Bernanke and pals wanted to recreate the same booming leverage and fiscal insanity of the bubble years. And they’ve done that in a big way. Among their various successes:
§ Commodities are at levels not seen since 2008.
§ Gas prices are at levels not seen since 2008.
§ The US Dollar has fallen to levels not seen since 2008.
§ Bank leverage is at levels not seen since 2008.
§ Microcap stocks are at levels not seen since 2007.
§ Wall Street bonuses are at levels not seen since 2007.
It’s really striking the similarities. And all the Fed and US Government had to do was:
1) Make itself insolvent
2) Bankrupt the US
3) Spend Trillions in Bailouts and Stimulus
4) Trash the US Dollar
So what’s the difference this time around?
Well, first off, the US consumer is in far worse shape than in 2008. The US has lost some 7.5 million jobs since 2007. The U-6 unemployment rate (which accounts for unemployed and underemployed) stands at 16.2%. These folks are in far worse positions to stomach higher fuel and food prices this time around.
Speaking of which, the number of people on food stamps is also up 58% since 2007. However, even this safety net is proving less and less helpful as food prices skyrocket. Indeed, Wal-Mart’s CEO recently commented that the firm’s customers are “running out of money” due to higher fuel prices.
As for those who have been receiving unemployment checks, the situation is getting grim. Some 2.3 million of them have lost their coverage since last year. The Feds claim that the US economy created 1.3 million jobs so only 1 million of the 2.3 are people who lost coverage and have no income. However, everyone on the planet knows the “jobs created” myth is as full of BS as the “recovery” myth.
My point with all of this is the following: we have entered a period quite similar to 2008 all over again. Energy and food prices are soaring. And the US Dollar is collapsing.
The only difference is that this time around, the US economy is FAR more fragile than it was in 2008. The average American has far less to fall back on than in 2008. And there are far fewer people with jobs than then.
On top of this, the US debt load and balance sheet is far FAR worse than it was in 2008. We’re running deficits and debt-to-GDP levels comparable to Greece.
In other words, when this mess comes unhinged it’s going to be much, much worse than in 2008. And believe me, it WILL come unhinged.
And this time, when it does, the Fed will have NOTHING to stop it. The Fed’s already grown its balance sheet to roughly $3 trillion AND used every weapon it has to combat Round One of the Financial Crisis. So when the next round hits this time around, the Fed will be powerless to do anything about it.
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