On
Market Predictions In The Current Chaotic Environment
By Richard C. Cook
29 August, 2007
Global
Research
No one can predict how deep the
decline in Western economies that is underway will go, because there
is so little transparent information. Within the U.S., the government
is hiding the severity of the crisis in order to prevent a collapse
of consumer confidence.
Realize that the problem
does not lie on the side of production. Global industry has the capacity
to produce a huge quantity of goods and services. There is even a glut
in some sectors, such as automobiles, textiles, IT, and other consumer
products.
Rather the problem, as with
the Great Depression, is that purchasing power at the consumer level
is lacking. In the U.S., purchasing power, as measured by M1, is already
in a recession-level decline. The causes are the high level of consumer
debt, high cumulative levels of taxation on the dwindling middle class,
and the tragic erosion of wages and salaries from job outsourcing.
In the absence of purchasing
power, the Federal Reserve has chosen the strategy of trying to outrun
collapse by creating inflation. This is the meaning of the bail-outs
that are going on. It's an attempt to devalue debt at the macro level.
It’s a hidden tax on everyone but the super-rich. Everyone else
is poorer today than they were yesterday.
How long this can go on is
unpredictable. It's another bubble following on the housing and asset
bubbles that are already bursting on a daily basis before our eyes.
I don't see any responsible
analyst who foresees any better outcome than a recession that would
see the DJIA at a level of 8000-8500 within a few months. Again, maybe
the Fed's printing presses can hold this level of decline at bay for
a while longer, but I doubt it.
There are major players in
the markets who see an even steeper decline coming even sooner. Some
say as soon as a month.
There is also a real chance
of an eventual depression-level contraction. How much of a chance, I
don't know. This conceivably could lead to a total collapse of consumer
markets, economic paralysis, and widespread homelessness and starvation.
Yes, even in the U.S. Agribusiness, bio-fuel conversion, seedless mega-farming,
the disappearance of family farming, and the recent disastrous weather
conditions place everyone at risk.
At some point, the federal
government, at a minimum, has to step in with New Deal-type relief measures.
Whether the Bush administration has that capability is doubtful. Look
at New Orleans. They may even try to cover everything up by starting
a war against Iran. Are they that crazy? Who can say?
There are also rumors going
around that there are plans to allow the markets to be crashed by a
terrorist event so as to divert blame. I have gotten no reliable confirmation
of these rumors, though there are parties placing what people in the
markets are calling "bin Laden"-type bets similar to, but
bigger than, the "puts" that were placed before the original
9/11.
These types of bets have
been placed in the U.S., European, and Japanese markets that assume
a stock market crash of fifty percent within the next five weeks. A
report was just carried, I’m told, on CNBC.
Some have said the culprit
may be China, but it makes no sense for the Chinese to crash the markets
while holding U.S. dollars. Others say it is hedge funds at work to
try to drive down the markets in a self-fulfilling prophecy.
But a fifty percent market
decline? That’s just not conceivable. Even the hedge funds do
not have that much power. The federal plunge protection team—known
as the "men in black" by floor traders—would never allow
them to do something so disastrous. This has caused some to speculate
that the "men in black" are parties to the bets.
These remarks probably give
some indication of the chaos going on right now in the U.S. and world
economies. The only real solution is a new world financial system based
on the concept of credit as a public utility. This is what should be
implemented to replace the present system of institutionalized usury.
Richard C. Cook is a retired federal analyst, whose
career included service with the U.S. Civil Service Commission, the
Food and Drug Administration, the Carter White House, and NASA, followed
by twenty-one years with the U.S. Treasury Department. His articles
on monetary reform, economics, and space policy have appeared on Global
Research, Economy in Crisis, Dissident Voice, Atlantic Free Press, and
elsewhere. He is the author of "Challenger Revealed: An Insider’s
Account of How the Reagan Administration Caused the Greatest Tragedy
of the Space Age." His website is at www.richardccook.com.
Leave
A Comment
&
Share Your Insights
Comment
Policy
Digg
it! And spread the word!
Here is a unique chance to help this article to be read by thousands
of people more. You just Digg it, and it will appear in the home page
of Digg.com and thousands more will read it. Digg is nothing but an
vote, the article with most votes will go to the top of the page. So,
as you read just give a digg and help thousands more to read this article.