This Is Not 2008…Too Bad It’s Not the 1930′s! It’s A Lot Worse!

“As bad as 2008 was, I think what will happen this time around will be worse, much worse.”

• This Is Not 2008…Too Bad It’s Not the 1930′s! 
  by Bill Holter, http://blog.milesfranklin.com/ 
  I have made mention many times that the U.S. was the White Knight to the world in 2008.  We were kind enough (shoved down the populace’ throats) to open up our Treasury to the tune of $700 billion, the Fed lent out a hidden $17 trillion while the other acronyms ponied up a trillion of dollars or two more.  Did it work?  Did anything actually get fixed?  As in structurally fixed?  No.  Did we “grow” economically from there?  Actually we have bottom bounced on a lower plateau as many economic numbers have been massaged and actually changed in the way they are “counted.”  A perfect example is that “R+D” used to be considered an expense…now it is considered an asset.
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  So here we are 5 full years out from 2008 and the very same storm winds seem to be blowing again.  Retail sales are slowing, the banks hold an 8 million “shadow inventory” of homes that one day must either be sold for a loss or actually torn down.  Automakers are channel stuffing like never before and the “unemployed” that cannot find a job are simply washed out of the “numbers” after their benefits run out.  State and federal debt levels and ratios are at all-time highs (and lows) while the derivatives markets have never been smaller or less “important” to the “pricing” of things as they are today.  In a nutshell, we are riper today for a 2008 financial event than we were back in 2008.  The only differences that I can see are that this time around the sovereigns themselves are broke AND the sheeple sleep more soundly now…even after being sheared, skin and all back then.
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  This may “look” and feel like 2008 but it’s not.  It’s not because another, bigger TARP plan:
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  1. Wouldn’t be big enough
  2. Would never pass public approval (yes I know, it did not the first time either)
  3. Would actually destroy rather than embolden confidence.
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  As I just wrote earlier, the problem is that there is no longer enough “unencumbered” collateral that can be leveraged.  This is a problem because the only “way out” is to reflate again but there is nothing left to reflate with or “upon.”
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  This is not 2008 because central banks no longer have the room to expand their balance sheets and the sovereigns themselves have little ability to issue more debt.  From another angle, will anyone believe (for more than a few weeks) that bank deposits will be “guaranteed 100%” as they were in 2008?  Or, what will the reactions be when “bail ins” rather than bailouts are used?  If over a week or a weekend, balances are suddenly “pilfered” to save the bank itself…what will be the reaction by market participants?
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  What I am saying here is that 2008 and afterwards was the “haymaker” that should have (according to conventional theory) “knocked out” the financial crisis.  It did not.  The only thing that it did do was buy some time…and make each and every problem that led up to 2008 that much bigger and badder!  I would also like to say that the fraud that led up to 2008 was never addressed and no one (less than a handful) went to jail.  The fraud actually flourished and spread further!  The fraud not only flourished but has become “business as usual” which is another reason…we are now on shakier ground than 2008.
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  As bad as 2008 was, I think what will happen this time around will be worse, much worse.  “Worse” as in our greatest fears back in 2008 will become the reality.  I might also mention that as bad, overbearing and “non Constitution is following” as the Bush administration was, the current administration makes that look like child’s play.  Can you imagine the outrage (not just by the media but by the populace) were an agency under Bush to have amassed 2 billion rounds of ammunition?  Or any of the multiple current scandals that are just “laughed off” and ignored?  The country sleeps…
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  read more!

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