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alstry (36.00)

What Is 9.09?

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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.

 

15 Comments – Post Your Own

#1) On September 07, 2009 at 10:38 AM, alstry (36.00) wrote:

GOVERNMENT WORKERS  LINING UP AT  FOOD BANKS!!!

California state workers swallow pride at food banks

Jasmine Bess has held down a good job at the Department of Motor Vehicles for the past seven years. She isn't used to asking for charity.

Three unpaid furlough days each month, erasing 14 percent of her income, have hit her budget so hard that by the end of August, she couldn't afford to feed her 9-year-old daughter....

http://www.sacbee.com/topstories/story/2164703.html

How hard was this to foresee?.....state saving money in wages only to have to pay it out at the food banks.

You don't need to lose your job to go broke......simply have your income drop below your fixed monthly expenses and savings run out. 

When tens of millions of American families were encouraged by bankers, politicians and the media to take their life savings and buy the biggest house they could afford at the best interest in history......few could have imagined what would happen when the bankers cut off credit and laughed while betting the loans would default.

Alstry could and did and did his best to warn you to prepare:

Homes would collapse in value, propety taxes increase, health insurance go up, bankruptcies explode, and wages implode......in simple terms, Zombulation to the many  which will result in Zombuation Nation.

Now the decline out is about to enter the parabolic stage as it impacts the biggest consumer of all....government.

By the time this unwinds, over 50% of the population will be unemployed.....40% of the working age Californians are already jobless curtesy of our buddy dickseacup:

A report released Sunday says two of five working-age Californians do not have a job, underscoring the challenges in one of the toughest job markets in decades. A new study has found that the last time employment levels among this group were this low was February 1977.

http://caps.fool.com/Blogs/ViewPost.aspx?bpid=255193&t=01000218353128929071

You can question Alstrynomics all you want....in the end, reality always prevails......because the bankers own you, and now they are collecting as you bail them out.

How much do you enjoy being bent over the kitchen table?

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#2) On September 07, 2009 at 10:45 AM, oshiri (< 20) wrote:

Alstry predicts, "...if we don't stop destroying our currency, the world will cut us off next."

     Well . . . 

Cheng Siwei, former vice-chairman of the Standing Committee and now head of China's green energy drive, said Beijing was dismayed by the Fed's recourse to "credit easing". "The US spends tomorrow's money today," he said. "We Chinese spend today's money tomorrow. That's why we have this financial crisis."

"If they (the Fed) keep printing money to buy bonds it will lead to inflation, and after a year or two the dollar will fall hard. Most of our foreign reserves are in US bonds and this is very difficult to change, so we will diversify incremental reserves into euros, yen, and other currencies," he said.

From: China alarmed by US money printing by Ambrose Evans-Pritchard http://www.telegraph.co.uk/finance/economics/6146957/China-alarmed-by-US-money-printing.html

     Outside of Al's 9.09, I really don't see the American people grasping our nation's reality.

     As an aside, looking out to next year's tax season (aka April 15th), how much more money will need to be printed to service the Federal refunds of those out of work, or those who've taken pay cuts? Reduced salaries (or no salary) = more income tax refunds.

     And remember those California IOUs to citizens due an income tax refund in 2009?

     State and local government tax receipts are already getting sqeezed. Come tax season, what will happen when those that expect a State income tax refund don't get one?

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#3) On September 07, 2009 at 11:03 AM, alstry (36.00) wrote:

oshi,

Looks like the Feds want to start giving IOUs for tax refunds:

To make it easier for those owed tax refunds to save, the IRS will allow tax filers in 2010 to recoup their refund by issuing U.S. savings bonds.

http://money.cnn.com/2009/09/05/news/economy/Obama_retiremetn/index.htm?section=money_latest

You gotta luv the spin as the TAXPAYER BAILED OUT bankers suck the money out of the system....and now they are starting to squeeze Obama.

Let's hope they don't squeeze him into war.  Either way, their bread is buttered as the citizens starve.

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#4) On September 07, 2009 at 11:18 AM, afamiii (< 20) wrote:

Whilst US spending is unsustainable and much higer than current income, it is unlikely to go broke within the next ten years.

The rest of the world still 'needs' the US as much as the US needs the rest of the world.

i) The US despite its problems remains the most productive economy in the world and a major consumer to China and Japan (who are lending the money for the US to continue consuming). Despite Chinese statements, they are only trying to get the US to moderate somewhat (like saying to your wife 'do your really need to spend all that money on that coat darling' - knowing that you still have to keep her positive mood for any night time activities) If the US should cut spending in any meaningful way China will be dragged back into the Mao decades and would possibly split. Piling up more worthless dollars is a better strategy than cutting your income by half and then trying to live off the your worthless existing worthless dollars.

ii) The US despite being over extended on two fronts (Iraq and Afghan) with military obligations in places that the President hasnt even heard of, remains the most formidable force for fighting a conventional war (plus it has nuclear weapons). It remains the lynch pin of the current global security system (i.e. without it there will be a mad dash to redraw borders in every continent of the world. If the US were to go broke it would have to cut its global military obligations significantly, for that reason alone its partners will offer much support for a phased end to the American era.

On another note going broke would be the best thing to happen to the US. It would force government to retreat from the arena and allow for the freeing up of resources back to the private sector. The American system remains the most flexible and innovation producing systems of all the developed (and probably developing) economies in the world. Like Apple or IBM rising back out of its ashes. www.smartinvestorafrica.com

 

 

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#5) On September 07, 2009 at 11:29 AM, alstry (36.00) wrote:

THE REST OF THE WORLD NO LONER NEEDS AMERICA!!!!

Now that we are running $2 Trillion dollar defiicits and destroyed the integrity of our currency and economy by permitting our banks and publicly traded companies to mark their assets to fantasy even though there is a market dictating otherwise...

The character of our currency of rapidly deteriorating to essentially worthless not much more than the paper it is printed on....

Once that happens, there will be no reason for anyone to exchange anything for dollars.....they could just as easily print their own currency and sell to their own citizens....

We are not too far away from this point unless we restructure and restore confidence back into the dollar.

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#6) On September 07, 2009 at 12:02 PM, oshiri (< 20) wrote:

Hey Afamiii . . . just a few comments . . .

     Because of our financial problems, China is looking internally to grow their domestic market. The Chinese economic stimulus program was directed almost entirely inward, not toward U.S. Dollar producing exports. There are four-times the number of consumers in China than in the U.S., and the shift is indeed underway to service them. Keep in mind that China's exports have plunged significantly, while their GDP is still growing at 7-9%. The domestic shift is happening (I saw it myself last month, from Beijing to Shenzhen).

      As a rule, what Chinese Communist party/government official are allowed to say, and what Mainland China media are allowed to report, are things that have already been ordained by the central government. When a party official says, ". . . we will diversify incremental reserves into euros, yen, and other currencies," it's already being done. In America, any politician can throw out any suggetion as to what might be done -- not in China however.

      Yes, the American military is the best in the world. So what we "Hope" is that events will not be manipulated into a war for "Change." The best military in the world can unfortunately be used as a large-scale distraction in these time of financial upheaval.

     I too would like to see a roll-back of the Government's role. However, there is a real possibility (better than 50-50 I think) that the Federal Government will increase its hold on us, its tax paying citizens. If that happens, you can forget about being the most flexible and innovative county in the world. When Government takes an ever increasing, confiscatory share, who will take the risk of creating new, flexible and innovative companies?

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#7) On September 07, 2009 at 1:26 PM, russiangambit (29.34) wrote:

> 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.

Good point. 

US is too big to be a service economy. Economy needs to small and have an air of exclusivity about its services-  let's say Monaco's casinos or Luxemburg's banks to be able to have high-mark up services.

US has some of it, financials and business - but those are badly damaged now and are not enough to support an entire economy the size of the US. As for cleaning, dining , landscaping services those are  very cheap, this is not something you'd want your economy to be built on.

US needs to become an innovative economy again if it wants to preserve its standard of living. However, with the education in the state it is in, I see very little chance of that.  Promoting high-skilled immigration could help there , but the unemployement is too high to be a viable option.

Actually, may be high unemployement will spur some innovation growth as unemployed people try out-of-the-box avenues in order to gain an income. Necessity is a mother of invention.

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#8) On September 07, 2009 at 1:30 PM, russiangambit (29.34) wrote:

And by the way, Bloomberg reported today that even UN is now talking about a global reserve currency. I wonder who suggested this idea to the UN. Of course, UN only barks and has no bite, but it would've been unthinkable 2 years ago to hear something like this from the UN.

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#9) On September 07, 2009 at 2:28 PM, alstry (36.00) wrote:

DEPRESSION GUARANTEED...AP adopting Alstrynomics

CHICAGO – A year after "shop 'til you drop" stopped, the nation fixates on this question: Will consumer spending ever return to pre-recession levels?

Increasingly, the answer appears to be no. Belt-tightening in bad times is normal. And after every other recession since World War II, penny-pinching quickly fell out of fashion and Americans resumed their demand for houses, cars and everything else.

This time it's different. Like the Great Depression in the 1930s, the Great Recession seems destined to turn many Americans into lasting coupon-cutters, scrimpers and savers. Consumers dug a debt hole over the past decade from which there's no easy climb out. The population segment that drives spending the most — baby boomers — faces special pressure: Boomers are running out of time.

A study by research firm AlixPartners concluded that once a new normal sets in after this recession ends, Americans will spend at about 86 percent of their pre-downturn level.

In an economy driven by consumption, the implications are far-reaching if that forecast proves correct:

• For every kitchen not remodeled, there will be lost sales of appliances and supplies, and fewer jobs for designers and contractors. As homeowners do work around the house themselves, there will be less work for gardeners, plumbers and handymen.

• For every shopper who trades down from luxury stores to discount stores, it will mean less profit for retailers and manufacturers. Retailers will continue to offer few product choices and leaner inventories, and they'll reassess store locations and advertising.

• If sales of cars and trucks average closer to the recession level of 10 million a year than the 16 million in boom times, more suppliers will fail and further consolidation among automakers could occur. Taxes not paid on lost vehicle sales will continue to stress budgets of state and local governments.

Frugality may be good for family budgets, but it's bad for the national economy.

http://news.yahoo.com/s/ap/20090907/ap_on_bi_ge/us_meltdown_new_frugality

As Benny Bin Laden and his Bailed Out Banker Buddies keep sucking the money out of the economy.....spending will shrink, incomes evaporate, jobs  lost, tax receipts lowered and debt default as the bankers RAISE interest rates and tighten credit.

It was never hard to see....just hard to watch so many Fools bend over and say please and Benny B and his buddies laughed while standing behind.

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#10) On September 07, 2009 at 3:17 PM, starbucks4ever (94.23) wrote:

russian,

 I cannot agree with you about that "poor education" thing. I feel the American education is more than adequate for the task. The only problem with it is that it's ridiculously overpriced. Of course I can see your meaning - that it doesn't work for 99% of the students. But the simple truth is, the lowest 99% just don't matter. 

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#11) On September 07, 2009 at 3:36 PM, alexpaz (29.01) wrote:

http://www.bloomberg.com/apps/news?pid=20601103&sid=aSp9VoPeHquI

 

Here's the link to support russiangambit

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#12) On September 07, 2009 at 7:33 PM, russiangambit (29.34) wrote:

>  I cannot agree with you about that "poor education" thing. I feel the American education is more than adequate for the task.

College education is fine, though I think they waste to much time on things they don't really need to know to earn a degree, like art classes with major in economics.

K-12 education , though, is really very average , and it could be excellent given the resources spent on it. They spend money on wrong things, - buildings and sport centers and stadiums and coaches and technology instead of smaller calsses and better teachers.

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#13) On September 07, 2009 at 7:43 PM, mliu01 (< 20) wrote:

NO worry, the super rich will doing the spending part for all of us. We just need to the working part.

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#14) On September 07, 2009 at 8:56 PM, ocsurf (< 20) wrote:

"College education is fine, though I think they waste to much time on things they don't really need to know to earn a degree, like art classes with major in economics."

What backwoods college did you go to? I've worked at one of the largest universities in this country for several years and this statement is completely false. Students have the choice as to what classes they take each semester. I can GUARANTEE you that no self-respecting university requires art classes towards an economics degree.  

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#15) On September 07, 2009 at 9:24 PM, starbucks4ever (94.23) wrote:

"I can GUARANTEE you that no self-respecting university requires art classes towards an economics degree.  '

Unfortunately, it's not true. Look at the core courses requirements, and you'll always find Literature 101 along with some History or Creative Writing. Wait a minute, I must take it back. Creative writing should actually be a part of the curriculum because this is what economists do anyway :) 

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