The Economy Will Flirt or Go into Deflation

The U.S. economy should begin flirting with deflation soon, something predictable as far back as 2001 when the economy last brushed up against it. I also predicted its coming over two years ago, based on my studies that became my book, The Rigged Game.

Deflation is an overall decline in prices; a widespread drop in prices reduces profit margins. This condition triggers additional layoffs and other cutbacks than would otherwise be the case in an economy dominated by publicly traded limited liability corporations, jsut like the U.S. economy.

Most CEO’s know little as to how their companies produce goods and services. Let’s face it. It’s difficult for a person to know what’s going on if they’re the CEO of a multi-national corporation manufacturing airplane parts when they just transferred over from Walmart or some other unrelated corporation; and even if they've been with the same company for years and years, they most likely know little of what is going on in their factories and stores; or how their products are produced; and that is precisely why rising profits, dividends and share prices are primarily the sole determinate of the effectiveness of corporate leaders.

When business plummets due to a recession, CEO’s have no option but to reduce costs, because that's all they know how to do; and those cutbacks include employment, wages, salaries, benefits and business-to-business transactions. But then when prices drop on top of that, companies are more likely to experience losses as profit margins on their products narrow or are eliminated. At that point there is no choice; it's cut, cut, cut.

While deflation is good for citizens who have jobs, since it enhances their spending power, it increases the numbers of the unemployed, making the recession worse as more and more citizens are thrown out of work. Deflation can turn a recession into a Great Depression.

One final note: Deflation or even flirting with it signals that the re-distribution of income and wealth from working people to the affluent since Ronald Reagan was president has gone too far, inasmuch as it has choked off the demand for goods and services. That's why the mass of prices are likely to be going down in a deflationary spiral. That condition is precisely what the New Dealers figured out when they took office in 1933. And that's what they sought to reverse. They did it quickly and successfully by re-distributing income back to working people.

Barney Frank has it Right!

Finally! Someone is talking sanity during our national economic crisis. Intelligent ideas are obviously not coming from the intellectual crackheads of far right institutes, like the Cato Institute or the Heritage Foundation. Instead, the Democrats are rocking intelligently with a proposed trillion dollar economic stimulus plan. In The Rigged Game, I mentioned that President Bush made all the wrong moves when it came to combating the effects of the recession of 2001. The downturn began and ended in 2001, but the negative impacts lasted at least until late in 2004.

State and local governments have to balance their budgets. So from 2001 to 2004, those governments experienced reductions in tax revenues. This forced them to slash programs and lay-off employees; they had to hack wages and salaries. When the governor’s of several states pleaded with him for federal assistance, Bush was simply too stupid or too uncaring and turned them down.

Bush probably rebuffed their requests because he is a conservative sociopath, as well as something of a psychopath. In other words, his ideology told him those government employees were not rich, and his government prefers to only help the affluent; and of course, as a noted sociopath, he didn’t care what happened to the little people that couldn’t do him any favors.

Now the Democrats, led by Congressman Barney Frank, are seeking to reverse the stupidity of Bush by seeking to give a trillion dollar booster shot to the economy; and one of those ways is to shove some of that borrowed money to state and local governments to combat the effects of what should be labeled "The Nightmare Created by George W Bush and the Republican Party." This economic calamity should be deep.

By all accounts, the economic system has not been threatened with as much financial ruin since the Great Depression; and that was caused by another batch of Republicans during the nineteen-twenties operating on the same ideological principals as Bush and his gang.

Under the Democratic plan, hundreds of billions of borrowed dollars will be funneled toward state and local governments. This should keep their employees working and local and state programs doing what they’re supposed to be doing: helping people. And this cash flow will act as a brake, slowing the economic descent, and possibly even preventing it from reaching the bottom, wherever that may be.

In other news:

In September 2007, based on my book, The Rigged Game: Corporate America and a People Betrayed, I made several predictions:

A recession would hit between the autumn of 2007 and the following summer for example.

Another prediction I made back then included home mortgage interest rates will drop below five percent, and possibly four percent. That’s not an indication of a healthy economy; rather it’s a sign of how weak it is. In his rush to enverate the economy Bush and his gang were aided by many corporate Democrats like the Clintons, Nancy Pelosi and Harry Reid.

The political establishment of the Republicans and Democrats continue to try bail out what shouldn’t be bailed out: rich folks. All they’re doing is leading us into bankruptcy and likely leading us to defeat at the hands of al-Qaida. That will be the first time a criminal organization centered in the White House, aided and abetted by their lackies in congress, will have led this nation to defeat at the hands of another band of criminals and their lackies.

Conservative radio talk show Lars Larsen continues to demonstrate his remarkable ignorance. A couple of days ago, he insisted the Carter years 1976-1980 were worse than today. How stupid! Last I looked, this is a guy who has a full size replica of George W. Bush standing near him on the television broadcast of his radio show. Apparently, he doesn’t listen to a word of what the president says. Maybe that's why he is so ignorant. Bush, his Treasury Secretary, and his head of the Federal Reserve Bank, all call the current financial crisis the nastiest since the Great Depression.

Lars told a caller a month or so ago that yellow cake uranium was discovered in Iraq. He didn’t say when or by whom, but the conversation indicated he was talking about after the U.S. invasion. Is Lars totally ignorant, a liar, or something else? Because he isn't telling the truth. Maybe he just listens to too much right-wing talk radio.

The Rigged Game: Corporate America and a People Betrayed

Based on my book The Rigged Game: Corporate America and a People Betrayed, I made several predictions in September 2007. One of them was that a recession would occur sometime between the autumn of 2007 and the summer of 2008. That prediction has obviously come true, but it wasn't that big of a deal when you consider I made that prediction in the autumn of 2006. All recessions follow the same patterns as outlined in my book, and it was obvious that we were on our way to another one two years ago.

I wrote several articles about the coming recession along with my predictions, and not even the good liberals at http://www.alternet.org/, http://www.commondreams.org/, or Amy Goodman's website were willing to publish it.

Now here is where things become more interesting. I predicted this recession would be at least as bad as the downturn of 1981-82 based on the horrible job creation machine under the Republican Bush administration, the decline of family income, the continued transfer of income and wealth from working people to the rich, and the likely bursting of the housing market. The recession of the early eighties was the worst since the Great Depression. This current crisis will beat it thanks to Republican Party economics.

In September 2007, a conservative wealth manager asked me to write some of my predictions. I said we were heading into a recession; the Dow Jones could drop below 8,000 and possibly even 6,000. The Dow fell below 8000 today, October 10, 2008.

I also wrote the economy will flirt with, and possibly fall into deflation. Inflation is cooling, signaling the coming of deflation. If the economy moves into it, the result will be the worst business downturn since the Great Depression, and possibly as bad as parts of that.

By the way, in September 2007, I predicted the unemployment rate would rise to between six and twelve percent. We hit 6.1 percent two months ago.

One final note; this is a Republican created recession. It has been brought about the work of its elites to transfer more and more income and wealth from working people throughout the world to their base, "the have and the have mores." Their proposals to fix their problem are foolish.

Right now there are crack head intellectuals working for the Republican Party trying to place the blame for the housing meltdown on a small, poverty stricken community organizing group called ACORN. Barack Obama has tenuous and distant ties to that organization. So obviously the current recession has been caused by Obama and ACORN according to these intellectual crack heads of the Republican Party.