Tuesday, September 22, 2009

US Credit Shrinks
At Great Depression Rate

... prompting fears of double-dip recession

Ambrose Evans-Pritchard - September 14th, 2009 - London Telegraph

Professor Tim Congdon from International Monetary Research said US bank loans have fallen at an annual pace of almost 14% in the three months to August (from $7,147bn to $6,886bn).

"There has been nothing like this in the USA since the 1930s," he said. "The rapid destruction of money balances is madness."

Barack Obama has started bragging about saving the banking system. He seems to lack understanding that pouring liquidity into an unstable system is bailing out the failures and not those who were still on sound footing. Bailing out failures has never been sound policy, especially when those failures are already the ones who have modeled their business on government largess.

It is therefore not surprising that Barack Obama cannot see the continuing financial system meltdown. The shrinking credit noted here is not the only serious catastrophe that is building up in the system. Commercial mortgages continue to default at higher and higher rates and the bubble in this market will burst soon.

Neither the growing credit collapse nor the growing commercial mortgage meltdown are sustainable. At the same time, Barack Obama is spending money like he runs Zimbabwe. That is a third serious problem that is also growing rapidly in America. Of course it is well known that Obama will not blame any of this on the true cause, government policy failures. He insists it is capitalism that is the cause. His solution is greater government control with Democrats at the helm.

At a time of disaster he may well persuade the American people to go along with him again. The coming crash may well end the experiment in American freedom and leave us with the same socialist tyranny that is destroying most of the rest of the world.


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