Bubble Myths

14 months ago the American economic bubble burst bringing about the worst recession since the Great Depression. Since that time, in the age of internet enlightenment, we have all watched as the Fed has done everything in is power to re-inflate the bubble. It is a very weird time in the history of our country and I hope I can bust a few myths related to our economic bubble.
Our economy is not improving
They are quick to rush out any sign that the economy is improving because GDP is on the rise. The best measure of the strength of our economy is not GDP; it’s employment. No matter how you cut it, the unemployment numbers continue to grow. Plus if you add in the people that were searching for a job and have given up, the picture looks even worse.
Although the Fed and the government would like us to believe that things are improving, it is a hard pill to swallow as long as unemployment continues to rise. If one takes into account, all of the illegal aliens and transient workers that have left since the economy imploded, the employment picture looks abysmal.
The Stock Market is not a proxy for the economy
The Dow has hit over 10,000 and is up to over 30% from its lows a little over a year ago. Wow! That is great growth. The problem is that in times such as these, there is little or no relation to stock market performance and that of our economy. More »
About two weeks ago, one of my brokers called and told me that it was time to get back in the market. I laughed at him. I reminded him that I got out of the market entirely in May 2008, and now that events have unfolded, I had little faith in our financial system. But he kept on pushing and pushing, and of course, we were going nowhere, because in my view the downsides far outweigh the upsides. Here are the top reasons why I will never listen to another stockbroker ever again.
This entire economic crisis has left me more than a little peeved. The reason is that Obama and Bush have been dancing around assigning blame for this huge mess. The reality is that this entire crisis and heartbreak was entirely avoidable. In order to create such a mess with the world’s largest and most powerful economy takes a perfect storm of retards acting overtly and covertly.
It has been over 6 months, since George Bush went in front of the entire nation and told us all that we are all screwed. He succeeded in putting the nation into a panic setting the stage for an unprecedented flurry of government spending. After 1/2 a year of spending, none of the stimulus has had any impact whatsoever. Employment continues to rise, housing prices plummet, and GDP is still shrinking.
The Fed announced two months ago that they would drop America’s key interest rate to .25% giving America the unique distinction of having the lowest interest rates in the world. In addition, although Congress is still wrangling, they will soon pass one of the largest spending bills in the history of the nation, wrapped up in a bow and called economic stimulus. Although, it sure smells like pork. These two events have one key thing in common - printing more money. In fact, the United States will begin printing money at an unprecedented rate, not just in the history of our nation, in the history of the world.
As I have already documented, I sold all of my stocks in May 2008. I feel fortunate, but I know of no one else that has escaped this economic crisis unscathed. The sordid details of the Madoff scandal and the avarice of AIG are just surfacing now. It is riveting how misplaced were our confidences with our financial security. Confucius said “May you live in interesting times.” And this is so very true. I put together these thoughts to help people navigate through these uncertain and interesting times.
This post is called the Double Bubble, because it is clear that there have been two very significant bubbles to ripple through the world in the last 15 years. Just looking at the Dow Jones Industrial average, there is a bubble which begins circa 1995 and bottoms out circa 2003. Immediately after the tech bubble bottoms, a new bubble begins to form, which is the crisis we face today. As has already been discussed in previous blogs, Greenspan intentionally created a second bubble by lowering interest rates after the Tech Bubble popped.
We keep on hearing that the current economic crisis is global in nature. That is to say, that each and every country in the world will suffer along with the United States. To be honest, this entire premise seems false to me. Surely there would be winners and losers as this economic crisis unfolds. Plus on top of this, the US is the largest debtor nation in the world. Surely the lenders will survive the crisis better than the debtors.
One of the greatest travesties to this bubble is the incredible American deficit under the Bush administration. The deficit has ballooned by over $5T in a scant 8 years. We can all agree that this is highly fiscally irresponsible, but the question remains, “Where did all this money go?”
The media is calling this bubble the worst since the Great Depression. That sure sounds scary, but where are the facts? What makes them believe this bubble is so severe relative to other bubbles? Are there any facts to feed the panic or just pure fear?









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