Written for My Father and Mother, whom I love very much though I may not always show it and for whose well-being I care about deeply because they cannot believe that Money=Debt.
Sept 21st 2009 11:39PM PST - A Strachan BC Canada
1) Q1/Q2 US Credit balance only being held up by federal reserve. Debt eating capital to stay alive. Collapse (Q3 results or software virus) ahead.
2) Government has duty to warn citizens collapse imminent. Solution - "Swine Flu Pandemic"
3) "Swine Flu" is a Metaphor. "Great Depression" "Global Mental Crisis" "Currency Crisis" "Software Virus" etc.
Understanding Money=Debt is the key to understanding the scope and scale of the economic shift we are witnessing and living through. It is so enormous it boggles my mind and is beyond the realm of possibility for most people, including my father.
The collapse is a direct result of how debt-monetary systems function, their limited lifespan, and their Achilles heal - they expand and collapse on credit. Earlier this year, Warren Buffet said the economy had "fallen off a cliff." VP Joe Biden said ‘We Have to Go Spend Money to Keep From Going Bankrupt’. Its fall has been slowed, but a crash in Q4 is inevitable and there is nothing anyone can or will do to stop it.
The collapse was accelerated when the Glass-Steagall Act was repealed “Does anyone think it’s a coincidence that less than 10 years after they repealed Glass-Steagall, the financial markets collapsed?” Governments have known world-wide economic collapse was inevitable and have been preparing for years. They had a duty to prepare and warn their citizens as best they could without causing panic. In the week of April 19th 2009, the first “Swine Flu” outbreak was discovered and reported by Google.
What has "Swine Flu" got to do with the current world-wide financial crisis? Everything. "Swine Flu" is a metaphor for the world-wide collapse of our socio-economic system which will cause a "Global Crisis." "Swine Flu" is a pandemic that affects the whole world. The collapse of the debt-monetary system, centered in US, will affect the entire world with bankruptcies, cross-defaults and deflation.
When debt becomes unmanageable, debtors, be they banks, businesses, consumers or governments, sell assets, refinance to take on more debt, or as a last resort declare bankruptcy to clear debt and start again. As of today, the world and its people still have a shrinking window of opportunity to get out of debt and avoid bankruptcy before the market, where they would sell those assets, becomes flooded with supply.
Here are the some facts about current market conditions in the US. Debt to income (DTI) and debt service ratios (DSR) have become so unmanageable it reached a crisis point in 2007 which is why credit and debt are shrinking as consumers/businesses pay down debt or default, but more importantly they can’t access new credit as all major banks are effectively insolvent and unable to make loans. Wealth is concentrating not diluting. Assets are collapsing, income is falling and credit is contracting. The ripple and compounding effect 14,000 job losses a day (according to the US Republican Party as of Sept 16th or ~7,000 a day according to official statistics) is having a devastating effect to credit card companies, auto loans, mortgage holders, tax revenues and so on. California already has over 40% working age jobless. The average work week in the private sector is now 33.1 hours. All US major credit card companies are reporting record defaults from 9%-15%. They are lowering credit and raising interest rates because the consumer based economy (70%) is bleeding to death.
The FHA, which insures 25% of mortgages in the US is currently reporting a delinquent and foreclosure rate of 22.9% and its reserve ratio has fallen below the federally mandated 2% minimum. The federal reserve is reporting record charge-off and delinquency rates of 8.27% (vs 1.59% in 2006) for all loans since they starting accumulating data. The FDIC, which insures deposits, is reporting $10 billion in capital remaining to insure deposits and analysts "rosy scenario" estimate bank failures of 1,000 on bad loans while only 94 have been declared so far. The FHA and FDIC are effectively bankrupt.
It is not only the US that is facing looming bankruptcy, Australia is reporting 1/3 of all mortgages are at risk of default. Airlines are reporting record losses. Fedex and UPS are reporting 50% drops in revenue and 70% decline in profits. Global trade is down. The list goes on and on. In our global economy where every nation is financially interconnected, when the centerpiece, the US financial system fails, the world economy as we know it goes with it.
These losses and defaults, combined with the credit contraction, are unsustainable and bankruptcy of the entire US financial system is inevitable. All major banks, all major credit card companies, the federal government, state governments, the FHA, the FDIC along with many more financial and banking pillars of the US economy are all bankrupt. They are the walking dead. Put simply by Barack Obama "We are out of Money". Once the money runs out, the ticking bomb, the wave of defaults and cross-defaults will wash over the world.
How do we get out of this mess? We can't.
Let’s look at debt to equity ratios and the widely held view that assets can be sold to pay off debt, or just refinance as it relates to Canada, where many still believe that life will carry on no matter what happens in the US. In Canada 85% of family net worth is in real estate. According to the Canadian Payroll Association, if 59% of Canadians missed one single paycheck, by a single week, they wouldn’t be able to make ends meet. ”Worse, half of Canadians can’t even save 5% of their income. Even worse, a majority of our friends and neighbors have no retirement savings and don’t expect to get any”. 80% of Canada’s exports go to the US. When the US financial system fails, Canada's economy will collapse.
As I write this, Canada and most of its citizens are cheerily singing "We all live in a yellow submarine" at the top of their lungs as they rejoice at the return of rising real estate prices. This bubble is about to burst. As Garth Turner prophetically writes "As has happened at several interesting moments in recent history, folks will realize a house is a home, not an investment or a retirement plan."
The collapse of the Canadian and world economy as we know it, is an inevitability that has been building for decades. Our "Minsky Meltdown" awaits.
Credit in the US is collapsing and has been since 2007. It reached crisis point in Q1 and worse in Q2. The only thing keeping it alive is the federal reserve. The Debt-monetary system is now eating itself “Yes the crops are still growing...But not fast enough to supply the required amount of food to feed everyone...So starvation is setting in.”
A collapse in debt signals a depression. The banking and financial crisis is also what distinguishes a depression from a recession. This is a banking, financial and bankruptcy crisis. A declining Dow and GDP signals a recession. That is why with the Dow and GDP up in the 2nd quarter (because of Cash-for-Clunkers and new home buyer incentive) Bernanke can safely say that technically the recession is over. What he didn’t say was the depression has begun.
What we have witnessed over the last year with Tarp, the bailouts, the stimulus is all to delay the collapse of western civilization as we know it and technically governments have made it worse by accumulating more debt. The reason governments have delayed the debt-monetary system collapse are numerous, but principally I think this was done in order to let the school year finish, get some key elections out of the way, US, Japan and Germany for example, and buy time for governments to mentally prepare their citizens as best they could over the summer.
Governments have been telling their citizens a Global Crisis was coming via the "Swine Flu Pandemic." They have not told their citizens a global shift was coming unlike anything in the history of the world because it would likely create panic. They have been warning citizens as best they can and no one can ever accuse them of not bending over backwards in this unprecedented awareness effort. "The Medium is the Message."
The global awareness campaign that something was coming is the “Swine Flu Pandemic.” CBC asks “October Peak?” Economists, analysts, forecasters and others have also been outright warning of economic collapse and a currency crisis on TV, Internet and print media for some time now as part of global effort to build awareness. As just one example of many, Igor Panarin, a Russian academic published a book titled “The Crash of America” in August 2009 and says it will be out of date by November 2009. In the US they have used Glenn Beck/Rush Limbaugh/Alex Jones “Tea Party” protests and many other avenues to warn its citizens something is coming and everything is not as it should be. (Will elaborate in a later post)
There are too many examples of the US government trying to warn its citizens something is coming but here is a gem. On Sept 8th DHA and FEMA announced a partnership with 3.5 million girl scouts of America as part of “September’s National Preparedness Month” encouraging “citizens around the country to focus on becoming better prepared for and more resilient in the face of emergencies of all kinds.”
"Swine Flu" is a metaphor. A metaphor for "Great Depression" "Global Mental Crisis" "Currency Crisis" "Software virus" and others. "Swine Flu" has been compared to the 1918 pandemic and hyped as going to cause millions of deaths if not contained as a scare tactic to warn people something is coming, but it is not mass death (I hope not). “Swine Flu” contagion, spread, symptoms, treatment and duration are all the equivalent of “common flu.” Easily spread, causes discomfort, you will recover on your own and it won’t last forever.
In July the WHO told countries to stop testing for swine flu. In Canada, public Health officials have told doctors to stop testing to determine the type of flu they treat and just assume it is swine flu. Surprisingly Australia, New Zealand and the entire southern hemisphere just had its winter and did not report mass deaths, did not quarantine and did not mass vaccinate its population. Australia announced in mid July it was going to immunize its entire population against the unstoppable "Swine Flu" but didn't. Now as Australia's summer approaches, it announces yet again it intends to implement mandatory vaccination of its entire population starting September 31st against a "second wave" of "Swine Flu."
Presumably then, this "Swine Flu" pandemic, which has been identified in 180 countries, will be much worse as “experts believe that the western world, including Britain, is facing a second wave of the virus.” So the first wave, which was no less harmful than common flu, but the “second wave” will be so much worse as to require mandatory vaccinations of entire populations because everyone will affected?
The first wave was the collapse of Lehman Brothers, mild discomfort, the second wave will be a Tsunami of bankruptcies and deflation that washes over the entire world.
In May, Bloomberg announced the WHO was "investigating a claim by an Australian researcher that the swine flu virus circling the globe may have been created as a result of human error" (those results - Q3, or a sofware virus, are yet to be released.) Last week the UN issued a 47 page report sent to health ministers around the globe requesting “money” or “vaccine” and warning "The swine flu pandemic could kill millions and cause anarchy in the world's poortest nations...If the virus takes hold in the poorest nations, millions could die and the economies of fragile countries could be destroyed." Gregory Hartl of WHO said the report required an urgent response from rich nations "There needs to be recognition that the whole world is affected by this pandemic and the chain is only as strong as its weakest link. We have seen how H1N1 has taken hold in richer nations and in the southern hemisphere. We have been given fair warning and must act soon." Another WHO official is quoted as saying "The money is a trickle, not a flood. It is going to be a struggle. If we are not careful, the virus could destroy a burgeoning economy or democracy."
The Medium is the Message. Sept25th Health Canada is running radio ads warning listeners of a "second wave" of "Swine Flu" come. On Sept 16th Reuters reported that the Canadian government had sent body bags to some remote Indian reserves in Manitoba as it prepared for the winter flu season. On Sept 18th CBC reported a “Swine Flu” outbreak “More than 100 people in an aboriginal community north of Tofino, B.C., have reportedly fallen ill with swine flu, in what's being described as the first pandemic outbreak in Canada's fall flu season, while one death linked the virus has been reported on a reserve near Victoria.” Since school started this fall, Canadian school children have been given take home handouts on how to prepare for “Swine Flu” which includes things like stocking up on medicines and be prepared in case you have to stay in your house for a few days. On April 29th 2009 Canada.com ran an article attributed to Meagan Fitzpatrick of Canwest News Service with the headline "Swine flu incidents at 19 in Canada" On the same day, April 29th 2009 Timescolonist.com ran an article attributed to Meagan Fitzpatrick of Canwest News Service with the headline "13 swine flu cases confirmed in Canada"
As noted previously, in July the WHO no longer collects or reports “Swine Flu” infection rates or deaths anymore because it is “too widespread.” Or as one Canadian doctor told Fraser Health staff last week “flu is flu. It’s all swine flu”
In summary, “Swine Flu” can affect everyone, is easily spread, is contagious, cannot be contained, likely man-made in error, causes discomfort, you will recover and it won’t last forever.
Governments around the world have announced they will “vaccinate” (save) their entire populations to protect them against this “second wave” of "Swine Flu." It is September 21st and they don’t intend to start until September 31st in Australia, which will be the first country to begin vaccinating its population of 21 million, yet CBC News in Canada is asking if “Swine Flu” will peak in October?
What is the message here? Government can’t save you from the second wave of “Swine Flu”
“Swine Flu” is a Metaphor. “Great Depression”, "Global Mental Crisis", "Software Virus"
Once the headlines change from “recession is over” to ”depression has begun” and “economic collapse” then those who cling to their faith and belief that such a thing could never happen may start believing it. Don’t say you weren’t warned something was coming.I expect to start seeing bad economic news in the main street media soon, after the German elections (Sept 27th) are out of the way and second wave of the man-made “Swine Flu” (Q3 results or Software Virus) arrives and are released in October.
The world-wide economic collapse underway is unlike anything in the history of mankind. The path the world has been on for the last 4,000 years is about to be altered. The ship has turned and about to embark on a new course. It is a historical moment unlike anything in the history of the world and we should see it as a privilege to be alive to witness and experience it. Human kind may finally be able to realize self-actualization through a transitional phase, perhaps something like Transfinancial Economics.