Economy Caught in Depression, Not Recession: Rosenberg

american dream is over

american dream is over

“Positive gross domestic product readings and other mildly hopeful signs are masking an ugly truth: The US economy is in a 1930s-style Depression, Gluskin Sheff economist David Rosenberg said Tuesday. Writing in his daily briefing to investors, Rosenberg said the Great Depression also had its high points, with a series of positive GDP reports and sharp stock market gains.” — CNBC

Mr. Rosenberg is right in that the World economy (the Federal Reserve) isn’t doing what they did in the 1930s. Instead of a deflationary depression, we’ll see hyper inflation. That’s why they don’t want the banks to tighten the borrowing which is what caused the great depression (not the stock crash itself) in the first place. This time around the central banks will inflate (to try to pay off the huge deficits according to Keynesian economics) and cause similar results to the great depression except it will be that whoever has savings in the banks will loose it due to inflation. Anyone working will barely make ends meet and poverty will end up being similar to that of the 30s but with prices rising instead of falling.

Where are the central banks (central banking being primarily a British invention) getting this money they are lending out to the charter banks. Well, they are creating it. And what does that ‘created’ money do? Well, when it’s greater than the growth of the economy, it creates inflation.

Let’s face it. This is not about the American sub-prime mortgate crisis. It is about the enormous debt that the American government has sustained (partly, though not entirely, on their foreign military adventures), the enormous American trade debt and the enormous American domestic debt. Through financial jiggery-pokery the central banks have contained those debts until they exploded. Sub-prime mortgages were just the first salvo.

Low interest rates will keep inflation down for only so long. As inflation increases, wage earners will be blamed. Interest rates will be increased to create unemployment and further reduce wages. And who will be able to pay their mortgages, then? The credit card debt in Canada will also collapse. Huge defaults will occur. And who can buy anything from anybody if they don’t have any money?

Have you experienced wage deflation?

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And that, my friends, is a depression. And no matter what lies the charter banks are spouting this time, it is going to happen. They cannot lie their way out of this one.

But then as now, those signs of recovery were unsustainable and only provided a false sense of stability, said Rosenberg.

Rosenberg calls current economic conditions “a depression, and not just some garden-variety recession,” and notes that any good news both during the initial 1929-33 recession and the one that began in 2008 triggered “euphoric response.”

“Such is human nature and nobody can be blamed for trying to be optimistic; however, in the money management business, we have a fiduciary responsibility to be as realistic as possible about the outlook for the economy and the market at all times,” he said.

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This is no joke people. You had better prepare yourselves and your families. E-books are a great way to start the journey into survival.

The 1929-33 recession saw six quarterly bounces in GDP with an average gain of 8 percent, sending the stock market to a 50 percent rally in early 1930 as investors thought the worst had passed.

“False premise,” Rosenberg said. “And guess what? We may well be reliving history here. If you’re keeping score, we have recorded four quarterly advances in real GDP, and the average is only 3%.”

Mr. Greenspan and Mr. Bernanke created bubble in everything, by slashing interest rates to zero. But central banks can’t control where the money will drop into when they give it out via low interest rates.

“Mirror, Mirror on the Wall, When is the Next AIG to Fall?”
is a speech presented by Marc Faber at the “Austrian Economics and the Financial Markets” forum at the Mises Circle in Manhattan on 22 May 2010, New York.

The video includes an introduction by Mises Institute president Douglas E. French.

Dr. Faber’s PowerPoint file is available for download via the following link

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