This chart from dvorak.org not only portrays just how deep the most recent recession was, it also conveys an important point about the economic system that has been in effect for the last 40 years and which is now running out of road.

Notice how each successive recession in the last handful has taken longer than the previous for recovery to take hold.

The response to each deflation has been a reflation of the same bubble and then a couple new ones along with it. This is why the next recession is inevitably worse as the prior bubble was never allowed to fully deflate and malinvestment to fully liquidate.

We should be expecting a pretty horrible recession in the near future.

In  a recent blog post, Robert Reich let’s us all know exactly who isn’t to blame for the problems facing the United States.

…government spending has absolutely nothing to do with high unemployment, declining wages, falling home prices, and all the other horribles (sic) that continue to haunt most Americans.

There you go.

Ben Bernanke warns that China is not playing fair by intentionally debasing their currency. If you think that this is a bit hypocritical coming from a man who has flooded the U.S. economy with liquidity over the past few years then Bernanke has news for you: his intention is not U.S. dollar debasement.

The Fed’s Treasury bond-buying program is intended to invigorate the economy in part by lowering interest rates, lifting stock prices and encouraging more spending. Lower interest rates on loans would prompt companies to borrow and expand.  And higher stock prices would boost the wealth and confidence of individuals and businesses, Bernanke has suggested. The additional spending would lift incomes, profits and growth.

Ok so Bernanke attempts to steer clear of the “hypocrite” label and instead ops for “moron.” He wants to improve the economy by blowing up another bubble. All he knows is bubbles. Apparently, helicopter Ben thought the Fed’s inflationary response to the dot-com bust was brilliant. He sees no connection between our refusal to undergo the necessary restructuring back in 2000-2001 and the larger bubble implosion that resulted in the housing and credit sector a few years later. Reflating bubbles is all Ben knows.

He is an idiot.

He also thinks that higher nominal stock values are great for consumer confidence and therefore great for the economy. Someone please pull up a graph of a Zimbabwe Stock Exchange and show it to this moron.

This is a pretty interesting clip, but the highlight for me is when one of the dime-a-dozen professional numbskulls suggests that if the Fed were to “reflate things a little bit” that that would be bad for gold.

Why would QE be bad for gold exactly? Seriously, how do these people get jobs as economic analysts?

The full article from Murray Pollitt of Pollitt & Co. in Toronto can be found here. I am quoting it in its entirety.

For decades we have been stuffing, or trying to stuff, gold into clients’ accounts. We have advanced all the economic reasons, but above all we have said money will be no good, governments will have to print, government policies will lead to hyper-inflation and so on. We have also used the same argument to encourage investors to buy other stocks representing hard assets. But, after all the verbiage, after all the decades and after markets have clearly started to scream roughly the same story, many investors just don’t get it. When, many ask, should they take profits?

At a time when the Western World’s economic system, such as it is, could blow up and most currencies could be on the verge of turning into confetti, dragging each other into a messy abyss, investors worry about gold? They shouldn’t. After decades on the sidelines it’s just coming back into its own.

Two generations ago the gold price in Bombay was about 450 rupees, whereas today it is about 58,000 rupees. Indians, along with nearly all non-Westerners, generally assume that, rather than the gold price being up, the money is down. Put differently, gold is gold, copper is copper, it’s the money that changes. Only in the Anglo-American world do investors consider money stable and things (gold, copper, whatever) volatile. It will prove a fatal mistake.

There are four principal groups in which meltdowns can occur: currencies*, real estate, commodities and stocks. Meltdowns usually happen without much warning and they often happen very quickly. Who forecast the Asian currency meltdown twelve years ago? Or any of the stock market crashes that have livened up Wall Street from time to time? The Lehman balance sheet had been a joke for years, but everybody assumed “too big to fail.” When Argentina was on the brink in 2001 the US and the IMF urged the usual dose of austerity and: “hold the line” on the Peso. Westerners believed them, but Argentina (wisely) pulled the plug. Devalued.

And meltdowns mean different things to different groups. Real estate and stocks went down together a few years ago, but stocks will generally go up when currencies get killed. France in the 1950s, Argentina, Zimbabwe, Germany more than once – there is a long list of collapsing currencies leading to strong stock markets. And, of course, they produce strong commodity markets. Our flight out of money scenario.

Today the signs are all there for an earth-shaking currency collapse, but we are all like a bunch of rabbits, glued to the highway, mesmerized and immobilized by the glare of an oncoming eighteen wheeler. In fact, a convoy of eighteen wheelers. If the first one doesn’t get us, the second certainly will. Ireland, the US, Euroland, California, Greece, Spain, the UK, Ontario – the list of walking wounded is long. But, as is always the case when problems loom, ministers of all shapes assure us that these and other issuers of debt will sort out their needs. And even borrow more next year! It’s economic
hallucination. But what else can we expect from Ministers? In Canada, where we have lost hundreds of thousands of jobs, in part as a result of the government’s strong dollar policy, the same government is increasing the payroll tax on jobs. And doing so with a nauseating aroma of complacency – they justify it by saying they aren’t increasing the tax as much as they could have! And most Western economic leaders are proposing the same austerity as was proposed nine years ago for Argentina, a sure way to collapse GNP and generate a few riots.

The business press is complicit with Governments and only rarely takes them to task. A grade school arithmetic student can connect the dots and conclude that Irish paper has no greater chance of survival than Enron paper. Not, that is, unless somebody prints up the hundreds of billions of dollars to bail them out. No major country’s currency has more than a shred of backing and all the basket case countries have unsupportable debts. Yet the press gives these issues a wide berth. Little comment, less analysis and none of the ridicule that policy makers deserve.

Nor will the press even entertain the idea of hyperinflation or its consequences.

Recently an officer of heavyweight asset group Berkshire Hathaway (which is long lots of conventional insurance stocks) supposedly said anyone who likes gold is a “jerk.” He may well speak for many, but his comment betrays a sad misunderstanding of both insurance and history. Regardless, for those who cannot stomach gold, buy Bell, Atco, Imperial, Labrador, maybe even Bombardier. Real stuff. And avoid paper at all costs – it may take a month, it may take a year, but the meltdown is coming.