The Great Fall

Yesterday I wrote about the theory that some economist hold (few but growing) that a depression is perhaps in our future. Today two announcements:

NEW YORK (CNNMoney.com) The National Bureau of Economic Research said Monday that the U.S. has been in a recession since December 2007, making official what most Americans have already believed about the state of the economy .

Down we go again: Fourth-worst drop ever for Dow -- The stock market suffered one of its worst days since the financial meltdown Monday, slicing 680 points off the Dow Jones industrial average as Wall Street snapped out of its daydream of a
rally and once again faced the harsh reality of a recession.

The voices for another, more robust, stimulus now clamour as loudly as ever. Such a typical Keynesian response. Deficit spending to "correct" a problem created by deficit spending and uncontrolled credit is, well simply stupid. It makes sense only in a world where people are more concerned with present and temporary safety and comfort in exchange for a long-term solution.

Then of course there is this prediction by Igor Panarin, a Russian political analyst.

Professor Igor Panarin said in an interview with the respected daily IZVESTIA published on Monday: "The dollar is not secured by anything. The country's foreign debt has grown like an avalanche, even though in the early 1980s there was no debt. By 1998, when I first made my prediction, it had exceeded $2 trillion. Now it is more than 11 trillion. This is a pyramid that can only collapse." ....

When asked when the U.S. economy would collapse, Panarin said: "It is already collapsing. Due to the financial crisis, three of the largest and oldest five banks on Wall Street have already ceased to exist, and two are barely surviving. Their losses are the biggest in history. Now what we will see is a change in the regulatory system on a global financial scale: America will no longer be the world's financial regulator."

He predicts a break-up into six parts but I will discuss that later, specifically what I think he got wrong and right. I think talk of a break-up is premature, even if looking at a ten-year cycle. Dragons die slow deaths and generally have one surprises in them, if history teaches us anything about these things that is a fact we know.


Talk of if we will have a robust stimulus is pointless -- we will. What does that mean? You full-well know or should know. It is in fact a step closer to tyranny for that money must eventually come from somewhere. History again teaches us of the depths that our central government will go to to in dire circumstances. Look to the depression years and the aftermath of all of those social programs and utter abandonment of solid constitutional principles. Our Federal government will do what ever is required to stem the tide of this current emergency - to hell with the long-term cost.

Occasionally systems need a natural reset, the time is now for such a reset. Painful for a while, yes. Sad for some, yes. That is the natural order of an economic system - if left alone this situation would come and go and in the end the system would be stronger - if and only if the government stayed out of it.

But as we know it will not - they will instead move us ever nearer to a bad end.