The Mother of All CATCH 22s
Global trade flows collapsing (First Take)
Russia May Base Strategic Bombers in Cuba, Venezuela, Air Force Chief Says
The above are just two of the headlines from yesterday.
We know that February container traffic at both the St. Petersberg, RU port and the L.A. port was DOWN about 30%.
We also know that Federal personal income tax receipts in February were DOWN over 60%.
We know that new housing sales are DOWN by about 75% over the past few years.
Auto sales are DOWN by about 50% in just a couple years.
The above numbers are really amazing if you think about how short a period of time it took us to contract(and, quite frankly, about six to nine months longer than my original estimates).
How did Alstry know that the contraction would be so violent and so quick??? It was very easy, because it was clear to me that a significant percentage of our economy was simply based on DEBT....and the vast majority of that NON Federal Debt.
You know...toxic mortgages, credit card expansion, insane commercial real estate loans, municipal debt based on short term spikes in revenues, auto loans to everyone, and corporations borrowing against unsustainable revenue streams.....
As long as the banks kept lending, the debt balloon grew bigger and bigger and it became harder and harder to make monthly payments without borrowing more money.
What was amazing is that for most Americans, wages never rose during this period of illusory prosperity....unless of course you were in the debt industry. Rising health insurance and rising fuel costs only exacerbated the demand for debt in order to keep the system going for EVERYONE.
Once the debt became too burdensome....coincidently right after the FED raised interest rates 19 times......you knew this house of cards was about to collapse because if people, business, and municpalities budgeted at 5%, how the heck were they going to make ends meet at 8%???
To compound the problem, banks began to realize this as well and started cutting back lending to just about everyone....the driver of this process in the first place.
Imagine, loaning out trillions and trillions of dollars at very low rates....and once in place....raising the interest rates 19 times????....the mafia never had it so good... and then telling people if they can't pay you back....you will kick them out of their house?????....
We should have just bailed out Madoff and gave him a house on the Riveria just to remain consistent.....oh yeah...he already owns one.
Clearly there was abuse by the borrowers as well...many on both sides were culpuble. However, when everyone was in trouble....who did the 'We The People' government come to rescue???....you guessed it...those guys that issued all of this toxic debt and extracted hundreds of billions in bonuses in the process.
Now, look where we are....revenues are evaporating in just about every corner of the economy. Ad revenues to newspapers, TV stations, and media outlets like Motley Fool are slowing to a trickle. Airlines continue to cut out flights and hotels are suffering. Shopping centers are growing darker and darker everyday and auto dealers are behaving like the dinosaur.
A BIG issue right now is the evaporating tax revenues to government. A 60% decline in income tax recepits is not sustainable without game changing initiatives. Similar arguments can be made for declining sales and property tax receipts.
Here is the CATCH 22....we need to borrow to keep things going (commonly called printing money)....but few are capable or desire to lend us the necessary funds.......at least at an interest rate that makes any sense...
Obama Seeks to Reassure China U.S. Debt Safe, Deficits Are Under Control
Now that we Fools are finally beginning to understand the problem is too much debt.....maybe collectively we can put our minds together and craft a solution?????
I heard this quote from Mr. Celente and it has stuck with me...
"When people lose everything they have....they lose it."
We must stop this process soon before too many lose it.
Yes...Alstry has an answer....but its time for you guys to come up with a better one.