Recession cycle or a Depression.
January 25, 2010
A recession cycle normally lasts about 18 to 24 months. A recession is normally defined as two quarters of negative gross domestic product. Some recession cycles last much longer. An example would be the longest in my lifetime that was from 1979 to 1983 about four years. We had a Democratic President, Jimmy Carter. We also had a super majority of Democrats in the House of Representatives and a majority of Democrats in the Senate as well. This is exactly what we have now in 2010. This long recession cycle was brought on by extremely high interest rates and no economic plan of any kind for the entire four years of Jimmy Carter's presidency. This created a recession cycle that seemed more like a depression than a recession.
The Federal Reserve chairman at that time was Paul Volcker. He was also to blame for the second largest recession cycle in US history next to the Great Depression. They told the people that high interest rates were necessary to bring down an out-of-control inflation rate that was running at 15% a year. But the true reason was huge budget deficits. These huge budget deficits were caused by Congress spending way too much money. This is what they have been doing right now in 2009 and 2010. The huge budget deficits required the Federal Reserve to sell huge amount of US treasury bonds into the system and taking away all the available money for private-sector economy. This is exactly what is happening now.
This situation caused by the massive overspending by the Congress, while the economy was shrinking tax revenues were declining. If you go to library of Federal records and have a look. You will see that Inflation only increased Six months after interest rates would increase. It was the high interest rates that caused the high inflation. Common sense dictates that if you dramatically increase the cost of borrowing money, you will dramatically increase the cost of everything. This is what gave us the high inflation of 15% from 1979 to 1983. That is exactly what happened when Jimmy Carter was president and Paul Volcker was In charge of the Federal Reserve. It was only after interest rates were brought down that inflation came down. Not before, but after interest rates dropped.
The United States economy has always run on a credit system. Depending almost entirely on the banks for everything we buy. Without the banks there would be no capitalist economic system such as we know it. This is nothing new. While Paul Volcker was In charge of the Federal Reserve Interest rates on home mortgages shot up to 21%. All the available money in the bank system going to the treasury bonds to finance the Federal spending, debt problem. There was very little money for loans for public-sector needs. The federal government was sucking up all the available money in the economic system to finance its out-of-control spending. Does any of this look familiar in 2010?
I was in business all doing that time period 1978 until 2009 and I remember Jimmy Carter's presidency like it was yesterday. It seemed to me that the Democrats in charge of all three branches of government at that time were intentionally trying to collapse the capitalist system that this country is built upon. At that time unemployment peaked at 10.3% as reported to the public. But if you look at the federal depository of records the real unemployment number was 13.3% not 10.3%. When Jimmy Carter took office as president the stock market was at 1200. When he left office it was 600. The Liberal fringe news media never talks about this. Unemployment was at 6% when Jimmy Carter took office and went up to 13.3% by the time he left office. This is a liberal Democrat idea of a good economy.
Currently in 2010 president Obama is taking advice from Paul Volcker. This is a worst person in the world to take advice from. Paul Volcker is a poster child for the not so useful idiot. He was the worst Federal Reserve Chairman to serve in the last 40 years. They give him credit for bringing inflation rate down to 6%. But that did not happen until 1986. By that time interest rates on home mortgages have been brought down to 9%. As I stated above inflation did not drop until well after the interest rates fell. It is just a fact if you increase the cost of doing business with high interest rates; you increased the cost of everything. This adds up to high inflation. If you bring the cost of doing business down you decrease the cost of everything as competition keeps prices in check. If this flies in the face of economic theory, that's just too bad, because this is the way the real world works. The only thing that will come of taking Paul Volcker's advice is to extend the recession cycle, much longer than it needs to be.
We are currently in a deep and long lasting recession cycle. We have the worst of all worlds possible. We have a liberal progressive socialist president Barack Obama. A super majority of Democrats, socialist and communists in the House of Representatives. A super majority of Democrats socialist communists in the Senate. I couldn't think of a worse scenario than this for the American people, the economy and for the future of America. The only people that think that this is good for America are people that believe in wealth redistribution or socialism which is communism.
The more capitalist leaning Republican party can do nothing to help the economy or the American people. They are currently in a super minority and can't stop anything the Democrats want to do. The Republicans won't be able to do anything until after the 2012 elections. If they take all three houses of government in the 2012 elections they won’t take office until January 20 of 2013. That's a very long time to wait for any real change to help the economy and create jobs.
If government is not favorable to business you're not going to create jobs if you make it more expensive for business to do business in order for the businesses to survive they have to cut costs. This usually results in job layoffs. That results in the higher unemployment that we see today. What has been done since Obama has been elected president is a war on businesses big and small. One of the first things signed into law was an increase in taxes on small-business back in February of 2009. This makes no sense if you really want to create jobs in the private sector. This is not economic theory is just the facts. I don't deal with or use theory. After more than 35 years of running a business in the real world I know what works and what does not. I did not learn economics just from books. My knowledge comes from real-world experience of running a business and understanding economics better than any economist I have ever seen. Including Paul Volcker, Alan Greenspan and the current Federal Reserve chairman Ben Bernanke. I knew the minute any of these guys make a mistake and I can tell you what the results of their actions will be, six months or year down the road.
Pres. Barack Obama has just declared war on the banks. This is just another big blunder on top of all the Blunders he has already made. The only result of this declaring war on the banks is making things much worse than they need to be. This will extend this recession cycle into a depression over the next 12 months. One week ago president Obama announced they would have a special tax on the banks. This will just take money away from the banks that would normally be available for private-sector bank loans. There is a nine to one banking rule. For every dollar loaned into the public sector it creates nine dollars of economic activity. When the federal government takes 10 billion in taxes from the banks. This will cost the economy $100 billion in economic activity over a 12 month period. Adding insult to injury one week later President Barack Obama takes away all the biggest banks ability to do proprietary trading. This is where banks make most of their profits. With the banks in the Poor financial condition they are in, this is the worst possible thing that could happen to the banks. By declaring war on the banks Barack Obama has declared war on the American people. If it was hard to get a bank loan prior to this Declaration of war on the banks. It will be 10 times harder after these new laws take effect.
These banks that Barack Obama is taxing are the biggest banks in the country. Most of these banks did not need TARP Money but they were forced to take it by the Federal Reserve to provide liquidity to each of the smaller banks that were in trouble. These big banks have paid back all their TARP loans to the Federal Government. Now that they have done that, the federal government wants to take more money in the form of new taxes from them and at the same time restricts them with new regulations that will keep them from their most profitable parts of investment banking for making additional monies that would normally be used to make loans to the public sector. There's no common sense to this. If I wanted to destroy the economy intentionally, this is exactly what I would do to destroy it. This is said to be Paul Volcker's idea. The law is even named after him. It is like I said Paul Volcker is not even a useful idiot. This also shows how Inexperienced Barack Obama really is. This will prolong recession cycle and certainly turn it into a depression.
The banks that cause the problems are exempt from these new taxes. Banks like AIG, Freddie and Fannie, which owe a total of over $600 billion of bail out money. They'll never be able to pay this money back. This is separate from and not included in the TARP money. This is outrageous and appalling to punish banks that did nothing wrong and let the wrongdoers go free with no penalties. This is all happened in less than one week after losing an election in Massachusetts. This was said to be Sen. Kennedy's seat. It was taken over by Republican and Democrats think that by penalizing the banks it will take away attention from socialized medicine and the fact that 60% of the people do not want this.
The general public is misinformed about who caused this bank collapse that came to the attention of the public in September of 2008. It was the Democrats in charge of both the banking committees Chris Dodd and Barney Frank that failed to pass Legislation to regulate Freddie and Fannie from going through or even coming to the floor for a vote. President Bush warned 17 times that there was a problem and that the banking committee needed to do something about it. From 2004 to 2008 even with a $13 billion scandal with these banks nothing was done to regulate them properly and we got the bank collapse in September 2008. President Bush is not in charge of these banking committees. It was the Democrats that were in charge and they did nothing even know they were waned many times there was a big problem back in 2004. But as usual the liberal fringe news media and the Democrats are blaming the Republicans for the democrats own lack of action. This is the truth, research it, don't believe me. Prove it to yourself. This is only part of the reason why we have such a long recession cycle.
These new laws passed by Barack Obama in a war on Wall Street and the banking system will result in huge losses in the stock market over the next three weeks. In just the past three trading sessions as stock market has lost 500 points. That is equal to $550 billion in stock value and that's in just three days. I predict that the market will go down at least another 1000 points over the next few weeks. For every 1000 points that the Dow loses it is said that $1.1 trillion in stock value is lost. As if the economy was not in bad enough shape. Barack Obama had to do this which will make matters much worse for the general public. This will only deepen the current recession cycle. More than 50% of the public invests in stock market with 401(k) s and other retirement Stock investment accounts. These are not the millionaires and billionaires that people seem to hate so much. Only 2% of the working population falls into the millionaires and billionaires category. This is nothing more than class Warfare for which Democrats and the liberal fringe news media loves to play. So as you can see 48% of the Working public will be adversely affected by this, not just for millionaires and billionaires or the big banks. President Obama needs to go back to school and take a course in economics. They say he went to Harvard but it doesn't look that way to me, it looks more like he got his college degree from a box of cracker jacks. Although I do know that Harvard hates America. It's loaded up with liberals who are nothing more than Progressives and or Communists. They all have the same political and economic beliefs.
Pres. Barack Obama is not helping the American people. He is not helping the economy with these new taxes and regulations on the banks. Taking what the liberal news media calls a populist view does not change the economics and the outcome of his decisions. These decisions will only hurt the economy and extend the recession cycle this attack on the banks is an attack on business and his equals an attack on the American people and the jobs market. This will only lead to higher unemployment and more companies not being able to get loans for expansion to hire new employees. This will also lead to more companies going out of business and many more jobs being lost. This will turn the recession cycle into an economic depression over the next 12 months. All the banks that Pres. Barack Obama is attacking are the ones that make loans to the smaller banks. This will have a negative domino effect throughout the entire economy.
For all of Paul Volcker's height, they call him the big man. He is a mental midget and apparently does not realize the consequences of his suggested actions taken upon the banks. You will see the results of his actions in the coming weeks as trillions of dollars are lost in the markets due to president Obama's actions. By president Obama's declaring a war on the banks and the stock market, at the advice of Paul Volcker. There will be trillions of dollars lost and most of that money belongs to the average American in their retirement accounts. They are the ones that will suffer the most because they don’t have as much money to lose. They are not millionaires they are just average citizens trying to save for their retirement.
Thanks to Barack Obama and Paul Volcker they can now kiss their retirement goodbye. This also makes Barack Obama a mental midget for following Paul Volcker's advice. I have no money in the markets of any kind to loose, but this will hurt every American not just people who invest in the stock market. I wouldn't invest one dime in the stock market with these boobs in charge. Politics directly affects the economy. With every action that our politicians take there is a reaction in the marketplace. This will only lead to an extended recession cycle. This will eventually lead into a currency collapse, self-created by the Democrat politicians now in charge due to extreme Multi-trillion dollar deficit spending that goes on as far as the eye can see.
Here is a summary of the Causes of a Recession cycle
Causes of Recession cycle step 1
Government spends too much in deficit spending.
Causes of Recession cycle step 2
Federal Reserve will raise interest to attract Investment money to finance the deficits spending
Causes of Recession cycle step 3
Housing and other industries slow from the higher Interest rates.
Causes of Recession cycle step 4
Banks don’t loan as much when interest rates are high and the overall economy shrinks.
The Recession cycle ends when government lowers taxes decreases government deficit spending. This allows the Federal Reserve to lower interest rates and the economy expands and thus the Recession cycle ends.