2008: Looking Back

2008 - Looking Back

The global financial bubble burst in 2008 — and that’s a good thing. It means that the bubble economy will stop draining the real economy. Instead of capital being invested in fraudulent mortgage securities, derivatives portfolios, and companies running black-box ponzi schemes, perhaps it can be used to finance real solutions to the problems before us. Now we can talk about the real world and real issues: there are many worth addressing.

The big question of 2008 is “Where is the money?” It just keeps disappearing. There was $4 trillion plus that disappeared from the US government between 1998 and 2002 along with the pump-and-dump of the Internet and telecom stocks and Enron. Since then and into 2008, funds keep disappearing into the Afghanistan and Iraq campaigns. Now we have $700 billion in bailouts and $7 trillion plus in loans by the Fed, not to mention the $5 trillion in mortgage market liabilities assumed by the Federal government with the passage of the Housing and Economic Recovery Act of 2008. The fraud in the US mortgage bubble was clearly enormous. But, where did all the money go?

The global financial meltdown that some market pundits predicted hasn’t happened. Instead, the “Slow Burn” continues. But, investor losses have been significant. The result has been an outbreak of healthy distrust which has resulted in the freezing up of the global financial system. Because they are not leveraged, pension fund losses have been relatively quiet. Look for reports regarding pension fund performance to have a profound impact in 2009.

What this all adds up to is financial coup d’état. Trillions are being stolen through the financial system in a manner that centralizes wealth, leaving governments bankrupt but with bigger budgets to assert control over the wider population. Not surprisingly, this leaves economies ever more dependent on defense and enforcement spending as the infrastructure of central control grows.

One of the biggest stories in 2008 was the continuing censorship of stories about manipulations harmful to our health, including chemtrails, the efforts to control the food and seed supply, and the ongoing suppression of energy technology. Watch for a continued failure of traditional media in 2009 … and a continuing loss of market share due to public disgust at such censorship. Go, Wikileaks!

The Good News
One of the few good investment categories in 2008 was building local self-sufficiency. From the success of the Financial Permaculture conference in Hohenwald, Tennessee to the rapid spread of Transition Towns around the world, to the spreading of participatory budgeting from Latin America, efforts by local communities to re-localize are very encouraging. The logical response to uneconomic centralization is to look for ways to decentralize. Despite all the difficulties in the economy, entrepreneurs doing natural home building, farmers markets, starting farms, installing solar energy and weatherizing homes enjoyed a market moving their way. These efforts will continue to grow well beyond any shakeout.

In this week’s Solari Report (Friday, December 26), I’m doing a year-end “wrap-up” looking back at events in 2008 and discussing what they mean to our future. Here’s an outline:

– The Slow Burn
– Bailouts: Where’s the Money?
– Financial Coup d’état
– The Crash in Commodities: Temporary or Permanent?
– The Freezing Up of the Global Financial System
– Election 2008: The First Billion Dollar Candidate
– Russia, China, and the Middle East Rising
– Pension Fund Time Bomb
– The Shake-Out Moves into 2009

You can learn more about The Solari Report and subscribe here. We’ve completed (2) reports thus far and subscribers can access our complete archive of MP3 files.

I hope you’ll join us.

Note: Solari Report subscribers can now listen to Catherine’s discussion of this topic via MP3 recording. You can subscribe monthly or annually here.

26 Comments

  1. On June 5th 2007 FICO credit scoring rules were changed. I your opinion, do you feel that was good timing? I think it was sort of strange how that happen and in 2008 we are all of a sudden in a “Credit Crisis”. I have not heard any media outlets like Coast to Coast, NPR’s Planet Money or Trends report on it.

    What say you?
    Thanks for looking at this..

    JD Daniels

  2. You have me concerned but not yet anticipating doomsday. I am new to the blog and am still trying to decipher your explicit solutions. You are way over my head but I still manage to get bits and pieces that make sense. We somehow have to get through these tough times and look for the light at the end of the tunnel. It has happened before and will happen again. Hopefully, with insight such as yours, we will be better prepared.

    By the way, the $4 trillion is in China. How do you think the government is getting all the bail out money?

  3. Jeffrey:

    I have occasionally wondered if the FICO credit scoring changes were another sign that we may be in an intentional “dump” — as part of a pump and dump. If you point me to a good article or commentary on it, I will post.

    One thing worth doing would be to collect anecdotal evidence that the dump is intentional. I shall add to the parking lot!

    Catherine

  4. Pete:

    IMO — The Fed is running down assets, printing and proposing to borrow. The Treasury is borrowing (on balance sheet and off balance sheet) and, I suspect, through the Exchange Stabilization Fund, generating insider trading revenues.

    And of course, they are borrowing back from China et al and the central banks who are playing the same games.

    You really should read http://www.dunwalke.com. If you will read it over Xmas, I will map out the local economy for you and how we might go about addressing “relocalization.

    🙂

    Catherine

  5. HOW TO HAVE EFFICIENT GOVERNMENT AGENCIES: A budgeting proposal

    There is a way to cut almost any state agency or department in half in about three years, with employees cooperating enthusiastically and willingly.

    Most government agencies propose their own budgets for each fiscal year, and each new one is almost always larger than the current budget. Most agencies make sure that the current year’s budget has been spent by the end of the fiscal year. They don’t want to lose their funding. There is no incentive for savings under this system.

    There should be a new budgeting policy for each department that would take any unspent, budgeted funds at the end of the fiscal year and split them among the people in the department. Then, the lower budget figure would be used for the next fiscal year, with, again, any unspent surplus being distributed to the employees who made the surplus possible. Personal interest would have every employee watching for any possible waste. Retiring employees would not be replaced, and hiring of new personnel would be almost eliminated.

    No money would be saved the first year, but after that, every department would have continuously lower budgets.

  6. Good Lady Catherine,

    Looking forward to your 2008 review! Thanks for the work you do, and for sharing it so openly! Have a great holiday everyone! And, then let’s all get to work relocalizing! (Don’t ya’ll just love that word?

  7. Catherine / Jeffrey,

    Yes, I was thinking the same thing about the credit card scoring rules, plus the impending legislation which will curb predatory lending for credit cards. Pro-consumer groups have been screaming for this leglislation for years and yet nothing was done. Now we enter dump mode and bingo it all comes onstream “in the interest of consumer protection”.

    Another “dump” indicator, for my mind, is the synchronized doom and gloom mongering by the head of the IMF and the Spanish Minister of Finance. After almost 18 months of trying to calm the markets with soothing predictions of a short and shallow recession they are suddenly predicting depression or something close. It’s like someone has flicked a switch. These guys don’t get to these positions without playing it safe so these utterences must have been signed off somewhere. Why now?

    Catherine – thanks for all the work in 2008 and before that. I’ve learned an enormous amount from your writings.

    Happy new year… exciting times ahead.

  8. Hi Catherine, could you write an essay on how a country like the Philippines would be affected by the financila meltdown of the USA? The Philippines is a member of the IMF. It has a central bank too.

    A little background: Economists have always pointed out that the Philippine economy does not grow as fast as other Asian countries when boom times occur (now I know from you that the boom is really a bubble), but in downturns or crisis, it does not go down as much as the others. I am beginning to be thankful that over half of the Philippine economy is underground, meaning informal and outside the pale of regulators and the internal revenue service, and does not not use the financial markets for capitalization.

    I would like to write a paper on how the crisis will affect us in the light of your findings about the US financial meltdown.

    Thanks.

    Rey

  9. You’re perfectly right, Catherine. It’s time to address the real issues. Except . . .

    As per recent panel discussion on Democracy Now!(Nov. 25 issue) concerning Mr. Obama’s “stimulus plan,” there is a strong likelihood of yet another bubble in the making as a result of privatization and raised real estate values as concomitants of heavy investment in infrastructure – mass transit in particular. The panel focused on Mr. Obama’s appointments, especially that of Mr. Summers who is a “dyed-in-the-wool privatizer and a free trader,” as Naomi Klein had put it. And I’m afraid I agree with the panel’s conclusion: we haven’t seen the worst yet.

    I wrote a piece on it on my own weblog, “Mr. Obama’s Stimulus Plan,” (also published in http://blogcritics.org/ Politics section) and the readers are welcome to refer it: in essence, it’s a digest of the discussion, though in context which incorporates many of Catherine’s salient points concerning privatization and fraud.

    Roger Nowosielski

  10. I recently ‘found’ this site through listening to Celente on Youtube. Catherine, you are a very courageous lady of great integrity. I am full of admiration for you.

    Do you ever visit the globalresearch.ca website? There is an interesting article on the significance of the ZIRP at http://globalresearch.ca/index.php?context=va&aid=11491 which is rather worrying – I am referring to the possibility of a world war.

    May I also ask if you have ever heard of Benjamin Fulford?
    http://blog.japundit.com/archives/2008/03/25/8185/
    Would you know if he is a nutter or are there any legs to his contention that the elites in the West were planning to unleash racially targeted bioweapons?

  11. Tonight the Solari Report, again, was well worth the investment of time and money.
    Your perspective on getting through this coming summer…setting the stage for either of two directions the economy could then take …this valuable. General timing of potentials is important on several fronts. It provides time for adjusting habits of thought to change habits of action without the fear motivator. Knowing a potential outcome and that I have actionable time is half of getting to a state of action that resolves preparedness.

    Thanks for your work,

    Brad

  12. Sophie:

    If you check out our blog links, globalresearch.com is among them. I skimmed the article you linked to…I did not find it useful.

    I have read some interviews of Fulford. I am very interested in finding more information about the use of HAARP or other invisible weaponry to trigger earthquakes and tsunamis. I believe that the financial circumstances and trading patterns around some of these events supports the contention that these events may be induced and may not be 100% natural. However, I can not find evidence to disclose what weaponry exists and who controls it.

    Catherine

  13. As I was reading through the first draft of this I wrote a few notes as things occurred to me.

    I wrote down “BIG”, “DURATION”, “RULES V. EDUCATION”, “PUMP”. I think we have to think about the right size for things and the right duration. At least for man made stuff. Hard to fault a flower that’s been around for a billion years no matter how big it is. I’ve been thinking about Tony’s response to the Madoff affair and perhaps we all depend too much on rules and not enough on relationships. If we were all really paying attention, how could things get pumped regardless of our trust in rules to save us from the inevitable dump.

    How do we establish reasonable expectations for accountability. Clearly the inspector generals don’t seem to work. Is it the mote in their eyes?

    Is it how the engineering of markets is managed or how the managing of markets is engineered. In either case we are now longer talking about markets, but a rigged game.

    The financial meltdown reminds me that we have to slow down. Look at the pace that food grows when it is not over stimulated with chemicals. Is there not a proper pace of things? Was that not the lesson we all learned from Aesop in his story about the hare and the tortoise?

    At what point is a healthy distrust becoming a healthy trust? The former is to stop doing dumb things, the latter to turn toward doing good things at the proper pace and scale.

    Bankrupt governmentss with bigger budgets seems to imply that we are surviving by eating our tails!

    Lawrence Lessig of network neutrality and file sharing fame is leaving Stanford to go to Harvard to study corruption. He’s a person with a lot of good ideas on how to make art and commrce thrive, but in the course of his study discovered that money prevents congress from making sane laws in this field so he’s going to Harvard to study this. Irony at its best.

    It occurred to me that contracting can also mean “shrinking”. I hope that’s not the interpretation for expanding and improving the infrastructure.

    On to Wikileaks and Edwin Black.

    Court

  14. Catherine,

    I have often listen to you on coast to coast and I agree with you that people need to
    get back to the local economy. Looking at this financial crisis, would you agree that there
    is a possiblity that China or other potential adversaries have declared economic warfare
    on the United States. That is not to say americans are not to blame for themselves in this
    position.
    I read about year ago in a top geopolitical magazine certain American enemies could be trying to purchase American dollars and that at a certain point dump dollars on the market destroying the US Economy. I get this feeling that behind the curtain there are certain countries, groups or both that are trying to take USA down in an economic 911

  15. Roger/Catherine

    It is not just the economy that is imploding but the Middle-East, South Asia are in crisis mode as well. The current Israeli government wants destroy Hamas before the February elections and the arrival of President Obama in the White House. Reading BBC News, Deustche welle and Haaretz that seems unlikely with Hamas gaining support. If Likud wins we can expect a possible conflict with Iran by attacking their nuclear facilities. That would trigger a grave international crisis in which the other powers aka China, Russia would be involved. My point was could it be that the Chinese or possibly other groups aware of the Middle East situation might strike at the US first through economic means. On the other hand, certain groups wanting a crisis with Iran might weaken the economy first and then procede with the war.

    Whatever happens, Catherine you are correct in that wealth should stay at home and not be sent to some Saudi Bank Account in Geneva.

  16. Whatever happens, Doug, I think it’s better that Obama will be in office and that the old hawks are departing, don’t you think so?
    Personally, I think the sequence of events may be different. I don’t think our economic problems have been orchestrated from “outside” as it were but are more indicative rather of a system breaking down from within, and it will drag the world economies along with it in a kind of spiral. Any political unrest that may result in the aftermath or wars between nations will be the natural consequence of uncertainty. They often are. Either way, it’s not a scenario I’m looking forward to, and I hope we’ll be able to pull ourselves together and re-establish worldwide confidence as regards the West’s stability as an economic/political system. I think even Russia and China would rather see that then a breakdown. (I’m not talking, of course, about fanatics who want to see US and the rest of the West disappear.)

  17. Roger/Catherine

    I consider the Bush administration the worst in American History ranking even below Grant and Harding. Prior to the Iraq War, I completed a Masters Thesis on Iraq and warned that invading Iraq would open up a can of worms that would be impossible to put together again. Events proved me correct when we invaded Iraq the situation collapsed due to the raise of ethnic and religious factionalism. I believe the neo-conservatives thought the population would throw flowers and candy at the troops like the French did in 1944. Whoever believed that idea has no knowledge of the Middle-East history or political culture.
    The current credit crisis has demonstrated a lack of financial education on the part of the Americans. We have to much debt and our economy is based way too much on the consumer. That has put us in a position where other countries, or groups can hit us with an economic 911. I hope Obama will start to redirect our resources towards a more productive economy instead of just consuming. As Catherine and Gerald Celente as pointed out that we can bring the money home by focusing our talents in new areas such as new sources of energy.

  18. Im Sorry I dont have the information anymore but what I was able to do was to do a search on FICO scoring for June 5 2007. I had found a lot of blogs talking about it but nothing like the news posting i seen in 2006. When I was looking for a house in late 2006 I was made aware of it thru my bank/lender and it helped me get my credit in order and laid a time line for us to close in on a house. I guess what really bothers me about the change is that they, the lenders, still dont have to use the FICO score. They use what they call a hardline instead of the FICO. There just seems to be a double standard. It is nice that i can at least try to make some changes and debate what is faulty with FICO but as far as the banks are concerrned they still prefer to use the live or hardline copy of my credit report and that line could have a difference of nine month to a year from when I made the changes and that does have an effect on when and where I can get money.

  19. Doug,

    I think you’re on the right track, Doug. Senseless consumption just feeds the worst traits of the capitalist system. It is perhaps one of Catherine’s strongest points to make us realize that if we really decide, we can be in greater control of our resources and act accordingly. At first, I was rather skeptical concerning the feasibility of instituting her “permaculture” program on any large scale. I’m beginning to realize, however, that in conjunction with curbing our consumption habits, we may be able to exercise a far greater control than we realize. I plan to write a piece on this on my website, and will leave a note here when done.
    Very good appraisal, by the way, of the Iraqi fiasco. They were just itching for that war and threw all caution to the wind.

    Roger

  20. I heard silver could be worth quite a bit if things collapse, like an incredible amoount, way more than gold. ON the other hand people have told me there is so much silver for industrial use. Yet they say silver can only be ordered from dealers for another month or so?

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