#83, KB:
Your comment about trying to set expectations about what a robust economy “should” look like rings more true today than ever. The actions taken by the Democrat president and Congress are designed to pull forward demand on what is essentially a tapped-out taxpayer base. Our last two booms (tech and housing) were highly speculative and debt-financed; now Congress is desperately trying to find another boom at a time where people not only lack the means to take on more debt, but have essentially run out of crap to buy. Companies are hunkering down, deleveraging and firing workers; this is no time to take on additional debt, yet this is the kind of blood Obambi and the Congress are trying to squeeze out of the turnip.
You can funnel all the money you want to your banker buddies (as the current and former administrations have done), but the ugly truth is that these banks are INSOLVENT, and by a staggering amount that no bailout can ever hope to cover. Banks are now stuck in an untenable position; they can’t leverage themselves further but they also are dealing with a shrinking loan market; there are simply too few people who are willing or able to service the debt.
Most people have no idea of the hell that is about to be unleashed on us. The banks are trying to sweep things under the rug, move money around and feign robustness, but soon they are going to have to answer to cash flow (just because you suddenly decide that a mortgage 30 days late is no longer “delinquent” doesn’t make the mortgage payment magically appear). Unfortunately they’re going to find that government can no longer service the debt they have incurred; banks will go under, the FDIC will be overwhelmed, and much like the 1930s, people will lose everything.
The federal government is going to end up becoming the last entity to finally admit that our economy must contract in order to bring things back into balance (based on real production and not on debt). Banks must be forced to write off the bad debt and declare bankruptcy. Housing prices must contract to levels where average people can afford them (and no more of this 100% financing crap…at least 20% down or you keep renting), and government must give up on the socialist utopian idea that every necessity of the population can be provided for in abundance and in perpetuity by government.
