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Paul B.

Farrell

July 5, 2011, 12:01 a.m. EDT

7 reasons U.S. needs a Good Depression now


Commentary: Dont raise debt ceiling, save us from worse later
By Paul B. Farrell, MarketWatch

SAN LUIS OBISPO, Calif. (MarketWatch) No, do not raise the debt-ceiling. You heard me: Block the debt ceiling vote. Dont raise it. Americas out-of-control. A debt addict. Time to detox. Deal with the collateral damage before its too late. We need to fix Americas looming credit default, failing economy and our screwed-up banking system. Now, with a Good Depression. If we just kick the can down the road one more time, well be trapped into repeating our 1930s tragedy, a second Great Depression. Yes, depression. Spelled: d-e-p-r-e-s-s-i-o-n. Wake up America, recessions do not work. Wont work in the future. Remember that 30-month recession after the dot-com crash? Didnt work. Why? Because in the decade since that 2000 peak, Wall Streets lost an inflationadjusted 20% of Americas retirement money. And what about the so-called Great Recession of the 2008 credit meltdown? Didnt work either. In fact, made matters worse: Wall Street got richer by stealing from the other 98% of Americans, the middle class, the poor. And now their conservative puppets in Washington want to make matters worse, widening the wealth gap further to benefit the Super Rich. Barton Biggs: U.S. needs massive public works program
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Seems nobody really gives a damn about our great nation any more. Americas now a capitalists anarchy: Every (rich) man for himself.Proxy battles are fought by high-priced lobbyists in a broken political system. America needs a 21-gun wake-up call. Yes, thats why America needs a Good Depression. The economys bad now. But kicking the can down the road again will make matters much worse later. Americas leaders lost their moral compass, lack a public conscience

This is not our first call for a Good Depression. As early as 2005 we began reporting on excessive debt. In November 2007 we warned of a crash dead ahead. The subprime credit meltdown had been accelerating for many months, although for a year our leaders kept misleading Americans: Fed Chairman Ben Bernankes its under control.Treasury Secretary Henry Paulsons delusional best economy Ive ever seen in my lifetime. In August 2008 came the original of our seven reasons why America needs a Good Depression. Yes August, just two months before Wall Street banks collapsed into de facto bankruptcy, after many warnings predicting a crisis. This was no Black Swan. In September 2008 we reported on Naomi Klein, author of Shock Doctrine: The Rise of Disaster Capitalism,warning of Wall Streets insidious plan to take over America: Nobody should believe the overblown claims that the market crisis signals the death of free marketideology.Then as the meltdown went nuclear, Klein warned: Free market ideology has always been a servant to the interests of capital, and its presence ebbs and flows depending on its usefulness to those interests. During boom times, its profitable to preach laissez faire, because an absentee government allows speculative bubbles to inflate. But when those bubbles burst, the ideology becomes a hindrance, and it goes dormant while big government rides to the rescue. But rest assured,she predicted, Reaganomics ideology will come roaring back when the bailouts are done. The massive debts the public is accumulating to bail out the speculators will then become part of a global budget crisis that will be the rationalization for deep cuts to social programs, and for a renewed push to privatize. Totally predictable: No Black Swans in 2000, 2008 nor in 2012 Yes, all was predictable: The events of the past few years were well known in advance. In fact, the events of the entire decade were predictable. The rich got richer off the backs of the middle class and the poor. Why? Theres class warfare all right,warns Warren Buffett. But its my class, the rich class, thats making war, and were winning. And they are also blind and deaf to the havoc their free-market Reaganomics policies are creating, selfishly undermining America, the worlds greatest economic power. Lessons learned? Zero. Why? Wall Street, Washington and Corporate America are focused on one narrow-minded short-term strategy: Economic g-r-o-w-t-h, bull markets, megabonuses, tax cuts. In good times they tout free markets.But when greed bombs, they throw free-market principlesunder the Reagan Revolution bus and unleash their mercenary lobbyists to go whining to Congress for huge taxpayer bailouts and access at the Fed discount window, to siphon off more taxpayer money. And theyll do it again soon, Wall Street and their cronies are doing such a miserable job, America needs a new strategy: First, stop kicking the can down the road.Let a good oldfashioned Good Depression do the job that our hapless, happy-talking leaders refuse to do. Take our medicine. Let a new depression clean house and reawaken Americans to core values. Trust me folks, its either a Good Depression now or a Great Depression 2. Here are seven reasons favoring the do-it-now strategy: 1: Capitalisms now a lethal soul sickness, needs a reawakening Whats the real problem? Not the economy, not markets, nor even politics. Yes, our economic pains are real. But theyre just symptoms. Somethings structural wrong. Since 2000 endless bad news: Greed, deceit, stupidity, corruption, unethical behavior, lack of moral conscience. The real problems deep in our character, the mutant capitalismJack Bogle warned of in The Battle for the Soul of Capitalism.Sadly, that battle was lost. With it we lost our soul, our moral compass. Americas character is measured by our net worth.

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2. Were already in the early stages of a Great Depression Comparing today with the Great Depression is common sport. In a Newsweek special Seeing Shades of the 1930s,Dan Gross wrote: Wall Street, after two terms of a business-friendly Republican president, self-immolated on a pyre of greed, incompetence and excessive optimism.Todays new normaleconomy means high unemployment for years, inflation driving prices, rising interest rates, more debt, chaos. We are destroying ourselves from within. Former U.S. Comptroller General David Walker warns that there are striking similarities between Americas current situation and that of another great power from the past: Rome.Three reasons worth remembering: declining moral values and political civility at home, an overconfident and overextended military in foreign lands, and fiscal irresponsibility by the central government.We are becoming more vulnerable to external enemies. 3. Good Depression exposes our self-destruct bubble-thinking Before the 2008 crash, Irrational Exuberanceauthor Robert Shiller warned in the Atlantic magazine that bubbles are primarily social phenomena. Until we understand and address the psychology that fuels them, theyre going to keep forming.Housing inflated 85% in the decade: Historically unprecedented no rational basis for it. Bubble thinking is an toxic virus that infected everyone. Shiller warns of another coming: We recently lived through two epidemics of excessive financial optimism we are close to a third episode. 4. Good Depression will stir outrage, force real reforms Writing in the Wall Street Journal, Jim Grant, editor of the Interest Rate Observer, wrote: Why No Outrage? Through history, outrageous financial behavior has been met with outrage. But today Wall Streets damaging recklessness has been met with near-silence, from a too tolerant populace.Grant worries that Wall Street will run itself and the rest of the American financial system right over a cliff. But we only went to the edge in 2008. Today, a rebellious throw the bums outhostility is blowing a new kind of bubble: Three years ago we did not have Tea Party, union fights, the Arab Spring and Greek austerity riots, all signs of an dark angry future sweeping across America. 5. Good Depression forces Wall Street to think outside the box In a powerful Bloomberg Markets feature, No Easy Fix,were told Wall Streets profit formula has hit a wall.Their money-making machine is broken and efforts to repair it after the biggest losses in history are likely to undermine profits. Even Mad Moneys Jim Cramer openly admits hedge fund managers are pocketing megaprofits at capital gains rates while laughing at the stupidity of a broken political system that gives hundreds of billions in tax breaks to the richest, then takes taxes off the table as our middle class is dying under massive unsustainable deficits. Soon angry mobs will fixWall Street. 6. Good Depression will deflate Americas warring soul The American economy is a war economydriven by a egomaniac. I saw it firsthand as a U.S. Marine. Americans love being king of the hill, worlds cop, the global superpower. Why else spend 54% of our tax dollars on a war machine, 47% of the worlds total military budgets. Why? Our war machine generates such spectacular profits that many people around the worldare convinced Americas rich and powerful must be deliberately causing catastrophes so that they can exploit them,warns Klein in Shock Doctrine.No wonder the GOP takes military spending, like tax cuts for the rich, off-the-table: The war industry is a major political donor. 7. Good Depression now avoids a far bigger depression later In The Price of Liberty: Paying for Americas Wars,Robert Hormats, undersecretary of state and a former Goldman Sachs vice chairman, traces Americas wartime financing from the Revolutionary War to present wars. He warns that today were relying on faith over experience, hoping that sustained growth will erase deficits and that the ballooning costs of Social Security, Medicare and Medicaid will be manageable in the coming decades without difficult reforms. Absent a brutal reset, we are on a historically predictable course says Kevin Phillips, Nixon strategist and author of Wealth & Democracy:Most great nations, at the peak of their economic power, become arrogant and wage great world wars at great cost, wasting vast resources, taking on huge debt, and ultimately burning themselves out.Yes, burned out, unprepared. So pray for a Good Depression earlier rather than later. Choose now and we can be prepared for whatever comes. Or a Great Depression will hit later, when were least prepared, the problems bigger, our faith weaker dont raise the debt ceiling.
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