Recovery or Redux?

Recovery or Redux?

Posted on 17 September 2009

By Patrick Wood, Editor

Has the world gone mad? Can everyone really see clearly now?

I can see clearly now, the rain is gone,
I can see all obsta­cles in my way
Gone are the dark clouds that had me blind
It’s gonna be a bright, bright Sun-Shiny day.

Money and credit is con­tracting at Great Depres­sion rates while the stocks and metals rise to new highs.

Bernanke says the reces­sion is over while the former chief econ­o­mist for the Bank for Inter­na­tional Set­tle­ments says we are headed toward another finan­cial and eco­nomic crisis.

William White was the top BIS econ­o­mist from 1995 through 2008. He cor­rectly pre­dicted the orig­inal banking crisis and even bat­tled with Alan Greenspan over his easy credit policy as early as 2003.

At the Sep­tember 14 Sibos con­fer­ence in Hong Kong, White just called for a “double-dip” reces­sion where the second dip could be sig­nif­i­cantly worse than the first. At best, he says we will have an “L” shaped reces­sion where we stag­nate like Japan did since the 1990’s.

At the same time, Ambrose Evans-Pritchard reported that “US credit shrinks at Great Depres­sion rate prompting fears of double-dip reces­sion”:

“Both bank credit and the M3 money supply in the United States have been con­tracting at rates com­pa­rable to the onset of the Great Depres­sion since early summer, raising fears of a double-dip reces­sion in 2010 and a slide into debt-deflation.”

He gleaned this infor­ma­tion from a report issued by Inter­na­tional Mon­e­tary Research (Tim Con­gdon) which serves the global elite with a sub­scrip­tion rate of $5000 per year.

According to Con­gdon, “There has been nothing like this in the USA since the 1930s. The rapid destruc­tion of money bal­ances is madness.”

Another elite econ­o­mist, David Rosen­berg, is also watching the con­trac­tion of money and credit:

“For the first time in the post-WW2 era, we have defla­tion in credit, wages and rents and, from our lens, this is a toxic brew.”

The actual stats look like this… in June, July and August, U.S. bank loans shrank at an annual rate of almost 14 per­cent. Four­teen per­cent! M1, M2 and M3 are falling at annual rates of 6.5 per­cent, 12.2 per­cent and 5 per­cent, respectively.

These num­bers are worse than those prior to the market col­lapse of 2007  –  2009.

I recently talked to a senior loan officer at a fairly con­ser­v­a­tive regional bank. When I asked about these fig­ures and the bank’s own expe­ri­ence, her coun­te­nance dropped. She con­fided that new loans (of any kind for any reason) are vir­tu­ally non-existent, and that there was no signs of relief on the horizon. Nobody can qualify for busi­ness loans because there are no profits. Home loans are skit­tish at best, and they are usu­ally requiring a down pay­ment of 20 per­cent, plus a job and other vis­ible assets.

While the white rab­bits run off with Alice in Won­der­land, the reality is that we are on the verge of an across-the-board eco­nomic and market meltdown.

Defla­tion has secured its grip on the world economy, and is accel­er­ating down­ward at a record pace.

Since 2007, the pic­ture has been like an avalanche that started at the top of a large moun­tain. The destruc­tive power of the first 1/3 of the avalanche is rel­a­tively mild com­pared to the last 2/3. The snow­balls just get bigger and harder as they roll down the hill.

There is no human taming of an avalanche, either. It stops with a thump when it reaches the bottom, having taken every­thing in its path with it.

So, why isn’t Bernanke warning Amer­i­cans? All of the above infor­ma­tion is from Europe, not the U.S. They appar­ently know more about us than our press will admit.

Bernanke is an expert on the Great Depres­sion and defla­tion. He has spoken many times on both topics. Yet, in the face of clear mon­e­tary evi­dence, Bernanke chooses to tell a story that is exactly oppo­site of reality.

Bernanke, addressing the Brook­ings Insti­tu­tion on Sep­tember 15th, said “The reces­sion is over.”

Either Bernanke is in gross denial or else he is involved in a larger, more pur­poseful decep­tion designed to catch Amer­i­cans com­pletely off guard.

For instance, while Amer­i­cans are buying stocks again at a record rate, insiders are dumping their stocks at a rate of 30:1. The insiders obvi­ously under­stand some­thing that the public is not aware of.

Although I under­stand and accept that opin­ions vary widely within the global elite on any number of issues, I cannot hardly accept that Bernanke doesn’t know better about defla­tion, declining money and credit and depression.

Whether inten­tional or not, Amer­i­cans are being set up for another painful thrashing.