What Is 9.09?
September 07, 2009
– Comments (15)
9.09 is the time you will know or should know that pretty much our entire economy is simply a Ponzi Scheme based on borrowing and consumption. The facts are clear and now that the bankers are cutting off credit to the private economy, consumption is evaporating and the Ponzi Scheme is slowly being revealed.
It is not too difficult to understand......
70% of our GDP is consumer consumption/spending.
50% of our GDP is government consumption/spending.
20% of our GDP is health care consumption/spending.
Combined (as they overlap), the probably account for OVER 90% of our GDP. Consumption is our GDP.
However, in order to consume, you must produce.......and here rests the problem. For the past 20 years, our nation moved much of our productive capacity overseas and supposedly we became a "service" economy.
A "service" economy? Nonsense!!!! We became a consumption economy servicing each other. It worked for a while as our nation had a lot of savings...but when the savings ran out, we started to borrow......and the bankers were more than willing to help out as we had lots of assets as collateral.
As we started to borrow, we needed to borrow more simply to be able to consume and service the borrowing. Once we borrowed so much, the Wall Street bankers knew this was unsustainable, so they devised an instrument, called a credit default swap, where they could actually make money when loans defaulted.
Once the swaps were mainstreamed, bankers started loaning insane amounts of money to mortgages, home equity loans, credit cards and autos, municipalities, and private equity loans. At the peak between 2004 and 2007, it was TRILLIONS of dollars per year supercharging the economy. All of this consumption drove fantastic revenues, profits and tax receipts to government.
Our service economy was booming and it seemed like the party would never end as everyone was consuming.....until the bankers wanted to collect on their credit default swaps. Interest rates were raised 17X, credit terms were tightened, and bankruptcy laws were changed to make it harder to discharge debt.
Once the bankers started tightening credit, they knew the party would end. Because beyond consumption, we really did not have much of an economy in America. And if Americans could not consume, the economy would come to a grinding halt.
Sure enough, the loans started defaulting, the jobs were lost, and wages cut.....and as fewer and fewer could consume, fewer and fewer were able to service and the dominos started to fall across the nation.
So here we are in 9.09. The bankers are continuing to raise interest rates and tighten credit on consumers and business. Consumption is continuing to decline and so are tax receipts. As government is the biggest consumer in the economy, government cut backs will have the most profound and visible impact on the economy.....and government has just started to cut back.
Health Care, Defense, Technology, and Retail are all HIGHLY dependent on government being able to spend and consume. For now, despite declining tax receipts, government has been able to borrow to keep the show going. But it is getting clear that this borrowing will have to come to a end as servicing the debt is becoming unsustainable.
(as an aside, this was Alstry's biggest miscalculation.....I never dreamed that government would be able to operate at a $2 trillion dollar deficit WHILE tax receipts were evaporating and the population not get angry......finally, it appears the population is only starting to get angry....but on collateral issues for now)
In the past, other nations have tried to "print" their way out of their deficits and debts...but inevitably it lead to a total collapse of the economy. Since America is a consumer based net importing economy, a collapse of our dollar would lead to a collapse of our society as wages would never beable to keep up with basic needs such as fuel and few would be able to afford to consume anything.
Two very good articles have been written about this issue recently:
http://market-ticker.denninger.net/archives/1414-2009-Labor-Day-Ponderings.....html
http://www.bloomberg.com/apps/news?pid=20601087&sid=a.SW_71xPhjA
Look around you, most of the jobs in America simply support the consumption economy. Much of what we produce is simply to support AMERICA's consumption. Much of that consumption was based on Americans borrowing tremendous amounts of money.....and if they didn't borrow we would not have had much of an economy.
In a strange sort of perspective...it was the borrowers of America that really drove our economy and tax receipts to government....and just like the fattened turkey before thanksgiving, we nutured and encouraged that borrowing until it was time to cut heads off....the problem is we are all turkeys to bankers.
Bankers profits came as a result of lending...and to the bankers, the American borrowers is why they made so much money and our economy boomed. So instead of preserving the borrowers, they invented an instrument to profit from the borrowers destruction.....and in destroying to borrowers, they are destroying out economy for everyone while we bail them out?
Practically the entire asset base of America is built upon a foundation of debt....houses, commercial real estate, corporations....and that debt is the assets of our banks, insurance companies and pension funds. When banks infected the debt, they infected the asset base of America.
Without a doubt, the game is ending as government spending and consumption is declining rapidly due to evaporating tax receitps. We have seen tens of thousands of jobs cut in September alone and hundreds of thousands announced.
Until we restructure the debt, we cannot build a durable economy for ourselves and our children as the lies continue all around us......
The Stock Market has become irrelevent because much of the trading is simply computers trading the same shares back and forth to each others. Accounting has been ridiculed as one time charge offs are now a quarterly event. Reported PE is now over 100 and the only reason we have a PE at all is due to government borrowing and consuming massive amounts of health care, defense, and retail products.
Soon the party will come to an end as the bankers have cut us off......if we don't stop destroying our currency, the world will cut us off next. At that point, there will be not many options....but since we are the biggest and baddest on the street......expect to see our military build up in anticipation of that day.
Any Fool really think Obama is going to reduce our military? Without our military, we would have been been bankrupt years ago.
The solution....simple.....resturcture the debt. Put our economy on a sustainable foundation so we can build for the future. If we go the other way, you know what solution politicians have chosen......
On this Labor Day when many are stressed, let's hope politicians make the right decision....and if not, let's hope the fight remains conventional.
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