Wednesday, November 19, 2008


30 'leading edge' indicators of the coming Great Depression 2*

Every day there is more breaking news, proof Wall Street's greed is already back to "business as usual" and in denial, grabbing more and more from the new "Bailouts-R-Us" bonanza of free taxpayer cash and credits, like two-year-olds in a toy store at Christmas -- anything to boost earnings, profits and stock prices, and keep those bonuses and salaries flowing, anything to blow a new bubble.

Scan these 30 "leading indicators." Each problem has one or more possible solutions, but lacks unified political support. Time's running out. We're already at the edge. Add up the trillions in debt: Any collective solution will only compound our problems, because the cumulative debt will overwhelm us, make matters worse:

America's credit rating may soon be downgraded below AAA

Fed refusal to disclose $2 trillion loans, now the new "shadow banking system"

Congress has no oversight of $700 billion, and Paulson's Wall Street Trojan Horse

King Henry Paulson flip-flops on plan to buy toxic bank assets, confusing markets

Goldman, Morgan lost tens of billions, but planning over $13 billion in bonuses this year

AIG bails big banks out of $150 billion in credit swaps, protects shareholders before taxpayers

American Express joins Goldman, Morgan as bank holding firms, looking for Fed money

Treasury sneaks corporate tax credits into bailout giveaway, shifts costs to states

State revenues down, taxes and debt up; hiring, spending, borrowing add even more debt

State, municipal, corporate pensions lost hundreds of billions on derivative swaps

Hedge funds: 610 in 1990, almost 10,000 now. Returns down 15%, liquidations up

Consumer debt way up, now at $2.5 trillion; next area for credit meltdowns

Fed also plans to provide billions to $3.6 trillion money-market fund industry

Freddie Mac and Fannie Mae are bleeding cash, want to tap taxpayer dollars

Washington manipulating data: War not $600 billion but estimates actually $3 trillion

Hidden costs of $700 billion bailout are likely $5 trillion; plus $1 trillion Street write-offs

Commodities down, resource exporters and currencies dropping, triggering a global meltdown

Big three automakers near bankruptcy; unions, workers, retirees will suffer

Corporate bond market, both junk and top-rated, slumps more than 25%

Retailers bankrupt: Circuit City, Sharper Image, Mervyns; mall sales in free fall

Unemployment heading toward 8% plus; more 1930's photos of soup lines

Government policy is dictated by 42,000 myopic, highly paid, greedy lobbyists

China's sees GDP growth drop, crates $586 billion stimulus; deflation is now global, hitting even Dubai

Despite global recession, U.S. trade deficit continues, now at $650 billion

The 800-pound gorillas: Social Security, Medicare with $60 trillion in unfunded liabilities

Now 46 million uninsured as medical, drug costs explode

New-New Deal: U.S. planning billions for infrastructure, adding to unsustainable debt

Outgoing leaders handicapping new administration with huge liabilities

The "antitaxes" message is a new bubble, a new version of the American dream offering a free lunch, no sacrifices, exposing us to more false promises.

Will the next meltdown, the third of the 21st Century, trigger a second Great Depression? Or will the 2007-08 crisis simply morph into a painful extension of today's mess to 2011 and beyond, with no new bull market, no economic recovery as our new president hopes?

Perhaps some of the first 29 problems may be solved separately, but collectively, after building on a failed ideology, they spell disaster. So listen closely to "leading indicator" No. 30:

At a recent Reuters Global Finance Summit former Goldman Sachs chairman John Whitehead was interviewed. He was also Ronald Reagan's Deputy Secretary of State and a former chairman of the N.Y. Fed. He says America's problems will take years and will burn trillions.

He sees "nothing but large increases in the deficit ... I think it would be worse than the depression. ... Before I go to sleep at night, I wonder if tomorrow is the day Moody's and S&P will announce a downgrade of U.S. government bonds." It'll get worse because "the public is not prepared to increase taxes. Both parties were for reducing taxes, reducing income to government, and both parties favored a number of new programs, all very costly and all done by the government."

Reuters concludes: "Whitehead said he is speaking out on this topic because he is concerned no lawmakers are against these new spending programs and none will stand up and call for higher taxes. 'I just want to get people thinking about this, and to realize this is a road to disaster,' said Whitehead. 'I've always been a positive person and optimistic, but I don't see a solution here.'"

We see the Great Depression 2. Why? Wall Street's self-interested greed. They are their own worst enemy ... and America's too.


January 2006: Fortune. Interview with Richard Rainwater. "This is the first scenario I've seen where I question the survivability of mankind." He's 112th on the Forbes 400, worth $2.3 billion: "Most people invest and then sit around worrying what the next blowup will be. I do the opposite. I wait for the blowup, then invest." He waited with a half-billion-dollar war chest.

End Note

*Paul B. Farrell, MarketWatch, November 19, 2008


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