The problem is not with democrats or republicans. They are both the same. Government intervention into the free markets in the form of FED, FDIC, Fannie, Freddie is the cause of our problems. So, why did the government create them? Let me explain the whole adventure shortly.
In the past economy seemed to be doing OK solely due to credit inflation that FED has fostered. FED made it easy to borrow. America borrowed and spent. When we borrow money, banks create new money and give it to us. They do not lend existing money. Here is how banks create money.
http://www.tradingstocks.net/html/banks_create_money.html
This new money expands the money supply. It makes it easy to earn. Our economy is now addicted to the ever expanding credit supply. People are happy to have a job, they do not save, consumer economy myth encourages them to spend, thus they do not care that there is inflation. When it is time to buy a home, they happy to promise their lifetime earnings to a bank who creates money out of thin air by making false promises that it never intends to keep. Slavery of the masses is another matter to be discussed in another post.
For decades, our total debt (not federal debt, but the debt people owe) increased faster than the GDP. For every unit of GDP increase, we had to borrow more and more every year. This is the system bankers have created to ensure that more and more of us are in debt. They created the FED so that in a time of inevitable bust like this, FED can save the banks while average Joe goes bankrupt and looses his home to the bank. Why does ordinary Joe is guaranteed to go bankrupt and loose his home to the bank?? Let me explain that too.
All of our money supply is bank credit. It is borrowed money. It needs to be paid back as principal + interest. The interest portion is not even created yet. Borrowing MUST increase exponentially so that principal+interest amount exists in the economy so that people can earn it and pay back what they owe. What happens when borrowing stops? Deflationary crash occurs. Debt problem:
http://www.tradingstocks.net/html/inflation_deflation_credit_bub.html
There is a limit to how much people can borrow. To make it last what did they do? They allowed people to deduct mortgage interest from income while calculating tax. That made mortgage more attractive. So people borrowed more and injected new money into the economy. This new money makes the current administration look good. In fact, they guarantee a future bankruptcy but who cares. As long as they get re-elected...
http://www.tradingstocks.net/html/housing_market_bubble_bust_cyc.html
Government talked about the American Dream and Affordable Housing. Now home prices are becoming affordable, but instead of celebrating, they are scared to death, they are trying to inflate prices again. They want the housing bubble back. Home prices are down, sales volume is down. After prime borrowers were exhausted, they changed the rules to allow sub-prime borrowers get big mortgages. No 20% down, liar loans were all to inflate total credit. Now sub-prime is exhausted and the crash has started. 8K tax credit won't work. Home prices must increase exponentially to sustain a recovery. People must borrow HUGE amounts to provide new money to the economy. Who is gonna do that??? Here is why FED's easy money policy does not work beyond some point: Jaguar Inflation
http://www.tradingstocks.net/html/jaguar_inflation.html
Where does that leave us? It leaves us at the top of the greatest bubble ever! What ever you do, make sure you do not take on more debt! Pay off existing debt! If you have existing savings in cash or cash equivalents such as short term US treasuries you should be fine for a few years. At the bottom of depression you may have to jump out of US dollars if FED freaks out and really prints money!
All of the prices, and salaries you see around you were based on inflated credit that happened over 50 years. It is based on a money supply that is almost entirely bank credit. People borrowed and borrowed and spent. The amount of money borrowed reached sky high. You earned in good times! Now, it is reversing course! Deflationary crash is here!
http://www.tradingstocks.net/html/prepare_for_market_crash.html
Even though at an individual level borrowing with interest may seem fair, at macro-economic level, interest based monetary system is guaranteed to fail. What is worse is that the bankers who run this country made sure that the government agreed to bail them out at tax payer expense.
The fix is to get the banks out of money creation business. Nationalize banks that fail. Abolish the FED. Let the treasury print it's own money. Entire America should not be a slave of bankers paying interest for the money that they create out of nothing.
