Armstrong Economics:
The Coming Great Depression.
Why Government Is Powerless
It is frustrating to read so many comparisons of
our current situation with 1929 while watching
policy be set-in-motion to create spending on
infrastructure. Everyone has their hand out
looking for a bailout like a bunch of street burns
pleading for money so they can get drunk or stay
drunk. Almost nothing of what I have read is close
to being accurate. The scary part is depressions
are inevitably caused by politicians who may be
paving the road with good intentions, but are
relying upon analysis so biased, we do not stand
a chance.
The stock market by no means predicts the
economy. A stock market crash does not cause a
Depression. The Crash of 1903 was properly titled
– “The Rich Man's Panic." What has always
distinguished a recession from a Depression is
the stock market drop may signal a recession, but
the collapse in debt signals a Depression. This
Depression was set in motion by (1) excessive
leverage by the banks once more, but (2) the
lifting of usury laws back in 1980 to fight inflation
that opened the door to the highest consumer
interest rates in thousands of years and shifted
spending that created jobs into the banks as
interest on things like credit cards. As a percent
of GDP, household debt doubled since 1980
making the banks rich and now the clear and
present danger to our economic survival. A
greater proportion of spending by the consumer
that use to go to savings and creating jobs, goes
to interest and that has undermined the ability to
avoid a major economic melt-down.
The crisis in banking has distinguished
depression from recession. The very term "Black
Friday" comes from the Panic of 1869 when the
mob was dragging bankers out of their offices
and hanging them in New York. They had to send
in troops to stop the riot. A banking collapse
destroys the capital formation of a nation and that
is what creates the Depression. The...