When is ENOUGH Fools????
We have now reached the point where very few are hiring in America. Practically every Hospital, Police Department, Fire Deparment, and Government Entity across America is contracting and laying off. This process known as Concentric Contraction not stop until most of America shuts down unless we restructure debt soon.
As you can see from the following chart:
Since 2000, at a level never seen in American history, lending drove spending........and spending drove revenues......revenues drove more borrowing.......which drove more spending......until interest rates were increased 17 times and credit was cut off. As a result, lending slowed and so did spending which in turn slowed revenues.
With slower spending and much lower revenues...businesses are shutting down as they can't meet monthly expenses. And now, due to evaporating tax receipts, so are hospitals and police departments and fire departments across the nation.
Mathematically, due to the MASSIVE amount of debt against contracting revenues due to little credit being extended, unless we restructure debt, servicing debt will consume practically all of the cash flow of the nation causing debt to sequentially default until most of our nation shuts down.
Now we are sitting on a debt load (FIFTY TRILLION) that simply can't be paid back with only a few trillion in savings and revenues evaporating.
What will really be devasting is that this massive amount of accumulated debt is the asset base of our banks, pension funds, insurance companies and mutual funds. As the debt defaults, so does the net worth of our entire nation constraining lending and spending even further.....
This process of debt defaulting, asset value implosion, and revenues evaporating is defined by Alstrynomics as Zombulation....simply an unsustainable debt burden causes debt to default which causes credit to be constrained and asset values destroyed lowering revenues further causing more debt to default creating an adverse feedback loop until practically everthing shuts down.
What few economists appreciated is how significantly credit extension impacted revenues and the growth of our economy post 9/11 that the chart demonstrates well....and more significant, the devasting impact of cutting off the credit and not replacing it with an alternative source of revenues.
For the past year and a half, I have been obnoxiously documenting Zombulation. We are now at the point where the process is accelerating where health care, government and public safety is being impacted. Contraction will really pick up speed going forward as revenues are starting to slow to a trickle where more and more debt can't be serviced and defaults are growing to record levels.
We saw record home foreclosures in Q3, increasing Commercial Real Estate Defaults, and rapidly growing bankruptcies. We are now entering the critical stage where practically no one is hiring, unemployment is skyrocketing, and the burdens on government are so high that our currency is on the verge of collapse due to an evaporating economy and massive deficits. If our currency collapses....few are prepared for the consquences.
Instead of raising interest rates on an economy where revenues are evaporating, we should have lowered interest rates on EXISTING debt so that more could service their obligations against a lower revenue stream. With less debt defaulting, asset prices would be supported and more would be able to spend.
This solution is not hard to apply...it is exactly what we did to the banks and what happened in Japan. By bailing out the banks and not the private sector....through Zombulation, we have virtually guaranteed the total destruction of our private sector, our economy and our currency.
Based on the current Zombulation policy, in coming weeks, you will see revenues contracting faster, deficits growing larger, more and more businesses shutting down, unemployment skyrocketing, our dollar crashing, oil prices rising, and distress reaching levels never seen in America before.
It is not hard, Zombulation is what happens when you load up a nation with trillions of dollars of debt based on rapid credit extension in a short period of time at low interest rates....and then abruptly raise interest rates and cut off credit without restructuring the debt or creating an alternative source of revenues. It becomes mathematically impossible to pay back the debt and the nation shuts down due to massive defaults.
You can try, but if you live in America, it will be practically impossible to avoid being Zombulated. Even if you have money, it will be very likely that the city, county, state, and nation you live in will be broke and need to tax you everything you have to keep society going.
.....remember, if a politician has to choose between your net worth and his salary, guess which one will be chosen....assuming that our currency is not worthless first?????