Greater Depression Yet to Come

Saturday, January 01, 2011
My Portfolios at All Time Highs as we Enter 2011

-------- Original Message --------

Subject:	FWC: Prosperity, Real or Imagined
Date:	Sun, 2 Jan 2011 11:11:41 -0800
From:	Jas Jain

Appended is a review of Inflated: How Money and Debt Built the American Dream by R. Christopher Whalen.

As those who have read my commentaries for more than a dozen years, with my signature slogan "It Is the Debt, Stupid!," know that the US has "enjoyed" an artificial growth via debt-induced consumption. All the GDP growth in the US economy since 1997, and more!, has been a result of  consumption by Americans of stuff produced outside the US of A with borrowed money. The arithmetic is plain and simple: 8-9% annual rate of debt-based consumption, funded by both private and public debt, to get 2-3% annual rate of GDP growth. Chinese could hardly thank Americans enough for turning China into a real contender for the largest economy in another 10-15 years. Even Indians are thankful for the thoughtless American profligacy. America ceased to have an economy; it has created profligacy! You ain't seen nothing during 2001-2010. The worse is yet to come. Lot worse, as in Greater Depression.

Jas

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Prosperity, Real or Imagined:

http://www.nytimes.com/2011/01/02/business/02shelf.html?_r=1&partner=rss&emc=rss&pagewanted=print

January 1, 2011

Prosperity, Real or Imagined

By NANCY F. KOEHN

"THE past is never dead," William Faulkner wrote in 1951. "It's not even past." Six decades later, R. Christopher Whalen takes up the gauntlet implied in those words in "Inflated: How Money and Debt Built the American Dream" (John Wiley & Sons, $34.95).

Mr. Whalen, a consultant and former investment banker, marches zealously back in time to try to understand the long-term viability of the American economy in the wake of the 2008 financial crisis.

The author sees a conflict at the heart of Americans' attitudes toward money and debt. We tend to view ourselves "as reasonably prudent and sober people," he writes, while "the choices we make at the ballot box seem to be at odds with that self-image."

"As a nation," he says, "we seem to feel entitled to a national agenda and standard of living that is beyond our current income."

To finance these expectations, we have continued to borrow extensively from the future — think subprime mortgages, household credit card balances, the federal debt, the trade deficit and more — with turbulent and, at times, nearly disastrous results.

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