The “Global Liquidity Crisis when the Credit Boom comes to an End”, Mike Whitney predicts, and here is why:

… There’s just one little problem; the Commerce Department announced yesterday that that GDP in the first quarter was revised downward to a measly .6%… In other words, economic growth is underwater and yet the stock market is still flying-high….  So, what gives? It’s easy. The markets are just responding to the growth in the money supply which is in double-digits just about everywhere around the world. When there are more dollars chasing the same number of assets — stocks go up. It’s just that simple. What we’re seeing isn’t the result of investor confidence or industrial output. Heck no! Stocks are rising because our $800 billion current account deficit is recycling into the stock market. What we are really seeing is the first signs of inflation — galloping inflation which will soon spill over into the broader economy….

The name of the game now is to keep the stock market flying-high for as long as possible while the transfer of wealth continues unabated. That means the hucksters on Wall Street will have to devise even better scams for expanding debt — increasing margin limits, escalating derivatives trading, loosening accounting standards, inflating the booming hedge fund industry, and — the new darling of Wall Street — increasing the mega-mergers, the biggest swindle of all…   If we eliminate the “frothy” exuberance of America’s trade deficit, then the stock market would be sucking air through a tube right now. And, you can bet that as soon as our foreign creditors wise-up and start raising interest rates the Dow Jones will quickly become the Dow Doldrums and the economy will nosedive into a 1929-type Depression…. 

Alas Mr. Whitney is not delusional. Even the U.N sent a dire warning early this week:

US debt could trigger dollar collapse, the USD is facing imminent collapse in the face of an unsustainable debt… He pointed out that since its peak in 2002, the dollar had depreciated vis-à-vis the major currencies by some 35 per cent and by 25 per cent against a broader range of other currencies…  

Not that we should rejoice but Americans (and the UK where up to a million households will face court action over their debts this year) are not alone, the dominoes are aligned for the last act of The Carnival of debts. Australia has never had more of debts either:

06/02/07… Households now owe a staggering $160 — and counting — for every $100 of disposable income, up from about $50 in the early 1990s. Reserve Bank figures show that families are now siphoning a record 12 per cent of their disposable incomes into interest payments. That’s up from just 6.9 per cent five years ago, and well above the ratio that prevailed in the early 1990s, when official interest rates hit 17 per cent. Now, evidence is emerging that growing numbers of Australians are struggling to service their debts. It is resulting in growing bankruptcies, credit agreements and, evidence suggests, mortgage defaults and evictions. A combination of high debt levels, lower lending standards by banks and exploitative behaviour by some lenders means that more people have mortgages they simply cannot keep…

The other day there was a video aired by Yahoo.com and whose link may not be availbale anymore whatsoever. But long story short, it was showing some parents shelling out up to $50,000 for their (very young) kids’ elaborate bashes. Many had to break their piggy banks. They others just couldn’t wait the next year to do (spend) even better and sustain the competition between parents.

While living rich on credit has distorted the ability to think rationaly, the construction of the U.S. embassy in Iraq is set to open quietly in September and is projected to cost $592 million, with a staff of 1,000 people and operating costs totaling $1.2 billion a year … at the expense of the taxpayers of course. While we encourage to write to your favorite congressmen, we ought to keep in mind that this embassy is approved by the same people who are responsible for having burdened the next 2 or 3 generations.

The US Treasury’s liabilities stand at $516,348 per U.S. household.

We live in a mad, mad, mad world.