WE ARE STARTING TO SEE THAT THE REAL REASON FOR DEPRESSIONS IS DELEVERAGING...AND THE RESULTING DECLINE IN THE VELOCITY OF MONEY.
IN SHORT DURING A CRASH THE VELOCITY OF MONEY GOES FROM 60 TO ZERO IN ONE SECOND... SORT OF LIKE HITTING A TELEPHONE POLE WITH YOUR CAR... IT'S THE SUDDEN STOP THAT KILLS! NOT THE SPEED!
THE US ECONOMY WAS MASSIVELY DEPENDENT ON DEBT...AND ASSET BUBBLES...AND "LEVERAGE."
UNLESS AND UNTIL THE ABILITY TO TAKE ON DEBT AND TO INFLATE BUBBLES IS RESTORED...NOTHING WILL EVER GO BACK TO THE WAY IT WAS...
THESE SO CALLED "JOBS PROGRAMS" AND KEYENSIAN STUMULUS ARE LIKE TAKING ASPRIN FOR PNEUMONIA...BECAUSE THE VELOCITY OF MONEY DECREASES...
IE AS THE PUNDITS SAY: "THEY WON'T SPEND IT...EVEN IF THEY HAVE IT..."
STIMULUS MAY REDUCE SYMPTOMS TEMPORARILY...BUT IT WILL NOT CURE THE DISEASE...
IT IS UNLIKELY THAT YOU CAN STIMULATE YOUR WAY BACK INTO HIGH LEVERAGE AND HIGH VELOCITY OF MONEY...
BUBBLES ONCE BURST ARE HARD TO RESTORE...ALMOST IMPOSSIBLE... PRINT ALL THE MONEY WE WANT...THE VELOCITY OF MONEY FALLS DRASTICALLY.
EVENTS LIKE WWII CAN RESTORE LEVERAGE OVER TIME... BUT FIRST YOU NEED TO DESTROY THE OLD LEVERAGE...THAT'S WHAT DEPRESSIONS ARE SUPPOSED TO DO...
BUT NOW WE DON'T "ALLOW" DEPRESSIONS...HENCE THE BAILOUTS.
ATTEMPTING TO LEVER ON LEVERAGE WON'T DO IT EITHER...THAT'S CALLED HYPER-INFLATION.
THIS DEPRESSION COULD LAST TEN YEARS...LIKE THE LAST ONE...1929 TO 1939...
THE DOW WILL EVENTUALLY HIT 2,000...PROBABLY IN LATE 2009 OR 2010...
