2008 – 2017: Absolutely ‘nothing’ solved!
Since the financial crisis of 2008 up until today…government leaders, our political advisers, and our banking administrators have essentially accomplished ‘nothing’ meaningful. Our financial problems today are actually much worse than during the last crisis. Our deficits are continuing, our total national and consumer debt has grown, our trade relationships have regressed, and our general prosperity is now more unstable and dangerous than during and after 2008. So does this lead to progress going forward or regression? What does history teach?
My sense is that problems do not disappear just because our leadership has avoided focusing on the problems. Our National Debt in 2008 was $9.8 trillion vs. $20 trillion today and our deficit was $278 billion vs. $592 billion today. Our total personal debt was $17 trillion vs. $18.2 trillion today. Credit card debt was $944 billion vs. $1 trillion today. Total U.S. debt (including State and Local and Financial institutions) was $50 trillion vs. $67 trillion today. See the numbers at: http://www.usdebtclock.org for the two comparative periods.
Gross debts to GDP was 71.5% in 2008 vs. 105.6% today. M2 money supply was $7.6 trillion vs $13.3 trillion today. I think the message is clear. Our Central bank has pumped up the monetary digits to ‘paper’ over the problems but there has been ZERO progress in resolving (solving) any of our financial problems. So can this trend continue forever? I don’t think so! At some point problems will overwhelm the inaction of our leaders/administrators and this means a serious crash in investor/consumer ‘confidence’ coming.
The precise date of the coming breakdown in ‘confidence’ is impossible to predict as our Central bank computers will continue to pump up the numbers as LONG AS THEY CAN. Also, human nature does not like to deal with problems which can not be readily solved. Our Keynesian model of economics has been a ‘one-way-street’ since its inception in 1934. The model can only deal with increasing numbers (called ‘values’) as the underlying debts do not disappear. So pump-priming via Central bank manipulations will continue until investor/consumer ‘confidence’ breaks.
I sense a small break in ‘confidence’ when it comes to many Geo-political issues (say immigration, the Middle East situation, and trade issues) but there has been no serious break in trader/investor/consumer ‘confidence’ as yet. Traders mostly buy into the bubble markets and the controlled financial media will continue with their hyper-positive psychology as long as possible. This means that our bubble markets could continue UP for some time. It’s shocking that traders/investors have so much ‘confidence’ in these illusionary cyber markets.
But when I look at history, bubble markets can continue for much longer than is logical to thinkers like me. The infamous tulip bubble started around 1593 and didn’t collapse fully until 1637. Tulip mania reached its peak during the winter of 1636–37, when some bulbs were reportedly changing hands ten times in a day. No deliveries were ever made to fulfill any of these contracts, because in February 1637, tulip bulb contract prices collapsed abruptly and the trade of tulips ground to a halt. This reminds me of the ‘paper’ gold trades of today. No delivery occurs and ‘imaginary’ trades continue!
By 1636 tulips were traded on the exchanges of numerous Dutch towns and cities. This encouraged trading in tulips by all members of society; Mackay recounted people selling or trading their other possessions in order to speculate in the tulip market, such as an offer of 12 acres (49,000 m2) of land for one of two existing Semper Augustus bulbs, or a single bulb of the Viceroy that was purchased for a basket of goods worth 2,500 florins. The complete collapse happened suddenly on February 5, 1637.
According to Mackay, the growing popularity of tulips in the early 17th century caught the attention of the entire nation; “the population, even to its lowest dregs, embarked in the tulip trade”. By 1635, a sale of 40 bulbs for 100,000 florins (also known as Dutch guilders) was recorded. By way of comparison, a ton of butter cost around 100 florins, a skilled laborer might earn 150 florins a year, and “eight fat swine” cost 240 florins.
The message from history is that bubble markets can continue as long as general ‘confidence’ is maintained within the marketplace. Money is a confidence game and bubble markets will continue until they end. Psychology must now continue to pump UP our markets AS LONG AS POSSIBLE. We live in markets which are illusionary and psychological. This continuing support for these bubble markets is shocking to a thinking person, but it reveals that MOST leaders/administrators/traders/investors do not think.
What is happening today could be reported as dire/ominous to a person of discernment and understanding…but to financial administrators and political leaders who need pumped-up markets to prevent chaos this mindset is unlikely to change. Group think is very powerful within the arena of finance/politics and within our global capital markets! Just look at all the hype being given to these markets by those who are temporarily prospering from the gains. Money and making more money has a powerful psychodelic effect on the human mental state. We need to watch this unique psychology for future understanding of human behavior.
Illusions will END, however, at some point. The tulip mania ENDED. John Kenneth Galbraith‘s A Short History of Financial Euphoria (1990; written soon after the crash of 1987), used the tulip mania as a lesson in morality. Tulip mania again became a popular reference during the dot-com bubble of 1995–2001. In the 21st century, journalists have compared it to failure of the speculative dot-com bubble and the subprime mortgage crisis. In November 2013 Nout Wellink, former president of the Dutch Central Bank, described Bitcoin as “worse than the tulip mania,” adding, “At least then you got a tulip, now you get nothing.”
The END will arrive at some point (maybe in 2017): I am: https://kingdomecon.wordpress.com.
Some images to add to your understanding:
Human nature does not change. History repeats with a rhyme. The current Stock Bubble will eventually burst. It will likely happen suddenly!