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Wednesday, September 23, 2009

When did the depression start?

A little warning, this is a bit of a rant, it's been a while since I did one of these. :)

Conventional wisdom says the US recession started in 2007, with the market peaking in the fall of 2007. But is that when the recession started?
In 2001 onward, we now know, much of the economic upswing was fueled by loose monetary standards by the US government, and after 2005 basically outright fraud by the US financial system in two main areas. Real estate loans and Credit Default Swaps.
In addition, the US dollar has been devaluing since 2000.

I have posted this chart before, I'll re-post now, a chart from Slope of Hope that shows the Dow Jones Industrial valuation priced not in US Dollars, but priced in gold. Why gold? Some use gold as "real money" valuation vs arbitrary paper printing. One supporting concept in gold is through the history of mankind gold holds value. Can't say that for ANY fiat currency!

See chart:
From WebSurfinMurf's Financial Blog
So, between real estate and financial fraudulent schemes, and devaluation of the US dollar, the US economy peaked not in 2007, but in 2000! (From a more absolute value perspective. The amount of paper dollars for goods based on resources, or better put, USA dollars before leaving the gold standard.)

Not convinced? In another financial service I pay for, "Elliot Wave International" (good service I recommend it), their September 15th edition of The Elliot Wave Theorist had an very interesting chart, posted below. (reprint permission given on 9/21/09)
This chart basically shows that the US has been in a recession/depression since 2000, based upon employment. The GDP and economic numbers looked good in the mid-late 2000's through currency devaluation and false financial inflation.
From WebSurfinMurf's Financial Blog

Still not convinced? Lets look at the recent "recovery" in 2009, lets cross reference the US stock market to US dollar valuation since Sept 2008. Clearly there is a correlation of devaluing USD to inflate internationally valued assets. (Oil, US stocks, etc) (Click here for longer view)
From WebSurfinMurf's Financial Blog
What value did the US provide to the world in the 2000-2009 era? In the 90's it was the tech revolution culminating with Internet explosion. 2000+ was building houses? The US expanding internally does not provide true economic value in a world sense. If Zimbabwe builds fancy houses through fraud, it doesn't build a more valued nation.

Another metric, the average income for a US citizen is currently the same as it was in 1998, showing that US wages have stagnated. Take note, this chart is from the US Government which tries to skew information for each political party as best as possible. I fear its actually worse than this shows.
From WebSurfinMurf's Financial Blog
Finally, while I am going "chart crazy", here is a chart comparing total projected cost of the 2008 bailout. (US backed many bank assets that need to be repaid, also Freddie/Fannie costs, bank failures, ets) So even if 2008 bailout doesn't pan-out to 4.6 trillion, the total cost in 2008-20017 easily will. The cost exceeds all of the other projects COMBINED. And the costs of the projects / efforts are adjusted into 2008 dollars! I wonder who got all that cash?.....oh yea, the bankers.
Let's recap, the US government has been devaluing its currency since 2000 (can only do this trick until USD is at ZERO), the US is now maxing out it's credit, and private citizens/companies already near max credit. (US Debt Clock) So don't be surprised when the US can't help it's citizens for Social Security, failed pensions, and the like. By the time the citizens realize what has happened, there will not be enough credit left by the US government to help them with their needs. The top will have already taken it.

From WebSurfinMurf's Financial Blog
Bottom line: Fiat currencies provide the political ability to provide a false sense of growth. When measured using more neutral valuations, such as "US stock market valuation per gold ounce", "employment level", or just plain correlating currency devaluation to asset inflation, it is clear that all is not what it seems.

America better stop pointing fingers at each other, and start pointing at themselves, get down to working hard, providing value, saving, enforcing the rule of law, in a nut shell back to basics. Otherwise America could end up as yet another failed republic.

**Special thanks to my Aunt and Cousin, who through an email chain got me fired up to write this rant **

I'll end with a little humor....

Matt Bors

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