How much worse is it going to get?

hiker472 · #1 (**permalink**) 03-04-2009, 12:31 AM

I've been following economic trends and conditions in recent months and do not believe that we are going to bounce back out of this "recession" we are currently in, IMHO.

Today (Tuesday), I caught some more interesting things going on and I thought I'd share it with you.

Clicking on the "Tue" link on Prophecy In The News will bring up a very interesting report.

I also found it interesting that "they" are finally going to discuss setting up the New World Order, to "save" the global economic instability.

What fascinating times we live in, eh?

POPS · #2 (**permalink**) 03-04-2009, 01:14 AM

I think ALOT worse! Our Canadian Buck is tankin! The bank of CA. just dropped prime to 0.5 and jobs are disappearing faster than a blink of a eye...Me thinks get ready for the storm...POPS

deacon · #3 (**permalink**) 03-04-2009, 07:22 AM

I have no idea what the devil is going on, but I do think that we are doing the wrong thing spending so much money. This money without any production to back up the paper (low gdp) is going to make inflation a huge huge factor soon. I am retired an it should be the real worry for us old folks.

Also the new carbon cap (hidden tax) is going to jack the price of natural gas and electric power up. Us old folks might be able to eat cat food, but we do have to stay at least a little warm. We are also the ones with the least energy efficient homes. By the way the carbon cap doesn't really hurt the producers. In the short term they will just pass it along to us of course. They will add a little on for the effort and those of us who still heat with gas, oil or electricity (Most all of us) will foot the bill. This is no less than war on the retired people of this country. A kind of subtle genocide I tell you.... Okay I don't really believe the genocide thing, but trust me it is going to be part of the re balancing for the worldwide standardization of living that is coming.

If I wanted to live in a third world country, I would have stayed somewhere in southeast Asia in 1967. I love this country and hate that it is on the road that it is on. Well those are my fears anyway... Now all the super liberals can jump on that.

**Bikeguy Joe** · #4 (**permalink**) 03-04-2009, 01:05 PM

I think it's going to get interesting, I'll leave it at that.

End of times? One could say "I hope so".

You may quote me on that...

HoughMade · #5 (**permalink**) 03-04-2009, 01:43 PM

Hold on tight....

Contractions in the economy must be allowed to occur over time. Since World War II, every administration has believed that it could manipulate the economy to prevent contraction. This idea was based on writings of economist John Maynard Keynes, though what has happened for 60 years is not strictly his plan. His writings were more philosophical and he rejected the idea of precise control of the economy. He was right about that, but for 60 years, the economic policy of the U.S. (and most other 1st world countries) was to use the “tools” he described to prevent any downturns- huge mistake.

What is going on now is that no smaller, realistic contraction in the economy was allowed to occur and in trying to prevent contraction, assets were overvalued (inflated value). Financial institution, large to small, and business, large to smal, and individuals ordered their economic lives on over inflated values (real estate is the easy example, but it went beyond that).

There is simply not enough money in the world- real value, at least- to allow continual boosting of the economy by genuinely valuable assets. Rather, if continual boosting takes place, credit is the only means to have it take place. Eventually, there will be so much credit extended that there is no more borrowing to be had and no more capacity to pay back what has been borrowed. Because the government, business and individuals budget (more accurately- borrow money) assuming a constant rate of growth which is artificially boosted by central control, and this saturation point is somewhat difficult to predict, when there is no more capacity and the rate of growth slows down (there may still be growth), it all falls apart. Currently, aggregate household debt roughly equals the Gross National Product. The last time that happened was 1929- no joke, no hyperbole.

Unfortunately, no matter the plan for recovery, they all suffer from the same error of being based purely on Keynesian economic theory which, at best, is effective only in the short term. This is not surprising as what passes for an education in macroeconomics in the last...who knows how many years involves assuming the efficacy of the Keynesian model (it’s all I was taught in macroecon). The Keynesian model states that in a situation such as we have now- deflation (or, at least inadequate inflation), rising unemployment and economic stagnation, the issue can be dealt with by several means including, but no limited to:

- lowering interest rates
- tax cuts
- government spending
- transfer payments - one type of government spending, payments directly to the populace in the form of one type of welfare program or another

All of these means have similar effects on the economy in that they get more money into the economy. However, each of the "fabulous four" is of varying utility as an economic booster because there is more of a "multiplier" effect with some categories. That is, the money is used several times before returning to the government with some of the "money injection" means and used less times with others. The first two categories generally have a higher multiplier, the last two a lower one. Some have said transfer payments have no multiplier, but I do not buy that. They have to- but I digress.

The fallacy is that while these means of "injecting capital" seem to work in the short term, they create individual, corporate and governmental dependency on further injections of capital by one means or another. This would have a better chance of working if any administration...any...would be willing to allow minimal to moderate contraction of the economy on its watch from time to time. Politically speaking, allowing a "correction", no matter how slight, is not acceptable. Therefore, it will not be allowed to happen by any administration. Willingly, at least.

Imagine this- interest rates are lowered. Banks make it easy to borrow money to buy a house. People buy houses that they cannot afford, but maybe even ones they could afford at the time. There is an increased demand for houses. Builders rush out to build houses...and borrow money to meet that demand. However, they do not borrow enough for today, they borrow enough for what they predict the increased demand will be next year and the year after. They also need trucks. They borrow to buy trucks. GM, seeing the increased demand for trucks, needs more manufacturing capacity to meet the demand. However, they do not increase the capacity to meet today’s demand, the increase capacity to meet the predicted demand (using the present rate of growth) for years to come. GM never built a facility for cash- they borrow money to build a plant. All GM’s suppliers must expand as well- for the predicted growth years from now- and they all borrow money to expand. As long as the rate of growth is ever expanding, everyone is happy. However, nothing is forever. All it takes is for one link in that money chain to turn south... and it did, as it always does. Everything from an increase in the default rate to fuel prices to saturation of the housing market to...make a list, started to happen.

When the predicted growth did not take place, because so many had already taken out credit based upon that growth, what could have been a mere reduction in growth became a true and severe contraction because the multiplier effect was reversed. Just like a single dollar can be used at several levels in the economy to boost, a single dollar not paid on a debt effected several levels negatively because every level was leveraged and dependent on that dollar be repaid....which now is not happening.

In the end, if smaller corrections had been allowed to occur, there would have been less of a chance of one catastrophic correction. A "stimulus" package, no matter the size and no matter how it is spent may affect the timing of the economic contraction, but it will not prevent it. It will, in my opinion, cause a bigger contraction when it finally happens...a depression rather than a recession. Is a depression inevitable at this point? I don’t know. All I know is that if the Keynesian model is used to try to pull us out too quickly, a depression will occur.

And Joe, I don't disagree with your last statement at all...and you can quote me on that.

deacon · #6 (**permalink**) 03-04-2009, 03:18 PM

I'm a long way from an economist of any kind for sure. The few economics classes I did take in college made a couple of points.

When you try to spend your way out of recession, you are throwing more dollars at a shrinking supply of goods. The idea is to increase the demand for goods there by boosting jobs and growth all the way down the line. Now it sounds real good till you toss in the second model.

INFLATION too many dollars chasing those too few goods. So I was taught that while we wait for production to catch up with the demand created by the free floating money, prices go up and up. That is good for some but very very hard on those who lack the capacity to keep up with inflation above a small amount. Toss into that the inflation that will be created by the carbon penalty however it is finally worded and you might easily have a lot of senior citizen and very poor people missing some meals ect.

I could be wrong and for my own sake I hope I am. It just looks like the models from my old college days in the 70s. which also predicted the world economy and the downward pressure on our standard of living.

Is any of that going to come to pass, I hope not. The statements from the white house seem to be preparing us for something like it.

HoughMade · #7 (**permalink**) 03-04-2009, 06:08 PM

There has to be downward pressure on the standard of living. It was overly inflated based on unhealthy debt levels. Standard of living (however that is measured) will stabilize (eventually) at a rate that reflects what would have been reasonable growth from the level about 30 years ago if debt levels are not increased any more....which the current "plan" counts on.

deacon · #8 (**permalink**) 03-04-2009, 07:20 PM

I expect in the world wide interconnected economy there will be a leveling out of living standards between countries. It will be hard for us to maintain this standard of living with those who make what we use have such a lower one. It is already effecting us in the worldwide demand for energy. I expect that to happen in other resources as well.

I would love to think my grand kids could afford housing with two rooms per family member when the family is young and four per family member when the kids are gone, but I somehow don't think that is a viable model for the future. At least not for the average family. Maybe for politicians but not the bank teller even with both parents working.

There was one excellent point made: Politicians, all of them, will do anything to prop up their own self interest. We can't have even a mild recession the economy has to be in constant upward motion. That is a ridiculous concept. But nobody wants to be the one to have even a mild recession on his political record. Politicians buy votes and we the people encourage it. Look at the special interest projects attached to ANY budget.

I wish I was a little smarter I might have answers instead of all these concerns. Anyway how much longer will it go on... Probably forever in one form or another. I just can't grow enough food to feed my family on the few square yards of my yard that is vacant. Not to mention raise the cattle, for meat and shoes, and the sheep for the wool sweater I need, and I doubt there is a pocket of pure gasoline under the house so I'm screwed.

lennyharp · #9 (**permalink**) 03-04-2009, 10:24 PM

I think that a lot of the complexity is greedy men trying to be able to pull a fast one and get over on others. My immediate response to being pushed to immediate action on something big, like the bailout, is that I am being hurried so I will not perceive some detail that might make me resistant to what is being pushed on me. A salesman might lose a sale to me at this point. The trick has been done way too many times and too many innocent people hurt. When you follow the principles of the issues it becomes easier to follow.

The US Constitution (20 powers granted to Congress, 6 powers to the President and 11 powers granted to Supreme Court, with all others reverting back to the States and Individuals from whence they came) was revealed by God to the best minds of the day who had all studied similar books starting with the Bible. Jefferson said that the American formula was more of a restoration of " the ancient principles" than some entirely new system. The Constitution will never become outdated because it is a protection from mans inherint weaknesses. James Madison stated, "As there is a degree of depravity in mankind which requires a certain degree of circumspection and distrust, so there are are other qualities in human nature which justify a certain portion of esteem and confidence." from "The Making of America", "The Founders' goal was to revive the ancient principles which would allow the sunshine side of human nature to enjoy virtually unlimited freedom, while setting up appropriate safeguards to prevent the doleful shadow of human passion, greed and lust for power from spreading a permanent "dark ages" across the face of the globe.

As Clinton Rossiter writing about the Fedralist Papers said, there is "no happiness without liberty, no liberty without self-government, no self-government without constitutionalism, no constitutionalism without morality--and none of these great goods without stability and order." We are in a place where the administration is taking advantage of instability made by inept or on purpose, by past administrations. The advantage taken will give such instability that allows a dependent society who cares not for liberty will beg the government to care for every percieved need. Thus we will fall into Communism and totaliaitarianism for lack of understanding the Constitution, the Bible and other gifts from God that could empower a righteous people to freedom and accomplishments like we saw in the first 2 centuries of America's existence as a Representative Republic.

James Madison said, "In questions of power, then, let no more be said of confidence in man, but bind him down from mischief by the chains of the Constitution. America is now in a time of great distress, an emergency avoidable but for ignoring the warnings sent to us. Prophets have warned us about staying close to the God who gave us a home and government to be cherished, they have been ignored. Founding Fathers warned about how to keep a Representative Republic that was the best system God could give to men. It was given to protect men against man's weaknesses, and it has been changed illegally, ignoring the laws of Nature and of the Constitution.

lennyharp · #10 (**permalink**) 03-04-2009, 10:30 PM

The Founders'
Unchanging Principles of Liberty

NOTE: The following is from the July 2004 newsletter of the National Center for Constitutional Studies, National Center for Constitutional Studies - NCCS, an excellent website that I highly commend for your review. I worked for Earl Taylor Jr for 7 years at Heritage Academy, and he teaches these principles in a "Making of America" seminar almost weekly all over the USA.

As we celebrate the Declaration of Independence in July and the Constitution in September, let us once again reflect on the marvelous principles underlying these two documents. The following is a review of these principles together with a comment or a quote by the Founders. The Five Thousand Year Leap devotes 1 chapter to each of these 28 principles.

Principle 1 - The only reliable basis for sound government and just human relations is Natural Law.

Natural law is God's law. There are certain laws which govern the entire universe, and just as Thomas Jefferson said in the Declaration of Independence, there are laws which govern in the affairs of men which are "the laws of nature and of nature's God."

Principle 2 - A free people cannot survive under a republican constitution unless they remain virtuous and morally strong.

“Only a virtuous people are capable of freedom. As nations become corrupt and vicious, they have more need of masters." - Benjamin Franklin

Principle 3 - The most promising method of securing a virtuous people is to elect virtuous leaders.

"Neither the wisest constitution nor the wisest laws will secure the liberty and happiness of a people whose manners are universally corrupt. He therefore is the truest friend to the liberty of his country who tries most to promote its virtue, and who ... will not suffer a man to be chosen into any office of power and trust who is not a wise and virtuous man." - Samuel Adams

Principle 4 - Without religion the government of a free people cannot be maintained.

"Of all the dispositions and habits which lead to political prosperity, religion and morality are indispensable supports.... And let us with caution indulge the supposition that morality can be maintained without religion." – George Washington

Principle 5 - All things were created by God, therefore upon him all mankind are equally dependent, and to him they are equally responsible .

The American Founding Fathers considered the existence of the Creator as the most fundamental premise underlying all self-evident truth. They felt a person who boasted he or she was an atheist had just simply failed to apply his or her divine capacity for reason and observation.

Principle 6 - All mankind were created equal.

The Founders knew that in these three ways, all mankind are theoretically treated as:

1. Equal before God.
2. Equal before the law.
3. Equal in their rights.

Principle 7 - The proper role of government is to protect equal rights, not provide equal things.

The Founders recognized that the people cannot delegate to their government any power except that which they have the lawful right to exercise themselves.

Principle 8 - Mankind are endowed by God with certain unalienable rights.

"Those rights, then, which God and nature have established, and are therefore called natural rights, such as are life and liberty, need not the aid of human laws to be more effectually invested in every man than they are; neither do they receive any additional strength when declared by the municipal [or state] laws to be inviolable. On the contrary, no human legislation has power to abridge or destroy them, unless the owner [of the right] shall himself commit some act that amounts to a forfeiture." – William Blackstone

Principle 9 - To protect human rights, God has revealed a code of divine law.

"The doctrines thus delivered we call the revealed or divine law, and they are to be found only in the Holy Scriptures. These precepts, when revealed, are found by comparison to be really a part of the original law of nature, as they tend in all their consequences to man's felicity." – William Blackstone

Principle 10 - The God-given right to govern is vested in the sovereign authority of the whole people.

"The fabric of American empire ought to rest on the solid basis of the consent of the people. The streams of national power ought to flow immediately from that pure, original fountain of all legislative authority." - Alexander Hamilton

Principle 11 - The majority of the people may alter or abolish a government which has become tyrannical.

"Prudence, indeed, will dictate that governments long established should not be changed for light and transient causes ... but when a long train of abuses and usurpations ... evinces a design to reduce them under absolute despotism, it is their right, it is their duty, to throw off such government, and to provide new guards for their future security." - Thomas Jefferson in the Declaration of Independence

Principle 12 - The United States of America shall be a republic.

"I pledge allegiance to the flag of the United States of America
And to the republic for which it stands...."

Principle 13 – A Constitution should protect the people from the frailties of their rulers.

"If angels were to govern men, neither external nor internal controls on government would be necessary.... [But lacking these] you must first enable the government to control the governed; and in the next place oblige it to control itself." – James Madison

Principle 14 - Life and liberty are secure only so long as the rights of property are secure .

John Locke reasoned that God gave the earth and everything in it to the whole human family as a gift. Therefore the land, the sea, the acorns in the forest, the deer feeding in the meadow belong to everyone "in common." However, the moment someone takes the trouble to change something from its original state of nature, that person has added his ingenuity or labor to make that change. Herein lies the secret to the origin of "property rights."