Tuesday, August 7, 2007

What will the future bring?

It seem fairly obvious that the policies of the Bush administration will catch up with all of us at some point in the not-so-distant future, and the results will not be pretty. A nation cannot prosper if its working class lives in poverty, and that is becoming a more common occurrence every day in the United States even though the pundits all paint rosy pictures. These would be the same people who are already rich and make loads of money while the remaining 95% of us are getting screwed.

Just look around. Oil prices are through the roof and will in all likelihood continue to increase. The housing market is a mess thanks to the Fed. More and more of our jobs are being outsourced thereby allowing CEOs to pay themselves even more money. Our national debt is immense and growing, and nobody has any real answers about how it will ever get paid off while we hand out massive tax refunds to the richest Americans. We've created disasters in Afghanistan and Iraq, and have no way to get out. New Orleans is still a national disaster. And the whole world hates us. Is there anything that isn't totally screwed up in this country?

It doesn't take a genius to figure out that our economy has nowhere to go but down. Blogger Mike Whitney interviews Elaine Supkis, who answers some burning questions about where the economy is headed.

Question: Will you explain how the inflationary policies of the Federal Reserve are causing the stock market to soar and what the potential dangers are for the global economic system?

Elaine Meinel Supkis: Oh, that is so simple! In 2003, interest rates were dropped to 1% despite inflation of +5%. Instantly, the value of all assets shot upwards as bankers moved money along as fast as possible since the Fed undercut their own interest rates! So mortgages were below the rate of inflation. But this didn't make enough money so banks and other entities offered loans to bad risks who had to pay a higher rate. As inflation rages, they need to give loans to worse and worse customers who pay over 11% interest!

Alas, the fly in this ointment is exactly that: risky customers can't pay back loans! They go bankrupt and everyone acts like a good little domino and over they fall, one after another. Right now,the crashing sound of dominoes falling is like the hissing of waves on a distant shore but it is rapidly approaching. We can certainly hear it coming.

Question: Last week, reports showed that US manufacturing unexpectedly rose in March. However, the Financial Times said that, “The rise in the ISM index is impossible to square with either the regional surveys released over the past few weeks or our medium-term yield-driven model. We think it is quite likely that in their next iterations the ISM will drop sharply.” Do you think the government is deliberately falsifying data on manufacturing to make the economy look stronger than it really is? Could they be doing this in areas as well, such as money supply, inflation, employment, and GDP?

Elaine Meinel Supkis: Do alligators bite? Of course, they lie all the time. Some things were sacred and they didn't lie about them. The M3 data that shows how much money the Fed prints as well as how much is in circulation, etc, just last year, they announced, 'No one is really interested in these numbers and they are too hard to compile.' Like a drunken, gambling spouse declaring there is no need to balance the check books or look into the bank accounts, so it is here. Many people yelled about the M3 numbers being suppressed but to no avail, of course.

Onwards! Since they are lying about basic bank accounting, they have to lie about everything else or people will figure out, something smells rotten in Denmark, DC.

They redrew the rules for figuring out inflation so it no longer tracks inflation. This is so they can cheat retirees and have fake interest rates and thus, steal from granny and gramps and starve school children while lining their own pockets.
Read the entire interview. It paints the most realistic portrait of the current economy that I have read in a long time.

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