Thar She Blows: The Last Hurrah for the Banking System

[Crewleader]

by Mike Whitney / July 31st, 2008

The Bush administration will be mailing out another batch of “stimulus” checks in the very near future. There’s no way around it. The Fed is in a pickle and can’t lower interest rates for fear that food and energy prices will shoot to stratosphere. At the same time, the economy is shrinking faster than anyone thought possible with no sign of a rebound. That leaves stimulus checks as the only way to “prime the pump” and keep consumer spending chugging along. Otherwise business activity will slow to a crawl and the economy will tank. There’s no other choice.

The daily barrage of bad news is really starting to get on people’s nerves. Most of the TV chatterboxes have already cut out the cheery stock market predictions and no one is praising the “impressive powers of the free market” anymore. They know things are bad, real bad. A pervasive sense of gloom has crept into the television studios just like it has into the stock exchanges and the luxury penthouses on Manhattan’s West End. That same sense of foreboding is creeping like a noxious cloud to every town and city across the country. Everyone is cutting back on non-essentials and trimming the fat from the family budget. The days of extravagant impulse-spending at the mall are over. So are the “big ticket” purchases and the “go-for-broke” trips to Europe. Consumer confidence is at historic lows, disposal income is a thing of the past, and all the credit cards are at their limit. The country is drowning in red ink.

Something has gone terribly wrong with the economy, but no one knows what it is. In the last three months bank credit has shrunk faster than any time since 1948. The banks aren’t lending and people aren’t borrowing; that’s a lethal combo. When credit creation slows, the economy falters, unemployment rises and the misery index soars. That’s why Bush will have to mail out more stimulus checks whether he wants to or not; his back is against the wall. He’ll try to make it look like the economy is still breathing on its own and just needs a spell on the respirator before resuming its normal activities. But Bush is wrong; we’ve reached Peak credit and the blood-transfusions won’t work anymore. The vital signs have shut down and rigor mortis is already setting in. Our goose is cooked.

http://www.dissidentvoice.org/2008/07/thar-she-blows-the-last-hurrah-for-the-banking-system/

[rusty_parts2001]

1. If you read the whole article...

You won't be able to sleep. Its frightening <:scared: :scared: :scared: :scared:>

[Hestia]

2. If something catastrophic is going to happen I wish it get over with

it's this constant 'if' that is pissing me off. Just let us know What so we can get on with it. We don't know which way to turn with push-me-pull-you reporting.

[Hestia]

3. Comments like this sure helping to raise all the signal flags:

An article in the San Francisco Business Times said that the FDIC is worried about the reporting on Internet blogs. They’d rather keep banking system’s troubles out of the news. The publicity just further undermines the public’s confidence and spreads fear. Sheila Bair, chairman of the Federal Deposit Insurance Corp, summed it up like this after the run on Indymac:

“The blogs were a bit out of control. We’re very mindful of the media coverage and blogs in controlling misinformation. All I can say is were going to continue to stay on top of it. The misinformation that came out over the weekend fed a lot of depositors’ fears.”

Is that a threat? The cure for a failed banking system is adequate capital and prudent oversight not threats to critics of the system. That’s balderdash. Commissar Blair apparently believes that bloggers should be treated the same way as journalists in Iraq, who, if they veer ever so slightly from the Pentagon’s “the surge is a great triumph” script, find themselves on the smoky end of an M-16 at some unmarked checkpoint outside Baquba.

[Hestia]

4. Classic Shock Doctrine - load up debt on any new country, leader, etc.

It now looks like Obama has been anointed by Wall Street (who are his biggest contributors) to revive the Resolution Trust Corporation (RTC) — a morgue for dead banks — so that the investment giants can offload hundreds of billions in bad paper in one fell swoop and purge the system. That will be the big “post election” surprise; another bone for investment giants.

[DJ13]

5. Something has gone terribly wrong with the economy, but no one knows what it is.

Sure they do, but fixing it would cause the freeride for the upper classes to come to a screeching halt.

We cant continue to undercut the middle and lower classes in their wages any longer, they must share in the increased productivity they've delivered for their employers over the last 30 years.

We wouldnt have HAD a housing crisis if people could have afforded to pay their mortgages.

(You wont hear that on the TV news, but its true.)

[tbyg52]

7. Exactly. All that money got securitized and funnelled upward before the suckers caught on. nt

[Warpy]

6. If you still need to rely on taking on new debt to survive

then you're totally fucked. Better start checking out the better dumpsters and overpasses and spots in the woods where you can slap up a tarpaper leanto and the cops won't bother you too much if you stay reasonably sober.

Drying up consumer credit means drying up the consumer economy until some genius or other realizes people will start to spend again if somebody pays them enough to do so. Until then, things are going to be terribly rough for all of us. Even those of us with cash are going to find few places left to spend it as first retail and then manufacturing/distributing all shut down. Cash will be king in the beginning, but later on, you'd better have something to barter in the way of goods or skills.

Banks and brokerages will generally survive, although the weakest of them will be cut into little pieces with the best parts sold off and the worst allowed to fail. However, no one is going to address the consumer economy, 67% of the overall economy, until it's too late and the damage has been done. They apparently have no clue what's coming since they've all bought into the fiction that it was the stock market crash and not the debt that had propped it up that was the problem in 1929.

The problem isn't so much that a few bad banks will go under. The problem is where the focus is placed, that the larger looming problem of a consumer economy crash will go unnoticed until it has crashed completely.

[Nay]

8. Yes, Warpy, these nimrods have yet to figure out that if consumers

don't have high wages, and then have no access to credit....why, all of a sudden, they can't buy anything! Imagine that! Now how the hell does that happen??

:sarcasm:


I am at a point where I just don't give a shit anymore. No one listened to me when I suggested that going into hock for a Coach handbag might not be a good idea, or that new car or house was maybe gonna strain the budget -- and now it looks like I, and others like me, are going to be forced to bail out all these idiots because we're the only ones who didn't fall for the consumer bullshit. Makes me mad, I gotta tell ya.