July 15, 2009 journal, this is not a recession or depression, it is an economic collapse. The estimated 600 trillion dollars lost on Wall Street gambling on worthless derivatives has yet to be addressed in the financial world for which it has devastated like a corpse. They say Henry Paulson Wall Streets ace in the hole was expecting meltdown of law & order during last fall's banking crisis even though the full effect of it is not yet developed. Gasoline prices took a tumble of about 30% overnight showing it being manipulated by Wall Street for the purpose of profits to the goon squads that's operating the gambling. What are we worth in terms of paper money to this society? I've heard preachers in the pulpit say we are not worth more than 13¢ the price of salt but to the hospital system we may be worth $5,000 a day, a nursing-home $200 a day or to a bank even much more. In the end we are finally worth 5 to $10,000 to some funeral home to bury. The hospitals are now for profit but they are not as full as they were. Car dealers are advertising like crazy and cannot even sell Japanese-made cars, only Korean, the cheapest thing made. Television commercials have become more abundant and even more vulgar & disgusting. I have only one life to live and I will not waste it watching awful television commercials. They tell us how wonderful things are economically and how they are improving but it is not true. We're actually on the verge of disaster facing total meltdown of all economics. The great Van Impe has stated that a majority of the church would welcome Antichrist in their pulpits and I agree with him on that issue. Catholics have Antichrist in their pulpits. Priest claim to substitute for Jesus while the Pope claims to be god as they have Mother Mary they claim to worship as divine. This is a spitting image of the Biblical Antichrist. It will all be silenced soon when printing presses run hot and as those satellites no longer. From the article on Recession vs Collapse I quote the prediction on sad economics. "Washington is bluffing that it will not bail out California, and every other state suffering from collapsed revenues and massive job losses. If cuts in police and schools don't force DC off from its current position, then the math will. Because in many states the aggregate revenue losses and looming cuts to state payrolls will largely render the intended effects of federal stimulus as moot. Frankly, unless Washington prints money and bails out every state that needs capital, including California, federal power will decline amidst this severe economic recession, and the process of a soft American devolution will begin. If you think this idea is outrageous, then you've still not come to terms with a core reality of our current situation: the structure of this financial crisis is wholly different than any in our post-war era. This isn't a recession. This is collapse. In Recession vs. Collapse published in March, this blog explained that in a normal recession existing savings are used to support government debt issuance and that those who remain employed increase their savings to also support government debt issuance. Neither phenomenon is at work today. Yes, the savings rate has soared in the US. But this has not resulted in any actual accrued savings. Because private sector debt came to define the internal structure of the US system, savings currently is little more than debt service. Also, bank purchases of US Treasuries are really just a result of the circularity of monetization. It's just money from the FED being recycled into Treasuries. There is no privately driven growth of bank deposits, in the aggregate. Americans as a class are broke. What the savings rate more accurately measures is a collapse of consumer spending. The internal composition of the US economic and financial system when it hit 2007/8 was very different than in previous recessions, even the severe recession of 1980/82. It's this internal composition that's now determinative, to the outcome. The sawdust of debt, and the monetization of assets rather than the production of goods, continually come to define the internal composition of the system. The economy cannot, therefore, express the same kind of resilience it has done so often, since WW2. This is the core problem of this collapse and why the prospect for recovery is dim. Americans can't actually rebuild the savings that the banking system needs to escape from the current mess. Individually, Americans are trapped by debt and cannot spend. In The Seigniorage Curse , I explain that one of the primary mechanisms for the hollowing out of the American economy over many years was the dollar advantage, which at first was earned. And then, came to be unearned. By the time the US reached the 21st century, our primary manufactured product was debt, and dollars. Is it any wonder that once that system collapsed, that we quickly gave up 100% of the phantom job growth that had been sitting on top of the debt bubble? The current level of employment in the United States has now returned to the levels of June Washington apparently has a fresh dilemma on its hands, just inside of 6 months after the new administration came to power. Clearly the economic team, even though they were given almost 18 months to study the nature of the current crisis (starting in the Summer of 2007), incorrectly judged this recession to be of the post-war variety. Is that any surprise? Nothing in the public record since the year 2000 indicates that Larry Summers, Ben Bernanke, or Tim Geithner understood that we had been building a skycraper of private sector debt in textbook blow-off style, since the deflation scare of 2001. Now, two years after FED repair operations began on the broken credit system, and over 3 years since US real estate topped in price, major portions of the country are staring at further home price declines in most major markets. Indeed, it appears that the same macro cycle of the last two Autumns is about to repeat, with more waves of foreclosure, more withdrawals from savings and investment to pay for living expenses, and the attendant bailouts of financial institutions that comes around each time. Washington can't really take a pass on this situation. If the federal government decides it can wait while "the states rebuild their balance sheets and clean up their payrolls" (as in past recessions) they'll be waiting forever. None of that is underway. It's no surprise therefore that the country is already being prepped for a second stimulus. Sure, Washington would like to act tough and tell the States to clean up their act. This is the moral hectoring version of Ben Bernanke saying in 2006 he doubts US real estate will ever decline year over year, or Treasury Secty Paulson saying that the front-end of the crisis was just a problem contained to sub-prime. We've seen this script before. If California issuing IOUs in a state where banks refuse to accept them doesn't get the message across, nothing will. We are on the front end, not the back end, of a crisis within the States. Unless Washington prints up dollars and bails out the States, of what use is Washington? Exactly what services can Washington provide, if California is let go? Left on its own, there would no doubt come an initial hooray from rubber-neckers and I-Told-You-So-ers. A newly broken relationship between Washington and the states might also quicken the pulse of anti-federalists, who feel we are long overdue for a tip in the balance of power. Perhaps it would all work out well. For the best, even? In Washington today the annual budget deficit crossed the one trillion mark . In Sacramento, there is a 26 billion dollar shotgun hole in their budget. (One hopes that CALPERS is marking to market, because if they're not, that would be a new liability for Sacramento to deal with). Meanwhile, Autumn approaches and whole range of rather nasty choices looms over the school system. Imagine living in a prime area of California and watching your house decline by 40%, your houshold income knocked for an initial 30%, and the after-school programs and town services get cut. Now throw some fees and tax hikes on top that mess. For the coup de grace, imagine Calfornia voters sitting down each night to another wave of bailouts from Washington to financial corporations. Under those circumstances it seems quite unlikely Washington can say no, to the States". -Gregor photos not copied.