Reply #39: Why Washington Cannot Stop Depression !!! [View All]

[Trojan]

http://www.moneyandmarkets.com/why-washington-cannot-prevent-depression-27968

Snippet:

The Debt Crisis, the Primary Catalyst
of the Economy’s Decline, Is Far Too Big
for the U.S. Government to Control

The facts:

1. Based on the Federal Reserve’s Flow of Funds report, there are now $52 trillion in interest-bearing debts in the U.S.

2. Based on estimates provided by the U.S. Government Accountability Office and other sources, it’s safe to assume that there are also at least $60 trillion in contingency debts and obligations now starting to kick in — for Social Security, Medicare and other pensions.

3. Separately, the Bank of International Settlements reports that the total value of debts and bets placed worldwide (derivatives) is $596 trillion, or more than a half quadrillion!

In contrast, even after the most reckless outpouring of government bailouts in recent months, the total rescue money announced in the U.S. so far is $2.7 trillion — a huge, unwieldy amount, but still minuscule in comparison to the massive debt build-up.


The numbers are not directly comparable, but just to get a sense of the magnitude of the problem, compare the size of the debts and bets outstanding (the first three bars in the chart) with the size of the $2.7 trillion in bailout commitments thus far (barely visible in the chart).

Still, most people insist,

“If only Washington can avoid the mistakes it made in the 1930s … if only Washington can preemptively nip this crisis in the bud … if only Washington can be our lender and spender of last resort … Great Depression II will never come to pass.”

What they don’t see is the fact that the debt build-up in the U.S. today is far greater than it was on the eve of Great Depression I. Indeed, in the chart below, Claus Vogt, the editor of Sicheres Geld (the German edition of our Safe Money Report) shows how …

Prior to the 1930s, the total debt in the U.S. was between 150% and 160% of GDP. Now it’s close to 350% of GDP.



Moreover, he reminds us that this chart does not even include derivatives, which barely existed in the 1930s but which are now sinking banks deeply into the red.

Clearly the government bailouts are too little, too late to end this crisis. At the same time …