Great Depression Online Archive Issue:

Incredible Economic Destruction

Great Depression Online
Long Beach, CA
July 09, 2010

Inside This Issue You Will Discover…

*** Not a Lick of Good
*** The Key Ingredient
*** Incredible Economic Destruction
*** And More

Not a Lick of Good

“Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate,” were the advice of then Treasury Secretary, Andrew Mellon, at the onset of the Great Depression.

Regrettably, President Hoover, and later President Roosevelt, didn’t listen to the callous words of Mellon.  Instead, by attempting to bailout the economy, they succeeded in turning a downturn in the business cycle into a 10-year economic depression.

Here we are almost three years into what’s been called the Great Recession and not one of the bailout schemes to save the world from itself has done a lick of good.  Cash for clunkers, first time home buyer credit, General Motors, AIG…all the gimmicks and giveaways have been rolled out yet home sales are down, retail sales are down, factory orders have collapsed, and there are no jobs to be had. 

~~~~~~The Long Decline~~~~~~

There has been a lot of debate about what the government is doing to stave off a so-called double-dip recession.  Some say it will cause runaway inflation; others say it’s simply delaying the inevitable.  The man you’ll hear from below says DEFLATION is the true concern.  It’s true that Robert Prechter is a polarizing figure in the world of finance.  Some write off his technical analysis theories as esoteric market hocus-pocus.  Others swear by the natural order of the markets, which is why they believe Elliott waves and Fibonacci are the purest forms of technical analysis.  Whatever your opinion, it's hard to deny that Prechter is on to something.  Virtually no one has called the crisis like him.

The Long Decline Ahead

~~~~~~~~~~~~~~~~~~~~~~~~~

What’s more, the government bailouts may have succeeded in turning a downturn in the business cycle into a long protracted depression. 

“Let us be honest,” said Ambrose Evans-Pritchard in the Telegraph.  “The US is still trapped in depression a full 18 months into zero interest rates, quantitative easing (QE), and fiscal stimulus that has pushed the budget deficit above 10pc of GDP.

“The share of the US working-age population with jobs in June actually fell from 58.7pc to 58.5pc.  This is the real stress indicator.  The ratio was 63pc three years ago.  Eight million jobs have been lost.”

The Key Ingredient

In June the U.S. economy lost 125,000 jobs.  If you were to flip that around, so that the economy had created 125,000 jobs, it would take over five years to get back all the jobs that have been lost since 2007.

Jobs, of course, are the key ingredient to the economic recovery.  But where will eight million jobs come from?  We don’t quite know, exactly.  No one does.  But we can quite confidently tell you where they won’t come from…

They won’t come from a government program or government spending.  What’s more, nearly all the jobs that do come from the government are less than worthless…they subtract value from the world.

For example, paying people to count each other does not bring wealth to the world.  In fact, because the money these people are paid with comes from the tax receipts of productive citizens, these jobs take wealth and squander it.

Real jobs, that create real wealth, come from private enterprise.  These jobs are self supporting; they provide a value to the planet that’s worth more than it takes to produce.  What we mean is they generate profit.

Incredible Economic Destruction

Often times, an entrepreneur must take on the risk, and operate at a loss, until his endeavor is up and firing on all cylinders.  And even once the cash is flowing in, the margin between profit and loss can often times be minuscule.  Taxes, no doubt, cut into this margin like a dull buck knife filleting through a Yellowfin tuna.

Regrettably, the current President doesn’t seem to comprehend – or care – about what an increase in taxes will do to the jobs market or the economy.  Here we’ll let Wayne Allyn Root explain…

“Obama is as hopeless, helpless, clueless and bankrupt of good ideas as the manager of the Chicago Cubs in late September.  This ‘community organizer’ knows as much about private-sector jobs as Pamela Anderson knows about nuclear physics.

“It’s time to call Obama what he is: The Great Jobs Killer.  With his massive spending and tax hikes -- rewarding big government and big unions, while punishing taxpayers and business owners -- Obama has killed jobs, he has killed motivation to create new jobs, he has killed the motivation to invest in new businesses, or expand old ones.”

With high business taxes, income taxes, payroll taxes, capital gains taxes, and worker compensation taxes…why higher anyone?

And that’s just the beginning…next year, taxes go up.  Have you ever sailed upwind in a lightning storm?  The destruction to the economy shall be incredible.

Sincerely,

M.N. Gordon
Great Depression Online

P.S.  Our friends at Elliott Wave International have just released a brand-new interview given by Robert Prechter.  A devoted inflationist asks the leading proponent of deflation tough questions about fiat currency, gold, the Fed, the Great Depression, financial bubbles, government intervention and how to protect your money -- and even profit -- in today’s environment.  

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