The US economy as we know it has collapsed. This has happened before, twice, and history is repeating itself again. This is the Third Depression the United States has suffered, and it will be the worst. FULL ARTICLE

Credit is neither good nor evil. Some economists point out that credit is not even necessary, but most would agree that credit has enabled many individuals and companies to grow much faster than they otherwise could have. However, not many would challenge the claim that credit has also ruined the lives of many, even though modern society has (somewhat) moved away from debtor’s prisons.  FULL ARTICLE

If you try to postpone recession the way the US government has tried to do, then one day you will have a much bigger problem. If you postpone recessions through deficit financing, or through easy monetary policies, then obviously you have very strong debt growth as we have had in the US. Debt as a percentage of GDP has expanded from 130% in 1980 to 360% today. FULL ARTICLE

Investors should watch the G-20 meeting with very great care and look behind the inevitable, bland ‘groupthink’ final communique’ of superficial cooperation. While this class of grade-A economies looks harmonious, the Anglo-Saxons are most afraid of the impending D’s: deleveraging and decoupling. FULL ARTICLE

Systemic risk is mitigated when individual firms mitigate their own risks. It is not mitigated when those risks are centralized in a few large firms with a government backup. That creates systemic risk. Decentralization and risk-avoidance mitigate systemic risk. Both of those are encouraged in money, capital, and banking markets not controlled and regulated by the federal government and the FED. FULL ARTICLE

We ought to be spending our time and effort doing something more worthwhile, like figuring out how the Federal Reserve is handling the trillions of dollars they are creating and pumping into the economy, and how that is affecting the purchasing power of dollars in your pocket. FULL ARTICLE

Contrary to Greenspan, we can conclude that it is not long-term rates as such that fueled the bubble but the loose monetary policy of the Fed.  We can also conclude that the so-called savings glut in emerging economies had nothing to do with the last economic boom or the current economic crisis.  The only institution that can set in motion the expansion of money and a false boom is the Fed. FULL ARTICLE

The banking dilemma seems eternal, like the monetary dilemma, the tax dilemma, and the marital dilemma. The essence of the banking dilemma, however, is that the depositors’ money is not in the vault awaiting the depositors’ decision to withdraw it. Instead it is out on loan or invested in the money market or in mortgage-backed securities. FULL ARTICLE

What everyone seems to have forgotten at this point is that credit does not come from thin air. Even in a system in which bank reserves are leveraged many times, someone has to put savings in a bank for the bank to turn around and make a loan. As a result, the bedrock is the savings, which allows for the credit to flow. Credit extended without adequate savings inevitably leads an economy into disaster. FULL ARTICLE

In the present recession, advocates of government intervention often evoke the specter of the Great Depression. Unless the government intervenes massively, we are told, we risk an economic collapse comparable to that of the 1930s. To see the fallacy of this claim, it is imperative to understand that government intervention both led to the depression and prevented recovery from it. FULL ARTICLE