Now that I have the illustrious honor of having my very own
stalker here on dKos, I am very pleased and proud, but I would like to reply seriously to the accusation that I am scaremongering - of course by bringing up more scary data...
Actually, hfiend has pointed me to this serious rebuttal of imminent peak oil by CERA, an energy consultancy I respect a lot. This is not the topic of this diary, but I promise I will do a later diary on this information, as it threatens a lot of my predictions...
Anyway, back to scaremongering, it'a lot more fun and it allows me to select the most interesting graphs. Today's selection all come from a fascinating (and VERY long) article on Financial Sense: IN DENIAL OF CRISIS: AN ECONOMY UNDERMINED BY FAILURES OF THE MONETARY SYSTEM, THE CONCENTRATED MEDIA, AND POLITICAL WILL, by David Jensen.
To start with, a hard fact: Bush's "recovery" is the worst ever:
That lackluster result, to say the least, has been obtained despite the most accomodating policy stance ever:
The creation and crash of the dot.com stock market bubble represented a complete failure of the Federal Reserve central bank - yet no accountability or consequences have stemmed from this failure either at the Fed, in the financial industry or in the media which all cheered on and justified the wildly inflated market as it grew. Unchastened, Greenspan went on in 2001to encourage the massive Bush administration tax cuts despite the fact that the Congressional Budget Office warned that capital gains and other taxes received by the Government would drop along with the declining stock market craze and corporate profits were projected to grow modestly until 2010.
Given the Fed's money (debt) creation combined with further government deficits, the U.S. economy is now more financially indebted than at any other time in history - exceeding even the debt vs. GDP levels of 1934 which were only attained after the U.S. economy GDP declined almost 50% during the great depression.
Item: According to the Fed, In 2004 U.S. debt (government, corporate and household combined) increased by $2.72 Trillion dollars (23% of GDP) yet this debt spending in the U.S. Economy can only produce economic growth this year of 3.4% of GDP. Thus $6.50 of debt increase is producing $1 of growth in the economy.
Item: The U.S. requires an injection of $2 Billion in foreign investment each day to sustain its economy absorbing more than 80% of the World's annual savings.
Meanwhile, some signs that stocks are still overvalued:
And the explanation for the apparent good profit numbers of US corporates;
After decades of monetary and debt injections to provide a fix for the economy, the U.S. economy now stands saturated and severely distorted by its credit excess. From a vitally productive and inventive society to one where financial speculation reigns supreme,
the US economy has been transformed to a financial betting parlor. Where, historically, manufacturing had accounted for 45% of business profits and financial services accounted for 15%, this relationship has been turned on its ear in the new economy with less than 15% of profits now generated by the manufacturing sector and 45% of profits generated by shuffling paper in the financial sector (stocks, bonds, derivatives, mortgage financing, etc.) . According to the U.S. Bureau of Labor Statistics,
the Financial Services Industry accounts for 6% of current U.S. employment giving a sense of outsize profits being generated by the Financial Services sector.
Go read the full article and see its detailed footnotes, including this December 2000 piece announcing the coming crisis, with this irresistible quote:
(...) modern Wall Street finance[:] Here the investment banker is king. The investment banker, as compared to the local loan officer, specifically seeks out ventures that burn cash. After all, negative cash flow businesses make the best clients, as they must continually return to the trough. At the same time, risky borrowers willingly pay high fees and interest rates, which in today's world can flow directly to the bottom line. The investment banker absolutely loves high-yielding securities, such as subprime auto loans, telecom equipment leases and credit card receivables - that can be structured and sold for large accounting gains. Higher yielding securities are also great fodder for their hedge fund clients, as well as their own derivative desks and proprietary trading operations. Nothing creates Wall Street profits like matching high-risk borrowers with leveraged speculators seeking high-yielding securities. The Wall Street firms nurture and profit from speculation - through IPOs, trading, derivatives and, importantly, lending to the speculators. The emphasis for Wall Street finance is aggressive growth in risky lending, creating and marketing high-yielding securities, security financing, and trading - and in all cases, the more the merrier.
The more, the merrier. That sounds about right. How long will it last?