Sunday, December 27, 2009

The Easily Predictable January Crisis

Max Keiser has said the next economic crisis will occur soon after Goldman Sachs pays out its employee bonuses in January. Consider the following:

1) My regular readers know that I have found the dancing around the rise in the debt limit issue to be most revealing. It was first announced as 1.8 trillion dollar which was raised to 1.9 trillion but was changed to 290 billion which is barely enough to run the federal government until January 2010.

At that point the administration and the Congress can threaten to shut down the government if we do not approve an increase in the deficit that is larger than last year's 1.885 trillion dollars. The 2009 budget deficit was 1.417 trillion. If you include off budget items like the Bailouts, you arrive at the more accurate 1.885 figure which is in excess of 150 billion dollars a month.

2) I also have reported that the federal government has been fudging unemployment figures by two means. One is to report a narrow definition of unemployment that does not include the 9.8 million Americans forced to work part time who want and need full time work. The narrow definition of unemployment is called U-3 and the broader definition is U-6. The narrow definition of unemployment is reported as 10% and the broader definition is reported as 17%,

In January the federal government will be eliminating the birth death model which is one of the government's favorite fudge factors they use to make the unemployment rates appear to be better than they are. The birth death model refers to the cycle of the creation and destruction of small businesses. The government assumes that there are lots of new small businesses out there hiring lots of people. In this job market we all know that this is a lie. This means the elimination of the birth death model in January will dramatically make our unemployment situation appear to be the crisis it really is. Consider this: Video: Depression Stories: Former Truck Driver (Interview) These men are in Florida and say their official unemployment rate is 13% but the real rate is 20% or more.

As Rahm Emanuel said, never let a crisis go to waste. When the January unemployment rates are released with all the retail store layoffs and the fudge factors are taken out, the new unemployment rates could reach 19% and be used to stampede the public into passing a Second Stimulus bill to cure what ails us not that the original 787 billion dollar Stimulus cured anything at all.

Our problem is that Wall Street shipped 5,000,000 jobs overseas through NAFTA and outsourcing. We also added 28,000,000 to our population mostly through immigration in the past ten years while losing 7,000,000 jobs since 2007. We have started to adjust to the shutting down of our production lines by laying off workers in supply industries and in retail. We have millions more layoffs ahead of us. Next year we could be laying off millions of federal, state and local government workers.

These threatened state budget crises will be added onto the unemployment problem. Please note that the administration and the Congress want to pass Amnesty for Illegal Aliens which will make our current unemployment crisis far worse than it presently is. Granting citizenship to 22,000,0000 or more illegal aliens will allow them to bring their children, parents, spouses and other relatives in to this country.

Due to population increases we are supposed to be creating 150,000 jobs a month to keep our unemployment rate at its present level. I recently explained this to a rather nice looking black woman who had an eight year-old daughter. The woman was employed but I pointed out that we had to create 150,000 jobs a month for the next 120 months plus rev up our economic activity enough to lift 9.8 million men and women from part time to full time work before we could even start to make a dent in our unemployment rate sufficient to have enough jobs available for her daughter when she graduates from high school ten years from now.

3) The 23.7 trillion dollar in Bailouts we have paid out to date did nothing to solve our crisis but has funded tens of billions of dollars in bonuses to the people who created this crisis when they invented mortgage backed securities and credit default swaps and repealed the Glass Steagall Act.

In January the banksters can easily bring forward a trillion dollars in bad mortgages. Please consider this: All Hail The Grand Poobah; Blank Checks For Fannie and Freddie Current law allowed the government to spend another 300 billion dollars on bad mortgages but apparently they think that is not enough so they are going for unlimited Bailouts for mortgage loans that the banks knew were bad when they took the applications.

The bankers and their overly paid employees in Washington will likely try to scare us into a second round of Bailouts in addition to the second Stimulus plus some money for the states to grease the skids for this planned emergency spending in January.

As I said earlier this year, when the Stimulus, Spending and additional war funding bills were passed, we will not be able to sell all those bonds. I was right. We have not been selling bonds to foreigners. What we have done is to make the Federal Reserve create more than a trillion dollars to buy our bonds.

When we borrow yuan from China and yen from Japan, we get to buy things from them with their money but when we create money to buy bonds all we get is higher prices and rapidly growing federal debts plus a looming rapid increase in our annual 700 billion dollar interest payments that will, as designed, reduce us to debt peonage.

That is our crisis. It was created by the banks in order to reduce us to slavery. I would like to suggest that instead of another Bailout we take over the Federal Reserve bank and fire everyone in Washington with any ties to Goldman Sachs, the Bilderberg Society, the Council on Foreign Relations and the American Israel Public Affairs Committee.

This was originally posted at my new blog on 12-26-2009 which is where I post six days a week.