US credit shrinks at Great Depression rate

Professor Tim Congdon from International Monetary Research said US bank loans have fallen at an annual pace of almost 14pc in the three months to August (from $7,147bn to $6,886bn).

"There has been nothing like this in the USA since the 1930s," he said. "The rapid destruction of money balances is madness."

"For the first time in the post-WW2 [Second World War] era, we have deflation in credit, wages and rents and, from our lens, this is a toxic brew," he said.

It is unclear why the US Federal Reserve has allowed this to occur.

"The current drive to make banks less leveraged and safer is having the perverse consequence of destroying money balances," he said. "It strengthens the deflationary forces in the world economy. That increases the risks of a double-dip recession in 2010."

Full article here

Buckle your seat belts, 2010 looks to be a financial mess; worse than this year!

It appears that the powers that be are engineering something. An alternative currency perhaps? Whatever the reason, I guess all will be revealed in the near future.

*edit to fix link

[edit on 15-9-2009 by warrenb]

Whenever I see the quote "not seen since the great Depression" I always consider how people view this considering our financial systems are intertwined and vastly more complex than they were then.

If something is going at the rate comparable to the great Depression, it will affect our financial system at least ten times more severely simply because of the international markets that didn't exist then, the political alignments that didn't exist then, the financial balances and structures that didn't exists then...

Everything is far more complex, and to have anything currently reflecting the great Depression is a sign that things are indeed a great deal worse than they were then.

Stock up on food I guess would be a good idea. I am getting a metal detector and plan on spending time in Alaska. May go fishing with Sarah

I have my own way of looking at the financial system.

IMO what we have is a series of giant pyramids, with the elite at the top where all the worlds billions end up.

The thing with pyramid schemes, is that you need a constant feed at the bottom in order to keep the capstones in place. And when there is nothing coming in at the bottom, the supporting structure gradually crumbles leaving those at the bottom acting like a giant crumple zone, taking all the damage in order to gently break the fall of the capstones who walk away with all their accumulations.

For years, the people at the bottom have been fed illusionary money, effectively laundering it into wholesome profit for the elite at the top. Now the feed at the bottom is slowly being cut off and the pyramid is crumbling. The people at the bottom are being expected to pay what the most probably cannot.

After all, there are only so many hours in a day for which you can sell your hard graft. And that's where the REAL money is generated. Those at the top make money off money, not from labouring, producing, or servicing. They make money off everyone else's backs, never their own.

Now there are fewer jobs, fewer products being manufactured, and natural resources are mostly imported. For example (and as I understand it), in the UK most of our North Sea oil and gas is exported - sold by the government. Then our domestic suppliers have to buy it back from overseas suppliers.

There is no longer sufficient volumes of fake money coming in (by way of credit), and ever more limited means to generate real money.

Those middle classes that still have some worth, are now being leached of that worth by stealth - anyone had a credit card interest raised to over 30% recently, not because you haven't kept paying but because you have ? (stand up MBNA / BoA customers !)

Yes, harsh times are afoot. And I don't need to be a market analyst to realise it.

People tend to view the Markets now a days as an economic indicator of how the nation is doing, that is not longer something that should be taken into consideration because all the liquidity that our government has put into them to keep the nation from collapsing.

The indicator of a nations health is its unemployment figures, there is where the wealth of the nation should be measure.

When unemployment figures are up it means that in a nation that depends on consumer spending to survive we are doing worst right now that actually during the great depression.

The nations economic health is very precarious and until Americas workers get back to work and actually make money is not going to be any real improvement on our nations wealth.

So yes US credit is shrinking and while the great depression happen
amid different times and situation, we can said that we are right now at the same point but with different reasons in some instances but the same in others