Reviews and Views

Economic Health – miscellaneous comments

Peter Schiff, Euro Pacific Capital, July 31, 2009

There are many commentaries telling us that the recession is over.  If we are seeing a recovery from the recession, then Schiff says, “we are actually sinking into a depression.”  It is not unusual to have periods of false growth following recessions.  During the last boom, “we borrowed and spent too much money, bought goods we couldn’t afford, built houses we couldn’t carry, and developed a service sector economy completely dependent on consumer credit and rising asset prices.  All the while, we allowed our industrial base to crumble and our infrastructure to decay.  Schiff says, “we simply traded short-term gain for long-term pain.”

(from an article, “Happy Days Aren’t Here Again” at http://financialsense.com/fsu/editorials/schiff/2009/0731.html)

Doug Casey, July 29, 2009 (www.CaseyResearch.com) – subject:  Mowing Down Green Shoots

Doug Casey always has interesting things to say.  Below are some recent comments.

• No real surprise that more banks are going to fail.  Will it put the FDIC into bankruptcy?  Casey says YES.
• Many pension funds are going to fail putting huge pressure on the Pension Benefit Guarantee Corporation.
• And there are a lot of other financial catastrophes still on the runway.
• The financial disaster is now a catastrophe!  There will be no way out of this mess without “major structural changes”.
• The whole world is awash in debt.
• Businesses (and other organizations) that are catering to old patterns of consumption are going to find they have no earnings (income) to service their debt with and their assets are unsalable at acceptable prices.
• All the world governments are going to destroy the world’s monetary system at the same time.  No one knows exactly how (or when) it will occur, but “it’s going to be really ugly.”  And all the while, everybody is looking to the governments to solve these problems which they (the governments) have caused.  They employ people who are not the brightest or the best, but the poorest and the worst part of humanity.
• Boobus Americanus is a complacent, lazy & stupid US citizen who votes for politicians based upon information proffered by government shills in the mainstream media, or for other vacuous reasons.  This dolt not only doesn’t understand the concept of “limited government”, but has never read The Constitution nor The Bill of Rights. He also believes his vote counts and that politicians are honest. (this definition comes from the Urban Dictionary.com)
• A Greater Depression has been coming for sometime because actions have consequences.  For years, the whole world has overconsumed and lived above their means, but now the party is over and it is over for a long time to come.
• You are going to see a lot more corporate bankruptcies and lots more unemployment.  There are going to be a lot more of unemployed personal trainers, carpenters, financial planners, mortgage brokers, department store (retail) clerks, and car salesmen.
• Unfortunately, too many businesses and organizations are still catering to old patterns of behavior in production and consumption and following last year’s plans and goals.  Everything is about to change.  Casey believes that the world is going to change more radically in the next 10 years than it did from 1929 to 1945.
• Don’t clutter your mind with what official sources say, but make your own observations and interpretations of what others put together.
• A major part of the cure for all of these problems is savings by Americans.  Savings is the only solution to the coming depression; where savings is defined as production over consumption.  If you make $100, but spend $75 and set the difference of $25 aside; then you have a savings of $25.
• Interest rates are going way up.  Why?  There will be tremendous demand for capital, of which there’s a limited supply.  Interest rates are the price of capital.  So they’re going up for that reason and because inflation is going to skyrocket.  High inflation will itself guarantee high interest rates.

August 1, 2009 - Posted by Bill Wyler | Economy