It’s Official: The Crash of the U.S. Economy has begun

[Christa]

Richard C. Cook wrote:

It’s official. Mark your calendars. The crash of the U.S. economy has begun. It was announced the morning of Wednesday, June 13, 2007, by economic writers Steven Pearlstein and Robert Samuelson in the pages of the Washington Post, one of the foremost house organs of the U.S. monetary elite.

Pearlstein’s column was titled, “The Takeover Boom, About to Go Bust” and concerned the extraordinary amount of debt vs. operating profits of companies currently subject to leveraged buyouts.

In language remarkably alarmist for the usually ultra-bland pages of the Post, Pearlstein wrote, “It is impossible to predict when the magic moment will be reached and everyone finally realizes that the prices being paid for these companies, and the debt taken on to support the acquisitions, are unsustainable. When that happens, it won't be pretty. Across the board, stock prices and company valuations will fall. Banks will announce painful write-offs, some hedge funds will close their doors, and private-equity funds will report disappointing returns. Some companies will be forced into bankruptcy or restructuring.”

Further, “Falling stock prices will cause companies to reduce their hiring and capital spending while governments will be forced to raise taxes or reduce services, as revenue from capital gains taxes declines. And the combination of reduced wealth and higher interest rates will finally cause consumers to pull back on their debt-financed consumption. It happened after the junk-bond and savings-and-loan collapses of the late 1980s. It happened after the tech and telecom bust of the late '90s. And it will happen this time.”

Samuelson’s column, “The End of Cheap Credit,” left the door slightly ajar in case the collapse is not quite so severe. He wrote of rising interest rates, “As the price of money increases, borrowing and the economy might weaken. The deep slump in housing could worsen. We could also discover that the long period of cheap credit has left a nasty residue.”

More:

http://www.globalresearch.ca/index.php?context=va&aid=5964

[El Supremo]

1. So now do you understand why we are trying to control the Middle East?

Our economic power is waning due to cheap goods from elsewhere and high labor prices here. One of the main tenants (sp?) of the Neo-Cons is that we must counteract that with a strong military controlling overseas markets - especially oil.

Ain't workin' too good so far.

I actually hope for a new Great Depression. That woke us up to the bad aspects of Capitalism. This generation hasn't had to suffer.

[illinoisprogressive]

2. The head of , I think the GAO, has been warning of it coming soon

[Psephos]

3. Samuelson has predicted six of the last two recessions

The truth is that no one knows what's coming, least of all (and quite demonstrably) economists with a "point of view." But that doesn't hit the right emotional buttons.

Stock prices are nonlinear and chaotic (in the mathematical sense, like the weather, or traffic patterns). They are by definition unpredictable from initial conditions (such as today's closing prices).

The only thing that is knowable about stock prices is that they are cyclical (like oil prices or sunspots) and are certain to have periods of boom and periods of bust.

Anyone who says different does not know what a Black Swan is, and can be safely accused of ignorance not only of stock markets, but also of the nature of knowledge. (Google it, if you're the curious sort.)