The Obama administration spent 60% of the increase in the debt ceiling in one day.
In case you have the slightest doubt over how bad this is, read the following:
Bank of NY Mellon [BK 24.06 -0.59 (-2.39%) ] announced it will start charging “large depositors” to hold cash due to a sudden increase in dollar deposits prompted by fears among its customers.
That’s right; the Bank of NY Mellon has so many people depositing dollars that it is going to start charging people for holding their deposits. When people are choosing investment options that guarantee a loss, because they believe a small loss is better than a big loss, it doesn’t get any worse than that. Frankly they would get a better return putting it under their mattress.
The stock market dropped over 500 points yesterday. Today could be better, it could be worse. Ultimately, a crash is evitable. The White House is gloating over a job report showing the creation of 117,000 new jobs. However, it turns out those are primarily government jobs and the private sector lost 38,000 jobs. In addition, even if it was true, it would not be enough to reduce the unemployment rate.
This may get worse. In a typical recession stocks lose 33% of value. Some people are predicting a decline even higher than that. We aren’t even close to those numbers yet.
But here is the really good news. This crash has been coming for a long time. The government has been trying to “manage” the economy by smoothing out the curves. Instead, they just made things worse. A financial crisis in the United States is not a unique event. That has happened many times before in our history. It just didn’t happen in our life time. A lot of people are ignorant of events that took place before color television. If they didn’t see it, it didn’t really happen. The worst crash in U.S. history did not take place in 1929. There were several crashes that were far worse. The crash in 1920 was worse. The difference was that in 1920 the federal government did not intervene and instead just adjusted by cutting spending. The economy recovered in less than a year, resulting in the roaring twenties.
In 1929 a progressive President, Herbert Hoover, tried to “manage” the crash. Then FDR came in and doubled down with the “New Deal.” The result was the great depression that only ended with the start of World War II.
We have to experience a crash. It is inevitable. The economy has no hope of recovering without it. Only a real crash causes enough pain to force people to make the difficult choices and change behavior. Addicts do not begin recovery until they reach rock bottom. But the good news is that once this happens, real recovery is just around the corner. Remember; the deeper the crash the stronger the recovery.
A lot of people fear Obama is destroying this country. He isn’t. Instead, he may have inadvertently saved us all. He did not destroy our economy by himself. We have been on the path to destruction for years. Obama, in his total ineptitude, may have done us a big favor. He pushed us over the brink, into the crash that was coming anyway, and ironically his incompetence may be the best catalyst for the real change that was needed. It is always darkest just before dawn. We are headed for a big crash. That could be the best thing to happen. There will be joy in the morning.
TDM