Banks, Baby Boomers & Business Bust
This is a long post, so settle back into your chair and take in all that is considered here. There's a definite sense that something is truly wrong with the state of the world these days.
Two years into what has been called the most severe economic downturn since the 1930s, the Great Recession of 2007-2009 has been declared "over" in the autumn of 2009 by government officials, Wall Street, and media pundits alike.
I ask, you cannot be serious?
Nowhere does it appear that the economic recession of 2007-09 is over except in the fantasies of those who would dare say such a thing in light of the true facts:
- One of every six Americans are unemployed/underemployed
- There are eight+ million Americans out of work & growing
- Business contraction expands
- Economic output continues to contract
- There will have been 5,900 bankruptcy filings a day for 2009
- Foreclosures continue with residential housing weak
- Commercial real estate bubble is bursting
- Lending by banks remains frozen
- Entrepreneurs & new businesses cannot gain funding
What is clear is this: the generation that has produced the greatest economic crisis since the Great Depression does not know what it is doing, and has to move on and retire, or the future of the country is going to put at even greater risk.
For instance, a September report from the International Monetary Fund showed that the type of recession that the United States is having, one caused by politicians, lobbyists and the financial community, is known to lead to longer term damage to a nation's growth prospects. "the path of output tends to be depressed substantially and persistently following banking crises," the IMF report said.
In short - the future of the country is at stake.
Economic recessions in general often result in lower wages, incomes, higher unemployment, and lost opportunities for the development of human capital - the most important capital of all.
This is called, "economic scarring" and is the feature of this important 2009 study by the Economic Policy Institute.
See - http://www.epi.org/publications/entry/bp243/
Bad Banks, Desperate Fed & The Screwed American Saver
According to my calculations, the world transits from now to the spring of 2011 indicate that unless great shifts are made to infuse younger workers into the economy that the long-term impacts will undoubtedly be so severe that it will take until the late 2020s and early 2030s to correct.
This is because that the generation shift that is now underway is happening too slow, and, as a result, is keeping a greater number of people out of the job markets, forcing the non-creation of new companies, to meet the demands of an aging generation that is consuming ever more resources with massive levels of debt, but creating less - leaving very little for the next generation to build on.
In addition, the policies of the Federal Reserve and U.S. Treasury shows that the push is to force American's to spend and consume rather than to save, which has been the direction of most Americans since the economic crisis began. High inventories from unsold products continue to be a drag on the overall economy, and this over capacity is behind the Fed's moves to keep the "bubble" alive for short term gain.
It will not work.
Amazingly, some large banks, like Wells Fargo, is betting on yet another housing bubble by issuing new thousands of "interest-only" loans deferring the balance of its borrowers between six to 10 years. This bank - the fourth largest in the country - has more than $107 billion dollars in debt of the dreaded "option-adjustable" rate mortgages. "we're banking on the fact the economy will improve and recover over time," says Michael Heid, co-president of Wells Fargo Home Mortgage.
The housing market has tanked, unemployment continues to skyrocket into double-digits and the world has seen about $50 trillion of global wealth evaporate. Just where is the money going to come that will see people rush out to buy houses and commercial properties that were priced much too high relative to their real value?
The reason why banks are not lending is simple: they are scared to reveal the true losses from the folly of investing in the derivatives market over the last 15 years. If the banks return to lending they will have to face the truth behind the immense losses on their books, so, rather than do this, they have tightened lending standards - which is zero - and using the bailout funds from the American people to cushion themselves while Americans on Main Street suffer as Wall Street hands out billions in bonuses to the very people who caused the economic crisis.
Let's be clear: this economic crisis is really a banking crisis, and it started with the banks; especially big banks, whose executives, and lackeys in Congress, initiated the most expensive experiment in the history of the world - with other people's money.
Now that the banks will not lend, the only lender left is the Federal Reserve and U.S. Treasury - both entities are now becoming the largest lender of non-prime loans in the history of the world.
Not many Americans know that over the last seven (7) years the U.S. Dollar has fallen 33 percent, and continues to drop. One economist put it this way:
"In global terms we are steadily getting poorer and poorer and the Fed and U.S. Treasury are happy to oblige. You need to remember that it would be very easy for the Fed to strengthen the dollar. All they need to do is increase the federal funds rate to encourage saving. Yet, the only people that are saving right now are foreigners and many are happy to invest at zero percent rates of return."
Is this a good thing?
"It depends," the economist says. "If you enjoy a weak dollar that is systematically being attacked."
What is happening is that the Federal Reserve is desperately trying to create inflation to get the country out of its massive debt since in a deflationary climate having debt is not a good thing at all. One reason is that asset values are falling as the value of the note stays the same.
"Housing is a perfect example of the problem," the economist said. "Say you bought a home for $500,000 and took out a $450,000 mortgage. That home is now worth $300,000. Say a current buyer purchases a similar house for $300,000 today and takes out a $250,000 notes. You then still have a $450,000 mortgage and the new buyer has a mortgage that is $200,000 cheaper than yours."
So, you can multiply this over a thousands times, and see why there's a housing crisis in this country.
At this time, the Federal Reserve is pulling out all the stops trying to get credit flowing again, but the banks are not biting.
So what will work?
Some economists say that radical means are required to take the reins away from the same bankers who brought us the Great Depression.2:
Nationalize all banks to enforce lending standards - The rational behind this is that by doing so, lending standards can be greatly eased and at the same time the government can directly oversee just how the money is being dispersed. If this is not done, then banks who continue to receive bailout money will continue not to lend at all as they look for banks to consume who can add to their bottom line - making it "appear" as if their bank is healthy while other banks that do receive bailout money continue to dissolve, as is happening now.
It appears that in these times those who are the losers are those who save another economist says.
"If you look at the savings rates at your local banks you are looking at another zero interest rate policy. The notion of dollar cost averaging into the stock market has gone out the window for probably a generation.
"If we were to go back to historical rates of 5 or 6 percent many savers would start storing money especially given the current economic shock. Yet we are doing the opposite. The Fed now is trying to make rates so low that bankers would be forced to lend."
But here is the bad news from the banks: They would rather have a zero percent rate return than face certain losses to bad borrowers who are in debt, foreclosed on, and unemployed.
Back in 2007, I read an unusual fictional novel titled Discipline, written by Paco Ahlgren, a financial analyst who studied quantum physics and spiritualism. In the novel, Ahlgren predicts a "Soviet-style breakup of the U.S.," he says may result from the simultaneous collapse of the equity markets, the failure of the U.S. dollar, and its replacement by competing private global currencies.
What does he think about the current state of monetary affairs?
"There are so many factors at play here," Ahlgren says. "Let's say the Fed makes good on its threat to buy the long end, to hold rates steady at these levels, or even bring them down further. How are they going to do that?
"They're going to have to print dollars and that's just inflationary. I don't care what kind of spin the Keynesians try to put on it. It's inflationary. We're getting into a situation where our government is printing currency and then loaning it to itself. It's just laughable.
"A lot of the TARP money went to institutions that dumped them into Treasuries, but how long will that last?" Ahlgren asks. "How long are managers going to accept these absurd rates of return from a bankrupt government? And how long are they going to perceive Treasuries as safe?
"The U.S. has pledged $8.5 trillion to bailouts -- more than all other programs and wars in our history, in real dollars, combined! We've gone from being the biggest creditor nation to the biggest debtor nation on earth. We're consuming everything, and we're not making anything! We're a nation of spoiled rich kids who sit around and watch television all day. How long do you think the rest of the world is going to continue to lend us money?
"I mourn for the U.S. Dollar," the economist said. "It is a very tough time to be a saver with our current Fed and U.S. Treasury destined to annihilate our once mighty greenback."
A Coming Generational War?
A situation of immense proportions after the economic madness since the early 1990s has come home to roost just before the start of the second decade of the 21st century begins as a aging generation not only consumes huge amounts of current resources for its own enjoyment, but also the future resources of others - at the same time.
What is most interesting in late 2009 is the fact that some of the same people of the establishment who played significant roles in the economic crisis continue to influence policy with incredible levels of ignorance designed to satisfy the current aging generation at the expense of younger generations who will inherit this mess.
Many younger people are very angry with Baby Boomers because they say that not only has this generation created the economic mess, but that they are taking jobs away from Generation X and Generation Y - refusing to retire at a time when most younger people need to get into their own careers to build equity for the future and to lead the country out of economic crisis.
See - http://samueljscott.wordpress.com/2008/06/26/why-my-generation-is-pissed-off/
"When an older generation dies off, its wealth, jobs, and responsibilities are transferred, through inheritance and other means, to the young generation. The next generation uses this capital to obtain jobs, get married, buy homes, raise families, and create more wealth. Then they will die off, and the circle continues. This is how society must function."
See - http://samueljscott.wordpress.com/2009/09/12/the-upcoming-generational-war/
What is amazing about this is that many Baby Boomers, now in their early 70s, 60s, and late 50s, do not seem to be clued in to the immense amount of anger from younger people that is felt about their time as the establishment. Anytime this issue is brought up it is met with immediate defensiveness to evade the issue by any means necessary.
There is the immediate response from among many Boomers that it is not right to "blame all the woes of the world" on one generation, or, will refute the concerns of younger generations with comments designed to avoid all responsibility for their years as the ruling establishment.
A typical defensive response from a Baby Boomer is seen here:
It's as if there is a need to deny the obvious; allowing little insight about this generation's failures personally, while casting blame not where it is due, but onto those who have not been holding any of the reins of of power at the Establishment during the last 17 years. This attempt to deny that any generation is responsible and held accountable is typical of many Boomers today, and it is frightening.
The reason why it is scary is because it feeds into a general denial of nearly everything that is important in these times. Many people have noticed that the Baby Boomers generation is in denial about their own aging, as if it is not happening and feel entitled to not only remain in the same positions they've held for 30 years, but intending on staying put - yet every generation ages. Not one single generation has ever lived forever.
Trend watchers are very concerned about all this as it is estimated that 10 million Baby Boomers will come down with Alzheimer's disease as well as suffering from a host of maladies associated with aging and not prepared to deal with the realities of being elderly.
We find that there are shrinking amounts of primary care physicians able to meet the challenges of the Baby Boomer generation's aging population, and elder care facilities are nowhere near capable of meeting the expected influx of tens of millions of Baby Boomers about to swamp the healthcare system. Little is being said about this, but the time is growing near where reality will set in and these matters must be faced. Time is a very formidable opponent for those who deny it and do not prepare for the passages of life.
We find most Baby Boomers entirely unprepared for aging, and for retirement - stating that they will work until they drop when no other generation in the history of the world has ever done this.
What to make of all this denial?
One non-Boomer put it like this:
"Sure, its a problem when you feel you deserve something you don’t deserve—but there is nothing wrong with acknowledging a legitimate debt. So let’s ask why some people in their 20s might feel the older generation hasn’t kept its end of the bargain…
"For those who just graduated, there was no job. That’s not technically true. There was a job—but somebody older has it and isn’t letting go. It turns out the whole system is rigged. Education and intelligence and everything we were told was important turn out to be worth nothing next to seniority and experience…
"Take health insurance. Decades of pressure to lower wages for new hires and cut benefits means that the employer-provided system means that even if you can find a job, it probably won’t offer health insurance.
"Paying for insurance out of pocket is prohibitively expensive if you’re healthy and coverage is entirely unavailable if you’re not. And if you have a minimum-wage job serving coffee, you’re still getting a chunk taken out of your paycheck to finance a program that won’t be solvent by the time you’re old enough to use it.
"But any effort to change this system is met with seniors screaming about communists taking away their medicare. And if 20-somethings back a legislative initiative that would help them obtain coverage, they’re slackers living in their parents basements. And let’s not even get into the individual mandate in the health-reform bill that will require the healthy and young to subsidize the health-care of their older and generally wealthier parents.
"Should twenty-somethings who have done everything asked of them their entire lives feel like somebody pulled one over on them? Probably—but bad things happen. And hopefully all those years of education taught us enough empathy not to be vindictive.
"Call us gullible—but don’t call us lazy or selfish. If some of us push for a few reforms that could help us succeed even when our parents have dropped the ball—back them, and be thankful that we’re not talking outright revolution."
If any generation should be very keen on what is happening in this light - it should be Baby Boomers, considering the history of this generation in their own establishment wars of the late 1960s and early 1970s.
It is important for Baby Boomers to clearly understand that the generations that follow them - Generation X and Generation Y - are seething with anger at the mess that is being left behind and of the immense resources that have been squandered by a generation that should have clearly known better.
All of the above is a serious problem because it foreshadows trends that will become front and center in the 2010s. This is seen by the global transits that show strong radicalism rising among the younger generations and seething anger at those deemed responsible for creating the mess.
The world transits of 2010s are very challenging. It will be this decade that will be the decade where the aftereffects of the 18 prior years of the Boomer establishment will be felt most. It will be a painful, radical, and stomach-turning decade filled with revelations and seething with anger at the truths behind the economic depression along with its causes, promoters, and authenticators.
The most powerful of the global transits will be those of the outer planets - Jupiter, Saturn, Uranus, Neptune and Pluto - as these celestial bodies in mundane astrology reflect the effects of generational incompetence, corruption, greed and ideological wars that will, when all is said, and done, be shown to have led to the crisis of the next decade.
It has started already, and is now in its early stages. The year 2010 sees the Cardinal Crisis transits that will continue into 2011, and by 2012 through 2015, there will be seven (7) exact squares between Uranus and Pluto that reflect revolutionary and radical battles that originated back in the 1990s and 2000s.
The year 2010 is the great transitional year where many hidden truths begin to be revealed and causes many who would have been more understanding and friendly to become even more outraged at the tremendous wealth and future resources that have been squandered, stolen, and misused to support a generation that sought only their own personal fulfillment - with massive consumption on itself in the short-term - at the expense of the futures of their own children.
All this will come down as the Baby Boomers will have since been shown the door and retired; yet, the tremendous burdens placed on next establishment, Generation X, as well as on the children of the Boomers - Generation Y - will be so great as to usher in a generational war that demands accountability from an elderly generation that is no longer holding all the cards under the mantle of the reins of power.
Each generation has its own time as the ruling establishment, and as such, each generation is judged by its own time in power, its own actions as a generation. This time usually lasts about 17-18 years, and, under this astrological cycle, the establishment of the Baby Boomers, which began in 1993, and that is now coming to an end; indicates that it will be impossible for the Boomer generation to even consider undoing the catastrophic damage it has done to the country, and the world over those years.
Even some Baby Boomers themselves realize this:
See - http://www.wnd.com/index.php?pageId=44881
See - http://www.youtube.com/watch?v=vpNZi9UjmhQ&feature=channel
Another Baby Boomer put it this way about his own generation:
"Some generations are better than others. I think my generation dropped the ball completely, and yeah, I'm sorry. We were supposed to be the generation that learned the lessons of Vietnam, and Watergate amongst other things and yet here we are, in Iraq, here we are in Panama, Grenada, El Salvador, Nicaragua, Kuwait. Here we are after 8 years of corruption and abuse of executive power that makes Nixon look like a boy scout.
We abdicated our responsibilities as citizens while we focused on personal fulfillment. We turned the economy over to the greediest and most corrupt people in our country while we went shopping and focused on our kids resumes.
We watched one corporate crime wave after another inflate and burst bubbles dragging us into one recession after another; and we learned absolutely nothing from any of these experiences.
Now our kids are graduating into an economy in shambles, albeit with impressive resumes. Not only do they inherit a war, they inherit two wars.
We're the only generation in US history to pass two wars on to the next generation.
And now we stand in front of them at graduation and say what exactly? The excuses offered are so banal they're beneath contempt. The only advice we can offer with a straight face is: "don't do what did."