Nobody wants to hear that we are heading for a depression. It conjures images of famine, tramps, extreme poverty, hyperinflation- a nightmare. The scars are numerous and although there are not many people alive today who have gone through the last Great Depression, everybody knows that this is not something that you want to be in.
I have been asked a few days ago what the solutions to our current situation are. The truth is- I don’t know . And before you start throwing tomatoes at me, let me add this: anybody who tells you he/ she knows is probably a crystal ball reader, or in other terms, a liar. Why? Because we have never been in such a situation before and with every new day, a new ” solution” is being thrown in our faces by our governements. As long as there is no pause in the process, there is no way to stop and figure it all out.
Of course there are some possibilities. The first one is that we are entering an era of deflation. ( That’s not good. We ” need” a minimum of inflation to have the markets growing and entrerpises expanding). But with all the money printing by the Feds, the ghost of hyperinflation is lingering in the background- and that’s not good either. It when your savings or your salary is not worth buying a peanut anymore. I am not an expert on currencies but the volatility of these markets are not helping either. And let’s not talk about the details of productivity, interest rates kept low, inexistant savings and more borrowing ( we have now gone full circle- more of the same is not going to make it go away).
By not allowing the banks to fail Mr Paulson and Mr Bernanke have created a monster. We have been told by our governants that they couldn’t let the situation follow its course. If we had, it would have been worse and immediate action was required to prevent a worse future. Of course it doesn’t make sense. By protecting the banks that were meant to fail, they put tremendous pressure on the banks that hadn’t committed the same mistakes. Even worse they are saving companies that do not deserve it (Â great example to set) and will probably not learn their lessons ( follow my lead, what happened to Enron? Or LTCM…deja vu someone…?)
Now if anybody thinks that this is going to work…Well, think again. Did it change the situation? Did it allow the markets to turn? People to keep their jobs? Retails to sell their good? Banks to get their loans and mortgages repaid? What good did it do exactly?
You can’t stop a running train. It is even worse with a wild beast. It usually kills some before it gets killed.
So here it goes. We should hit the wall and then we will get up. Governements are trying to stop this but it looks like they are only creating a delay. It will probably happen anyway. But why did they intervene really?
Who is happy to see those banks stand up? People who have their savings in them, that’s right. But if we have our life savings being swallowed up, most of us have to keep doing their day jobs and struggle some more. If the very wealthy ( the 2% who owns the 80%) go into the wall, what will we have? Interesting idea, don’t you think?
The Madoff affair gave a big clue to this. The SEC didn’t respond to the party poopers whistle blowing. Bloomberg’s articles explain very well the why and the because of this. Who were the ones who had every interest not to know and keep the party going? It is the old history of greed. But what is sad is that the ones who should be punished end up being rewarded.
To end this rant, I would like to point out one thing. So far most depressions have ended up in a war. It created a solution to all the problems ( alledgedly). We think ourselves too civilized to take the arms again but I would suggest that you think twice about this before dismissing the idea. Look at Israel/Palestine, Russia/Ukraine, China/Japan or even USA/ South America. How quickly can a situation escalate?Â Of course I am pessimistic here, am I not?
But I can do worse. If there was to be a war…Can we afford it? I am not talking about weapons and money here, I am talking about potentially erasing a generation or two of an indispensable workforce in the Western world. A majority of our population is getting older and we will need young people- to pay for the retirement pensions and to answer the needs of the elderly. If we were to damage our human assets more, what could happen?
Of course we are civilized. Of course. Something will turn up alright in the end and we will win the lottery.Â Good night and good luck.