No 60 Posted by fw, September 05, 2010
Following is a transcription of the commentary from Part 3 of a three-part video documentary film, Overdose: The Next Financial Crisis, which is available for viewing here on the Information Clearing House. I have transcribed most but not all of the commentary from these three parts. Each video part is about 15-minutes long.
Obama: “One year later the worst of the storm has passed.” Do you believe him? Do you trust him?
Barack Obama – [State of the Union speech, January 2010. Loud applause and cheering]. One year ago I took office amid two wars, an economy rocked by a severe recession, a financial system on the verge of collapse, and a government deeply in debt. Experts from across the political spectrum warned that if we did not act we might face a second depression. So we acted, immediately and aggressively. And one year later the worst of the storm has passed.
Narrator – There are positive signs. This is the Hamptons outside of New York, a classy playground for Manhattan’s elite. A house by the Atlantic like this one costs $30 million. And a hotdog bun with lobster salad costs $18. Fast food, Hampton style. The crisis has made its mark here too. There are fewer private jets at the airport. Instead the Porsches jostle the Mercedes on the turnpike to New York.
David M. Walker – New York City, Washington, DC and Los Angeles California don’t represent the real world. They also don’t represent the real part of America, the so-called “Main Street of America”.
The Mother of All Bailouts — $10 thousand billion!
Narrator – The U.S. government has launched bailouts, stimulus packages and guarantees to the tune of $10 thousand billion. That’s more than the total cost to the U.S. government for World War 1, World War 2, the Korean War, the Vietnam War, the invasion of Iraq, the New Deal, the Marshall Plan and the moon landing. Bush almost racked up more U.S. debt than all presidents before him combined, from George Washington to Bill Clinton. And Obama is almost creating greater debt than all presidents before him, including George W. Bush. But it’s not just the U.S. that’s increasingly looking like a house of cards. During the crisis many governments went deeply into debt. Estimates say that the average debt in the richest nations will exceed 100 percent by the year 2011. These are loans taken at currently low interest rates. Should the interest rate rise by 1 percent, the U.S. interest payments will rise by $100 billion per year. That’s more than the annual cost for the Vietnam War. It sounds absurd to even think that the United States, the world’s economic super power might crash. After all, they get the highest ratings from the credit rating agencies.
David M. Walker – One of the lessons that we must learn from the mortgage-related sub-prime is you have to take credit ratings with a big grain of salt. Because as we saw with the mortgage-related securities, they went from triple-A rating to junk bond pretty fast once people understood the true situation. Today the United States is rated triple-A, but if it doesn’t start taking steps to put its financial house in order that triple rating will be lost. It’s only a matter of when and how quickly.
If the worst of the storm has passed, why are new bubbles popping up everywhere?
Narrator – In September 2008, the bankruptcy of one large investment bank brought the world economy to its knees. The fate of Lehman Brothers raised the question of who was next in line. So everyone avoided doing business with banks. How will the world react if the next entity to declare bankruptcy is a nation? Who is next in line if that were to happen? Some houses of cards have already started falling. This is Iceland, until recently, one of the richest nations in the world. When the crisis hit, the Icelandic banks collapsed. The Icelandic stock market crashed leaving the debt with a small population. For the first time in 50 years this peaceful country saw riots.
This is Greece. Here deficits have hit a record high. The national debt is approaching 135 percent of GDP. The market wants higher interest rates for Greek loans, increasing the pressure on its strained economy. Italy, Spain, Portugal and Great Britain are other EU nations with similar problems.
Dr Karen Horn – We have new bubbles everywhere. So I am pretty worried about what’s going to happen.
Peter Schiff – If you don’t want bubbles to burst, then don’t blow them up in the first place because all bubbles burst.
The $Trillion question: What will pop the Bailout Bubble?
Narrator – If enough things can go wrong, some of them probably will. The question is just which needle will burst this bubble? Will it be new credit losses as banks take on greater risks knowing that the government considers them too big to fail? Or falling stock prices as interest rates rise and the steroids wear off. Will it be the Chinese economy overheating? Or will it be a collapse of confidence in the U.S. dollar?
David M. Walker – If we lose the confidence of our foreign lenders – and we must not allow that to happen – but if that were to happen then there would be a dramatic decline in the dollar, a dramatic increase in interest rates, significant fueling of inflation, a very, very deep recession and possible depression that would be felt around the world. We must not allow that to happen.
“The solution is the problem.”
Narrator – When the next bubble bursts, you cannot use the same emergency measures. You can’t lower interest rates that are already at rock bottom. You can’t stimulate the economy with borrowed money if an excess is the cause of the crisis. The governments could save the banks but who can save the governments?
Peter Schiff – Ultimately there’s going to be a price all around the world to be paid for this. And the longer it continues, the bigger that price is going to be.
David M. Walker – You know, this really is a moral question. I mean I can give you plenty of big and bad numbers. You know when you talk about tens of trillions of dollars it’s just hard to imagine. But you have to put a face on it. And to me, I put my children’s and my grand children’s face on it. It’s their future that we’re mortgaging.
“People don’t want to believe the worst is yet to come.”
Gerald Celente — When we tell people that there’s going to be a bailout bubble and they see the world’s equity markets up 50, 60 percent, they don’t want to believe it’s another bubble. They want to step right up back to that table and throw their dice and try to win their hand at the wheel of fortune that Wall Street’s spinning. So people still don’t want to believe that the worst is yet to come.
Narrator – It’s easy to think of these predictions as much too gloomy. But that is exactly what people said the last time. When these experts – Gerald Celente, Peter P. Schiff, and David M. Walker – predicted the 2008 financial crisis they were laughed at by the media.
David M. Walker – We can do it. But we need to do it soon because the clock is ticking and time is not working in our favour.