Despite doubling the national debt and the expansion of the money supply to some $8 trillion since the beginning of Obummer’s misbegotten presidency, the U.S. economy is once again in a free fall. Actually, there has been no real recovery, but a continual deterioration of living standards despite the lies and distortions from the financial media and government authorities.
Conditions, however, are now descending at an even faster pace.
Recently, the leading manufacturer of heavy equipment, Caterpillar, announced that job cuts would exceed 10,000 through 2018. Up to 5,000 employees will receive pink slips between now and the end of 2016. Retail sales for the manufacturing giant have slumped 11% between June and August.
While Caterpillar’s contraction is an ominous sign, a more telling indicator of worsening economic conditions came from the Federal Reserve’s refusal to raise interest rates at its latest FOMC meeting. Many commentators had speculated that the Fed would raise rates at least a quarter of one percent on the belief that the economy was strengthening.
The Fed, of course, based its refusal to raise rates on “international concerns” – China’s stock market selloff. The real reason is that the nation’s central bank understands, although it will not publicly admit it, that the economy is far too weak to “absorb” a rate hike, no matter how infinitesimal.
More importantly, the Fed cannot raise rates to any significant degree because the entire financial system, which is built on “cheap money,” would immediately plunge into a significant downturn similar to that of 2008, or worse. The federal government and many of the states and municipalities would default since they could not continue to finance their current profligate borrowing and spending patterns with higher interest rates.
Thus, the Fed is trapped in a world of zero interest rates for the foreseeable future. As economic conditions continue to worsen, the central bank will more than likely turn to another round of money printing like its infamous “QE” program.
While the Fed is locked into a zero interest rate policy, the Obama Administration and Congress remain oblivious to economic reality. A few years back, Obama and the one-time Democratically-controlled Congress tried a “stimulus” program which did nothing but increase the national debt. Also weighing down the economy is the disastrous Obamacare program, which will only become more burdensome as time passes.
Just as troubling, none of the current crop of presidential hopefuls, with one possible exception, has proposed or suggested any credible measure that will improve matters. None of the fundamental problems that are crippling the economy have been seriously addressed.
The reason why there has been no recovery is that the malinvestments and bubbles created during the last boom have not been allowed to contract and/or burst. Instead, the Fed pumped massive amounts of “liquidity” (money printing) into the markets, which kept these institutions (mostly banks) and their assets afloat.
A credit implosion will not come about “voluntarily.” The Fed will not increase interest rates, nor will the Obama Administration or Congress have the courage to cut spending to relieve pressure on the Fed to finance its unsustainable deficits and continue to inflate the stock market.
Instead, there eventually will be a monetary crisis surrounding the dollar, which will force interest rates to rise, which will lead to widespread defaults and bankruptcies and an ensuing depression which will dwarf every previous economic downturn in American history.
Alternative financial analysts have, for some time, pointed to the declining living standards not only in the U.S., but throughout the Western world. Egon von Greyerz of Matterhorn Asset Management has predicted some very unpleasant times in the not too distant future: “The coming years will not be easy. I wrote an article a few years ago called ‘The Dark Ages Are Here’ and I now really think they are imminent. These will be difficult times for most of us.”
Ultimately, the only way the U.S. economy will be turned around is through a change in ideology. The ideas and policies upon which not only the U.S. but the entire Western world’s economies are predicated upon must be debunked. Until the principles and beliefs of the current economic system are intellectually discredited, the U.S. economy will continue to stagnate and eventually collapse.
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