No doubt that recent quantitative easings and government interventions are having the only purpouse of earning some time to avoid a sharp collapse, practically they are trying to drive us down a rolling hill instead of falling down a cliff. If this earned time would have been spent to seriously reform the economy, ban the derivatives and go back to a productive system would have been a wise decision, instead it has been used to reinflate myriad of bubbles while going on living like there is no tomorrow and not addressing any of the systemic risks that are growing by the day.
The most interesting graph that I have been checking constantly since 2008 and that give a clear picture of what is going on is the following:
Job losses have mounted faster and sharper than ever before while job recovery is non-existent; we are on a plateau and unfortunately in the following months we could slide down even more.
It is no wonder that many are starting to talk openly of Great Depression.
The news that frequent CNBC guest Peter Yastrow of Yastrow Origer (and formerly with DT Trading) told CNBC that "We’re on the verge of a great, great depression. The [Federal Reserve] knows it" went viral.
Although this is hardly any news since in the last 2 years the following experts have said that the economic crisis could be worse than the Great Depression:
- Fed Chairman Ben Bernanke
- Former Fed Chairman Paul Volcker
- Economics scholar and former Federal Reserve Governor Frederic Mishkin
- The head of the Bank of England Mervyn King
- Nobel prize winning economist Joseph Stiglitz
- Nobel prize winning economist Paul Krugman
- Former Goldman Sachs chairman John Whitehead
- Investment advisor, risk expert and "Black Swan" author Nassim Nicholas Taleb
- Well-known PhD economist Marc Faber
- Morgan Stanley’s UK equity strategist Graham Secker
- Former chief credit officer at Fannie Mae Edward J. Pinto
- Billionaire investor George Soros
- Senior British minister Ed Balls
In the meanwhile a new report from Moody's has just confirmed that as in regards to banks we are already far worse than during the Great Depression:
The most recent rate of bank charge offs, which hit $45 billion in the past quarter, and have now reached a total of $116 billion, is at 3.4%, which is substantially higher than the 2.25% hit in 1932, before peaking at at 3.4% rate by 1934.States and cities all over United States are in dire financial straits, and many may default in 2011.
California is issuing IOUs for only the second time since the Great Depression.
Things haven't been this bad for state and local governments since the 30s and for common people will be even worst when soon normal services including food stamps in US will be terminated due to lack of funds. If everything goes according to tradition we could see a new crisis exploding in September before the US presidential election, last time in 2008 it changed the race to the White House in favour of Obama, this time it could sign his demise.