John Markman’s, MSN Money’s, analysis of the national banking system’s probable insolvency (See: “Why The Bank Bailouts Are Doomed”) is something I did not notice last month. I would have taken the issue up and spent some time with it if I had noticed it. I encourge anyone and everyone to read this thoughtful analysis because one thing it does do that most every other commentary does not do is this: it takes off the Pollyanna, rose-colored glasses of “we’re simply in a recession” nonsense. We are not “simply in a recession.” We are on the very cusp of the long ago foretold end times and as time goes on people will be left with the reality that this is not only true but that while they slept they lost the opportunity to survive it.
Let’s punch out some of the key analytical facts from Mr. Markman’s insightful analysis.
“The math is not complicated. Bank losses from the write-offs of bad loans and busted derivatives tally up to $1.5 trillion so far. In addition, $5 trillion to $10 trillion worth of off-balance-sheet businesses such as structured investment vehicles …”
Add the $1.5 trillion in losses to $1 trillion in needed new reserves, and you can see that banks need as much as $2.5 trillion in new capital to remain solvent under current rules.”
Ultimately, Mr. Markman writes:
“… time is running out, because the next phase of the credit crisis is at the door: the part where we see a normal rise of loan defaults during a recession, further crushing banks’ earnings. At the moment, defaults are running at 2.5%, but history shows they will hit 10%-plus over the next year or two as commercial real estate and business loans sour. This is why fixing the banking system will not end the recession; it will help only to smooth the path of a turbulent descent.”
Defaults that are looming over the horizon, which appears as ice fog over an economic system that is literally “congealing” as we speak. Today’s mass media leaks out a few more hints at possible, coming business failures, including Chrysler, Six Flags, Blockbuster, Krispy Kreme, and others . (See: “15 Companies That Might Not Survive 2009,” Yahoo! Finance.com) The real and truthful unemployment rate today is vastly understated. One of the most carefully guarded secrets right now in government is the truth about unemployment. Fears about consumer and investor responses is driving a machine of lies about present unemployment. That policy of lies, however, has a price tag–the defaults that loom over the horizon will point right at it. I sincerely believe we have over 12% of the population unemployed right now, including those that policy makers have agreed to disregard in labor statistics reporting but otherwise remain desirous of working but are, for one reason or another, unable to find work. At the height of the Depression we had unemployment at about 25%. I am saying we are already about half-way there. The 8% we are hearing about vastly understates true unemployment in this country and when all the defaults roll in people are going to be asking–”why did so many default on their loans and their credit card debt”?
When the salivating neofascists enacted bankruptcy reform not long ago I knew, I sat back, smiled and knew, for certainty, that this would result in a massive wave of injustice nationwide, because it was enacted without concern for the plight of debtors. It was so creditor biased that it practically required debtors to consent to be raped in public if they were to avail themseles of the powerful remedies allowed under Title 11 United States Code. At the time, as Americans were riding high on a wave of borrowed doom, as they lied to themselves that loans were wealth, that liabilities were assets, and thus those who were insolvent at the time were deemed as moral losers, as failures that deserved to be punished with injustice and cruelty. They looked away as the nation’s creditors demanded the right to punish and even transform Chapter 13 into the modern-day equivalent of indentured servitude. Now ordinary people are looking at bankruptcy because they cannot make their car payments, their mortgage payments, their credit card payments, and they are appalled at what bankruptcy really affords them. What happened? Who did this?
I suppose the cries will go out for real bankruptcy reform and if that occurs, of course, the impact upon businesses–also known as creditors–will deepen, leading to even greater problems with balance sheet problems at the banks downtown.
Humanitarian crisis is on the way. Unprecedented humanitarian crisis in the United States is looming over the horizon. Selfishness and greed will preclude any of the creditors developing a holistic approach to the problem of account receivables, they will, instead, become increasingly rabid. Debt collection will be the new growth industry during the next 12 months. This will likely churn large waves of court cases by contingency fee attorneys, who gain a portion of the judgments. To protect themselves and their dwindling assets, debtors will be driven into Bankruptcy Court in droves. Indentured servitude in the United States of America.
As you look at all the various linkages, and there are so many which remain hidden even now, which will come to light at things develop–which is another way to say “as things worsen”–the entire system of things is on a course to be plundered and robbed blind. I think that is the way to describe it. It is as though a superhuman thief were walking about taking anything and everything he wanted to take, from anyone, anywhere, and it is happening on such a massive scale, over the entire surface of the earth, that is leaves you breathless to consider the implications.
I have been saying it as often as I speak and so I will say it again. Things are not going to get better. They are going to keep on getting worse. They will continue to turn downwards, and everything that is tried will only plunder and rob and achieve very little else other than to highlight how futile things are. People are going to increasingly look out their windows and realize that the world is on a ride to the depths of despair and beyond. Although he still has hope that things will improve, and surely he does not say what I am saying–that things will continue to erode to the point of the Great Tribulation long ago foretold–John Markman ( see cite above) says:
“Get out your parachutes — it’s going to be a rough landing. “
Rough landing is an understatement. Now, one last point I have made before and make again: If you have any significant money in the banks, get it out NOW. Better do something more constructive with it. Eliminate debt. Pay off your car loans. Pay your mortgage off if you can. Reduce your monthly outflow on debt as much as you possibly can. Think frugal. Think small. Think basics. Draw things in as tightly as you can get them. At a Town Hall meeting today President Barack Obama put it this way: “Obama To Elkhart: I’ll Do All I Can.”
“The situation we face could not be more serious. We have inherited an economic crisis as deep and as dire as any since the Great Depression. Economists from across the spectrum have warned that if we don’t act immediately, millions more jobs will be lost, and national unemployment rates will approach double digits. More people will lose their homes and their health care. And our nation will sink into a crisis that, at some point, we may be unable to reverse.”
I’m telling you plainly. It will not be reversed, except possibly for a brief appearance of resurgence, long enough and significant enough to permit the long ago foretold cry of peace and security. For now? Just watch the defaults roll in like a huge Tsunami and watch the banks bleed in bright-red gushers of economic gore.
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