The bubble is about to burst. The business cycle is about enter its destructive stage. We are about to witness another possible Great Depression in the almost exact way it went down over 70 years ago. Those that doubt the Austrian Business Cycle will soon see overwhelming evidence for it.
The Roaring Twenties. The name explains itself. The 1920s saw a huge boom in economic activity. There was an expansion of credit, new technology boosted industries, consumption was high, and consumer spending was up. The market inevitably outran the resources resulting into the depression.
The Great Depression was only a recession at first until government policies intervened and prolonged the economic collapse by a decade. The first policy was the complete over-adjustment and mis-judgement by the Fed in interest rates. Then a huge bailout for the banks. Overall the government spent one billion dollars in bailouts. This may not seem much but keep in mind that this was 1930 where total Federal Expenditures equaled 11 billion. This was followed by massive budget increases. The Federal Budget rose 42% from FY 1930 to FY 1932. Lastly, the last blow to send the economy into depression, was the protectionist policies from the Smoot-Hawtley Tariff. All of this occurred under the Hoover administration, a so called Republican.
FDR was elected in 1932. He oversaw the largest expansion in government at any time in US history. During his reign of power FDR, in his New Deal, created NIRA (perhaps the most unconstitutional, socialist program in US history), the SSA, The Food Stamp Plan, and a multitude of government programs to try and stimulate the economy. This set the foundation for the massive increase in welfare and government in the years to come, from LBJ to Obama.
There are some parallels from the then to today. The boom being the 90s and early 2000s of course. Bush Jr playing the role of Hoover and Obama being FDR. But this time around there wasn’t a world war to stimulate the economy. This time the economy remained weak and interest rates low. This time there will be a different, more devastating ending.
Despite Obama’s and the left’s claims, the economic recovery, or lack thereof, has been the weakest since 1945. They have cherry picked facts that show improvement, and discarded facts that show otherwise almost in a “1984” like fashion. Currently we are in a fragile economy. Labor force participation is down, interest rates are at record lows, QE has propped up the the stock markets, and the Fed has bought over 4 trillion in assets that were previously private sector. We are on top of a huge bubble and I predict this bible will burst with in the next 8 months, or possibly before the upcoming election.
What makes me believe this? The charts above.
•Manufacturing sales and inventories are stalling
•Merchant Wholesalers are stalling
•Industrial Production Index is stalling
•Labor Force Participation is at all time lows.
•Nonperforming Consumer loans are increasing. This is the most worrying. Without fail during every recession, Nonperforming loans skyrocket. This is because business cycle booms are created by and expansion of credit (loans). Loans lead to riskier loans (low income individuals who can’t pay back their loans).
•Assets at banks whose ALLL exceed non performing loans are dropping. This is also worrying. A huge part of the business cycle is the revelation that the resources created weren’t real all along. A growing number of banks don’t have enough to cover the losses they lose through non per forming loans.
•Gas prices drop right before recessions. They’re dropping.
It’s not a matter of if the bubble will burst, but when. If it hurts before the upcoming election, Donald Trump will surely be elected. If it happens after, Clinton will be our president. What will happen if Trump is elected? If Clinton?
Trump will be the incarnate of Hoover if elected. A Republican with a left leniency and protectionist policies. I predict Trump will act exactly like Hoover with massive spending, bailouts, and high tariffs. This will throw us into the depression like a car racing toward a cliff with no brakes. He will destroy the conservative movement by disregarding its principles. After Trump’s term in office, a far left leaning president will take over and act exactly like FDR. After that there will be no more hope.
If Clinton is elected she will transform America into the New Deal on steroids. Expansion of welfare programs, stimulus ten times the amount of Obama’s, public work programs, high taxes, and even government directed industries. This time there will be no Supreme Court to stop it. BUT there is a glimmer of hope. When her policies ultimately fail Americans will realize that leftist policies don’t work (with the help conservatives showing them). This will potentially lead the way to a true conservative president and congress.
So pick your poison America. We’re in for a rough ride.
His opinions are his own and do not necessarily represent the rest of the writers or the blog as a whole.