Best of the Week
Most Popular
1. Ray Dalio: This Debt Cycle Will End Soon - John_Mauldin
2.Stock Market Dow Plunge Following Fake US - China Trade War Truce - Nadeem_Walayat
3.UK House Prices 2019 No Deal BrExit 30% Crash Warning! - Nadeem_Walayat
4.What the Oil Short-sellers and OPEC Don’t Know about Peak Shale - Andrew_Butter
5.Stock Market Crashed While the Yield Curve Inverted - Troy_Bombardia
6.More Late-cycle Signs for the Stock Market and What’s Next - Troy_Bombardia
7.US Economy Will Deteriorate Over Next Half Year. What this Means for Stocks - Troy_Bombardia
8.TICK TOCK, Counting Down to the Next Recession - James_Quinn
9.How Theresa May Put Britain on the Path Towards BrExit Civil War - Nadeem_Walayat
10.This Is the End of Trump’s Economic Sugar High - Patrick_Watson
Last 7 days
Is a Deleveraging Event about to Unfold in the Stock Market? - 11th Dec 18
Making Money through Property Investment - 11th Dec 18
Brexit: What Will it Mean for Exchange Rates? - 11th Dec 18
United States Facing Climate Change Severe Water Stress - 10th Dec 18
Waiting for Gold Price to Erupt - 10th Dec 18
Stock Market Key Support Being Re-Tested - 10th Dec 18
May BrExit Deal Tory MP Votes Forecast, Betting Market Analysis - 10th Dec 18
Listen to What Gold is Telling You - 10th Dec 18
The Stock Market’s Long Term Outlook is Changing - 10th Dec 18
Palladium Shortages Expose Broken Futures Markets for Precious Metals - 9th Dec 18
Is an Inverted Yield Curve Bullish for Gold? - 9th Dec 18
Rising US Home Prices and Falling Sales - 8th Dec 18
Choosing Who the Autonomous Car Should Kill - 8th Dec 18
Stocks Selloff Boosting Gold - 8th Dec 18
Will Weak US Dollar Save Gold? - 7th Dec 18
This Is the End of Trump’s Economic Sugar High - 7th Dec 18
US Economy Will Deteriorate Over Next Half Year. What this Means for Stocks - 7th Dec 18
The Secret Weapon for Getting America 5G Ready - 7th Dec 18
These Oil Stocks Are a Ticking Time Bomb - 7th Dec 18
How Theresa May Put Britain on the Path Towards BrExit Civil War - 7th Dec 18
How easy is it to find a job in the UK iGaming industry? - 6th Dec 18
Curry's vs Jessops - Buying an Olympus TG-5 Tough Camera - 5th Dec 18
Yield Curve Harbinger of Stock Market Doom - 5th Dec 18
Stock Market Crashed While the Yield Curve Inverted - 5th Dec 18
Global Economic Outlook after Trump-Xi Trade War Timeout - 5th Dec 18
Stock Market Dow Plunge Following Fake US - China Trade War Truce - 5th Dec 18
Subverting BREXIT - British People vs Parliament Risks Revolution - 5th Dec 18
Profit from the Global Cannabis Boom by Investing in the Beverage Industry - 4th Dec 18
MP's Vote UK Government Behaving like a Dictatorship, in Contempt of Parliament - 4th Dec 18
Isn't It Amazing How The Fed Controls The Stock Market? - 4th Dec 18
Best Christmas LED String and Projector Lights for 2018 - Review - 4th Dec 18
The "Special 38" Markets You Should Trade ebook - 4th Dec 18
Subverting BrExit - AG Confirms May Backstop Deal Means UK Can NEVER LEAVE the EU! - 3rd Dec 18
The Bottled Water Bamboozle - 3rd Dec 18
Crude Oil After November’s Declines - 3rd Dec 18
Global Economic Perceptions Are Shifting - Asia China Markets Risks - 3rd Dec 18
Weekly Charts and Update on Equity Markets, FX Trades and Commodities - 3rd Dec 18
TICK TOCK, Counting Down to the Next Recession - 3rd Dec 18
Stock Market Key (Short-term) Support Holds - 3rd Dec 18
Stocks Bull Market Tops Are a Process - 3rd Dec 18
More Late-cycle Signs for the Stock Market and What’s Next - 3rd Dec 18
A Post-Powell View of USD, S&P 500 and Gold - 2nd Dec 18
Elliott Wave: SPX Decision Time Is Coming Soon - 2nd Dec 18

Market Oracle FREE Newsletter

How You Could Make £2,850 Per Month

Credit Crisis Five Years Past or Five More in the Making

Stock-Markets / Credit Crisis 2013 Sep 16, 2013 - 06:10 PM GMT

By: Nadia_Simmons

Stock-Markets

Wall Street is now reflecting upon the fifth anniversary of the Lehman Brothers bankruptcy and the start of the Credit Crisis. In fact, most are celebrating the belief that the complete collapse of the American economy was avoided thanks to a massive intervention of government-sponsored borrowing and money printing.


However, it is much more accurate to maintain that the Great Recession was only temporarily mollified by our proclivity to re-inflate old bubbles. Therefore, the Great Recession should not be thought of as something that is behind us. Quite the contrary; the last five years have been spent creating the conditions conducive for producing a depression.

It was our reliance on asset bubbles to generate economic growth that caused the Great Recession of 2007. Therefore, to believe that we have truly overcome our problems we should have already weaned the economy from its addictions to debt, low interest rates and inflation. But nothing could be further from the truth.

Our central bank pushed down interest rates to one percent during 2002-2003 and that was the primary contributor to the creation of the housing bubble. Now the Fed has resorted to providing a zero percent overnight lending rate from December of 2008 until today. The monetary base has jumped from just $800 billion, before the start of the Great Recession, to $3.7 trillion--and it's still growing at a rate of one trillion dollars per annum. The money supply is back to the same growth rate as witnessed during previous bubbles. Our nation's debt is now at 107% of GDP and the aggregate debt now stands at 350% of our annual output--the same level as it was at the start of the Credit Crisis. Home prices are back rising at the same double digit clip as they were during the height of the real estate bubble and stock prices are up nearly 20% YOY on little or no earnings and revenue growth. And, keeping in line with our tradition of lending money to people who can't pay it back, subprime auto loans now make up 36% of all car financings.

Yet despite of all the above facts, most investors now believe our problems are behind us and interest rates can rise without causing a slowdown in growth. But if that were indeed the case, why is it that the Fed is still conflicted over whether or not the economy can withstand even a slight reduction in its $85 billion worth of monthly counterfeiting? It seems they are tacitly admitting that our GDP growth (anemic as it may be) is still contingent on the perpetual growth of asset bubbles, debt, low interest rates and money printing.

The truth is that the U.S. economy is more addicted to the artificial stimuli provided by government than during any other time in our nation's history. Aggregate debt levels, the size of the Fed's balance sheet, the amount of monthly credit creation and the low level of interest rates are all in record territory at the same time. This condition has caused the re-emergence of bond, stock and real estate bubbles all existing concurrently. If investors choose to believe this is an economy that is on a sustainable path they can do so at their own peril. Disappointingly, it is much more probable that the government has brought us out of the Great Recession only to set us up for the Greater Depression, which lies on the other side of interest rate normalization.

Gold mining shares are currently struggling under the weight of rising real interest rates. However, the steadily weakening economy should soon end the Fed's talk of reducing its asset purchases. If that is indeed the case the PM sector is getting set to make a significant and substantial advance.

Michael Pento is the President and Founder of Pento Portfolio Strategies and Author of the book “The Coming Bond Market Collapse.”

Respectfully,

Michael Pento
President
Pento Portfolio Strategies
www.pentoport.com
mpento@pentoport.com

Twitter@ michaelpento1
(O) 732-203-1333
(M) 732- 213-1295

Michael Pento is the President and Founder of Pento Portfolio Strategies (PPS). PPS is a Registered Investment Advisory Firm that provides money management services and research for individual and institutional clients.

Michael is a well-established specialist in markets and economics and a regular guest on CNBC, CNN, Bloomberg, FOX Business News and other international media outlets. His market analysis can also be read in most major financial publications, including the Wall Street Journal. He also acts as a Financial Columnist for Forbes, Contributor to thestreet.com and is a blogger at the Huffington Post.
               
Prior to starting PPS, Michael served as a senior economist and vice president of the managed products division of Euro Pacific Capital. There, he also led an external sales division that marketed their managed products to outside broker-dealers and registered investment advisors. 
       
Additionally, Michael has worked at an investment advisory firm where he helped create ETFs and UITs that were sold throughout Wall Street.  Earlier in his career he spent two years on the floor of the New York Stock Exchange.  He has carried series 7, 63, 65, 55 and Life and Health Insurance Licenses. Michael Pento graduated from Rowan University in 1991.
       

© 2013 Copyright Michael Pento - 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.

Michael Pento Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

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

6 Critical Money Making Rules