Economy Caught in Depression, Not Recession … Positive gross domestic product readings and other mildly hopeful signs are masking an ugly truth: The US economy is in a 1930s-style Depression, Gluskin Sheff economist David Rosenberg said Tuesday. Writing in his daily briefing to investors, Rosenberg said the Great Depression also had its high points, with a series of positive GDP reports and sharp stock market gains. But then as now, those signs of recovery were unsustainable and only provided a false sense of stability, said Rosenberg. Rosenberg calls current economic conditions "a depression, and not just some garden-variety recession," and notes that any good news both during the initial 1929-33 recession and the one that began in 2008 triggered "euphoric response." – CNBC
Dominant Social Theme: All is well? Or maybe not?
Free-Market Analysis: In analyzing the memes of the Anglo-American power elite and its seemingly berserker attempts at creating global governance, we face the conundrum of whether what is going on is part of a larger plan or the crumbling of a plan. This is not just a question for the Daily Bell but for readers, feedbackers and others who see the Western world from the standpoint of elite control of financial, military and sociopolitical mechanisms.
When it comes to the economy, we believe the outstanding, or pre-eminent dominant social theme is "the Western world faces an economic crisis but with a steady hand at the top from wise central bankers and with citizens willing to take the tough medicine of austerity all will be well."
But is this so? The Great Recession as it is now called, has spawned numerous cliches in the mainstream media, many of them medical terminology – as the powers-that-be struggle to maintain control of the message. Thus far we would argue they are holding, but barely. And if the larger global economy continues to unravel, we would guess that the more optimistic messages themselves will come under increasing strain.
What is the messaging? The West, and especially the spendthrift European PIGS, are likened to patients with pathologies and the cure, of course, is seen as one of discipline and "getting back to the basics" of thrift and saving. This perspective is commingled, of course, in this day and age, between the state and the individual, so that there is unfortunately no clear distinction. Greece, for instance, is portrayed as a nation of spendthrifts and its government merely representative of the larger problem.
Currently, as we stated above, the viewpoints of many citizens of the West when it comes to the economic crisis are colored by mainstream reporting. (How could they not be?) But this does not mean the reporting is in any sense accurate. In fact, the Bell's perspective, and one that seems to have touched a nerve within the blogosphere, is that the powers-that-be attempt to maintain control of civil society via fear-based promotions that are in a sense marketed by an elite-dominated mainstream media.
These promotions of necessity provide an authoritarian solution that has previously been put in place, often some sort of UN-oriented "fix" via that organization's myriad dysfunctional agencies or affiliations. However, there are also global solutions available via "non-governmental organizations" and quasi-independent bureaucracies set up to enforce treaties, trade agreements, etc. As we regularly point out, people are induced to give up power and control over their lives via these fear-based promotions and thus become more amenable to the command-and-control enterprises that are conveniently provided.
Over time, we've placed one more overlay on our perspective. We concluded after a good deal of study of historical elements that the history of humankind is in large part one of effective communication. Those who wish to control society – and there have been elites trying to do this since the rise of city states – depend on the creation of various memes (and the conflicts that result from such belief systems). These memes (religious, political and military, etc.) generally tell a story that organizes society to the benefit of its leaders.
But once in a while, especially in modern history, communicative technology begins to outpace the themes that the powers-that-be have inculcated. An alternative message begins to circulate and people begin to question not just what they are told day-to-day but even their fundamental or core societal beliefs. These beliefs may have to do with the inevitability of state control, the competence of current leadership, the reality of deities or a deity and many more. It is hard for people to question their core programming but we would argue that during an era of significant communication upheaval, such questioning occurs.
The precursor for such questioning is the availability and information and points of view that have not been available previously due to elite suppression. This may have happened, as the Bell has pointed out during the era of the Gutenberg press (spawning the Renaissance, Reformation, etc.) and it is perhaps happening now as well during the era of the Internet. The process, we would argue, could be so far advanced in the modern era (having moved far faster that we expected) that it may not be reversible. While it would be easy for us here at the Bell to remain agnostic about elite promotions, we have taken up the challenge of trying to analyze the results of the collision between the Internet and elite dominant social themes as we have analyzed them.
We are trying to do what we suggest investors do in the 21st century, which is to evaluate whether elite memes remain believable (and thus viable tools for social organization) or whether they are beginning to crumble. What has been the result? The Internet is a most democratic place; the ever-increasing streams of traffic to the Bell would indicate that our perspectives on the economic crisis are, if not popular, at least compelling to a certain stratum of electronic readership.
We are not surprised, of course. We think such a historical perspective is a compelling one and is far more viable long-term than historical perspectives that emphasize sociopolitical trends, the "great man" theory of history etc. No, for us and for those feedbackers who stop by here (and educate us every day) modern history especially is a struggle between a powerful, monied, familial elite that uses an intergenerational toolkit to help control society and new technologies that broadcast information antithetical to elite theses.
So let us now return to the question we asked at the beginning of this article: Whether what is going on is part of a larger plan or the crumbling of a plan. Having decided NOT to be agnostic, we will answer tentatively, as we have before, that the elite plan insofar as the economy is concerned is "crumbling." There is no way that the powers-that-be in our estimation do not understand fully the ramifications of the fiat-money, central banking boom-bust system that has been foisted on the West over the past 40 years. But we think, as we have stated before, that the elite miscalculated the impact of the inevitable results.
Not for us is the prevailing point of view among the Internet's "conspiracy" sites that the powers-that-be are infallible or all-powerful. Enormous amounts of money and the ability to control governments (which we too perceive the elite has) are great advantages but the invisible hand of the marketplace itself is even stronger than elite control. This is yet a third overlay of analysis that we have offered and a most important one. If one concludes that the free-market itself is overwhelming the elite promotional agenda then further complexities arise and additional judgments have to be made.
It is our humble opinion that a market backlash against the West's central banking economy when combined with the truth-telling of the Internet is causing a historical rupture in terms of elite planning. We think it may even cause the elite to take a step back at some point, and to abandon what would seem their plans and timelines regarding ever-more-centralized Western governance.
We do not believe at this point that the elite is in control of events. It is a fact that the powers-that-be were panicked by the swirl of radicalism and discontent caused by the Great Depression. It is our perspective that World War II was possibly, in part, an elite solution to the discontent caused by the failure of the elite's central banking-oriented economy. But we do not believe that the elite is capable at this moment of fomenting another world war.
The wealthiest, elite families apparently seek control, not more "money." Control, in fact, is an organizational force that likely guides their actions. But they are confronted today by forces beyond their control. The market itself is undermining the West's central-banking (boom-and-bust) economy. And the truth-telling of the Internet is undermining the credibility of the system itself and the rationale for its configuration. In both Europe and America the same question arises: How can tiny groups of men (central bankers) predict the volume and rate of money necessary for complex economies? In fact, they cannot. Central banking is a form of price fixing that ultimately causes queues, scarcity, rationing and economic ruination.
Sometimes those in charge of this perverse system can "re-stimulate" by printing yet more money but not in this case. In this case, as we have argued previously many times, the bust is a generic one. Fiat money itself – and especially the reserve currency of the dollar – has been compromised. Inevitably, some sort of new economic and monetary system is going to arise. We have argued that it may well be gold based, or gold-and-silver-based and we see no reason to revise our perspective.
In the CNBC article excerpted above, we can see questions continue to percolate about what really is happening during this Great Recession. In fact, in America especially, unemployment is estimated at 20 percent or more. (We think it is even higher.) In Europe, the economic crisis has not abated and frustrations are building over "austerity" measures in Greece and elsewhere. Countries like Spain are taking desperate measures to prop up bond markets. Here is what the UK Telegraph had to say on the matter just yesterday:
Spain uses social security fund to prop up the bond market … Spain is putting all its eggs into one basket, and if it carries on like this, we may start to see a lot of Basques and Catalans crowding into one exit. The state pension fund – the €64bn Fondo de Reserva, known as the 'hucha de las pensiones' – is buying Spanish sovereign debt at a vertiginous pace. The financial daily Cinco Dias reports that the share of the Fondo's total portfolio invested in Spanish government bonds rose from below 50pc in 2007 to 76pc in 2009. … Evidently, Spanish savers are underpinning Madrid's Treasury auctions, whether they like or not. It is they who are mopping up the debt along with the European Central Bank as foreign creditors stay away. The Bank of New York Mellon said that its iFlow data on bonds reveal that foreign demand for Spanish debt has "dried up" again after a brief recovery in July. There has also been some "net selling" of French bonds. … We will hear more of that Gallic sub-plot over the next year.
In America the situation does not seem much better. While it is always difficult to divine Federal Reserve intentions, we began arguing well over a year ago (long before it was popular) that the Fed was losing credibility and that it would come under significant pressure in terms of its operations. We would argue this has indeed happened and that the result is increasingly one of stagnation. The Fed, and Ben Bernanke himself, are afraid to take bold steps because of the pressure of the attacks that are underway. The Fed as an institution is somewhat paralyzed at this point. Yesterday an interesting article was issued in the US Philadelphia Bulletin on this matter, as follows:
The Federal Reserve's Historic Announcement … Mark it down. At 2:15 p.m. on Tuesday, August 10, 2010, the U.S. Federal Reserve made a historic announcement. It signaled that the central bank was going to "preserve the size of its balance sheet." The announcement didn't sound all that dramatic, but don't be fooled. In the two subsequent days, the stock market fell over 300 points, and the price of gold rose $20. The Fed's balance sheet, which historically consisted of nearly 100 percent U.S. Treasury securities, has grown in size from about $850 billion to a towering $2.3 trillion (or $2,300 billion) currently. In the middle of the financial crisis two years ago, the Fed expanded its holding of securities by purchasing lower-quality, mortgage-backed debt securities primarily from our nation's domestic banking system. The need for this balance sheet expansion was to provide massive liquidity for our entire financial system. …
The political class in Washington will see the Fed's announcement as a potential gold mine. They will no doubt attempt to mine it for all it's worth. The significantly rising risk is that the accumulation of future government debt attended to this process will result in hyperinflation rather than a garden-variety, modest inflation. Hyperinflation occurs when there is a total collapse of confidence in a currency. A central bank that is willing to simply print money out of thin air to finance unlimited amounts of debt will eventually undermine the confidence in the currency being managed as lenders eventually seize on the realization that they will never be paid back in anything other than worthless paper. The road to hell is indeed paved with good intentions.
In this article we have presented an argument that the current economic system is not rebounding as the mainstream media has advertised. The twin forces of the Internet and the free-market itself have provided a powerful countervailing force to "recovery" (or even claims or recovery) – and we expect this state of affairs to continue. The power elite that has evidently and obviously organized the current Western economic system has a stake in its survival; we would argue that while a certain amount of chaos is appreciated by the elite as it strives for evermore financial consolidation, the kind of chaos that now threatens the system is beyond what was expected.
What can the elite do? A world war would doubtless kick-start the Western world's monetary engine (as books like General Smedley Butler's "War Is a Racket" explain) but in the nuclear age such a war is difficult to mount. The unraveling of the current system may eventually give rise to calls for a new economic system, but this is not the 20th century. A convocation of wise men will only fuel the current anger and disdain that many have for the current central banking economy. The alternative, as we see it, is to take piecemeal steps toward "something else" – and this the elite may be trying to do through the IMF and its SDRs. But even here, there has already been considerable speculation as to what the IMF powers-that-be have in mind. Where has the speculation occurred – on the Internet of course.
The apparent tools of the elite – war, economic chaos and dominant social themes – are increasingly of questionable value in the 21st century. We do not argue that such tools are useless or that the elite will not succeed in maintaining the control it already has. But we do submit that things are not getting any better and that they may even get worse. If they do, the ramifications could be as meaningful as anything that happened 500 years ago with the advent of the Gutenberg press. This is what we think people should be paying attention to. The next few years – even the next few months – could be a critical time for Western economies and even for the larger elite configuration of society itself.