The deleveraging and deflation haven’t even gotten into full swing yet.
By Daniel at 31 May, 2009, 11:23 am
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There will be TRILLIONS OF DOLLARS of additional writeoffs on bad loans in all sectors globally. Additional losses on residential loans here in the US will easily run another $2 to $4 trillion. Interest rates will rise which will help curb additional debt. The Federal Reserve is now powerless to do anything about increasing interest rates, but the good news is that increasing rates will help stop the wasteful deficit spending and force politicians to start dealing with making cuts which is what they should have been doing all along, rather than vastly increasing spending.
We have been living in a TOTALLY ARTIFICIAL DEBT BASED ECONOMY since the early 1980s when the economy would have corrected during the 1981-82 recession had it not been for the massive increase in debt. Prices were coming down, inflation had been halted, and equilibrium was returning. Instead government launched out on the biggest increases of debt in history coupled with huge shifts in the tax system favoring corporations and tax avoidance and the deficit started balooning from $1 trillion to the now $11 trillion amount.
Government hiring and salaries and pensions skyrocketed and no attention was paid to balancing the books. Then when it slowed down in 2001 the debt engine was revved into full gear for real estate loans and now we have the current debacle of the most massive debt ever seen in the history of the world. This debt cannot be repaid. We cannot inflate our way out of it. It will deleverage and is deleveraging and prices must come down across the board relative to incomes so we reach a stage of equilibrium and balanced books once again.
-A.P
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