The US Banking System's Bankrupt: Roubini, Prechter, Soros

the coming great depression
Today three heavyweight economic and financial analysts have given their frank opinions on the state of the American financial and banking system, and the news isn’t all that comforting, or as positive as the news outlets are telling the general public. Indeed, one does not even need any so-called expert to tell them that things are bad.

All they have to do is look outside their window onto the city streets to find that many businesses are shutering at a record pace and have been doing so for a couple years, and in many areas of the country where the life-blood of the economy — the manufacturing industry — has been destroyed by penny wage labor in places like China, to find out that the recession (make that depression) is not even being close to being over.

Soros says our banking system is “basically bankrupt” and consumers have debt coming out of their ears. U.S. consumers are “overdebted” and the country’s banking system has been “basically bankrupt,” Soros said in Istanbul today. “The United States has a long way to go.”

Roubini thinks the market is discounting a “v-shaped” recovery and will therefore be disappointed with a “U.” Indeed, “Markets have gone up too much, too soon, too fast,” Roubini, who accurately predicted the financial crisis, said in an interview in Istanbul on Oct. 3. “The real economy is barely recovering while markets are going this way,” Roubini said. “I see the risk of a correction, especially when the markets now realize that the recovery is not rapid and V-shaped, but more like U-shaped. That might be in the fourth quarter or the first quarter of next year.”

Robert Prechter (Elliott Wave guru) says the bear market resumed in September. Prechter, of course, is predicting a full blown Depression. U.S. stocks may suffer a “major decline” after climbing to the highest levels in almost a year two weeks ago, according to technical analyst Robert Prechter, founder of Elliott Wave International Inc. “Stocks are very overvalued,” Prechter, who advised betting against U.S. equities three months before the market peaked in October 2007, said in an Oct. 1 telephone interview. “Stocks peaked in September and are back in a bear market.”

If only to confirm the socionomic causality at work, an economist quoted in the article above muses, “The one anomaly in the puzzle is that people shouldn’t be feeling better because the jobs market is so terrible and unemployment is likely to keep rising.” Of course it would be an anomaly, and people should not feel better, if mood were exogenously caused. But it is endogenously regulated, and it precedes social actions, which produce events such as job creation and elimination. That people feel better is evident in our rising sociometer, the stock market. If the rally continues, economists will soon agree that the Fed’s “quantitative easing” and Congress’ massive spending are “working.” Those predicting more inflation and hyperinflation will have the last seeming confirmation of their opinions. Then, a few months from now, some economists will probably express similar puzzlement when the stock market starts plummeting again despite the fact that the economy has improved.

But all of these considerations are temporary. Conditions are relative, and behind the scenes, the depression has been, and still is, grinding away.

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