Sixty eight lies and reality

Someone asked me how I can be so sure the economy will crash again. I said “math and common sense”, the anonymous person in question asked me to elaborate, so here goes.

I have already lined out the only scenarios that can be ahead of us on several occasions, sometimes with better and more accurate numbers, so this is just another one very obvious conclusion of the reality we live in. It’s not a prophecy, it’s not magic - it’s all about math and using that grey matter between the ears.

Since the main “green shoot” or “positive figures” we are seeing at the moment comes from the stock market, let’s start there. What drives the stock market right now?

1) Banks
Financial institutes are pushing equities forward because of two main frauds. The first fraud is thanks to several governments that has printed trillions of pounds, dollars etc. and then given it to those institutes, partly for “saving them” and partly to jumpstart the economy i.e. give incentives to people to borrow more money.

Mostly the banks are hording that cash, not using it. Only around 20%-30% of those bail-outs and cheep credits from central banks have been put to use. But where does that money mainly go? Towards two things, firstly to buy up other companies, often other banks, secondly to continue the frauds on the housing and lending market. In both the UK and in the US, banks are the main driving force behind prices not going down, as they should. In fact, in many cases, the banks are buying real-estate and housing from themselves and over market value. Isn’t that special?

So the main trigger for this crisis, the housing markets in some countries, haven’t really crashed yet as many think. Actually things are much worse today than it was before.

Looking at the banks going bankrupt in the US, their values are written down with between 15-60% - this applies for all of them, no exception. If we apply some middle ground and round of the figures downwards (just to keep the figures down) we end up with about 20% overvalue in general. Add to this that cheep money, the continuation of the frauds and what the government is doing, and we have a big pile of crap. It’s all crap, nothing else.

2) Interest rates and cheap money again
In the world of illusions and tricksters, GDP is what matters. As long as GDP is positive, things are okay according to all those idiots that rule us. I don’t know if all of those enemies of the people believe in this scam, but they certainly want you to believe it.

So to keep GDP up as much as possible governments has increased their spending. It doesn’t matter on what, just spend, spend and spend. Most of this spending comes from that oh so funny printing machine. So, again, lost of trillions being thrown into the system borrowed against the value of each currency. Add to this the fictitiously low interest rates that are meant to make people borrow and go on shopping sprees, and we get lots of spending that, in reality, shouldn’t exist.

This also drives both GDP and markets upwards. This is, however, a temporarily fix, and just as a drug addict getting a fix, it will soon be over. After all is said and done, the money is spent and we are left standing with enormous debts. This can temporarily patch things up and create an illusion of us heading in the right direction (here we are today). IF spent wisely that collective spending spree can also create additional growth, but how often are politician wise? However, that is not our main problem, the enormous debt and the problems we elaborated in “1” above are. Add to this huge unemployment and the pending inflation bubbles, and we have a nice pile of crap plus crap in a puddle of manure with fertilizer sprinkled over it.

This part is, however, hard to count, especially since all countries have done the same thing, but we can do reasonable assumptions based on debt-GDP ratio’s, extra money in the system (looking at those M-thingies economist talk about) and how long those extra government money will last. Looking at that cash-for-clunkers program in the US, for example, that ended last month, and consequently car-sales are now down 23% from last year.

With those numbers in mind we can conclude that we are POORER today, then we were 2 years ago, we have higher debts and most of those government programs have or are about to end soon.

3) USD disaster and China
Both of these need to be mentioned, they are not in any way the real problems or the things that will plunge us, as I see it, however, they will have significant impact on the severity and length of this depression.

China is one of the main driving forces behind the “green shoots”. In part with borrowed and newly printed money, but mainly thanks to that vast currency reserve; China is spending a lot which keeps their GDP up and helps other countries like Japan and Germany to keep theirs up as well. China is also the main lender to the US, owning somewhere around USD 1.5-2 trillions. The USD has already lost a lot of value thanks to all the scams and the printing, but not nearly as much as it should. And the longer this currency is kept afloat the worse the crash.

Our enemies can keep this scam going for a while yet, but looking at all the rest of the things, not very long.

4) Positivism
Different agencies, journalists (useless as always), politicians and such are pushing for those positive signs. There are “green shoots” everywhere, and the slightest thing, like an increase in US military orders (in reality a negative factor) is taken as a good sign of better times ahead. Positivism breads more positivism and this is also driving stocks and other commodities upwards.


Conclusion
I have seen real economists (people who understand 4th grade math or better) stating that stock markets are overvalued with 20% or higher. The highest number I’ve seen is 41% Economist. All based on what I have written above and compared with graphs that, over time, are showing a higher level than they should at moment. The US market is pricing in 4% economic growth and have been doing so for several months. This cannot last, it's an mathematical impossibility.

If we assume that the stock market is overvalued at only 15%, what will happen if a correction is done only on this much lower number? The market wouldn’t just crash that 15%, no; it will go down around the double as an additional effect. And if this happens, which it will, it will have serious repercussions throughout, and if the rest of the problems wasn’t the cause of the downwards spiral, they too will crash and burn with the stock market.

In other words, the only things we need to contemplate is how long will the depression last, how severe will it be and whether or not any government or people do the right thing to stop it.

I see three different scenarios.
From the very start, about 3 years ago, when I first started to really look at the numbers, I’ve predicted that the real crash would happen somewhere around February-April 2010, probably after the first quarter numbers ticking in in April. This is still my main assumption because that’s how long I predict the bubbles can withstand reality.

However, recently I have seen more and more signs of a much closer timeframe. Maybe as soon as this month of October. I still think our enemies can continue the lying and deceit for a while longer, but there are lots of wild cards that can be played at any moment, so heads up for an early crash bash and boom. Keep a close eye on those Iran-funnies for example…

At the very best (or rather worst) the trickery can last about 1.5-2 years longer. This is the absolute maximum before we plunge down into complete darkness. It all depends on how long the USD-trickery can last, how stupid people really are, how much our politicians can borrow from each other and how warm they keep the printing press. At the height of summer 2012 we will be in such deep shit that you cannot comprehend it today. I would even go so far as to give the Mayan calendar a few extra looks, that’s how bad it’s going to get.

What you should do
If you don’t believe me, pick up a calculator and look at the stock values in comparison with debt-GDP ratio, add in the fact that the banks are continuing their frauds (at least 20% overvalued in the US), and only this little very easy calculation will end up with you grasping after breath. It’s not hard to do, the numbers are available, so don’t take my word for it, take a look.

There are different levels of disaster numbers, depending on which country you live in, but the overall factor is the same all around.

And when you have done this, I’ll probably not need to tell you this, but take a large portion of your money and buy some products you’ll need in the near future. I have made sure my parents have about half a year’s worth of extras, probably not enough, but more will be added along the way.

Isn’t reality fun?