The Politics of Economic Depression

You don’t have to be a conspiracy theorist to know that the U.S. economy is entering a recession that may result in a larger Depression, of the type we experienced in the 1930’s. In addition to the economic considerations that we must now contend with, we face a second problem that’s just as harmful.

As the economy fails, our elected leaders will be tempted to use the resulting national fear and and individual misery to their advantage. Never mind the fact that most of these politicians and their cronies had a hand in the fiscal mismanagement that is going to hurt us. They’ll insist that they have the answer to our woes, which will come in the form of more government.

Critics of the recent Republican administration will counter that GOP policies only made things wrose. For the most part, they'll be right. Since 1994, the Republican party has been anything but fiscally wise in its policies. In many respects, George W. Bush has out liberal'd the liberals in matters of money management and the growth of goverment. Even so, the larger trend has meant that both parties are guilty of bringing us to this horrible moment in our history.

The overall trend in centralized power at the Federal level hasn't been hard to identify. It's been observed by many of ATS, and elsewhere, for a very long time. I'm still of the opinion that you won't find a more real conspiracy than this. The terrible fact of the matter is that our political elites know what they've done to us, and they have every intention of exploiting the opportunity they've created.

Using the threat of financial failure as leverage, we can expect to see certain members of the conspiracy take a more active role in public life. Some will be people you've heard of. Many will not. The institutional forces that drive this hidden agenda will cause some members of civil service to be recruited. Others will simply be bullied into not bucking the trend.

It's been two years since I made my case in The Shape Of Things To come, and we're now on the verge of seeing it all play out. The hidden politics of economic decline are no longer being practiced. Power brokers at all levels are now acting out in the open. Tehre's really only one question left to ask. How does it all play out?

That's what I'd like to discuss with you in the weeks and months ahead. Most will be preoccupied with the Presidential elections. Others will be too busy with their daily lives to notice that this trend is cresting. The issues we face go beyond radicalization and revolt, with the potential for coup de'tat. In the years to come, as conditions deteriorate, we'll wrestle with social issues and questions of personal philosophy that could affect our national future.

My goal is dialogue. Don't just read what I write. Share your thoughts, and let's see what happens.

The potential for U.S. economic collapse now seems more real to me than at any other time in my life. As it stands, we are heading in to a recession that may be deeper and longer than anyone suspects.

What is a recession? If you ask an economist, you won't get a straight answer. See this example. In school, they taught us that a recession was caused by a slow down in consumer spending...which...caused a slow down in business activity.

Why does consumer spending slow down? One word. Inflation. As this article points out, there are two things that make up "inflation."

Part One:

"An increase in the amount of currency in circulation, resulting in a relatively sharp and sudden fall in its value and rise in prices: it may be caused by an increase in the volume of paper money issued or of gold mined, or a relative increase in expenditures as when the supply of goods fails to meet the demand."

The recent hosuing bubble in the U.S. was made possible when too much credit was made available. The resulting spike in home prices had the net effect of putting too much currency in to the economy, which drive up the prices of many things.

Part Two:

2) "A persistent increase in the level of consumer prices or a persistent decline in the purchasing power of money, caused by an increase in available currency and credit beyond the proportion of available goods and services."

The recession we now face will be 'propelled' by this over abundance of credit and dollars. It won't go away unil the bad debts and excess credit have dried up and the dollar has increased in value enough to allow the average person to afford a stable and 'safe' lifestyle.

There are only two ways for the bad debts to go away. the major banks that own those debts could eat the losses, or; they can be bailed out by the U.S. taxpayer. The recent Bear-Stearns bail out indicates that the Federal Reserve intends to use taxpayer money to prevent these businesses from failing under the load of their bad debts.

Banks and speculators aren't the only people and institutions that will be hurt by the recession and depression that follows. Many ATS members have written quite a bit on the subject of predatory lending. I don't want to duplicate their work. I will say that the home loan failures and personal credit bankruptcies that result will play their part in this economic disaster.

Over the next two years, American consumers will have less spending power, which will mean they'll be buying a lot less. Entertainment budgets will go away so that the average family can keep paying their utilities and other bills that make it possible for them to keep their jobs...if...they keep their jobs.

As the economy fails, the Federal treasury will take in fewer tax dollars. that means they won't have as much money on hand for company bail outs. We should assume the Fed will resort to credit, as many consumers did. In the long run, Uncle Sam will be forced in to bankruptcy. When that happens, you'll begin to see the worst of a Depression that could last for ten years.

Under these worst-case conditions, we should expect the Federal government to do something drastic. The Federal Treasury may choose to default on its debts and issue a new currency. This could serve the interests of many corporations, which have since moved their headquarters to Dubai and other non-U.S. locales.
As many ATS members have pointed out, this would easily be the moment when the "Amero" is put in to service.

There is a school of thought among certain conspiracy theorists who believe that this crash is deliberate. They contend that this planned depression is going to pave the way for the creation of a North American Union. In purest political terms, this is possible when one considers that a shattered economy would be much easier to manipulate than one which is healthy and robust.

I would say that it is safe to say that the reduction in consumer spending is world wide. Every body is feeling the pinch of higher fuel and living costs . IMO it is likely that there will be recessions world wide the difference being I don't think that there will be total economic collapse every where. Justin if your predictions are correct then China will inherit the mantel of the Worlds number one economy and there will be a period of adjustment.

Originally posted by xpert11
I would say that it is safe to say that the reduction in consumer spending is world wide. Every body is feeling the pinch of higher fuel and living costs .

I have to disagree with you there. There are many countries that are booming now. What we are witnessing is a transferal of wealth. Notice I wrote 'wealth', not money. Citizens of industrialized countries will feel the pain the most due to the fact that they have more debt. This is where countries like India and China etc will have advantage. They have booming economies and the people have savings. The Indians buy gold and the Chinese like silver. They don't have much faith in banks and 'credit' is a new thing.

It is my belief that we have already become part of the global system which is why we are all being forced to pay the same prices for things. It's total control of the market. Global fascism/socialism, they are both the same really.

Deessell you are correct concerning India and China. Here in New Zealand there has been a slow down in consumer spending as people feel the pinch of rising fuel and living costs . IMO the US is paying the price for not adapting to the global economy. If you fail to hop on or get good seats on the the global economic train you will be left at the station . Of course there still is the US insane fiscal practices .

The only way I see the depression going global is if China lack of environmental controls catches up to them.

[edit on 14-4-2008 by xpert11]

Good to see you active on the main forums again Justin.
I resonate with the idea concerned about the this next jump in economics becoming far worse than the crash of yesteryear. Simply put, the complexities are far wider reaching in its global implications. The credit boom or as it is more aptly named 'stampede' since then has all but ruined the very notion of a free society. Our dependency upon the Fed pumping enormous amounts of paper fiat into the economy is only shadowed by the growing amount of skyrocketing debt world wide and the implications of these types of foreign debt being 'called' is beyond frightening. Obviously it has been a shell game of monumental proportions. The end result will be far more devastating than the crash of 29.
Our elected leaders created a fear based National panic Syndrome which keeps the consumers on edge at all times and know well that unless they create stress, people will become wise to the real situation and put an even greater stress on the big bail outs. They are walking towards the door two by two and side by side full well knowing that they are the only ones that will be escaping the great floods.
One more thing to consider is that in 29 people were self sufficient for the most part and today completely reliant upon goods and services, electricity and gas for their basic survival.

Doesn't it astonish the mind that industrialized countries are all tremendously in debt?

To whom? For what?


Well, banks. Because this is where our money comes from. And they want more money back than they created. More than exists.


To keep paying off old debts, new loans are taken out. In essence, paying old debts with newer, bigger ones. The money system forced on these countries leaves its citizens with NO CHOICE.


Some say "Well, don't borrow. Don't use credit cards." An individual can do that, but a whole country cannot. The way the system is designed mandates the public going into debt just so they can use money to buy and sell with. If as a whole the country stays out of debt, then as a whole the country has NO money to buy and sell with.


Money as debt

Google Video Link

Fiat Empire

Google Video Link

Freedom to Fascism

Google Video Link

The Creature from Jekyll Island

Google Video Link

Welcome all to this discussion. I reget that much of what I predicted has come to pass. For the last two years, I've limited my discussion to polcy and bureaucracy. As our economic decline became more obvious, I thought it was necessary to talk about the hidden politics of economic decline.

Our leaders have known this downturn was coming for quite some time. There are two schools of thought on the matter.

a) That they intended this failure to happen so that hey could exploit our fears and centralize power.

or...

b) That this whole thing is the end result of stupid people acting stupidly.

In my opinion, there's too much collusion between governemnt and big business for this economic slide to be an accident.

Great to see you active again Justin. If you can tell from my recent posts i've been almost obsessed with markets and the credit crisis since it started. I believe that we are repeating alot of the mistakes ( or actions if you are of the deliberate collapse thesis) that lead to the great recession. History does not repeat but it often rhymes. I'm starting to see rumblings in the bond market that really scare me. The financial institutions almost all have encumbered balance sheets and are only solvent currently due to access to the Fed's money. They must instigate something that lets them restore their balance sheets. A bond market collapse would allow them to restore balance sheets by swooping in and buying up treasuries.

I'm currently studying what happened to commodities during the Deppression and trying to get a handel of what is going to happen to them.

I've seen a couple of people say that in this long cycle, the US sits where Britain was during the first depression, and china is sitting where the US was.

What do you see happening near 1-3 months, intermediate 6-18months and long term 18 + months economic wise.

Hello jefwane, it's good to meet you.

Originally posted by jefwane
Great to see you active again Justin. If you can tell from my recent posts i've been almost obsessed with markets and the credit crisis since it started. I believe that we are repeating alot of the mistakes ( or actions if you are of the deliberate collapse thesis) that lead to the great recession. History does not repeat but it often rhymes.

It has been said that those who don't know their history are doomed to repeat it. Like yourself, I've been interested in the economic side of this thing for quite some time. You've seen my work in the other threads, so I won't bother quoting it here.

It's hard to know if this collapse is deliberate. I say that its deliberate in that no one in the Bush administration has made an honest effort to deal with this problem. They could've let the housing bubble burst in '02 OR '04, depending on how you run your numbers.

They could've reformed the banking laws at any time prior to '06. They couldn've done a lot of things, but they didn't. That says to me that they saw this coming, and decided to exploit it.

Originally posted by jefwane
I'm starting to see rumblings in the bond market that really scare me. The financial institutions almost all have encumbered balance sheets and are only solvent currently due to access to the Fed's money. They must instigate something that lets them restore their balance sheets. A bond market collapse would allow them to restore balance sheets by swooping in and buying up treasuries.

In my published work, I determined that bonds would be the only refuge ONCE the credit market had failed. T-bills won't be worth having, and the voluntary acquisition of Savings Bonds will dry up. As I write, that's 2-4 years out. Expect Bernanke to be replaced. Expect the NEXT Fed Chair to tell the bankers to eat the bad debt until its mostly gone. The bond market collapse will essentially happen with Federal approval. Watch the litigations, and you'll see what I mean.

Originally posted by jefwane
I'm currently studying what happened to commodities during the Deppression and trying to get a handel of what is going to happen to them.

The short answer is that they'll become too expensive prior to the financial collapse. Blame the speculators, who will be leveraged to the hilt. Prices will fall like a hot rock, but nobody will have credit to finance improved production or new product development. Expect the Fed to reach for FDR's playbook. You know how well that turned out.

Originally posted by jefwane
I've seen a couple of people say that in this long cycle, the US sits where Britain was during the first depression, and china is sitting where the US was.

That's a fair assessment for just one reason. The Brits had money, but they had no labor and no heavy manufacturing. Today, the Chinese have both, as we once did.

Originally posted by jefwane
What do you see happening near 1-3 months, intermediate 6-18months and long term 18 + months economic wise.

1-24 months out, recession. 12-24 mounts, out, unemployment increases by 3%. 1-36 months out, comodities boom, credit dries up, and the housing crisis bottoms out. 36+ months out, the depression hits. 2014 becomes the year of greatest misery before we have any shot at climbing out of the hole we dug with our own hands.

I've also noticed that Volker has crawled out of his crypt lately. It appears he is one of the main economic advisers to Obama. A blunt former Fed chairman takes on Bernanke. Take heed of what he says I'm looking for a source right now but all is not as it seems with Volker, apparently he's pushing for a global currency on the other hand while criticizing actions of Central banks.

Mr. Volker is an blast from the past, to be sure. A lot of ATS member have speculated that the new currency threat may be the activation of the "Amero." The very idea of the North American Union now seems to be more plausible than every before.

Hey Justin, did you notice that back in December of last year the Treasury lowered the amount of Series EE and Series I savings bonds that an individual could purchase yearly? It was changed from $30,000 to $5,000 yearly. I think this is probably proof that they know what's coming. Here is a link.

Dept of Treasury

I buy these for my kid, maybe I should be buying some for me as well.

I recall reading something somewhere about that. It could be that the Fed was trying to prevent a stampede in to those bonds. As things get worse ,tehy may be one of the best shelters. I think it's going to be all about wealth preservation, in the not too distant future. Gold and silver will be out of reach for he avera guy within two years. What's left? Double E bonds.

My Perspective

I am all for giving third world countries access to first world markets . I do find it hard to put myself in a position to consider the NAU because to start with an ocean separates New Zealand from its neighbours . The illegal alien problem in the US means that there is no incentive for Mexico to produce products for the US market . If US didn't suffer from the illegal alien problem the US manufacturing sector would have moved to Mexico rather then China .

If US auto makers are anything to go by then the workings of the US economy isnt geared up for free trade to begin with.

With commoditie procies going up across the board and around the world, I'm wondering if our current free tade polcies haven't somehow made things worse by encouraging such unchecked and rapidly accelrating growth.This may be good for the corporations, but it's also being bad for the average consumer.

When it hits t,eh depression will be world wide, and it could be harder to get out of than tk was in the 1930's.

Justin if you are saying that the opening of markets has led to higher oil costs due to increase in demand from China and India then I cant disagree . Another issue that is seperate from the factors already mentioned. I am convinced that the corporate culture of CEOs getting massive pay packets regardless of performance is unhealthy and unsustainable . In my view such a cultural can only lead to the down fall of the corporate world in the long term.

There isnt sufficient maturity amongst the corporate world or its supporters to deal with this issue. When the corporate world does fall to bits either by itself or combined with other economic factors I expect to the rise of unions and other left wing militant organisations. Even just peaceful protests and organisations will feel the squeeze .

Note by militant I mean the likes activists protesting rather then armed insurgency . Think of economic versions of Greenpeace . One ill rational extreme thought process will be replaced by another.

You make a good point. In talking with Don, I've decided to start a seperate discussion thread that relates to speculation. There's a lot going on in the anreas of currency and commodity speculation. Don has convinced me that this topic needs a seperate thread, which I will start soon. There IS an important distinction to be made between the corporations, and the people who speculate in currency and resources. More soon.

I note with some interest that the American mainstream media is going out of its way to scare us with stories of rice hoarding. Do any of you know anyone who is doing this? Do you think it's time to start stocking up? If so, what are you putting aside?

A little news on the bond collapse front Justin. It looks like Japan, who as I'm sure you know is the largest foreign holder of US debt, is reconsidering the value of treasuries due to dollar decline.

From Bloomberg

Japan owns more Treasuries than any other nation. After raising their holdings by $9.2 billion to $620.6 billion between March and July 2007, Japanese investors trimmed that stake by $34 billion through February, the Treasury said April 15.

Also what is your take on the negative non-borrowed reserve number referenced in this ATS thread.

www.abovetopsecret.com...