Why the Current Crisis Isn't Going Away

The title of this blog post is borrowed from another article that I am going to link to, but it echoes exactly how I feel. I spoke to a friend recently, in which I shared my pessimism that things would return to normal as we had come to know them. By "normal", I mean a functioning economy with relatively decent jobs, provided that you have the education to qualify for them. She told me that things will get better, as they always do, since just as the economy falters, it goes on to "recover". I'm aware that getting to the belief system I am currently residing at requires the discovery of certain facets of information, and a willingness to undertake a mental and spiritual paradigm shift, in which things as you have come to know them go "kaboom", and are replaced by growing levels of uncertainty and anxiety. I came by this phase (which will be permanent) through discovering the concept of peak oil, but now that platform is shared by our dying economy.

Anyway, a man named Mike Whitney makes some good points in this article, and borrows from some good sources. One of these sources is from within Morgan Stanley, and he wrote that the total debt for the financial sector in the 2nd quarter of this year was $16.5 trillion, while last year it was $16.6 trillion. All that money funneled to our financial sector, courtesy of the taxpayer, and a decline of around $100 billion in the financial sector's debt. From what I have been able to gather from this (again, I'm no financial or economic expert), all this means is that now there is more money in the system (I'm assuming that's what "expanded equity capital base" means), rather than that money being used to helped deleverage (or reduce debt) in the system.

Whitney then goes on to point out that our government's lending institutions weren't set up so much to rescue our financial system from ruin, but to keep asset prices high so that these institutions could continue to maximize their profits on the risky investments that brought them to the brink before. A poll from Bloomberg is then cited that states that less than a third of investors throughout the world see investment opportunities, with 50 percent of American investors stating that they are hunkering down and are not budging.

Further, Goldman Sachs reports with this query: "How much of the rebound in real GDP (GDP was raised by 3.5 percent last week, meaning a "recovery") was due to the fiscal stimulus?" So, it's a fair assumption that this economic bump that is being talked about in the media was largely due to the increase in government spending (with the bailouts, the stimulus plans, and the like). Consumer spending and credit is still on a steep downturn. Unemployment continues to rise, and wages are staying stagnant. A bull market on Wall Street does not equal a recovery and more jobs on Main Street.