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Thread: Are we really in a recovery?

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    tWebber
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    Are we really in a recovery?

    Note: please take heed that I’m not interested in the left/right political paradigm (Bush vs. Obama, any past political heads or whatever future candidates are in the picture); I’m just interested in the economic facts as they are currently being represented. I’m not really interested in the politics of this, whose fault it is or what political strategy will best get us out of it. I’m more interested in looking at the bigger picture – the disconnect between economic fantasy and reality.

    I guess I’m not really surprised by the false optimism being expressed by the MSM and their economic pundits about the so-called "improving" US economy contrary to what lies underneath the actual economic data. After all, we all want to be optimistic. Corporations that run MSM especially want this optimism to reflect onto the populace so that the populace continues to spend (and accumulate more and more debt). Politicians want this optimism as well so they can bask in the glory of their political accomplishment.

    However, society at large can apparently see right through this charade. Though polls indicate optimism is slightly growing, the numbers are still low and don't at all reflect the persistent optimism we've seen in the MSM for the past year or so. And indeed this is something we would expect if we assume the economic recovery really is just a charade, not because of any exceptional knowledge about the economic data the general public has, but because they live and experience the economy firsthand and know the economy has not really been improving.

    So why is there this disconnect? If the economy is improving as politicians and MSM economists have been touting for years, then why doesn't the general populace (susceptible to media influence) reflect this optimism? Because here’s what the economic numbers really show (note, we could go into a myriad number of data points that are misrepresented, but I’m just going to cover the three major facets of the economic data that are used to tout a recovery the most, as this is already a very long post as it is):


    Unemployment

    While everyone looks on the surface of the U3 unemployment number dropping and celebrates this as a positive, in actuality the participation rate has been declining to record lows…


    While by now everyone should know the answer, for those curious why the US unemployment rate just slid once more to a meager 5.9%, the lowest print since the summer of 2008, the answer is the same one we have shown every month since 2010: the collapse in the labor force participation rate, which in September slid from an already three decade low 62.8% to 62.7% - the lowest in over 36 years, matching the February 1978 lows. And while according to the Household Survey, 232,000 people found jobs, what is more disturbing is that the people not in the labor force, rose to a new record high, increasing by 315,000 to 92.6 million!

    And that's how you get a fresh cycle low in the unemployment rate.

    http://www.zerohedge.com/news/2014-1...s-not-labor-fo

    Coupled with this alarmingly declining job market is that a large portion of the jobs that are actually being created are still part time and/or low wage service sector jobs…


    The situation of these so-called involuntary part-time workers—those who would prefer to work more than 34 hours a week—has economists puzzling over whether a higher level of part-time employment might be a permanent legacy of the great recession. If so, it could force more workers to choose between underemployment or working multiple jobs to make ends meet, leading to less income growth and weaker discretionary spending.

    Employers added some 3.3 million full-time workers over the past year, but the number of full-time workers in the U.S. is still around 2 million shy of the level before the recession began in 2007. Meanwhile, the ranks of workers who are part time for economic reasons has fallen by 740,000 this year to around 4.5% of the civilian workforce. That is down from a high of 5.9% in 2010 but remains well above the 2.7% average in the decade preceding the recession.

    http://blogs.wsj.com/economics/2014/...-seven-charts/

    We could also very easily speculate here that people are taking multiple part time jobs which would distort the employment report even more than it is. In other words, if Bill needs two part time jobs just to make ends meet, this would count as two jobs created in the data. But that’s admittedly just an aside because it’s purely hypothetical. Nevertheless, the declining U3 number is not what it really seems once what's underneath the surface is exposed.


    Stock market record highs

    This is not shocking when considering the hundreds of billions of dollars the Federal Reserve has pumped into the financial system. After all, those billions need someplace to go and being that every major economy in the world is on the brink of meltdown (EU, Japan, Russia, even China), both US bonds and the US equity market is really the only "ideal" place in town or the least risky place to park those billions. The problem is that this is a moot point relative to any discussion about a recovery because: a) as mentioned, there's nowhere else to put all that money, thus it doesn't necessarily reflect a good economy, just an economy that appears better relative to other more dire economies; b) it doesn’t in any way shape or form even reflect general public optimism or their own wealth because it’s actually corporations (those that have access to the Federal Reserve easy money printing) buying back their own stocks…


    Companies are buying their own shares at the briskest clip since the financial crisis, helping fuel a stock rally amid a broad trading slowdown.

    Corporations bought back $338.3 billion of stock in the first half of the year, the most for any six-month period since 2007, according to research firm Birinyi Associates. Through August, 740 firms have authorized repurchase programs, the most since 2008.

    The growth in buybacks comes as overall stock-market volume has slumped, helping magnify the impact of repurchases. In mid-August, about 25% of nonelectronic trades executed at Goldman Sachs Group Inc., excluding the small, automated, rapid-fire trades that have come to dominate the market, involved companies buying back shares. That is more than twice the long-run trend, according to a person familiar with the matter.

    The surge underscores share-price gains by many companies repurchasing stock more than five years after shares hit their low in the late stages of the financial crisis.

    http://www.wsj.com/articles/companie...ket-1410823441

    As one could easily figure out, contrary to reflecting any sort of positive aspect of the economy and even distorting one's view of the economy, this creates an overvalued asset market similar to 2008 pre-crash, or as one might also put it – another market bubble.


    GDP growth

    This is probably one aspect of the economic data being misrepresented that astounds me the most (next to the unemployment data), and one could even make a strong case of actual manipulation, whether intentional or otherwise is not the point here.

    I think anyone with any common sense doesn’t need all that much economic knowledge to know that something is amiss if the third quarter GDP can surge to 5% from the outright crash of the first quarter. I mean even if you believe the US economy is doing well, it can’t be doing THAT well. Well, you’d be correct in your suspicion. In short, the surge of GDP in the last two quarters from the crash of the first quarter is primarily based on healthcare. Yes, the government mandate on healthcare has forced consumers to buy a product which has been the major driver in GDP growth.

    But not only is it the major cause of the last two quarter surges, but the Bureau of Economic Analysis (BEA) is arguably revising it in a way to cause these dramatic surges (note here that I’m not necessarily suggesting why they’re doing this – whether for nefarious reasons or just standard procedure… I’ll leave that up to you)…


    Fast forward to today when as every pundit is happy to report, the final estimate of Q3 GDP indeed rose by 5% (no really, just as we predicted), with a surge in personal consumption being the main driver of US growth in the June-September quarter. As noted before, between the second revision of the Q3 GDP number and its final print, Personal Consumption increased from 2.2% to 3.2% Q/Q, and ended up contributing 2.21% of the final 4.96% GDP amount, up from 1.51%.

    So what did Americans supposedly spend so much more on compared to the previous revision released one month ago? Was it cars? Furnishings? Housing and Utilities? Recreational Goods and RVs? Or maybe nondurable goods and financial services?

    Actually no. The answer, just as we predicted precisely 6 months ago is... well, just see for yourselves.

    ...

    In short, two-thirds of the "boost" to final Q3 personal consumption came from, drumroll, the same Obamacare which initially was supposed to boost Q1 GDP until the "polar vortex" crashed the number so badly, the BEA decided to pull it completely and leave this "growth dry powder" for another quarter. That quarter was Q3.

    http://www.zerohedge.com/news/2014-1...n-surge-q3-gdp

    Moreover, this is anything but a reflection of household wealth, as people are apparently being forced to dig into their savings just to make these purchases…


    Despite the increased consumer spending, households actually lost disposable income in this revision -- losing yet another $29 in real annualized per capita disposable income (now reported to be $37,496 per annum). This is now down a full $373 per year from the 4th quarter of 2012. The healthcare spending growth reported above came exclusively from reduced household savings, which dropped yet another -0.3% percent in this report.

    http://www.consumerindexes.com/

    Why we are really in stagnation

    Or what I would term as stagflation. Even though hyperinflation hasn’t set in due to the insane amount of money printing as one would expect, we are seeing signs of inflation in certain areas of the economy, particularly food prices, healthcare, tuition, etc (things that naturally don’t reflect the CPI). I don’t think I need to offer any citations here because I’m sure this is more than apparent to anyone that consumes US goods and services.

    So I argue, once the facade of the economic data has been exposed, that we are actually experiencing both recession (evident by dropping commodity prices, such as oil) and inflation – or stagflation. But why haven’t we seen consistent hyperinflation? Simply put, the hundreds of billions created by the Fed is not being used as intended, or is not flowing into the main economy outside of the equity and bond market. In short, we have an extremely lopsided economic system here (which has been contributing to the growing wealth gap of late). The hyperinflation is actually evident in both the over-inflated stock market (as I covered earlier) and the US bond market…


    American banks are loading up on U.S. government debt, a sign they remain cautious on the economy even with the jobless rate at a six-year low and corporations at their healthiest in a generation.
    Commercial lenders increased their holdings of Treasuries (BUSY) and debt from federal agencies in September by $54 billion to an unprecedented $1.99 trillion, data from the Federal Reserve show. Banks have now been net buyers for 12 straight months.

    http://www.bloomberg.com/news/2014-1...m-lending.html

    In the midst of a recovery facade, there are three major bubbles to keep an eye on: stock market, bond market, and derivative market (exceptionally susceptible to EU troubles and falling oil prices).
    Last edited by seanD; 12-28-2014 at 08:48 PM. Reason: better clarity

  2. #2
    tWebber
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    Federal Reserve raising interest rates is a major sign of a true recovery. Everyone is so sure, including the MSM economists, that the Fed will finally raise interest rates because, according to them, we're in this wonderful recovery and the economy is surging ahead. So it's only natural that if we're in a recovery to assume that the Fed will HAVE to raise rates.

    However, the Fed obviously knows what the real data shows. So if we assume the data doesn't really reflect the type of recovery MSM is touting, then the Fed actually raising rates as expected would be somewhat of a shock to us. In fact, I will admit that I will be very shocked if they raise rates. On the other hand, we would not be at all surprised if the Fed not only forgoes raising rates, but actually implements another QE program. Everyone will be utterly shocked and outraged by this "strange" move, but you and I won't be surprised at all for obvious reasons

    Nonetheless, I thought this was an interesting quote from the Fed about raising rates...

    In its recent statement, the Fed said it would no longer be considering the unemployment rate, in isolation, as a barometer for when to begin raising interest rates and instead would now consider a wide range of information, including measures of labor market conditions, indicators of inflation pressures, inflation expectations and readings on financial developments. The Fed reiterated that its outlook for the economy and monetary policy remains unchanged.

    http://www.forbes.com/sites/advisor/...n-spring-2015/
    In the past, unemployment outlook was a primary barometer in determining what the Fed would do with interest rates, but now they state they're only considering this with other data factors in their determination. Well, of course, because the fact the U3 number is dropping we know is not the type of glorious news MSM is making it out to be, in addition to the type of jobs that are actually being created. And so does the Fed. They look at the actual data just like we do. They know that the participation rate is dropping and that many of the new jobs are part time and/or low wage jobs, which also explains why wages are dropping at the same time these jobs are being created.

    So let's see if the Fed actually raises rates as everyone expects them to in such a great recovery. Or will they do the "unthinkable" and implement another QE program.

  3. #3
    tWebber
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    First quarter GDP 0.2% (which will probably be downgraded later into the negative).
    Retail sales plunge.

    Reason this is important, other than the nonsense recovery we're constantly told is happening, two more MSM economist myths have been shattered:

    - Downturn is related to the weather (lol).
    - Yes, falling oil prices might hurt the economy in the long term, but at least low gas prices will cause consumers to spend, thus will boost the economy in the short term.

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    tWebber
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    Yup, first quarter GDP revised down to negative 0.7.

    Though the economist shills expect there to be a rebound in the second quarter, the problem is they can't use Obamacare sales this time to rescue it like they did in 2014, so I guess we'll have to wait and see. Two quarters of negative GDP in a row is officially recognized as a recession by everyone, even the shills.

    And now, there are even talks of manipulating the way they measure GDP data even more than it already is. How about they go back to measuring inflation like they did in the past... because that would sink GDP even more

  5. Amen Paprika amen'd this post.
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    Zerohedge just summed up this fake economy in one short article and called it the Velocity of Money. No, I didn't just call it a fake RECOVERY, because that's a given. I called it a fake economy in general. The reason all the data shows weíre not in a real recovery is because we donít have a real economy, and Iíll explain why in greater detail. Note the chart...

    Money.jpg

    As you can see, the velocity of money, or dollars exchanging hands, is actually lower now than it was during the Great Depression of the 30s. Of course, we would naturally wonder, if the velocity of money is actually that low, why we are not seeing some of the same signs during the Great Depression.

    Itís important to note that even during the Great Depression not everyone was affected the same, and apparently about 40% of the population was not affected at all. Interestingly enough, according to a CNN poll, 42% believe they are financially better off today, whereas the rest of the pollsters say theyíre either the same or worse.

    During the Great Depression, some were affected to a much greater degree than others that were also affected, much like we see today, where there are great economic imbalances currently at play. But the more specific answer is because we live in a much different economy than we did in the 30s; a digital economy and financial sector that can disguise economic disparities much more effectively. Iíll give a few examples:


    Digital breadlines

    In a fake economy like ours, where 70% of GDP is consumer spending, a lot of what drives the economy is perception psychology. Today, 65% of households are receiving some form of government aid. Thatís 65%.

    However, technology is a thing of beauty for government and the economic recovery shills in our modern culture. Most of wealth disparity is digitalized and thus unseen by the naked eye. For example, 46 million people are on food stamps. In the 30s, these were called breadlines.

    depression.jpg

    To put this in perspective, imagine we didnít have digital EBT cards, and 920,000 men and women (not including children) stood in visible breadlines in all 50 US states each month. With that image in mind, do you think anyone anywhere could get away with even uttering such nonsense as "a recovery" without being admonished and discredited as a nutcase?


    Criminality and crony capitalism

    Three factors absent during the Great Depression keep the current financial sector wheels churning:

    Transnational banks and corporations that should have failed (if we had a REAL free market capitalist economy) during 2008 were not just bailed out but had (and still have) access to Federal Reserve zero percent interest rate loans at their leisure. Imagine the backstop youíd have against bankruptcy if you had near zero interest rate loans any time you wanted. In addition, the trillions of dollars the Federal Reserve doled out during QE1, QE2 ("operation twist"), and QE3 also went to select transnational banks in exchange of their toxic assets. Simply put, the Federal Reserve gave banks the money so that the banks could unload all their bad and risky assets (i.e. subprime mortgage derivatives) off their balance sheets onto the Federal Reserveís balance sheets. Now imagine you run a business and an institution offers to buy all your bad assets in exchange of fresh crash. If you werenít completely liquid at all times in that situation, there would probably be something terribly wrong with your business model.

    Likewise, select corporations that are able to exclusively borrow money from the Federal Reserve at near zero interest most likely dump a lot of it into the stock market (as I explained in the OP). This way, they can keep their companies thriving and their shareholders happy while they reward themselves with corporate bonuses in the process without much risk. This is why there are companies supposedly worth billions (i.e. Facebook, Twitter, Uber, etc.) that donít make any products, donít generate anywhere near the revenue and didnít even exist a decade ago. This amount of irrational money distribution not only did not happen during the Great Depression but the actions of our central bank in 2008 are unprecedented at any time in US history. Though Greenspan kept interest rates low (something even he admits contributed to the housing bubble of 2008), he kept them low for about three years. The magnitude of 2008 QE never happened before (which the Fed itself calls "unprecedented") and the Fed has STILL kept interest rates low from 2008, some 7 years later now.

    Banking corruption and criminality in the last decade is unprecedented. This keeps the banks thriving with unlimited profits because they can take overreaching, risky and even illegal actions without any repercussions. Banks that conspire to manipulate global interest rates in their favor without any criminal charges; banks that rig global foreign exchange markets in their favor without criminal charges; banks that launder billions in drug and terrorist money without criminal charges are able to sustain themselves quite well, in addition to the financial system of which they play in.

    In other words, the unprecedented wealth volume, created by what we might call both state capitalism and outright criminality, is clearly in existence but it's not moving or being distributed into Main Street (a factor that is both necessary for a vibrant economy as a whole and that also causes inflation), thus is also why we have a lopsided economy and why the wealth gap is worsening. This is not free market capitalism, but government economic micromanagement -- i.e. socialism (for the wealthy class). Think of it like a great dam of endless water supply surrounded by whole communities suffering a severe drought because theyíre cutoff from access to the water. Some parts of the economy artificially thrive while other parts are stagnant or deflating. Thus the MSM and economic shills can downplay ill effects in the economy, even misrepresent much of the data and focus on the booming aspects, such as the stock market, vibrant banking sector and record corporate profits in order to continue to perpetuate this grand illusion of recovery.


    The underclass wealth mirage

    We are now a debt-based country, with our debt-to-GDP over 100%, and though it was high in the 30s, it was never this high, both public and private. Credit card debt at unprecedented levels; student loan debt at unprecedented levels; housing loan debt at unprecedented levels; car loan debt at unprecedented levels; national debt at unprecedented levels. None of this easy credit was available to so many people at one time during the Great Depression. Though we know that credit is not wealth, it certainly creates the temporary illusion of wealth and might hide the reality of a depression for a decadent culture such as ours in the short term, but is obviously disastrous in the long term.

    So, the obvious question is: when weíll this grand illusion wear off? When will reality catch up to what the mountains of actual hidden data is telling us about the economy? When will the bond bubble pop? When will the stock market bubble pop? When will the derivative bubble pop? Iím becoming more and more convinced that the illusion may continue indefinitely as the disparity gap gets worse and worse. In other words, Wall Street and the stock market may continue to thrive off of criminality and state management, while the decline of Main Street continues to deteriorate.

    The reason I believe this is because the powers that be will never allow these bubbles to pop. This isnít just my assumption, but based on what weíve observed over and over in recent history. If the stock market starts to crash too low, for example, the powers that be will step in and prevent it (i.e. plunge protection team -- see here and here). If interest rates on bonds start to rise too fast, the Fed will step in and continue QE (so far it was 85 billion a month, if it has to be 170 billion a month so be it). If the derivative bubble starts to burst, government and banking institutions will initiate bail-outs and/or bail-ins to prevent a cascading banking collapse.

    In the meantime, the "collapse," if not a sudden one, may continue to be gradual. We'll experience and watch the ugly reality of the Main Street bust continue to manifest in several various ways -- i.e. federal and state governmental corruption, infrastructure deterioration, municipal bankruptcies, social unrest, etc.

  7. Amen klaus54 amen'd this post.
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    Quote Originally Posted by seanD View Post
    Today, 65% of households are receiving some form of government aid. That’s 65%.
    Got to make a correction. That's 65% of children living in a household that accepts government aid. I misread that.

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    Quote Originally Posted by seanD View Post
    Federal Reserve raising interest rates is a major sign of a true recovery. Everyone is so sure, including the MSM economists, that the Fed will finally raise interest rates because, according to them, we're in this wonderful recovery and the economy is surging ahead. So it's only natural that if we're in a recovery to assume that the Fed will HAVE to raise rates.

    However, the Fed obviously knows what the real data shows. So if we assume the data doesn't really reflect the type of recovery MSM is touting, then the Fed actually raising rates as expected would be somewhat of a shock to us. In fact, I will admit that I will be very shocked if they raise rates. On the other hand, we would not be at all surprised if the Fed not only forgoes raising rates, but actually implements another QE program. Everyone will be utterly shocked and outraged by this "strange" move, but you and I won't be surprised at all for obvious reasons

    Nonetheless, I thought this was an interesting quote from the Fed about raising rates...



    In the past, unemployment outlook was a primary barometer in determining what the Fed would do with interest rates, but now they state they're only considering this with other data factors in their determination. Well, of course, because the fact the U3 number is dropping we know is not the type of glorious news MSM is making it out to be, in addition to the type of jobs that are actually being created. And so does the Fed. They look at the actual data just like we do. They know that the participation rate is dropping and that many of the new jobs are part time and/or low wage jobs, which also explains why wages are dropping at the same time these jobs are being created.

    So let's see if the Fed actually raises rates as everyone expects them to in such a great recovery. Or will they do the "unthinkable" and implement another QE program.
    No rate hike... gee what a shocker

    Federal Reserve policymakers on Wednesday kept the central bankís benchmark short-term interest rate near zero, opting against the first increase since 2006 after determining the economy still isnít strong enough to handle it.
    I remember when Benanke's rate hike benchmark was when the unemployment figure (the U3 figure that is) would reach 6.5%. Then the rake hike was a certainty in June. Now it's September...

    Given the slow start to the year, and inflation that remains low because of the decline in oil prices, many analysts had expected the Fed would not raise rates until at least September.
    The funny thing is, now even the MSM economist shills are starting to call their bluff. I must admit that I was wavering a bit about the June hike because of a theory I heard someone propose. If the Fed hikes the rate in June, when all hell breaks loose as a result of a weak economy, at least they have the option of lowering it again. In other words, at least they have some leg room to do something aside from just print and pump trillions more into the financial system. I thought this was pretty plausible, because if all hell breaks loose before they raise rates (and the bottom is clearly beginning to fall out of the so-called economic recovery illusion as we speak), then they have nothing more to do than just print more trillions, which will be more than transparent to our world creditors holding US debt that they are clearly in a bind with no solution in sight. So I hesitated a bit until June.

    Yellen admits that the economy is still weak, so, even putting the horrendous data we've had from the start of this year aside (GDP, manufacturing, consumer spending, etc.), my question to Yellen is: what could possibly happen in just THREE months that could change the economic outlook enough to raise rates in September than June, or anytime in the second half of this year?

    Now I have no doubt the fed is bluffing and has been bluffing all along. All they're doing is trying to maintain the flow of the markets with their continuous empty promises.

  10. #8
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    Quote Originally Posted by seanD View Post
    In other words, the unprecedented wealth volume, created by what we might call both state capitalism and outright criminality, is clearly in existence but it's not moving or being distributed into Main Street (a factor that is both necessary for a vibrant economy as a whole and that also causes inflation), thus is also why we have a lopsided economy and why the wealth gap is worsening.
    I thought I'd add a bit more support to the idea that the Federal Reserve's monetary action (I'm specifically focusing on the period during Bernanke/Yellen's term) is directly responsible for the growing wealth gap of late, as opposed to free market capitalism in general.

    All it takes is just a little common sense to know that if you give select financial institutions more than four billion dollars in exchange of their bad assets within seven years, and then keep 0% interest rate loans available to this same exclusive group of wealthy institutions during that same timeframe, while excluding everyone else from that party, the wealth of the former group will greatly surpass the wealth of the latter group. I mean, this isn't rocket science.

    But here's the data to back that upÖ

    Disparity graph.GIF

    As you can see, not only is the middle class fading fast (more about the shrinking middle class here), and not only has the .001-1% practically regained the income they had pre-2008 crisis, but the bottom 50% continued to lose ground from 2007-2012 (with most of the loss from 2009-2012) during the supposed recovery.

    Obviously this is not because the .001-1% is smarter than everyone else, as they were on the verge of wiping themselves out, along with everyone else, in 2008. Of course, one might also argue an advantage for those that can engage in investment criminal activity without any real criminal consequences other than fines that are smaller than the profits they make in such activity, but it's impossible to really prove how much of that .001-1% is engaging in criminal activity.

    So, in regards to an increasing wealth gap, when we apply a little logic and match it with the data, the conclusion is pretty clear. The tragedy is that liberal media is implying that this is a result of capitalism, thus we need more government capitalist control (i.e. socialism). But again, this isn't free market capitalism; this IS wealth socialism with explicit government complicity.

    Things have a tendency to balance out in a free market capitalist system. We donít know for sure how much, if any, the middle class would have regained post-2008 crisis, but many of the corrupt and reckless wealth monopolies in place right now making the system lopsided would have had this advantage eviscerated if government had allowed free market capitalism to actually work.

  11. #9
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    Quote Originally Posted by seanD View Post
    All it takes is just a little common sense to know that if you give select financial institutions more than four billion dollars in exchange of their bad assets within seven years, and then keep 0% interest rate loans available to this same exclusive group of wealthy institutions during that same timeframe, while excluding everyone else from that party, the wealth of the former group will greatly surpass the wealth of the latter group. I mean, this isn't rocket science.
    Um, that's trillion with a T

  12. #10
    tWebber whag's Avatar
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    Obsessed with your own opinions much?

  13. Amen shunyadragon amen'd this post.

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