Part 1 - Is Economic Disaster About to Hit & Are You Prepared?
By Thom Hartmann A...
Right now the United States and the world are facing four massive trends that, in combination, we haven't faced since the 1920s. We are seeing the rise of a new and brutal form of governance with extraordinary industrial capacity and power in China, much as Nazi Germany rose in Europe. We are seeing the exhaustion of monetary policies as interest rates hit zero and below, much as monetary policy was failing the world badly between 1929 and 1933. We are seeing levels of inequality and poverty in previously wealthy, industrialized countries that were only last seen in 1929. And we are seeing massive governmental and private sector debt that is being used to hold together, because of low interest rates, governments and large businesses, with the latter using that debt in many cases to simply buy back their own stock rather than investing in new products or services, much as margin debt fueled the stock market mania of 1929. As these variables rush together, we find the world on the brink of a second Great Depression and a Third World War. To navigate times like these, we need intelligent and committed leadership, but instead we have a thief and a con man in the White House. This is a prescription for worldwide disaster; hopefully
Part 2....
Artificially low interest rates are a atomic bomb embedded deep inside our economy. With interest rates in a normal range, around 5 or 6 or 7%, businesses only borrow money when they know that they can earn more money than the cost of interest with the equipment or expansion or new products they are rolling out as a result of the borrowed money. With interest rates around 1%, though, businesses don't need to make anything in order to make money; as long as the stock market is going up, all they need to do is buy their own stock, which raises stock prices and executive compensation, and then ride stock up with the market. Companies right now are buying back literally trillions of dollars worth of their own stock every year. The problem is that this adds nothing to the strength, wealth, or resilience of the companies, and when a downturn comes or interest rates start to rise these companies will be wiped out by their own debt. The CEOs who ran the share buyback Ponzi scheme will have already walked off with their hundreds of millions of dollars in profits, but the entire economy of the country will be left in shambles. We need sane monetary policy and laws to prevent this kind of extraordinarily risky behavior by corporations.
-Thom
-Thom
Comments
#2
Thom,
Thanks for having Dr. Richard Wolff on regularly. I've been watching the economy more closely since 2007, and presently read several investor types on line that I find mostly thru Max Keiser, who I watch regularly. I'm never quite sure if these guys actually know what they are talking about, or are just hype. Today (1/2/20) I listened to Dr. Wolff in the car with my wife, and he basically confirmed my understanding of the coming crisis. It was great for my wife to hear this as I've been talking about it with her but she hears so many conflicting stories about how great the economy is in the media, that I sometimes feel foolish even mentioning it. I'm a novice concerning the economy, and certainly no investor, but I know bad times are ahead. I remember doing some rough calculations in my head concerning the equity we have in our home, BEFORE the crisis of 07-08 hit, and so know that the warning signs then were ignored and distorted by the media and especially the Republicon bankers. I don't doubt that it's all happening again, with the crisis now being delayed by the Fed until after the elections. W Bush missed the target by a few months. I'm hoping Trump will do no better (not that I'm rooting for the crisis, I just don't see a way to avoid it).
Thanks again for all you do,
Bob Selover
Littleton, CO
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