The Coming Depression Editorial Staff (original story here)

“Yes, coming soon says Martin Weiss in his “7 Major Advance Warnings,” which is “bound to have a life-changing impact on nearly all investors in the U.S. and around the globe.” His new Weiss Ratings warnings are the “most important” in a 40-year career. The stress on Wall Street banks will force them back to Congress for more bailouts. “

Warning eight: No new bailouts. That will push the economy into a deep recession.

Then what? New Glass-Steagall? Not enough. Tax the rich? Not enough. Perp walks? Not enough. Presidential commission? Useless promises. Occupy Wall Street will fail without a fundamental constitutional change. No compromise. Or Wall Street wins, again. We go back to the same free market, deregulated, too-greedy to-fail, conservative Reaganomics policies that have been destroying democracy for a generation.

All this was so obvious, so predictable. America is at a crossroads. Occupy Wall Street buildup has emerged as America’s last great hope to restore democracy. Last week when USA Today called the Occupiers a “ragtag assortment of college kids, labor unionists, conspiracy theorists and others” hinting they’re a flash-in-the-pan “devoid of remedies,” I smiled, reminded of that famous painting of George Washington crossing the Delaware on Christmas 1776, leading what historians also called a “ragtag” Continental Army, surprising the British, and winning the Battle of Trenton. Source (1) Market Watch

From a scan of the European news, the recapitalization thrust would come from three drives – sale of subsidiaries and shutdown of losing operations; restriction of dividends to accumulate capital, and the issue of new issues that diluted current stock prices.

The shape of the stress-test failure showed the real vulnerability was smaller and marginal institutions. Before the governments intervene and conduct a massive experiment on the European banking system, it might be better to heed the banks message and do some triage.

Tho complex, restructuring puts the absorption of sovereign debt default (Greece goes here) on the current bank investors (‘the rich’ goes here); while leaning on government bailouts funded by bonds avoids recapitalization (‘taxpayers’ goes here). The Euro banking stocks have been almost in serious decline for the last six months.

Pretend and extend is starting to run out of road. Economic theories are just that, theories proven through mathematical models in a vacuum. When they fail, economists point to the implementation and corruption by others as the cause of the failure. When they compare the real results to their mathematical model, they say they would have done better if you followed them or, if you followed them and failed, that was the corruption or it would have been worse had you not followed them. There is never any proof.

Now let’s look at real world examples – Australia and Canada. Similar economies, similar problems. We are sure they are economists out there with their pat responses to prove the differences, but basically, despite them selling to Asia, us to the US, they to China, we both are commodity based. The US pays the same price and we do ship to China.

So assuming many similarities, compare their approach and result. They left rates high, we left ours low. They abhor deficits, we seem to embrace them (even while the feds were prudent, the provinces were not, we always ran total government deficits).

And today, Australia is still running trade surpluses, their economy faring better than ours, their currency, which was 10-15% lower than ours a few years a few years back is now a few points higher.

Despite the proven failure of low interest rate policies, despite the better result from other economies, Canada is continuing along the same path, following the economic theories of the US and EU despite the failings. And now the other problems are emerging; iinsurers, pensions, households are all stressed.

EU may be the next to have a financial meltdown, but it won’t be the last. UK, Japan, and the US are all on the radar maps. And, while we barely had anything to support us during the last crises, this one will see us standing there naked.

References:

(1) Market Watch

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