The Depression of 2016 Rafael Aguayo

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Published: May 10th 2013

Kindle Edition

168 pages


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The Depression of 2016  by  Rafael Aguayo

The Depression of 2016 by Rafael Aguayo
May 10th 2013 | Kindle Edition | PDF, EPUB, FB2, DjVu, audiobook, mp3, RTF | 168 pages | ISBN: | 4.17 Mb

In 2013 most economists and pundits assume a recovery of the US economy as if it were indisputable fact. 10 year government projections forecast a growing economy, declining budget deficits and declining unemployment. These predictions are wrong.MoreIn 2013 most economists and pundits assume a recovery of the US economy as if it were indisputable fact. 10 year government projections forecast a growing economy, declining budget deficits and declining unemployment. These predictions are wrong.Professional economists view the economy as a single entity with little differentiation and detail.They believe that by feeding more money into the economy, either through federal budget deficits for demand, or Federal Reserve action to bolster the capital markets, or both, we can restore the economy to good health.This notion assumes that the economy is generally healthy and just requires a boost to recover back to “normal.” But the economy is broken in several fundamental ways.This book uses system dynamics to analyze the US economy and shows the interactions among the economy for goods and services, financial markets and international trade.

What emerges is an economy that approaches low unemployment by relying on financial bubbles to generate income and employment. But bubbles burst and lead to severe contractions. Rather than analyze what is occurring and working to rectify the economy our government has only moved to create an even bigger bubble each time. So far we have experienced three bubbles each ending in a “recession” in 1991, 2001 and 2008. And each time the fundamentals of the economy are allowed to worsen while the debt continues to grow.

Our external debt has moved from a $3 trillion surplus to a $4 trillion deficit, a swing of over $7 trillion, more than the size of any economy in the world except the US. The federal budget deficit has rung up similar sized deficits.When the recession of 2008 began the federal government was running a significant budget deficit.Yet even more money was thrown at the economy and the Federal Reserve initiated a program of Welfare for the financial sector to the tune of $3 trillion. The three past bubbles make up the Super Bubble, so far.Today, in 2013, we are embarking on the fourth leg of the bubble.

We will see an improvement in gross numbers such as GDP and unemployment for about two years. But since no action with respect to the trade deficit, tax policy, income and wealth inequality is being taken the fundamental problems persist. Government policy is merely hiding reality much like a drug hides symptoms of a person’s pain. Another analogy is a car leaking oil. Providing an infusion of oil will allow it to start and even run for a while. But unless the leak is corrected the car will not run for very long.

In fact running it hard will do permanent damage to the engine. That is where we are today. And the inevitable conclusion of this analysis is that somewhere between 2015 and 2017 we will see an even more severe recession. In all likelihood we will see even more spending as a response. The other response that is discussed in the media today, European style austerity, is even worse and will throw the economy into an even worse depression.

What is required is a fundamental understanding of how the economy functions and action to correct the chronic problems. The odds of that happening are slim to nil.About the TheoryThis book uses Systems Theory to look at Macroeconomics and brings in a new set of concepts developed over 40 years of studying business, economics, finance, capital markets and other areas. The result is an insightful picture of economics that explains our current condition but goes on to make predictions about the near and distant future.

And the picture is not pretty.Unlike most works on economics that at best explain events this work builds a qualitative model that can predict. The predictions here are relatively short term allowing for confirmation or refutation in a few years.



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