No 54 Posted by fw, September 4, 2010
“After they did the dot com bubble, and that burst, then they re-inflated it with the real estate credit crisis bubble and then when that burst, now they’ve created the bubble of all bubbles. And it’s not only the United States, this is a global bubble. They’re all into it. It’s called the Bailout Bubble! Hey, the economy’s going down, recession’s setting in, sales don’t look good, exports soft, need more money? How about, we’ll call it Stimulus Packages. And from Australia to the United States, from the UK to China, they’re dumping funny money into the system to keep it going.” Gerald Celente, Overdose: The Next Financial Crisis.
When the world’s financial bubble burst in 2009, the Bush administration’s solution was to lower interest rates and pump trillions of dollars into the global banking system. “The solution is the problem, that’s why we had a problem in the first place”. For Economics Nobel laureate Vernon Smith, the Catch 22 is self-evident. But interest rates have been at rock bottom for years, and governments are running out of fuel to feed the economy. “The governments can save the banks, but who can save the governments?” Forecasts predict all countries’ debt will reach 100% of GDP by next year. Iceland has already crumbled and Greece is on the brink. Who will be next?
The storm that would rock the world began brewing in the US when President George W Bush pushed the idea of home ownership for all, propping up those who couldn’t make the down payments. The Market even coined a term, NINA loans: “No Income, No Assets, No Problem!” Enter Fannie Mae and Freddie Mac, government-sponsored, privately owned enterprises. “Want that vacation? Wanna buy some new clothes? Use your house as a piggy bank!” mocks trend analyst Gerald Celente. Why earn money to pay for your home when you can make money just living in it? With the government covering all losses, you’d have been a fool not to borrow.
The years of growth had been a continuous party. But when the punchbowl ran dry, instead of letting investors go home to nurse their hangovers as usual, the Federal Reserve just filled it up again with phoney money. For analyst Peter Schiff, the consequence of the spending binge was crystal clear: “We’re in so much trouble now because we got drunk on all that Fed alcohol”. Yet along with other worried experts, he was mocked and derided during the boom.
If you took out a mortgage or bought stocks in the years leading up to the housing market crash, you may have lost out when the bubble burst. Governments promised decisive action, the biggest financial stimulus packages in history, gargantuan bailouts: but what crazed logic is this, propping up debt with more debt?
On a personal note, in the context of Overdose’s thesis, I was struck by three leading headlines on the front page of the business section of the September 2, 2010 Windsor Star: “Chrysler, Ford sales surge, Great news for Windsor”; “McGuinty urges BoC not to hike rates”; and “Canadian banks taking bigger risks”. Have we learned nothing? Is Overdose right – are we re-inflating a new bubble — the Mother of All Bubbles? I am alarmed that many of the individuals who, for reasons of apparent political expediency, got us into this mess remain in positions of power and influence.
Swedish filmmakers Martin Borgs and Johan Norberg document their version of events from 2001 to the present, events that triggered the 2009 Global Financial Crisis and set the stage for an even greater global crisis to come, perhaps before the end of this year! Their documentary, Overdose: The Next Financial Crisis, premiered in Washington D.C. on May 8, 2010. Overdose is based on Norberg’s book, Financial Fiasco: How America’s Infatuation with Home Ownership and Easy Money Created the Economic Crisis. (There is a review of Norberg’s book here).
This 45-minute documentary is widely available in three parts on the web, including here on the Information Clearing House. Overdose rivets viewers’ attention with a very definite point of view, leaving no doubt as to whom the filmmakers think the “bad guys” are. Watch it and decide for yourself.
Overdose was aired on August 23, 2010 by the Australian Broadcasting Corporation (ABC). Not surprisingly, there’s little if any mention of it on Canadian/U.S. mainstream media.
Posts of my transcription of the Overdose commentary immediately follow in a six-part series.