While You Were Sleeping… The Economy Collapsed

There are a number of half truths and financial fantasies floating around the U.S. today, which may explain why some have decided to throw caution to the wind, adopting a cult-like blind faith in the “unsinkable” American economy. I suspect that the consequences for this error in judgment will become quite clear to most by the end of next year, but until then, let’s examine our current situation, what the government has to say about it, and the reality they wish to gloss over.

It’s nice to maintain a rosy outlook on the economic situation we face. It makes us feel safe. The fact is, though, that we are far from safe, and denying the problem will not make it go away. The MSM’s main drive, at least for now, is to promote a sense of well being. Some of them do it because they believe the markets are driven by psychology and that by creating a positive atmosphere, we can somehow make our troubles disappear through shear force of will. Of course, this is an absurd notion.

Others ignore the facts and spin ideas of recovery deliberately and with malicious intent, because they know comfortable people are not alert, and those that are not alert are easy to surprise, and surprised people are easy to control.

Société Générale tells clients how to prepare for potential 'global collapse'

Société Générale tells clients how to prepare for potential 'global collapse'

Telegraph UK

By Ambrose Evans-Pritchard
Published: 6:12PM GMT 18 Nov 2009

Explosion of debt: Japan's public debt could reach as much as 270pc of GDP in the next two years. A bullet train is pictured speeding past Mount Fuji in Fuji city, west of Tokyo Photo: Reuters

Société Générale has advised clients to be ready for a possible "global economic collapse" over the next two years, mapping a strategy of defensive investments to avoid wealth destruction.

In a report entitled "Worst-case debt scenario", the bank's asset team said state rescue packages over the last year have merely transferred private liabilities onto sagging sovereign shoulders, creating a fresh set of problems.

Overall debt is still far too high in almost all rich economies as a share of GDP (350pc in the US), whether public or private. It must be reduced by the hard slog of "deleveraging", for years.

"As yet, nobody can say with any certainty whether we have in fact escaped the prospect of a global economic collapse," said the 68-page report, headed by asset chief Daniel Fermon. It is an exploration of the dangers, not a forecast.

Under the French bank's "Bear Case" scenario (the gloomiest of three possible outcomes), the dollar would slide further and global equities would retest the March lows. Property prices would tumble again. Oil would fall back to $50 in 2010.

Financial Relocalisation: Direct Way to Fix Credit Crisis | N. Dakota's State-Owned Bank Became the Envy of Wall Street

Credit Where Credit is Due: Direct Way to Fix Credit Crisis

Ellen Brown | Web of Debt

January 11, 2009

Letter to the bank –

Dear Sirs, In light of recent developments, when you returned my check marked “insufficient funds,” were you referring to my funds or yours?

Economist John Kenneth Galbraith famously said, “The process by which banks create money is so simple that the mind is repelled.” If banks can create money, why are we suffering from a “credit crunch”? Why can’t banks create all the money they can find borrowers for? Last fall, Congress committed an unprecedented $700 billion in taxpayer money to reversing the credit crisis, and the Federal Reserve has already fanned that into $8.5 trillion in loans and commitments.1 But the bank bailout has proven to be no more than a boondoggle for a handful of lucky Wall Street banks, without getting credit flowing again.

To understand the real cause of the credit crisis and how it can be reversed, we first need to understand credit itself – what it is, where it comes from, and what the real tourniquet is that has limited its flow. Banks actually create credit; and if private banks can do it, so could public banks or public treasuries. The crisis is not one of “liquidity” but of “solvency.” It has been caused, not by the banks’ inability to get credit (something they can create with accounting entries), but by their inability to meet the capital requirement imposed by the Bank for International Settlements, the private foreign head of the international banking system. That inability, in turn, has been caused by the derivatives virus; and only a few big banks are seriously infected with it. By bailing out these big banks, the government is actually spreading the virus by furnishing the funds for them to take over smaller regional banks.