The real economic collapse could come by the end of this year

Deep Recession in America: The Crash of 2009, The Collapse of 2010
Editor’s Note

This article is meant to be provocative. American Armageddon Blog does not necessarily share its conclusions.

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by Humayun Gauhar
Letter to my son

I told you that it’s a funny world getting funnier. Many American analysts are saying that America’s real economic collapse could come by the end of this year. “It will come to be known as ‘The Crash of 09′, they say. Others, especially a Russian political analyst, are predicting its physical collapse too. There’s no doubt that the country is up the dirtiest of imaginable creeks without a paddle. But what’s amazing is that America remains mired in stunning denial, continuing to make bad situations worse with useless bailout plans and messing around with the world instead of facing up to the reality that its time as a hyper-power is up, that’s its economic system has failed and that its only recourse is to end its adversarial doctrine and get out of its lost wars as painlessly and honourably as possible. There’s no point in going on flogging dead horses. The only sensible thing that survival demands is to craft a new moral economic and financial system and a moral foreign policy.

Obama’s Toxic Asset Plan

The most succinct description of what is wrong with Geithner’s PPIP toxic asset plan comes from the Financial Times:

Critics say that would leave the same amount of toxic assets in the system as before, but with the government now liable for most of the losses through its provision of non-recourse loans.

That’s exactly right. American banks that have received billions in bailout funds, including Citigroup Inc, Goldman Sachs, Morgan Stanley and JPMorgan Chase & Co, are considering buying toxic assets to be sold by rivals under the Treasury’s trillion dollar plan (and Bank of America – another big bailout recipient – is buying toxic assets as well).

Will the Global Economy Resurface?

The Group of 20 (G20) is making a big show of getting together to come to grips with the global economic crisis. But here’s the problem with the upcoming summit in London on April 2: It’s all show. What the show masks is a very deep worry and fear among the global elite that it really doesn’t know the direction in which the world economy is heading and the measures needed to stabilize it.

The latest statistics are exceeding even the gloomiest projections made earlier. Establishment analysts are beginning to mention the dreaded “D” word and there is a spreading sense that a tidal wave just now gathering momentum will simply overwhelm the trillions of dollars allocated for stimulus spending. In this environment, the G20 conveys the impression that they’re more commanded by than in command of developments (In addition to the seven wealthy industrial nations that belong to the G7, the G20 includes China, India, Indonesia, Mexico, Brazil, Argentina, Russia, Saudi Arabia, Australia, South Korea, Turkey, Italy, and South Africa.).

The International Monetary System’s Breakdown is Underway

 

The next stage of the crisis will result from a Chinese dream. Indeed, what on earth can China be dreaming of, caught – if we listen to Washington – in the “dollar trap” of its 1,400-billion worth of USD-denominated debt (1)? If we believe US leaders and their scores of media experts, China is only dreaming of remaining a prisoner, and even of intensifying the severity of its prison conditions by buying always more US T-Bonds and Dollars (2).

In fact, everyone knows what prisoners dream of? They dream of escaping of course, of getting out of prison. LEAP/E2020 has therefore no doubt that Beijing is now (3) constantly striving to find the means of disposing of, as early as possible, the mountain of « toxic » assets which US Treasuries and Dollars have become, keeping the wealth of 1,300 billion Chinese citizens (4) prisoner. In this issue of the GEAB (N°34), our team describes the “tunnels and galleries” Beijing has secretively begun to dig in the global financial and economic system in order to escape the « dollar trap » by the end of summer 2009. Once the US has defaulted on its debt, it will be time for the « everyman for himself » rule to prevail in the international system, in line with the final statement of the London G20 Summit which reads as a « chronicle of a geopolitical dislocation », as explained by LEAP/E2020 in this issue of the Global Europe Anticipation Bulletin. 

Crisis as a Means to Building a Global Totalitarian State

by Olga Chetverikova

As the world financial and economic crisis comes into its own, the Western political leaders and elites are seeking to impress on mankind the idea that this upheaval will end up ‘turning the world into something different’.
Even though the picture of the ‘new world order’ remains vague and fuzzy, the main idea is quite clear: A single global government, goes the argument, has to be established if we don’t want general chaos to prevail.

Bush and Obama Administrations Broke the Law By Refusing to Close Insolvent Banks

Geithner’s statements that he didn’t have the power to close down the big banks is false. Moreover, Geithner and Paulson actually broke the law which requires the government to close down insolvent banks, no matter how big.

The Prompt Corrective Action Law (PCA) – 12 U.S.C. § 1831o – not only authorizes the government to seize insolvent banks, it mandates it.

As William K. Black – the senior regulator during the S&L crisis, and an Associate Professor of Economics and Law at the University of Missouri – told Bill Moyers in their recent interview:

Americas Summit: ALBA Nations Condemn Capitalism

Document of the Bolivarian Alternative for the Peoples of Our Americas (ALBA) countries for the 5th Summit of the Americas
Introduction

The following statement was issued on April 17 by six of the seven governments of the ALBA economic and social alliance in Latin America. (The seventh member, Ecuador, was unable to attend the meeting.) Speaking in Australia, Luis Bilbao, editor of the monthly magazine América XXI (published in Venezuela, Argentina and Uruguay), described the statement as “profound” and “historic.”

“We have seven governments of the world speaking in language that used to be the reserve of left parties only,” Bilbao said. “Gone is diplomatic language to discuss the political and economic situation facing Latin America and the Caribbean and their relation with the United States. Instead, we read that the draft statement of the
Summit of the Americas is considered ‘inadequate and unacceptable.’ The ALBA countries declare that an entirely different approach to the world’s problems is required.

Massive Cover-Up of Economic Crisis

William K. Black was the senior regulator during the Savings and Loans (S&L) crisis, and an Associate Professor of Economics and Law at the University of Missouri (bio).

Black says that massive fraud is what caused the economic crisis. As one example, he explains that everyone involved knew that the CDOs which packaged subprime loans were not AAA credit-worthy (which means that they are completely risk-free). He also said that the exotic instruments (CDOs, CDS, etc.) which spun the mortgages into more and more abstract investments were intentionally created to defraud investors.

Moreover, Black says that the government’s entire strategy in dealing with the economic crisis is a massive cover-up:

The Debt-Purge of 2009

The Fed’s $12.8 trillion of monetary stimulus has triggered a six week-long surge in the stock market. Think of it as Bernanke’s Bear Market Rally, a torrent of capital gushing from every rusty pipe in the financial system. The Fed’s so-called “lending facilities” have gone far beyond their original purpose which was to backstop a broken system. Now they’re leaking liquidity into the equities markets and sending stocks soaring while the “real” economy sinks to the bottom of the fish tank. That’s how the Fed does business these days; plenty of tasty crepes for the Wall Street kingpins and table-scraps for the lumpen masses.

Bernanke has provided generous “100 cents on the dollar” loans for Triple A mortgage-backed collateral that is now worth 30 cents on the dollar. The Fed stands to lose trillions of dollars on these loans because the assets will never regain their original value. Eventually the taxpayer will have to pony up the difference in higher taxes, fewer public services and a weaker dollar.

Bernanke’s liquidity-injections may have sparked a flurry of speculation, but they won’t end the recession or slow the downward spiral. The relentless systemwide contraction continues apace and all of the leading economic indicators point to a deepening slump that will last for two years or more. Here’s a clip from a recent statement from the IMF:

The Housing Crash: In A Downward Momentum

Why is the media misleading the public about housing? The housing market is crashing. There are no “green shoots” or “glimmers of hope”; the market is worn to a stump, it’s kaput. Still, whenever new housing figures are released, they’re crunched and tweaked and spin-dried until they tell a totally different story; a hopeful story about an elusive “light in the tunnel”. But there is no light in the tunnel; it’s a myth. The truth is, there’s no sign of a turnaround or a “bottom” in housing at all; not yet, at least. The real estate market is freefalling and it looks like its got a long way to go. So why is the media still peddling the same “rose-colored” claptrap that put the country in this pickle to begin with? Here’s an example of media spin which appeared in Bloomberg News on Wednesday: