Tuesday, January 14, 2014

Has the Economy Already Gone Over the Cliff?

Do I believe that we’ve gone over the cliff or not, and is there turning back? Really a tough one, so opinion only. I’ll preface it one more time, opinion. But, you asked my opinion.

I think we did go over the cliff. I think we went over the cliff in 2008. I think that everything that’s happened since then has been a backing and filling and, as you call it, MOPE, where the perception of reality is being managed as carefully as possible by the mainstream media that we’re back on track and everything’s going to be okay.

But, the reality is, the factual truth is that these banks have been reliquified but at the expense of the population. Because when the federal government borrows money in any country it’s only based on the productive capacity of the citizens to pay back what they borrowed. I mean they don’t come to you and ask you if they have the right to borrow more money and if it’s okay if you have to lower your living standard to pay it back in the future, do they? No. They just go ahead and do it. So, that’s the reality. The banks are being brought back to life, so to speak, at the expense of the populace regardless of the nation state we’re talking about.

And that derivatives problem that took down the 2008 financial crisis… It really is 2007. But, I don’t want to get too technical here. It manifested in 2008 and has only gotten bigger.

The banks have gotten fewer. So, the problem has gotten actually worse rather than better. Not to say that if there was another 2008 that these banks aren’t liquid now, because a lot of them are. They’ve got more fiat to buffer the situation.

But, no, the reality is that nothing has really changed. It is over the cliff. And, it’s sort of like the cartoon. I might lose some people here. I forget the name of it. I think it’s called the Road Runner or something. There was this Wile E Coyote, and he’d run over the cliff with this anvil or something. Then, it would be suspended in mid-air. Then, he’d look down and realize there’s nothing below him, and that suspended animation would break away to reality. He’d fall a mile down or whatever and crash into the ground.

That’s sort of my take on it. We are at a situation where we are over the cliff, yet we’re in this sort of suspended animation managed perception that everything’s okay, we’re back on track, look at this, and look at that. Not to say that there aren’t areas that are doing better than they were. Certainly, there are. But, not in such a significant way that we’re really coming out of this.

- Source, Sprott Money: