Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
US House Prices Trend Forecast 2024 to 2026 - 11th Oct 24
US Housing Market Analysis - Immigration Drives House Prices Higher - 30th Sep 24
Stock Market October Correction - 30th Sep 24
The Folly of Tariffs and Trade Wars - 30th Sep 24
Gold: 5 principles to help you stay ahead of price turns - 30th Sep 24
The Everything Rally will Spark multi year Bull Market - 30th Sep 24
US FIXED MORTGAGES LIMITING SUPPLY - 23rd Sep 24
US Housing Market Free Equity - 23rd Sep 24
US Rate Cut FOMO In Stock Market Correction Window - 22nd Sep 24
US State Demographics - 22nd Sep 24
Gold and Silver Shine as the Fed Cuts Rates: What’s Next? - 22nd Sep 24
Stock Market Sentiment Speaks:Nothing Can Topple This Market - 22nd Sep 24
US Population Growth Rate - 17th Sep 24
Are Stocks Overheating? - 17th Sep 24
Sentiment Speaks: Silver Is At A Major Turning Point - 17th Sep 24
If The Stock Market Turn Quickly, How Bad Can Things Get? - 17th Sep 24
IMMIGRATION DRIVES HOUSE PRICES HIGHER - 12th Sep 24
Global Debt Bubble - 12th Sep 24
Gold’s Outlook CPI Data - 12th Sep 24
RECESSION When Yield Curve Uninverts - 8th Sep 24
Sentiment Speaks: Silver Is Set Up To Shine - 8th Sep 24
Precious Metals Shine in August: Gold and Silver Surge Ahead - 8th Sep 24
Gold’s Demand Comeback - 8th Sep 24
Gold’s Quick Reversal and Copper’s Major Indications - 8th Sep 24
GLOBAL WARMING Housing Market Consequences Right Now - 6th Sep 24
Crude Oil’s Sign for Gold Investors - 6th Sep 24
Stocks Face Uncertainty Following Sell-Off- 6th Sep 24
GOLD WILL CONTINUE TO OUTPERFORM MINING SHARES - 6th Sep 24
AI Stocks Portfolio and Bitcoin September 2024 - 3rd Sep 24
2024 = 1984 - AI Equals Loss of Agency - 30th Aug 24
UBI - Universal Billionaire Income - 30th Aug 24
US COUNTING DOWN TO CRISIS, CATASTROPHE AND COLLAPSE - 30th Aug 24
GBP/USD Uptrend: What’s Next for the Pair? - 30th Aug 24
The Post-2020 History of the 10-2 US Treasury Yield Curve - 30th Aug 24
Stocks Likely to Extend Consolidation: Topping Pattern Forming? - 30th Aug 24
Why Stock-Market Success Is Usually Only Temporary - 30th Aug 24
The Consequences of AI - 24th Aug 24
Can Greedy Politicians Really Stop Price Inflation With a "Price Gouging" Ban? - 24th Aug 24
Why Alien Intelligence Cannot Predict the Future - 23rd Aug 24
Stock Market Surefire Way to Go Broke - 23rd Aug 24
RIP Google Search - 23rd Aug 24
What happened to the Fed’s Gold? - 23rd Aug 24
US Dollar Reserves Have Dropped By 14 Percent Since 2002 - 23rd Aug 24
Will Electric Vehicles Be the Killer App for Silver? - 23rd Aug 24
EUR/USD Update: Strong Uptrend and Key Levels to Watch - 23rd Aug 24
Gold Mid-Tier Mining Stocks Fundamentals - 23rd Aug 24
My GCSE Exam Results Day Shock! 2024 - 23rd Aug 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

U.S. Economy In the Greater Economic Depression Confirmed by GDP Data

Economics / Great Depression II Mar 28, 2011 - 01:55 AM GMT

By: Jas_Jain

Economics

Diamond Rated - Best Financial Markets Analysis ArticleOn all forums and blogs I have always posted under my name, Jas Jain, but in early days of my comments in 1990s I would sign as Rabbi Jazzman (rabbi of morality of financial practices and their impact on the real economy and asset classes, e.g., the stock market and the housing market; with moral tone obvious in my use of language). Here is a quote from the period, July 1998:

"May be you are on to something here... What will happen...? The Greater Depression? ...The glory days of the US stock market may be over for good and in few decades the Chinese might assume the place of the supreme economic power in the world. Shalom, shalom. Rabbi Jazzman"


In 1998, I also concluded that fraudulent financial practices, permitted by the US govt and enforcement agencies, e.g., SEC (Securing Entitlements for Crooks), have guaranteed an inefficient allocation of capital, on which the private US economy heavily depends, on top of the theft of the shareholders, would necessarily lead to a weak economy, long-term, and the US economy would enter a period of long-term growth far poorer than during the Great Depression, which was also caused by such practices that had preceded it, but at a lower degree of fraud. It also became obvious to me that a large number of organized group of economists, including Bernanke, have been lying about the true causes of the Great Depression -- bad financial practices, especially related to lending. I also concluded that, historically, the stock market has been a substitute debt market.

Hence, I started to sign off some of my comments with: It is the debt, stupid! Not diligently and rigorously preventing the fraud since the mid-1990s had guaranteed outcome similar to, or worse than, the Great Depression. Now, after dozen years we have the data to prove that forecast. My forecast was based primarily on the widespread fraudulent financial practices, e.g., stock options, acquisitions, and related accounting practices, at the highest levels in corporate America and evidenced themselves in the so-called stock market, which I termed as the Scam Market, bubble. It wasn't a bubble but a direct consequence of fraud. It continues to be the primary mechanism to defraud the wider public, including thru pension funds.

After the Tech "Bubble" Burst

The economy was officially in a recovery in late 2001, but a very weak recovery. Here are my comments on July 27, 2003:

THERE HAS BEEN NO ECONOMIC RECOVERY, INCLUDING DURING THE GREAT DEPRESSION, WHERE THE YoY NOMINAL GDP GROWTH RATE DID NOT REACH 5% WITHIN ONE YEAR OF THE RECOVERY. WE HAVE BEEN SUPPOSEDLY IN A RECOVERY FOR 20 MONTHS AND THE NOMINAL GDP SHOWS NO SIGNS OF GROWING AT 5%. A "weak recovery," or "sub-par recovery" is like being half pregnant! If the weak recovery lasts long enough conditions would be as bad or worse than during a recession, or depression. For example, a 2% growth in real GDP over a period of 10 years would create conditions worse than the Great Depression! During the worst 12 years of the Great Depression, the real GDP growth averaged 2.83%! But, that was a full percentage point below the trend-line growth rate before the Great Depression.

At the minimum, the nominal GDP growth rate would have to go above 5% and stay there for at least one year for the trend to be revered. That means that the 10-year Note yield must get above 6% [upper limit, my forecast was that it will not get to 5.5%] for a year.

Don't let the e-CON-meisters lure you into the con game of predicting bright future for the US economy. There are far more powerful secular trends (the attached gr aph [updated to the present, see Fig. 1] being just one piece of evidence) that point to the opposite. The recent low in the 10-year Treasury yield points to continuing weak growth in nominal GDP, a very bad sign for future employment, the single most important factor. A GDP growth rate above 3.4% that fizzles after one quarter is no good after a recession. And that is what has been happening.

Nominal GDP Growth

Fig. 1

Continuation of the Fraudulent Financial Practices Became a Necessity

The weak economic "recovery" wasn't going to get GW Bush re-elected. In November 2002, two years ahead of the next election, things were getting desperate and suggestions from trade groups (pool and spas!) that a housing boom could be just the shot-in-the-arm to lift the economy from its funk caught the imagination of the managers of the economy. What was needed was low rates and even lower standards of mortgage lending. Enters on the main stage a big actor -- Ben Bernanke to save the economy from replay of the Great Depression (GD). I wasted no time in concluding that the jig was up, i.e., we were already there, i.e., the conditions already existed.

There is no way to prove the counter factual: Would GW Bush gotten re-elected without permitting the mortgage fraud, beginning in 2003 and continued thru 2007, and would Bernanke be appointed the Fed Chairman in 2006 (a place was held for Bernanke until Greenspan's term expired for good)? My conclusion in 2006 was that the mortgage fraud was a necessity. Here is what I said on 09/04/2006 (See, or Peak Debt):

Let us see, in 2003, Bernanke wanted to artificially boost the economy in preparation for the Bush re-election in late 2004 and his own future appointment. He had read articles by some self-serving economists in 2002, if it hadn't occurred to him, that low interest rates could boost housing and that may lead the economy out of the recession (it was already out of the recession, but didn't feel like a recovery with the employment falling). So, during the first half of 2003, Bernanke, as a Fed Governor, started to publicly talk about the deflation threat and how the Fed can always stop that by "printing money." Thus, the Fed, under Greenspan chairmanship back then, lowered the rates to "emergency" levels when the only real emergency was the Bush re-election. Greenspan was very happy to play along because his own reappointment in 2004 was contingent upon the economy visibly recovering.

All that the Greenspan-Bernanke did during 2003-2007 was to artificially boost the economy and literally borrow from the future employment and growth. The proof is in the pudding. What fraud giveth fraud taketh away!

Annual GDP Growth

Fig. 2

Fig. 2 (Exhibit A for the prosecution) shows miserable failure of policies to manipulate the economy since Reagan, lest we forget Reagan fired Volcker and gave America Maestro Greenspan and his successor GW Bush gave America Miracle-maker Bernanke. Sorry, no miracles. Unless, of course, we call defending fraudulent practices by authorities, and throwing wool in the eyes of the public, miracles. Here is what I concluded on 27 Feb 2006 (See):

I think that based on the above the FRS should stand for Fraudulent Reserve System. It has helped perpetrate biggest fraud on American People by making it easy for bankers and financiers to push debt on them.

The beginning points of the two graphs in Fig. 2 are growth rates during GD and the ending points are the current growth rates over similar periods now. The two graphs clearly show that we have already been in the Greater Depression. And you haven't seen nothing yet. The Greater Depression would last for the rest of your life if you were over 50. The 10-year, 12-Year and 20-year growth rates would go negative at some point in time. No one has power to stop that. The damage, institutionalizing fraudulent financial practices for such a long period, has already been done. The current form of this is allowing mortgage fraud (mortgages that no private person with his, or her, own money would make) by FHA, Fannie and Freddie, all in the name of saving the system. The current system not only doesn't deserve to be saved it needs to be exterminated and replaced with relatively honest financial practices. Lloyd Blankfein is not doing God's work. He is doing Satan's work and people like him need to be locked in jail for the rest of their lives with no communication allowed. They are the carriers and facilitators of financial fraud.

Ten Years of Hoover & FDR, 1930-1940, Against Ten Year of GW Bush and Obama

Now let us look at some shocking facts about our recent hires for the top job.

Ten Years of Hoover and FDR

Fig. 3

There are couple of key differences between the economy of 1920s and 1930s and the one in the recent decades. First, the economy was young and more active on the up side as well as the down side. One can also call this more volatile. Now the economy is old and not very agile. Second, there was lot less government intervention back then compared to now. On whose behalf does the govt mostly intervene?!

Looking at the above figure, isn't the performance of the recent top guys pathetic with all their promises of jobs and growth? GW Bush even bragged about "strong economy" that his policies had created. And Obama has continued all of GW' Bush's economic policies and some more giveaways. During the decade of GD we had 10.7% higher economic growth with 2.4% lower population growth! See (my emphasis):

"The U.S. population over the past decade increased by 9.7 percent, surpassing the 300 million mark to reach 308.7 million, but at a rate slower than recent decades. Since 1900, only the 1930s [7.3%] experienced lower growth than the past decade, which saw growth similar to the 1980s (9.8 percent)."

Had the economic growth under the recent Presidents, GW Bush and Obama, both proven defenders of fraudsters, been the same as during 1930-40 we would have severe job shortages! Defending crooks' interests is not consistent with creating jobs for honest people. Hoover was morally superior man than Obama and the same goes for FDR versus GW Bush. America has a serious problem of having morally bankrupt people at the top of the economy and the politics. Only they can survive the journey to the very top!

Some may say that we don't have soup lines now. Food stamps are the modern version of the soup lines. Also, in terms of employment, as per my best guestimate (data is not available for 1930s), the employment rate for white men between 18-55, as a percentage of all white men in the age group, during the recent slum was not much different from the worst period in GD, 1932-33.

Why Are We In the Greater Depression?

Major depressions in the US, as the country became more industrialized and financialized, have been caused by bad financial practices that have ranged from loose to widespread fraud, which is where we have been for the past 16 years. And there is No Change since Obama. Unless an overwhelming majority of crooks are removed from power and shut in jails, the US economy would continue to get worse, log-term, with few years of artificially inflated growth, at a very high cost, followed by deep recessions.

We have a system that rewards bad people at the very top as well as a significant percent at the bottom. That lessens incentives for honest work. We are not Europe and we are not Japan, we are worse. China, Europe and Japan would fair better over the coming years. They have more responsible governments than ours in terms of looking out for the honest working men and women.

By Jas Jain , Ph.D.
the Prophet of Doom and Gloom

Copyright © 2011 Jas Jain - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

Shalom Patrick Hamou
01 Apr 11, 05:03
☮ La Nouvelle Économie.
________________________ ☮ La Nouvelle Économie. is the only plausible alternative against the rise of the fascist temptation due to the impoverishment of the People and the inexorable decline of his purchasing power and hence his confusion. Everybody want the politic elite ot but what is the alternative economic project? ☮ La Nouvelle Économie. is the only one that overcomes this deficiency of ideas. Participation is FREE and Anonymous. What is your risk? What you got to lose? What is your other option? But the Essential Issue Here is One of Free Insurance Against a Future Potentially Catastrophic Economic and Financial Event. ☮ La Nouvelle Économie. will be launched a few weeks after the Inevitable Crash. The Number of Participants is Growing Everyday! ☮ La Nouvelle Économie. ________________________

Post Comment

Only logged in users are allowed to post comments. Register/ Log in