GDP numbers are revised down again. Some think the recovery is failing and we are headed for a double dip. But it can be worse. A single dip depression that rivals Great Depression should not be dismissed. To explain the severity of the situation, we need 2 more charts next to that graph. One is public debt, the other is private debt as a percentage of GDP. Here is a chart of total credit versus GDP. The bubble is clear even to the blind eye:
http://www.kondratieffwavecycle.com/economy/deflation-how-to-survive-it/
2008 was just the warm up. We will have more and bigger crashes. GDP is up, but debt is up even more. It is a borrowed recovery. Deflationary depression is coming.
The idea that the government can fix the economy is a myth. Social mood directs the markets, economy, politics. Government intervention only makes things worse. FDIC, FED, Fannie, Freddie are the cause of our problems. Free markets, small government, less tax was the way to go. The government does not have the vision for economic progress. They only make impossible promises and when things go south, they demand bailout at tax payer expense.
The government should have stopped messing with the economy long time ago. Their so called good intentions cause the crash. FED has been inflating the money supply (bank credit) for the last 50 years. It exploded exponentially, much faster than the GDP. In other words, as every day passes by, it takes more and more borrowed money to create $1 increase in GDP. This is because the real economy is shrinking and wall street, finance, and other non-productive sectors are expanding. Here is how the entire population is chasing profits from paper trade: Financial Mania
http://www.tradingstocks.net/html/financial_mania_continues.html
We need financial institutions just like an engine needs oil. But look what happened: At the top of the housing boom, the number of realtors was more than the number of factory workers in the US. This is the financial mania mentality where people think they will all get rich without creating something. Not only that, this shows the sad state of the population where they don't have the capacity to create something and sell. Where does that leave us? It left us at the top of the rally that was right before the real crash in Great Depression. Here how the technical indicators predicted the stocks market top:
We cannot borrow and recover. Borrowing is the cause of the problem. More borrowing will not solve it. I wish the Keynesians would understand common sense economics. Consumer economy is a myth. It is a way to put the American public to sleep while the multinational corporations pillage and plunder their wealth until there is nothing left.
Keep your dollars save. Do not risk your hard earned money in this expensive market. Past generations bought stocks much much cheaper. Why should you pay more??? Valuations in terms of dividends, PE versus bond yields do not add up. The risk is too much.
