Sunday, October 29, 2006

US Recession Coming Very Soon

As the housing market continues to decline and the consumer spending falls it will have serious ramifications for the overall US economy. These two factors combined with other factors will almost certainly to cause a recession in the US starting in late 2006 or early 2007.

The preliminary 3Q 2006 US GDP growth was a lousy 1.6% compared to a 2.6% for the 2Q. That is a very strong drop in the growth of the GDP. Nouriel Roubini, an economist with Roubini Global Economics, writes

The first leading indicators of economic activity for October -– the Philly, Richmond and Chicago Fed reports -– are all consistent with a further economic slowdown in Q4 relative to Q3. I thus keep my forecast that Q4 growth will be between 0% and 1% and that the economy will enter into an outright recession by Q1 of 2007 or, at the latest, Q2.
Here are other factors that will contribute to the upcoming recession:
  • Federal Debt & Deficit
  • Continuing Housing Bust
  • High Consumer Debt
  • Large Trade Deficit
  • Continued Offshoring
  • Security Costs
Billionaire speculator George Soros said he did not expect the United States to fall into recession in 2006 - but he does the following year.

For the past 4 years the US economic 'recovery' has been too dependent on a mountain of debt. It was simply unsustainablele. The housing boom of last year is now a bust. The convergence of the housing bust with other significant economic factors will almost certainly put the US into a recession by late 2006 or early 2007.


  1. It would be interesting to look into how globalization fits into all this. Predictions are based on models ... and the models we have today are based on the assumption of the existence of national economies. National economies are evaporating faster than the notion of the nation-state. Put another way, people's wealth and earnings are less and less tied to the particular geography in which they happen to be located. In the new global economy, a person's wealth can be from anywhere in the world ... just like his stream of income can come from anywhere. That being the case, why would person A located in Washington DC be anymore --- or any less --- affected by the fortunes of so-called "US" companies that person B located in Beiging?

    My thoughts on the matter are that lots of people are misinterpreting the signs of shifting wealth on a global scale with what would have been a depression if economies were still at the national level. It's simply a matter of misreading the tea leaves because one hasn't realized that they should be reading the leaves in the entire pot ... and not just those that happened to land in the cup.

    Sorry, no, there's no depression on its way. On the contrary, we're on the verge of a world economy with an efficiency and scale of economics well beyond the dreams of anyone until just recently. It's what is being referred to as the Pan-Global economy. And rising real estate prices are but one sign of its emergence.

  2. Very funny, Lance. I really hope your post is satiric in nature, for I find it hard to believe that one can be this naive...

  3. Lance said..

    "In the new global economy, a person's wealth can be from anywhere in the world ... just like his stream of income can come from anywhere. That being the case, why would person A located in Washington DC be anymore --- or any less --- affected by the fortunes of so-called "US" companies that person B located in Beiging?" is different this time..just like during the dot com days..Douchebags on CNBC back then were often seen selling this "New Economy" bullsh!t propaganda to rationalize a bubble stock market.Did you got to the same salesmanship propganda schools as the idiots on wall street..???

  4. while the savings rate is negative now and only going to keep at it's trend, i got my quarterly TSP statement and they compare the savings rate, being around -2%, but the TSP participation has inversely gone up over the same period, almost equally.
    so all is good

  5. Let's get one thing straight, kids: a recession is defined as at least TWO quarters of negative growth. Given 3Q GDP was positive, a recession by the end of this year is an impossibility.

  6. "Let's get one thing straight, kids: a recession is defined as at least TWO quarters of negative growth. Given 3Q GDP was positive, a recession by the end of this year is an impossibility"

    4Q could be th first quarter where we experience a decline in GDP and thus being the first quarter that we are in a recession (ex post facto).

  7. Roubini has another post out suspecting the number was cooked due to Nov election. The BEA has incorrectly used a 26% percent increase in automobile production. Without that GDP growth stands at 0.9%. Which puts Q4 to be on the fast track for a -ve growth.

    Read it here:

    Was Q3 GDP growth manipulated upwards because of the coming elections or is the US government clueless about measuring output?

  8. After the economic catastrophe, ie. "The great experiment of globalization gone bad", The US will be able to write Fair trade laws for its citizens.

  9. The GDP numbers are actually a lot worse than they appear at first glance. For details:

  10. The housing market has been feeding this economy for the past 5 years. With the housing collapse on its way where will people borrow now. They have been using their houses as ATM machines. Without the use to borrow againt their houses where will they borrow now?????

    Not going to be good once foreclosures start to increase going into 2007 as Trillions of dollars worth of ARMS reset.


  11. Actually, I completely understand and agree with what Lance is saying.

    Your good friend,

    Nuttier than Squirrel Turds

  12. hey I agree woth lance, however he is wrong about one thing - whats going on right now is Globalization all right. However depressions are LOCAL.. So even of world's market is not in depression US economy very much will be... Since all what world needs is already produces in China/asia/india. NO JOBS, NO PRODUCTION - Keep creating money - how long do you think other countries will keep on accepting out paper money??
    Only it is not even is magnetized space on the hard-drives wich can be easilly erased - kind of symbolic don't you think???

  13. Lance,

    As for the strength of globalization, you may be right we are entering a new era. However, as it relates to real estate we may have to endure some short term pain before the powers of Globalization cure all our ills:

    Realestate, by it's very nature, is local. And while anyone, anywhere can invest in it, the returns on it are purely dependant upon local factors (It aint "location, location, location, for nuthin---and by the way, I though globalization was going to make location less relevant, not more so. Wasn't it the internet that meant could locate warehouses in the desert, and telecomuters could work in L.A. and New York from the plains of Nebraska, and doctors could operate on patients from the deck of their yaght? ). Anyway, given that residential real estate is virtually unaffordable to local purchasers throughout the states (ex: median price is rougly 8x median income in San Diego), and most recent purchases have only occurred through the use of exotics which at some point require an increase in equity, wages, or a huge decrease in the price of debt (otherwise why purchase with one?), we may see a perfect storm of factors including an elimination of MEW, at the same time we have realestate depreciating, while exotics get scrutinized and regulated, while investors in MBE's demand a higher risk premium, while job growth (can you say local home buyers) flattens or contracts.

    Globalization may make things different alright...different as in worse...It may just mean the capital inflows and outflows of local markets are that much more rapid and severe.

  14. Definately a recession.

    Gary Shilling, amoung others, is predicting one. Since his fortune was built on accurately predicting recessions in the past multiple times... Would you bet against him?

    Nitpic, last I heard a recession was two complete quarters of negative growth. Is a depression 7 quarters? I've heard its 25% unemployment. :(

    All economics are local and global. For example, Detroit is almost at 25% unemployment (what I would call an economic depression). Is that enough to effect DC? No. But as soon as the tax revenue is squeezed... there will be cuts in DC. Government employees? Probably not. Consultants? Yes.

    Adam smith wrote how cycles are just a normal part of economics. Well... we're about to be it hard by this one. :(

    I know far too many people with 3 or more homes to believe this will be gentle. People who have spent almost every penny of equity appreciation. One of my closest personal friends is now going through a divorce. I was shocked to find out both of his homes have 2nd mortgages due to his wife's gambling issues.

    The real pain doesn't start until 2Q 2007. Then? Ouch. Watch out. No more debate, home prices and employment will drop hard. :(


  15. You should revisit your July 11, 2006 posting.

    A new photo from the same vantage point would be very interesting. A lot has changed since you took that pic in July!

  16. There's something seriously wrong when Lance's post is the most sensible of the bunch....And the most consistent with economic theory. (Ok, Wayne's was fairly sensible, too.)

    However, just because globalization is beneficial in the long run does not mean that we won't experience recessions from time to time. The business cycle still exists.

    OC Bear needs to go back and study David Ricardo. And, no, wealth does not only come from manufacturing. In the long run, increasing wealth (economic growth) comes from the invention of new goods and services, and the more efficent production and distribution of existing goods and services.

    Services matter. Financial services matter. Legal services matter. Communications services matter. Transportation services matter. Health care services matter. Educational services matter. IT services matter. The United States is a global leader in all these very important services. This is a big part of the reason why the U.S. is one of the wealthiest countries in the world. (Currently, only Luxembourg and Norway are wealthier on a per-capita PPP basis.) Pessimists have been predicting the downfall of the U.S. economy for decades, and they have been consistently proven wrong. And, no, it's not different this time.

    For those concerned about outsourcing, I recommend reading What Goes Abroad Usually Comes Back, With Benefits by U.C. Berkeley economics professor Hal Varian.

  17. Private Contracting Trend Reflected in Region's Job Data
    Washington Post
    Monday, October 30, 2006; Page D02

    The number of jobs in the Washington area grew to 3,006,400 in September, up 2.5 percent from the comparable period last year, as the region continues to be one of the nation's largest jobs growth centers.

  18. I agree with Lance that the economy is globalizing. I also agree that not all production results in physical goods. The fact that China makes all the trinkets we play with, while disconcerting, is not the bad news. Worse is the fact that our children are failing Math and not learning how to program computers. But that's not the immediate problem either.

    The problem with America today is simply that we consume more than we produce (refer to trade and gov deficits). Think of an island that sells a few goods but consumes more, year after year. Is the island getting richer? No, they're burning the furniture. Globalization will eventually level the living standards of people around the world. Since we in America currently have the highest SOL, we're SOL.

    We consume way more than our "fair share" of resources. What does that mean? The whole world can't all afford to live so unsustainably, therefore, in a globalized economy, neither can we.

  19. creativemind said...
    "where are these people going to find new wealth and earnings??"

    I didn't say they would ... If you'd understood my previous (and current) postings, you'd understand I said quite the contrary. Over the last couple centuries (since the French Revolution to be exact), an increasingly complex set of laws and regs have been developed to level the playing field so that the results of group efforts were distributed more "fairly" than they otherwise would be under circumstances where it was simply "the law of the jungle" coming into play. The force and enforcement behind all these laws (even those that are so-called "international" law) are national governments. National goverments were able to pass and enforce these laws because they were able to control all aspects of an economy from production to distribution, etc. What happens when because of pan-globalization they can't? I.e., when Ford can produce its goods for cheaper in Mexico and closes that plant you're referring to? There might have been a time when there were practical considerations to keeping that plant here ... There aren't any in the pan-global economy we've entered. ... Just as there are no truly enforceable pan-global laws and regs to "level the playing field" and temper the excesses of the laws of the jungle.

  20. anon 7:22 said:
    "We consume way more than our "fair share" of resources. What does that mean? The whole world can't all afford to live so unsustainably, therefore, in a globalized economy, neither can we."

    Oh so true ... The only error in logic I find is your underlying assumption that the "we" of tomorrow will be "us". Where I work almost every single high-wage "laborer" is foreign born. (Only the management isn't ... and that is changing quickly as the foreign-born rise from the ranks.) I'm talking government IT analysts with a fortune 500 company (contractors) and I'm talking salaries that are certainly in the top 10% of all American wage earners. (Few are earning below 6 figures.) We're not doing a good job educating our children? And actually that's not entirely true ... if you take into account the thousands of dollars spent per year per student for pre-school alone by those with the means. True that doesn't produce enough skilled employees to fill all the spots, BUT there is plenty of talent around the globe to fill our ever increasing demands ... and we don't even need to educate them! ... They come here ALREADY educated? And, once they are here, we're willing to pay them top dollar for the skills they bring with them ... and they in return are willing to use their high salaries to invest in their new land ... including buying real estate. Being born in a wealthy country is no longer an automatic ticket to a high standard of living. The economy's gone global ... including the market place for labor. National borders can be strengthened to prevent terrorists from entering, but they don't mean much anymore in regards to job security.

  21. @James:

    I think what your argument misses is the trend toward a bimodal distribution of income in this country. Sure, our corporations are showing record profits - driven by record investment in Asia. The money is coming back here, but it's certainly not trickling down to the average US consumer.

    The internet, in combination with financial market efficiency, has tapped a tremendous vein of resources. I just dont see how negative real wage growth in the US middle class will be avoided. And this will have a very large impact of two things that can't be avoided - deaths and taxes.

    It's very telling that most of the large tech outfits (Intel, MOT, etc.) have opened large campuses in India and China. The focus of these campuses is R&D, by the way.

  22. I think what your argument misses is the trend toward a bimodal distribution of income in this country. Sure, our corporations are showing record profits - driven by record investment in Asia. The money is coming back here, but it's certainly not trickling down to the average US consumer.

    During this decade the middle class and lower-middle class have seen real wages decline slightly, but the rich, the upper-middle class and, yes, even the poor have been doing better than in the past.

    Over the longer term, the trend has been that those with a college education have been seeing real incomes increase, while those with just a high school education or less have stagnated.

    The U.S. has evolved past the industrial revolution and is now in the information age. Knowledge is what drives the modern U.S. economy, not manual labor, and a good education is required to get ahead. On the whole, Americans are significantly wealthier than they were a generation ago (adjusted for inflation). However, it's those with a college education who have benefitted, not factory workers.

    It's very telling that most of the large tech outfits (Intel, MOT, etc.) have opened large campuses in India and China.

    There are six billion people in the world, and the U.S. only has 300 million of them. Of course companies are going to open campuses overseas. Despite all the scare stories in the press about tech jobs going to India and China, tech-related college degrees still pay very well.

  23. How will offshoring contribute to a recession? In fact, analysis from McKinsey has found the opposite -- outsourcing is a boost to economic growth.

    Ditto for the trade deficit. Trade deficits actually correspond with economic growth. They are not a drag. The surest way to lower the trade deficit is go into a recession.

    I'm likewise unconvinced about the federal deficit, which is under 2% of GDP and better than many, if not most, industrialized countries.

  24. "explain in this scenerio where the first dollar is produced to be able to hire any one of these srevices."

    You seem to not realize that the U.S. exports services. A Chinese company manufacturing DVD players may purchase business consulting services from the aforementioned McKinsey & Company. And trust me, the American consultants at McKinsey earn a whole hell of a lot more than the Chinese factory workers building the DVD players. (They also earn a whole hell of a lot more than American factory workers building automobiles.) When foreign students study at American universities, they are purchasing U.S. educational services. When sick foreigners come to American hospitals for medical procedures that are not yet available in their home countries, they are purchasing American health care services. That's how America becomes wealthy by selling services. Manufacturing is poor man's work.

    "BTW i'd be willing to bet that at the turn of the century the automobile was the "globalization" of it's time. the car changed everything but it didn't stop the great depression."

    The turn of the century was six years ago and we haven't had a great depression since. LOL

    "I am not against globalization, I am for Fair-Trade not Free Trade."

    Truly free trade is fair, but we don't have truly free trade. Which type of fair trader are you, an AFL-CIO fair trader or an Oxfam fair trader?

  25. OC Bear wrote...
    "at no point did I say that services do not matter, please do not put words in my mouth. I said that wealth creation for a society comes from manufactureing of goods, and I agree that new goods do apply."

    I did not say that you said services do not matter and I did not put words in your mouth, so please don't put words in my mouth. However, you implied that wealth creation only comes from manufacturing, and I was arguing that wealth creation comes from services as well. If wealth creation doesn't come from services, how can so many service employees (such as doctors, dentists, attorneys, professors, business consultants, IT professionals, investment bankers, etc.) earn so much? Obviously, they provide significant economic benefit to society if the free market is willing to pay them well. Also, in the information age there industries, such as software, that create goods that involve no manufacturing.

    If a service company, such as, provides a service that allows consumers to purchase goods more cheaply than they used to -- or purchase goods they couldn't find before -- then creates wealth. By lowering consumer costs, helps raise the standard of living of its customers.

    If McKinsey provides advice that allows companies to operate more efficiently, thus lowering costs which can be passed on to consumers, then McKinsey -- a service company -- creates wealth.

    OC Bear wrote...
    "As you obviouslly don't agree with Buffet's and yet probably do with some of his investing ideologies."

    I think you are mischaracterizing Buffett's writings. He has complained about the current account deficit, but I'm not aware that he has ever complained about the manufacturing decline in the U.S. Please point me to where he says this. Again, you can export services. America does it all the time.

    The current account deficit can be fixed entirely by increasing the national savings rate (which is negative). The easiest way to do this is for Congress to balance the federal budget and for consumers to stop using their houses as ATM machines.

  26. "Here is one article that references debt society vs., manufactureing/produceing society."

    I've read that one before. That article is not about manufacturing. It is about the trade deficit (most people use the term trade deficit when they are actually talking about the current account deficit) and America's negative national savings rate.

    The core problem Buffett is complaining about is America's negative national savings rate. When America spends more than it earns, it must either borrow from foreigners or sell off assets. You should also remember from intermediate macro that national savings equals the current account surplus. When one is negative, the other will be also.

    The problem is not the loss of manufacturing jobs, it is that the federal government engages in deficit spending, and consumers spend more than they earn. This causes our national savings rate to go negative, which causes us to run a current account deficit.

    I will say again that you are mischaracterizing Buffett's writings.

  27. oc bear,

    providing a "service" is just as much providing real value as is providing a tangible good. as a matter of fact, if we start "peeling the onion back", I think we find that most "tangible goods" contain a fair amount of service in them. just like 90% of the human body is water, I suspect a similar percentage of all goods is services. take a restaurant meal for example ... without the waiter bringing it to your table, and the cook cooking it, and the chef putting together the ingredients, and the owner putting together the menu for you to read and the restaurant itself for the meal to be prepared in and for you to sit in, and for the trucker to bring it to the restaurant, and the Dept of Transportation workers to build the road, and the illegal immigrants to harvest the food and the butcher to butcher the meat, and the farmer to raise the vegetables and the rancher to raise the animals, ... you wouldn't have a meal on the table to eat. You'd be out scrambling in the woods to catch some wildlife and pull up some roots for dinner. No, you're right, services are worth nothing! ;)

  28. Sorry, I should have said that national savings minus investment equals the current account. My bad.

  29. OC Bear wrote...
    "I have been unable to find the article that I read by Buffet but will definately keep looking when time alows. I am VP and facilities manager for a manufactureing company and as such find time a short commodity."

    I fully understand. I waste too much of my own time on this site. It is also hard to find old articles when you most want them. ( is the best place to look for Buffett's writings.) The point I am trying to make by asking is that I know Buffett has written warnings about the current account deficit, but I don't believe he has written warnings about the decline in U.S. manufacturing.

    OC Bear wrote...
    "I am curious James, as to what percentage of GDP needs to be in manufactureing to keep an economy with "growth" in standard of living in your view in practical terms?"

    I'd say zero. Let's imaging a small fictional country that specializes in financial services. Let's call this country "the Cayman Islands". As long as this country has a strong comparative advantage in financial services, they can countinue to grow as long as there is strong international demand for financial services. Of course, a diversified economy is much more stable than a one-horse economy.

    Economies don't grow through manufacturing. They grow by making the best use of their comparative advantages. This is standard economic theory. In a large country like the U.S., different parts of the country will have different comparative advantages. NYC has a comparative advantage in financial services, Silicon Valley has a comparative advantage in technology, Texas has a comparative advantage in oil production, West Virginia and western PA have a comparative advantage in mining, etc. If you were to break off NYC into a separate country and had no trade restrictions between NYC and the USA, it would do just fine as a primarily service-oriented country. In fact, NYC would probably be the richest country in the world.

    Over the past several decades, the U.S. has been losing its comparative advantage in manufacturing and gaining a comparative advantage in professional services. One problem with your "what percentage of GDP needs to be in manufacturing?" question is that it doesn't remain consistent over time. As people become wealthier, their demand for services tends to increase more than their demand for products. Trying to keep America a manufacturing country, when our comparative advantage has obviously changed, holds us back.

    threadkilla wrote...
    "that's how Bush 2.0 has managed to increse GDP by 1 trillion during his term in office but increase our debt by 5 trillion."

    The government doesn't run the economy. The government usually just gets in the way. Bush is just a big-government Republican who does more harm than good.

  30. threadkilla said:
    "you do realize that you just proved that at the core of it all is somebody manufactuing.

    thanks lance you just made my point for me!!!


    And ALL services are part of the manufacturing process ... even those you have chosen to view as "just services". For example, the financial services provided by Wall Street are just as much a part of the manufacturing process of every good produced by every company listed in the exchanges as are the services provided during the assembly part of "somebody manufacturer". Are you understanding what I mean? Conversely, as an example, people don't provide financial services in a vacuum. They exist to help get goods produced, houses built, etc. etc. Even when they exist apparently only to provide a service such as the financing of an education, ultimately they play a part in the manufacturing of goods by having facilitated the educating of someone directly (or indirectly) involved in manufacturing that good for you. Looking at the problem even deeper, it becomes clear to me that actually ALL goods exist ONLY to provide a service ... I.e., you buy a car in order to be able to get places ... You buy a house, in order to get sheltered ... You buy a gameboard, in order to be entertained. Viewed in that light, i.e., that "goods" are merely vehicles for services, what do we care if it is a tangible or intangible good providing that service? What you're reading on the screen really does verge on the intangible, doesn't it? I mean it's not a book that you can put away in a drawer and know what you've read will be there forever ... Yet, it provides you essentially the same "service" as a book ... at least for now .... No, sorry, the manufacturing of goods is NOT essential for a healthy and sustainable economy. Manufacturing is but a low-tech means of supplying services. As intangible high-tech means evolve to provide the same (or better) services, the manufactured books providing said same services become obsolete (e.g., books ...) A service economy is a a more-highly evolved economy. Period.

  31. OC Bear wrote...
    "This article I found very powerful in its understanding of what lost manufactureing could mean."

    I read the articles you listed. As a general rule, I think it's wiser to learn about science from scientists, economics from economists, and history from historians, etc.

    Journalists and politicians tend to be generalists and they tend to be fairly ignorant regarding both science and economics (as well as many other fields of study). Thus, when the public learns about science and economics from them—as they usually do—it is often a case of the blind leading the blind. Journalists and politicians also tend to over-weight the importance of anecdotes and under-weight the importance of statistics. In addition, journalism tends to be manic-depressive; overly-optimistic and overly-pessimistic stories tend to make far more interesting reading than your typical academic research paper. Journalists also tend to be myopic because their profession revolves around day-to-day events, rather than focusing on the long term.

    Scientists, economists, and other academics (especially researchers) spend much more time, and use much more intricate thought, when studying their respective fields of study than a generalist would. They also tend to be much more up-to-date regarding the latest advances in their field. At the same time, some academics are better than others. I generally prefer to read books written by professors at Ivy League universities, and other highly ranked schools such as Stanford, U. of Chicago, Cambridge, etc. Leading textbooks are also excellent sources of information, because they reflect the mainstream specialist view.

    With that said, journalists and politicians—and the general public who learns about economics from them—tend to agree with the "free trade is bad" hypothesis. Economists, who study the subject in much more detail, are overwhelmingly of the opposite disposition. Of course, specialists can be wrong just as anyone can, but I'd argue that they have a much higher probability of being right than the generalists do.

  32. OC Bear wrote...
    "It is interesting to note that high end service sector job's are being outsourced as well. We are actually puting people on planes and sending them to India for surgeries. Financial analysis is being moved to Asia, Taiwan MBA's cost a lot less than US MBA's. Pharmacutical's are moving out of US and Europe for Asia and India....We all know that software is being developed in India now."

    Again you make a very serious logical error. You assume that because companies hire people overseas, it leads to an aggregate loss of jobs in the USA. This zero-sum-game assumption you make violates economic theory. The statistics don't back you up on that either. MBAs aren't hurting. Neither are software engineers, college professors, financial advisors, or many other service industry professionals.

  33. OC Bear,
    So, intense U.S. and global demand for well-educated workers is a bad thing? I don't get it. Why are lots and lots of high-paying MBA jobs a bad thing?

    You seem to have a zero-sum game mentality: that in order for Americans to prosper, the poor nations of the world must remain poor. Do you want the world's poor to remain poor?

    I will re-emphasize my earlier statement, "Again you make a very serious logical error. You assume that because companies hire people overseas, it leads to an aggregate loss of jobs in the USA. This zero-sum-game assumption you make violates economic theory."

    The reason the zero-sum game belief is wrong is because there isn't a fixed amount of wealth in the world. People create wealth by creating new goods and services, improving existing goods and services, more efficient production and distribution, etc. As John F. Kennedy said, "A rising tide raises all boats."

  34. Lance...

    First, the entire economic system, both globally and nationally, is based solely on fiat currency (completely backed by debt, nothing more). In every historic case of the use of total fiat currency, the economy eventually implodes due to the fact that the economy can no longer service the burden of debt. Eventually, it requires more of the economy to service the debt than can be used to support the actual economy of commerce.

    We have almost reached the practical life-span of the system itself; that is, it will soon become inpractical to continue the system because it can no longer function.

    Our government is very similar to a person borrowing a home loan from a bank. The bank doesn't actually have any "money" in their vaults to lend, the "money" for the home loan is created the moment the borrower signs the Mortgage Note. The borrower then spends the next 30 years paying the bank back "money" that the bank never actually had to lend in the first place, and on top of it all, the bank charges interest on the "money" it never had to the first place.

    The whole economy of the world is based on the very same principle, eventually, it cannot maintain the burden of debt that is created through the fradulent Central Banking System. The problem with such a system is that the debt can never be repaid, in fact, in the case of government borrowing, it is never meant to be repaid.

    Consider this: The publicized debt of the government alone is now over $9 Trillion, with future obligations estimated at over $80 Trillion. Now, if you started in the Year 1 A.D, borrowing $1 Million a day, every day, 365 days a year, year after year, it would take you until the year 2037 to borrow $1 Trillion. Now relate that debt to what the government has borrowed and add to it corporate debt and then add to that private debt and you get an idea of just what type of overwhelming burden we are facing. Actually, we will never fact it because the whole system is headed toward a massive collapse that cannot be thwarted by any tricks of the Central Banks, or governments around the world.

  35. Republicae wrote...
    "First, the entire economic system, both globally and nationally, is based solely on fiat currency (completely backed by debt, nothing more). In every historic case of the use of total fiat currency, the economy eventually implodes due to the fact that the economy can no longer service the burden of debt....Actually, we will never fact it because the whole system is headed toward a massive collapse that cannot be thwarted by any tricks of the Central Banks, or governments around the world."

    Wow! That post was 100% pure B.S.

  36. A little hidden secret:

    There hasn't been on single recession that wasn't trigged by a significant change in regulations (either regulations or, in some instances, dergulations).

    For all those that think the U.S. economy is headed toward a recession in 2007 or 2008, one must ask this: what recent and material regulatory change has been significant enough to result in a future recession? In my, there hasn't been since 1996 and 1998, respectively, each causing the dump after 2000. Today, growth, as measure by GDP, might slow, but there's no recession on the horizon.

  37. Its late 2007 and there's no recession here yet

  38. Hey James, it is now almost two years later since you called my posting was pure 100% B.S., I wonder what you will be saying in another two years? As you may know, we are now in the beginning of a rapid degradation of credit liquidity, now since the entire monetary system is built upon and consist of credit expansion, thus debt creation, it will only be a matter of time before the pressures of this present liquidity crisis actually works through the economy.

    For the first time in the history of the fractional reserve banking system in this country the non-borrowed reserves not only hit the zero mark, but took a dive to around a negative 100%. Of course, if you don't understand how our money is made, how it works in the fractional reserve system you might not understand the import of this development, but soon enough you will.

    Since every single "Federal Reserve Note" must be "borrowed" into existence, the underlying debt obligation is now irreversible and multiplies exponentially. Soon, the expansive money supply will exert pressure on the economy in an ever-increasing rate of inflation to the point that hyper-inflation places a death-grip on the economy.

    It has already began, but the first step is when people know that prices are high and getting higher, so they think to themselves perhaps they will wait to make a purchase they need for a few months, when they expect prices to go down.
    Then, when they notice that not only are prices not retreating, but continue to rise rapidly, they decide that the purchase they were planning could be put off for a couple of years.
    Afterwards, the final step is when the people decide that they had better spend their cash as quickly as possible, converting it into any and every possible product they can because they suddenly realize that their money is rapidly losing all its purchasing value. So, the begin to immediate buy anything they can that they believe might hold some value even if they don't need what they purchase. At this point the shortages begin to spread and chaos ensues.

    So, get back to me in a couple of years, then tell me what you think....

  39. Well looks like you were right ....