By Paul B. Farrell, MarketWatch
SAN LUIS OBISPO, Calif. (MarketWatch) — “Facebook will become the poster child for the current social-media bubble,” warns economist Gary Shilling in his latest Forbes column, “just as Pets.com was for the dot-com bubble.” Yes, Wall Street is repeating the 2000 dot-com crash as today’s social-media bubble crashes and burns.
Think history folks: Remember 2000-2002? The economy suffered a 30-month recession and a brutal bear market. The Dow Jones Industrial Average peaked at 11,722, then crashed, losing over 4,000 points dropping below 7,500, down more than 43%, with massive losses of more than $8 trillion in market cap.
Pets.com sock puppet.
But it gets worse: Shilling’s bluntly warning: “If we aren’t already in a recession, we’re getting very close.” Yes, he’s more reserved than Nobel economist Paul Krugman, whose latest book goes beyond hinting that the America economy is repeating the 2000-2002 recession, His title says it all: “End This Depression Now!”
But the scariest fact is that America’s warring politicians, CEOs and Super Rich can’t even see the obvious link between the 2012 social-media bubble and the 2008 Wall Street credit bubble that nearly bankrupt our monetary system and forced Congress and the Fed into bailing out our too-big-to-manage banks to an estimated $29.7 trillion in cash, credits, cheap money loans and debt relief.
But, unfortunately, the banks still haven’t learned the lessons of history. Instead, they dug in their heels, spending hundreds of million on lobbyists, fighting all reform efforts, went back to business-as-usual, sabotaging America and ultimately themselves.
Déjà vu: here we are four years later. Again mired in another presidential election, right back where we were in the summer of 2008. In denial, trapped in lies and mean-spirited theatrics, ignoring warnings, blinded, obsessed about the smell of election victories no matter the cost, even if it triggers a recession.
Yes, déjà vu all over again. Four short years. We forget. We’re back repeating the same buildup scenario to another meltdown.
Worse, bankers, politicians and billionaires just don’t seem to care. And you get the foreboding feeling that it really doesn’t matter who wins the election. This war will go on till 2016: For one party and their billionaire super PACs will do anything to hold on to the presidency, and the other, backed by their billionaire super PACs, will do anything to regain it.
Politics is now a deadly blood sport that reminds us of the “Hunger Games.”
As if 2008 never happened, creating the granddaddy of all bubbles
Yes, another crash is coming soon because we’re back playing the same speculative games as we did for years prior to the 2008 crash. Nothing’s changed. And when we collapse, it will be because America’s leaders never do learn the lessons of history. And never will, if you get the meaning of economists Carmen Reinhart and Kenneth Rogoff who surveyed “800 Years of Financial Folly” and saw nothing but repetitive cycles.
In a BusinessWeek editorial, Peter Coy and Rouben Farzad described the latest cycle in this eternal drama of the bubbles:
“It’s as if 2008 never happened. Once again the worlds investors are pumping up bubbles that will probably explode in their faces. After the popping of a real estate bubble led to the first global recession since the 1930s, world markets are frothing like shaken Champagne. Pundits claim to have spotted price increases that are unsupported by economic fundamentals in assets ranging from U.S. farmland to Israeli biotech to Australian housing to Chinese cemetery sites. Commodities have soared. Global junk-bond issuance hit a record … this is the granddaddy of them all, an almost-encompassing bubble right at the heart of monetary systems.”
Yes, for the past four years our great free-market system has been blowing many new bubbles, like the Facebook bubble that we saw coming months ago. It will soon halt Chairman Bernanke’s nonstop printing press. This bubble will sink like a mafia stiletto deep into the “heart of the monetary systems” worldwide, proving something Nassim Taleb said about Bernanke when Obama reappointed him in 2009: “He doesn’t even know he doesn’t understand how things work,” that his methods make “homeopath and alternative healers look empirical and scientific.”
Warning, the Real Crash is dead ahead, will bankrupt America
That’s also what economist Peter Schiff, CEO of Euro Pacific Capital, predicted recently when interviewed on Fox Business about his new book, “The Real Crash: America’s Coming Bankruptcy.”
“We’ve got a much bigger collapse coming, and not just of the markets, but of the economy … like what you’re seeing in Europe right now, only worse … when we hit our real fiscal cliff” and a meltdown more severe than the Crash and Great Recession of 2007-2010.
Schiff was one-upped during the same NewsmaxWorld report by Robert Wiedemer, author of the 2006 “America’s Bubble Economy” and recent “Aftershock” book about the “Next Global Financial Meltdown.” He warns that “the data is clear, 50% unemployment, a 90% stock market drop, and 100% annual inflation,” starting this year.
Yes, it sounds like overkill to drive home the message, but maybe not. Maybe this is déjà vu 1929. Maybe the Real Crash is dead ahead. And maybe nobody wants to see it, like 2008.
Big secret, buy banks? Yes, if Wall Street doubles down, splits up
That signal comes from no less than former Citigroup president Sandy Weill. Imagine, the man responsible for building the first too-big-to-manage mega-bank, and killing the 60-year-old Glass-Steagall separating commercial and investment banking back in 1999, now saying:
“I think what we should probably do is go and split up investment banking from banking. Have banks be deposit takers, make commercial loans and real estate loans. And have banks do something that’s not going to risk the taxpayer dollars, that’s not going to be too big to fail.” What a game-changer.
Huffington Post columnist Mark Gongloff notes that Weill is “not doing it out of the goodness of his heart.” But the truth is banks haven’t been doing well since 2008, in spite of controlling politicians and regulators: “The banks themselves, including the abomination he created, Citigroup, would be worth a lot more if they were broken into smaller pieces.”
Since 2008 “the market has turned against the big banks,” investors have been “doing the government’s dirty work for it.”
De facto Glass-Steagall? Yes, split and get richer on two bank stocks
Weill must also sense that with all the relentless political fears about the government’s out-of-control debt, plus the real possibility that the American economy could in fact go over a Fiscal Cliff in 2013 and into a long recession, or even a depression, the appetite for another taxpayer bailout will be zero, forcing a bank breakup anyway.
So Weill’s brainstorm makes a helluva lot of sense: Take command. Get ahead of the coming slowdown. Shilling warns the social-media bubble will keep deflating.
Forget them, seize this opportunity. Refocus on new bank stocks. Besides, if insiders control a split-up into a commercial bank and an investment bank, it’d be on terms more favorable to bank insiders, executives and shareholders than if Washington did it.
And you can bet the smart money’s on Weill’s strategy. For example, The Wall Street Journal quotes Phillip Purcell, former CEO of Morgan Stanley: “From a shareholder point of view, it’s crystal clear these enterprises are worth more broken up than together.”
Yes, deniers are claiming it’ll never happen, especially Jamie Dimon, who publicly doubled down on loving his too-big-to-manage $2.3 trillion bank. But Gongloff and the Journal note that Dimon’s reshuffled organizational chart suggests otherwise.
Moreover, you know bank CEOs like Lloyd Blankfein are motivated more by their own personal wealth than by firm assets under management. Ultimately, if they can make more money and get more control of their destiny by owning two bank stocks, you can bet they’ll plan a de facto Glass-Steagall revival in a New York minute. They can make more … and so can America’s 95 million Main Street investors like you.
Bottom line: if you are a risk-taker, maybe you can beat the market to the punch, before The Real Crash overwhelms Wall Street, like it did in 1929 and in 2000 and in 2008. Because next time, even though our too-big-to-manage banks expect they’ll get bailed out, the reality is that they’ll go begging for bail-out billions and Congress won’t do it again, without forcing a newer, tougher Glass-Steagall law on the banks.
Leo Beer says:
Debt bomb:
http://www.youtube.com/watch?feature=player_embedded&v=GXcLVDhS8fM#%21
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31st July 2012 at 9:50 am
Bob says:
A return to Glass Steagal won’t work unless derivative liabilities are returned from the commercial banks to the investment banks. When Bank of America transferred ownership of the Merrill Lynch/BOA derivatives portfolio to the banking part of BOA, it was clear they had decided to hold their depositors hostage in their attempt to wring money and regulatrory relief out of the system. That this was allowed to me is a criminal act that is waiting to be prosecuted. I wonder how many of the other financial institution have done the same?
Until this is done, and the investment banks face up to their crimes, millions of people are at risk of a major, life-changing shock. When the collapse begins, it will be too late to start a run on these banks — they will already be empty. And furthermore, empty many, many times over.
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31st July 2012 at 10:11 am
Bob says:
And good luck getting help from the FDIC:
F ucking
D erivatives
I ncinretated
C ds
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31st July 2012 at 11:25 am
Ron says:
Green energy was supposed to bring jobs,well if China didnt flood our market with cheaper made products.I just cant see how we can make new jobs and move ahead when we compete with such cheap labor countrys.
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31st July 2012 at 11:52 am
Colma Rising says:
“No more treasure than one can carry”
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31st July 2012 at 11:55 am
AWD says:
“the data is clear, 50% unemployment, a 90% stock market drop, and 100% annual inflation,” starting this year.”
It’s the leaks in the dikes model. The little dutch boy finds leaks in the dike, and tries to insert fingers. Then more leaks, bigger leaks, and the kid runs out of fingers. Then all of a sudden, one of the big leaks blows and tears the whole dike apart, and collapse.
A completely unnoticed article yesterday about diminishing tax receipts by the government. It seems the unemployment/underemployment problem has lead to lower tax receipts by the Feds, which in turn has lead to increased borrowing. And not surprisingly, spending has continued to rise, not decline.
The banks will never break up voluntarily, and unpayable debt is what will cause the final hole in the dike to blow. Hyperinflation or austerity. Nobody believes the American public, especially the FSA is go for austerity. I’m hoping for hyperinflation.
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31st July 2012 at 11:56 am
Stan says:
Hidden due to low comment rating. Click here to see.
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31st July 2012 at 12:51 pm
Tim says:
I’m surprised “they” have kept it going this long.
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31st July 2012 at 1:00 pm
Pirate Jo says:
Somebody yesterday (Dave?) said he sometimes hopes his children don’t have children of their own.
Which was interesting, because the same day CNN ran an opinion piece called “Does parenting make you unhappy?” The writer opined that even though most people find the day-to-day tasks associated with childrearing to be dull (only housework, work, and commuting ranked lower), it provides longer-lasting, more enduring satisfaction in life, because “a good life is not one centered around squeezing as much pleasure out of life as possible.”
The idea goes that enduring some short-term aggravation and boredom in exchange for something that’s worth doing in the long term is worthwhile.
I never experienced any desire whatsoever to have kids, so this is a debate I never had to have with myself. But I’m beginning to wonder. It’s one thing to change all those stinky diapers and spend all that money if you can see your kid grow up to have a better life than you had, and have a good relationship with them when you’re old.
But if you’re just popping out yet another kid into a world where there aren’t enough jobs for the people who are already here, and their standard of living will be much lower than yours, just as yours is probably lower than what your parents enjoyed, “squeezing as much pleasure out of life as possible” is going to be a luxury you will only WISH you could enjoy.
Americans don’t really know what it’s like to do without. For as long as I’ve been alive, the government has always been there to mop up after people, no matter how stupid they were. Of the mere 310 million Americans, the bottom 100 million have a standard of living many multiples higher than BILLIONS of other people in the world. We just don’t realize it. But even the poorest Americans enjoy First World standards of living, even if they completely screw up and do everything wrong.
You can be born on welfare, pop out six kids you can’t afford, live your life on welfare, and the government will support you from cradle to grave. You aren’t going to go hungry, you won’t have to do without booze and cigarettes, your kids will get fed at school, and you will have a cell phone and some nice rims. Even middle-class people figure they can have all the kids they want, fail to save for retirement, spend their entire lives in debt, and they will do just fine because all those deadbeats who don’t even have jobs are doing just fine too. And for all the bitching the Tea Partiers do about their taxes, we aren’t even paying for all this – we’re borrowing it. It’ll be those kids you have – those precious miracles that bring so much long-term meaning to your lives – who will be saddled with it.
As we watch our standard of living decline over the next 20-30 years, I wonder if people will still think having kids is worth doing. People might think, ‘Gee, not only is the world around me just going to get worse and worse until I die, I can rest easy at night knowing my kids will outlive me and will get to see things get even worse than I will!’ We won’t exchange shallow pleasures for deeper meaning. We’ll give them up in order to cling desperately to the side of the bowl when the big flush happens.
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31st July 2012 at 1:58 pm
AWD says:
Small businesses account for most hiring in the U.S., only problem, they are disappearing. Not good for employment:
Has America Lost the Entrepreneurial Spirit?
“America may be going out of business when it comes to starting new businesses, according to a recent report.
The study-from the non-profit New America Foundation-argues the U.S. is seriously in danger of losing its entrepreneurial spirit because the number of small business created has been declining since the 1970s.
“We see entrepreneurship declining per person and what figures there are have over-counted the number of small businesses,” Khan says.
What the report reveals is that-beyond the impact of the Great Recession-small businesses declined by 53 percent between 1977 and 2010. Meanwhile, the reports says, the share of self-employed Americans has been declining since 1991-dropping more than 20 percent by 2010.”
Entrepreneurs and small business owner have shrugged.
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31st July 2012 at 2:00 pm
AWD says:
versus
No wonder we’re so fucked.
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31st July 2012 at 2:15 pm
AWD says:
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31st July 2012 at 2:17 pm
Wyoming Mike says:
Is the facebook bet over? I see it’s around 21.
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31st July 2012 at 2:28 pm
Administrator says:
Not yet. Facebook has to hit $20.50 for Admin to do his touchdown dance.
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31st July 2012 at 3:08 pm
Colma Rising says:
FBES
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31st July 2012 at 3:10 pm
Big Cat says:
It’s worse than anybody publicly says. The Fed is monetizing our debt. It creates billions in bogus dollars every month. It’s only a matter of time before we have hyperinflation like Germany had in the 1920s. When that happens almost all economic activity will stop. Almost nobody will be able to buy food or gasoline. Or pay their natural gas or electric bills. Government at all levels will go bankrupt. There will be no police or fire protection or city water. No food or other goods being transported across the country. Million of Americans will starve to death or die in the violence that will follow. I believe that as many as 90% of Americans will die in the two years following the collapse. From everything I read I think the collapse is coming in the fall.
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31st July 2012 at 3:39 pm
jeff says:
rice, honey, water and water filters, grains, dried and tinned foods, medical supplies and then start prepping!
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31st July 2012 at 4:52 pm
Pirate Jo says:
I don’t agree, Big Cat. The dollar will be destroyed, but we’ll move to another currency before we get to the point where people can’t buy food, gasoline, or pay their utility bills.
It’s going to devastate old people who are trying to live off their savings. It’s going to devastate the members of the FSA, who probably will riot and be violent, but they already live in high-crime areas and we’re used to them acting like animals.
Everyone’s standard of living will decline, as the few working people who are left struggle to support themselves and their aging parents whose savings will be cut in (at least) half.
The borrowing will have to stop, which is why old people and the FSA (the recipients of most government spending) will be hurt the worst. We will go back to living within our means (hence the diminished standard of living) which we should have been doing all along anyway.
Millions of Americans won’t starve to death or die – many will help each other and cooperate for mutual benefit, but that will probably be in communities and families where people already do those things.
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31st July 2012 at 5:41 pm
fwiw imho says:
As a followup to the loss of small business in AWD’s post, some anecdotal evidence:
My insurance agent was in today and we talked about how business activity is slowing down. He commented that he lost most of his smaller business customers. The smaller companies in various industries who work 5 to 10 people have just shut the doors and gone out of business. The smaller contractors he works with who have 5 of fewer employees are still in business, but they are dropping their insurance and working off the books for cash.
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31st July 2012 at 5:46 pm
SSS says:
Terrell Owens eats shit. Fucking showboat.
World class wide receiver, team player, and all around good guy: Larry Fitzgerald.
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31st July 2012 at 6:37 pm
Zarathustra says:
“More than any time in history, mankind faces a crossroads. One path leads to despair and utter hopelessness, the other to total extinction. Let us pray that we have the wisdom to choose correctly.” – Woody Allen
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31st July 2012 at 7:11 pm
scot says:
Folks, just how many times over how many years have I heard someone hollering the sky is falling? Just saying.
Hot debate. What do you think?
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31st July 2012 at 11:35 am
TeresaE says:
@scot
Enjoy your passivity. Enjoy your coming eye-opening status.
I’m going to guess you have insurance for you, your car, your home. Right?
Have you had a loss recently?
If not, then why are you still buying it? After all, if you haven’t had a fire up till now, you surely won’t have one tomorrow. ( I pray that statement just made any math majors/dabblers crazy).
Actually scot, in insurance, if you haven’t had an accident/claim, your ratings actually reflect the reality that your odds increase with EVERY day that you continue to be accident free.
Yes, people have been making these claims for “years.” And the PTB have kicked the can harder, and further, than most would have ever thought they could. Of course, most of us that know they are kicking the can also had no idea how bad the corruption and illusion would be allowed to become (primarily because people like you refuse to call a spade a spade and keep holding onto those happy thoughts that since things haven’t exploded today, they won’t tomorrow either).
So, you are right, “they” have been telling you to pull your head from your ass for years. The MSM keeps telling you things are great even as you watch your life spiral downward.
The choice is yours.
I know that I would rather plan for the worst, then not need my plan, than hope for the best and be the first to the slaughter when my normalcy bias is eroded with plain old ass-screwing reality.
Good luck to you scot. You are going to need it.
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31st July 2012 at 12:10 pm
Administrator says:
scot
Do you remember Sept 2008 through March 2009? What do you call that? A walk in the park?
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31st July 2012 at 12:28 pm
scot says:
I”ll tell you what I do remember.
Pastor Lindsay Williams saying war with Iran………in 2011.
Farrell saying we were doomed…………in 2010.
Shiff saying it was over………………………..in 2011.
Gerald Celente saying it was over………in 2009.
And Steve Quayle telling us to head for the hills………………in 2010.
And on and on and on it goes.
I am beyond bored of these chicken littles crying the sky is falling.
Hot debate. What do you think?
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31st July 2012 at 3:52 pm
Gary says:
It wont be long now. Hopefully nobody will starve too much. A few thousand murders here and there. The welfare bums will go beserk but the normal people will form posses in the decent communities and survive. Its almost like that now anyway isnt it.
The hyperinflation will set in and nobody will owe anymore money to anyone, the hundreds of thousands of dollars you are in debt will be peanuts when a loaf of bread is $1000 After the smoke clears in a few years or so, things will begin to come together with a new currency.
Of course, this is only if we are really really lucky, otherwise, it takes about nine days with no food for people to become cannibals.
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31st July 2012 at 7:10 pm
llpoh says:
I suggest an argument can be made that we are approaching 50% unemployment already – the workforce participation rate is around 56% last I looked. In a modern society, it seems impossible that a nation can survive with that kind of participation rate.
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31st July 2012 at 7:19 pm
pateriot says:
.PirateJoe – I agree that we will move to a different monetary system. It will be an internationalelectronic one without paper or coinage. This will be even easier for the Globalists to manipulate and their actions will become even more secretive. After all, how can money be devalued if no one has any idea how much of it there is. Values will almost be set by edict. Perhaps tied to oil. ie oil is fixed at $100 per barrel. I do not think it will be tied to Gold or Silver but it is possible. It is possible that they will fix the price of a range of commodities. It will be the tail wagging the dog. The value of 5100 would not be determined on the demand for the commodities versus the availibility of dollars, but rather an artificailly fixed exchange. This will tend to mederate the proces of everything else that is not fixed by law. This will tend to sap the wealth of everyone who has built it up based on free market assumptions. Most notibly to get screwed are those who hoarded Gold or Silver thinkingit would at least keep up with inflation. The only ones who are likely to benefit are the poor who have nothing to lose and who rely on governmental handouts anyways aswell as those who are going to engineer the change and who will position themselves to make Trillions when the rest of the World loded everything. Ironically it will be these same fascists who will be heralded as the saviors.
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31st July 2012 at 3:56 pm
gman says:
pateriot “do not think it will be tied to Gold or Silver but it is possible.”
they will introduce it with the promise that it will be tied to gold, but it will be implemented as pure fiat with no reference to gold. this lack of backing will not be announced until the system has pervaded every necessary facet of life and is unavoidable.
pirate jo “The dollar will be destroyed, but we’ll move to another currency before we get to the point where people can’t buy food, gasoline, or pay their utility bills.”
the new electronic currency will be allocated to those who are worthy to serve the new system. those who are judged unworthy will be turned away and will suffer the fate described by big cat.
those who in the future become unworthy of serving the new order will have their individual electronic accounts locked and voided – their money, their certificates, their records, their citizenship, their deeds, their licenses, their registrations, their memberships, their authorizations, their addresses. this will excise them them from society with surgical precision while everyone else procedes untouched and unimpeded in the service of the new society. it will be the perfect tool for exacting excommunication.
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31st July 2012 at 10:26 pm
Tampa Gold says:
BEWARE OF TROLLS. LINKED FROM SB DOT COM
Jim, love ya like a brother from a different mother but thumb down for the gratitious TO pic. SB XXXVII, bitch!!!
SSS: Thumb up for taking the words out of my mouth. Read me agin for me too Jimmy.
scot. too bad for you.
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31st July 2012 at 12:12 am
m says:
I’m 64 yo and this is the worst I have ever the economy.
I’m surprised Americans aren’t taking it out on the corrupt politicians.
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31st July 2012 at 1:12 pm