By LAWRENCE POLYAKOV
What's awaiting the financial markets, both globally and domestically is something we haven't seen since the depression of the thirties. The problem is real money. America's current markets and economy are built on what I refer to as "fake" capital. I say this because printing forty billion a month and forcing healthy banks to give bad loans has created a credit bubble larger than that of 2008. The economy needed to grow at a minimum of five percent to supplement the extra capital thrown into them.Now America sits on a 20 trillion dollar debt and a 500 hundred billion dollar deficit. Our current administration is telling us our economy is healthy. They say unemployment is at 5%, but they never mention their calculations do not include those who stopped looking for work nor those on welfare. In essence, that number is meaningless, it is an illusion to keep the people thinking things are just fine. Real unemployment is around 25%, a number the government will never release. In less than 2 decades the government drove up a one trillion dollar debt into a twenty trillion dollar debt.All of us have to keep cash on hand every month to pay our bills. We can't just increase our credit limit every time we go over. So why does the government have the power to do so? This is where the problem lies, credit. We have entrusted a corrupt and incompetent government with our money. And they have nothing to show for it, other than their special friends getting special contracts. Millions more dependent on government, and the workforce participation rate as bad as it was in the 70's. All the meanwhile they rack up the debt by spending every last dime we give them plus a few hundred billion. In the 60's LBJ started his war on poverty. 50 years and 60 trillion dollars later, poverty rates have not moved an inch. We already know throwing money at a problem never fixes it; when will the government catch on?It seems fine and dandy giving all these people money they will never be able to pay back, but in a free market capitalistic society that is a recipe for disaster. Eventually, they will default, and given they were mostly given out around the same time period. That means millions will default concurrently. One can only correctly presume we will see something like 2008, or much worse considering we are dealing with a substantially larger amount of capital. Our markets were not built on socialism, the government didn't create the millions of great businesses, small and large cap responsible for the creation of the largest middle class known in history. Average American's used to have good lives, they used to believe their kids would have even better lives; I can assure you they don't feel that way right now. The credit bubble will burst. When is something I as well as most analysts are just waiting to see?The problem with the Bears is they wrongly predict these issues to come to the surface next week. They are not wrong in assuming the looming crash will happen, it is more about when it will happen at this point. There needs to be a trigger, something that will set it off. A trigger as in a large sell-off or G-d Forbid a series of terrorist attacks. Margin calls and inflation will deplete the people's cash. The three major indexes will fall by at conservative estimates of 30%, possibly as high as 50%.The ones who made the mistake of giving a 30-40% deposit on a luxury condo, like the ones being built across America, will be left with little choice other than to just forfeit their deposit. On my block alone they just put up 7 brand new luxury condos. More than half are not yet finished, and since January, they have quadrupled the men on site to get them finished before August. I have my projections dropping real estate in Miami on average 20% with areas such as Sunny Isles taking a 30% - 40% hit by the end of September. My projections became clearer when I began asking GCs on site when their deadline was and when they expect to finish. They told me July 31st was their deadline, not one said they would actually make their deadline.I am using this example because this is exactly what China is dealing with right now. They built all these ghost cities where not a single soul dwells. And most of those building were supported by the banks and investors. This is only one example out of almost a thousand different things taking place right now within our economy that is about to implode. Capital will disappear overnight, capital that truly never existed in the first place. It was never created through growth, it was created by a printing machine and politicians with the power to keep them rolling. The power to force healthy banks to put bad loans on their books, the power to force banks to loan and loan and loan.History reminds us time and time again that Rome fell because they overspent, they overtaxed and inflation was the icing on the cake. The government and their expansionist plans had depleted Rome, there was nothing left for the people. Our government along with the interest of a few, have now placed the lives of millions at risk. The markets are not healthy, in fact, they are in danger control. Every word Yellen and Draghi utter from their senseless mouths can have the markets moving in either direction at unprecedented percentages. These people are supposed to be important, but not the driving force behind our markets. Our markets are dependent on the people growing the economy, not the government printing cash or lowering interest rates. The fact that these two individuals yield so much power within our financial markets is already problematic. All you have to do is look at the S&P 500 yearly chart. The market going up on low volume, shooting down on high volume. Not a good thing, definitely not how it's supposed to work.The unfortunate thing is, there is nothing the average American can do about it. Sure there are people with some capital to invest on the downside. But what about the rest of the people, their cash will be depleted and what's left will be worth very little compared to what is was just a year ago. The government believes it did the people a service by giving out loans, in actuality they created a looming disaster, unlike anything we have seen before. How the banks and markets react will be more volatile than 2008. Who will survive? Who will the government bail out? With interest rates so low what can the FED do to reverse course? It reminds me, do we ever truly learn from the mistakes we made?
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