Contrarian economic analyst Karl Denninger, of The Market Ticker, argues that we are not in a recovery, as the mainstream media and Obama administration would like us to believe, nor are we in a recession. We are in a depression. And, the scary thing? Karl Denninger utilizes basic mathematics and a common sense approach to analyzing the economy to come to this conclusion. Yes – an economic analyst that uses REAL MATH, not the fuzzy math the government has been using.
If Mr. Denninger can do it, why can’t all of the brain power at CNBC or the experts in the Obama administration see what is really going on. Perhaps they can see it, but don’t want to tell the American people. It is an election year in 2010, afterall. Or, perhaps there is an even more sinister plot, though we’ll save our conspiracy theories for another time and let the reader use his imagination.
In his October 8, 2009 article Bernanke Under Fire: Grayson / Paul, Karl Denninger outlines why he believes this is in fact a depression. Some of these are excerpted below, but we highly recommend reading the full article, as the core article is not solely about the depression, but moreso about the mistakes committed by The Fed and government that got us here, and some solutions to clean out the system.
Government created this Depression just as Government created the Depression of the 1930s by refusing to do its job of regulation.Â 75% of the people in the 1930s had jobs.Â 75% of people have jobs now.Â If you truly believe that unemployment is 9.something percent, you’re delusional.Â If you believe it is the 16.x percent that is recorded in “U-6” you are likewise delusional as neither counts those who have given up trying to find work.Â Take a trip to Detroit, Michigan.Â It is not that different from any other major city today.Â If your perspective is limited to the Beltway of Washington DC or the sheltered parts of America where it all appears ok you need to get out more often.Â I have, I lived in the Detroit area in the 1970s and 1980s, and I have never – ever – seen anything like what happened at Cobo Hall as described in that article before today in America.Â Anywhere.
This Depression was caused by the same thing all others in modern times have been: banks lending unsecured beyond excess reserves.Â That is, banks lending in a speculative rather than secured manner. That is the primary sin. It is that simple. It has always been the primary sin that has led to this result, and it is the primary sin this time as well. This must end, now and forever, if we are to both stop this lunacy and prevent it from ever happening again.
The government cannot make up for the contraction in private credit.Â All the government is doing is risking its own insolvency.Â We cannot run trillion dollar+ deficits – Depression or no Depression.Â We cannot continue to take bad debt onto the balance sheet of Treasury or The Fed and we cannot make unsound FHA (and now USDA!) real estate loans.Â WE CANNOT LIE OUR WAY OUT OF THIS.Â Despite the fact that Washington DC politicians are known for lying whenever their lips are moving, mathematics never lies and always catches up with you – without exception.