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On Market Predictions in the
Current Chaotic Environment
Richard C. Cook
Global
Research
Tuesday Aug 28, 2007
No one can predict how deep the decline in Western economies
that is underway will go, because there is so little transparent
information. Within the U.S., the government is hiding the severity
of the crisis in order to prevent a collapse of consumer confidence.
Realize that the problem does not lie on the side of production.
Global industry has the capacity to produce a huge quantity of
goods and services. There is even a glut in some sectors, such
as automobiles, textiles, IT, and other consumer products.
Rather the problem, as with the Great Depression, is that purchasing
power at the consumer level is lacking. In the U.S., purchasing
power, as measured by M1, is already in a recession-level decline.
The causes are the high level of consumer debt, high cumulative
levels of taxation on the dwindling middle class, and the tragic
erosion of wages and salaries from job outsourcing.
(Article continues below)
In the absence of purchasing power, the Federal Reserve has chosen
the strategy of trying to outrun collapse by creating inflation.
This is the meaning of the bail-outs that are going on. It's an
attempt to devalue debt at the macro level. It’s a hidden
tax on everyone but the super-rich. Everyone else is poorer today
than they were yesterday.
How long this can go on is unpredictable. It's another bubble
following on the housing and asset bubbles that are already bursting
on a daily basis before our eyes.
I don't see any responsible analyst who foresees any better outcome
than a recession that would see the DJIA at a level of 8000-8500
within a few months. Again, maybe the Fed's printing presses can
hold this level of decline at bay for a while longer, but I doubt
it.
There are major players in the markets who see an even steeper
decline coming even sooner. Some say as soon as a month.
There is also a real chance of an eventual depression-level contraction.
How much of a chance, I don't know. This conceivably could lead
to a total collapse of consumer markets, economic paralysis, and
widespread homelessness and starvation. Yes, even in the U.S.
Agribusiness, bio-fuel conversion, seedless mega-farming, the
disappearance of family farming, and the recent disastrous weather
conditions place everyone at risk.
At some point, the federal government, at a minimum, has to step
in with New Deal-type relief measures. Whether the Bush administration
has that capability is doubtful. Look at New Orleans. They may
even try to cover everything up by starting a war against Iran.
Are they that crazy? Who can say?
There are also rumors going around that there are plans to allow
the markets to be crashed by a terrorist event so as to divert
blame. I have gotten no reliable confirmation of these rumors,
though there are parties placing what people in the markets are
calling "bin Laden"-type bets similar to, but bigger
than, the "puts" that were placed before the original
9/11.
These types of bets have been placed in the U.S., European, and
Japanese markets that assume a stock market crash of fifty percent
within the next five weeks. A report was just carried, I’m
told, on CNBC.
Some have said the culprit may be China, but it makes no sense
for the Chinese to crash the markets while holding U.S. dollars.
Others say it is hedge funds at work to try to drive down the
markets in a self-fulfilling prophecy.
But a fifty percent market decline? That’s just not conceivable.
Even the hedge funds do not have that much power. The federal
plunge protection team—known as the "men in black"
by floor traders—would never allow them to do something
so disastrous. This has caused some to speculate that the "men
in black" are parties to the bets.
These remarks probably give some indication of the chaos going
on right now in the U.S. and world economies. The only real solution
is a new world financial system based on the concept of credit
as a public utility. This is what should be implemented to replace
the present system of institutionalized usury.
Richard C. Cook is a retired federal analyst, whose career
included service with the U.S. Civil Service Commission, the Food
and Drug Administration, the Carter White House, and NASA, followed
by twenty-one years with the U.S. Treasury Department. His articles
on monetary reform, economics, and space policy have appeared
on Global Research, Economy in Crisis, Dissident Voice, Atlantic
Free Press, and elsewhere. He is the author of "Challenger
Revealed: An Insider’s Account of How the Reagan Administration
Caused the Greatest Tragedy of the Space Age." His website
is at www.richardccook.com.
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INFOWARS:
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