:25 PM, alstry (34.92) wrote:

Preston,

What is so incredible is so few can see what is so obvious.

Government will have to shrink back to at least 2000 levels in order to bring it into line with the current GDP.  Cutting back to 2000 levels will contract GDP 25% right out of the gate applying a current $6.5 Trillion dollar Fed, State, and Local spend.

Just the fallout from a 25% contraction in GDP will have profound effects.

We are already down approaching 10% decline in GDP with rapidly rising government spending.  Imagine what happens to the private economy now that banks are not lending and government will be forced to cut spending.

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#7) On August 01, 2009 at 8:56 PM, alstry (34.92) wrote:

Just wait until Americans who losing jobs, incomes and are getting foreclosed learn their politicians are funding the following in exchange for very large campaign support...

Citigroup, Merrill Lynch and seven other American banks banks paid more than $32.6 billion in bonuses in 2008 while receiving $175 billion in taxpayer funds, according to New York Attorney General Andrew Cuomo.

New York Attorney General Andrew Cuomo's report on the bonus structures of the banking industry is out and — oh my— it's damning. The AG says that 3 banks, Goldman Sachs, Morgan Stanley, and JP. Morgan Chase, paid out bonuses that " were substantially greater than the banks' net income."

Seriously folks, how long do you think Americans will remain calm as bankers who infected our nation with more debt than it can possibly pay back get bailed out for their reckless behavior?

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#8) On August 01, 2009 at 9:03 PM, alstry (34.92) wrote:

THE HOUSING RECOVERY MYTH....

JD Power Finds 56% of Home Buyers are First-Timers

http://www.housingwire.com/2009/07/31/jd-power-finds-56-of-home-buyers-are-first-timers/

How hard do you think it is to sell houses for $50-$100K that used to sell for $250 to $400K?

Heck, even Alstry might go long the market if the DOW hits 2000.

At the move up and upper end, home prices are still crashing.

 

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#9) On August 01, 2009 at 9:17 PM, alstry (34.92) wrote:

And for any of you that are under the misguided impression that this is simply a recession:

The Detroit school board is nearly powerless as a state appointee oversees the $1.2-billion budget that is at least $259 million in deficit. Achievement is low in too many schools. And about 100 schools are now vacant scars in the neighborhoods as thousands of students drop out or opt out.

My friends, this is a catastrophe.  And unless we restructure debt and put an end to the current Zombulation policies, all of America will be like Detriot.  Most geographical areas in our nation boomed in recent years simply as a direct and indirect result of reckless credit creation.  It is now over, but the debt remains as much our nation is declining.

Remember, California's deficit was about 20% of its budget.  A depression is only a 10% decline in GDP.  In a few weeks, you will learn the number is much higher than 20%.

Just wait until ALL of the new budget revisions become public in the next few weeks...America has a lot of shrinking to do....

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#10) On August 03, 2009 at 6:48 PM, jubling (68.44) wrote:

Alstry,

  So what you're saying as soon as the FED started increasing interest rates people got in trouble in servicing their debt so that caused the collapsed. My question was did the FED need to increase the interest rate or was it out of their control. If the FED can increase the rate why not decrease it without causing the collapse. Who was gettting greedy here. Even if the american people were over leveraged as long as they can service their debt the economy will continue as is the case now. My point is there was no need for the FED to  game the system and let it blow up in their face. 

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#11) On August 03, 2009 at 7:20 PM, x1x2x3x4444 (36.93) wrote:

Jubling:

 I don't know about all this other stuff, but the Fed raised rates from near-zero in the early 2000s. I always thought Greenspan was a huckster and he proved to be just that in the end. Anyway, the point is yes, the Fed had to raise rates to some degree - but still the dollar collapsed versus other world currencies and the price of gold shot up 50 percent. This, thanks to the "conservative" government of GWB. Which is why I will never call myself a Republican - it has not been a party of fiscal conservatives for more than half a century. Republicans were all crazy to spend money we didn't have while GWB was president - not they claim to be against deficit spending.

 It's all a shell game. Among other problems are that the system is fixed and the people who brought us the current economic collapse still fill the country's board rooms and offices, and it seems very few will ever be held accountable for the ruin they have brought. Bernie Madoff, and his ilk, don't count.

 And this is why I have such a hard time investing in anything - I don't trust anyone.

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