Our Recession officially ended in June 2009 so where is the recovery.?
We have 17 million unemployed and 8 million foreclosures coming in the next two years (Realtytrac.com)
The fed’s current policy of “Quantitative Easing” may have unintended consequences. We are paralleling Japan’s 20 years of economic stagnation in our economy.
John Hussman and Mike Shedlock provide some insight as to what is happening and why. See “Mish’s Global Economic Trend Analysis” Oct 26, 2010
This policy is causing the next asset bubble in commodities, especially precious metals and the stock market which some are now saying is overpriced.
Mish states we should not have thrown trillions of tax dollars at the banks but should have allowed them to go to bankruptcy. This is actually what the law says we should have done.
So why did our Congress not follow “the law”? In two words “Scare tactics” They were told (by the bankers) there would be “a financial crisis of biblical proportions” So instead we bailed them out . FYI we are preparing for another bailout of the banks, A second TARP.
In essence the investors (stock holders) would have been wiped out and the bond holders ( the wealthy) would have taken a hit BUT the banks would have reorganized with clean balance sheets and the ability to make loans overnight. The so called ”toxic assets” would have been removed from the bank’s portfolios and allowed a market readjustment of their value.
Note: Mark to Market valuation of assets is now a major contention with Wells Fargo and other major banks, with the Accounting Board’s GAAP proposal changes. If the banks are forced to report current housing asset values (which have dropped up to 50%) their balance sheets will be in the dumpster and they will be forced to declare bankruptcy.
Yes, the economy would have gone through some rough time maybe 6 months to a year until people realized “the sky was not falling” but we would have already started a true recovery. Instead the banks are not lending to people who need the money to expand business AND can pay it back!!
Paulix
