GLOBAL ECONOMIC BOOM & BUST CYCLES THE GREAT DEPRESSION AND RECOVERY OF THE 21ST CENTURY KHAFRA K OM-RA-SETI Edited by Darlene M. Justice KMT PUBLICATIONS SACRAMENTO Copyright © 2012 by Khafra K Om-Ra-Zeti All rights reserved. Without limiting the rights under copyright reserved above, no part of this publication may be reproduced, stored in or introduced into a retrieval system, or transmitted, in any form, or by any means (electronic, me- chanical, photocopying, recording, or otherwise) without the prior written per- mission of both the copyright owner and the above publisher of this book. Cover Design by Ronnie Prosser of Black Art Production Company Editing by Darlene Justice ISBN: 978-1481042314 (paper) First Edition Published by KMT Publications Printed in the United States of America DISCLAIMER: No express or implied guarantees or warrantees have been made or are made by the author or publisher regarding certain incomes, earnings, prof- its or other financial claims. 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To my Mother, Mary Asalee Davis 1921-2007 “Markets can remain irrational longer than you can remain solvent.” John Maynard Keynes * * * * * CONTENTS Tables viii Prologue ix ECONOMIC TURMOIL Introduction 18 1. America at the Crossroads 26 2. European Sovereign Debt Crisis 104 BOOM AND BUST CYCLES 3. Roaring 20s and the Great Depression 178 4. Booming 80s and Crash of ‘87 196 5. The Japanese Connection 233 6. Roaring 90s and Crash of 2000 286 7. Mortgage Meltdown of 2008 333 FORCES OF TRANSFORMATION 8. Impact of the Information Age Revolution 400 9. China: Emergence of a New Global Superpower 452 FUTURE SHOCK 10. PEAK OIL: The Coming Oil Shock 491 11. The Economic X-Factors: Natural Disasters & Terrorism 523 Epilogue 573 About the Author 576 Glossary 578 Bibliography 596 Index 599 TABLES Table 1: United States Government Major Debt Holders 30 Table 2: Post-World War II Recessions 34 Table 3: The European Economic Community: 12 Member 108 Nations Table 4: Pre-Crash Point Loss 208 Table 5: Post-Crash Dow Jones Volatility 210 Table 6: Junk Bond Industry Analysis 216 Table 7: World’s Ten Largest Banks 248 Table 8: Crash of 1990: Nikkei Declines 263 Table 9: Historic Share Prices of Tech Leaders 326 Table 10: GAO Audit Report - Institutions with the Largest 387 Total Transactions viii PROLOGUE his book supports the premise that during the period 2013- T2015, there will be a major global economic collapse, but it also envisions a recovery and new beginning if our world can avoid systemic wars and massive economic destruction. The economic the- sis presented in this publication is the result of over 25 years of research, writing and thinking on this subject matter, which is cul- minating in this incredible era of enormous transformation. What is emerging from the historical data examined over the past century and what forms the foundation of my thesis is what I call the Grand Convergence, the confluence of a diversity of economic forces bring- ing about a manifestation of creative destruction and global eco- nomic reformation. My interdisciplinary research and approach seeks to arrive at the truth embedded in a number of factors that are com- ing together in epic proportions. These very powerful economic forces will collide to bring about collapse and massive disruptions to our modern civilization. We will witness the rise and fall of government leaders, technologies, and economic systems and models that are part of the creative destructive nature of capitalism. In 2012, our world entered a period of economic, political, technological and so- cial trials and tribulations. And this will be an economic reformation that will not come easy. The first phase of this economic reformation was the Meltdown of 2008, which was a truly shocking event, one that made the Crash of ‘87 appear minor by comparison. The boom and bust pattern was similar: A roughly five year boom period followed by a massive meltdown and bust period, however, this was something quite dif- ferent and was much more deadly and destructive in its impact on the global economy. Unlike the Crash of 2000 which brought to an end the Dot-Com Bubble Mania, this crash took us to another level and nearly brought about the collapse of financial systems through- out the entire world. The global credit system froze and was literally in a state of shock. This was clearly an epic event and drove me to revise my thinking on economic collapse and periods of recession ix and depression. After over two decades of observing major boom and bust cycles, my gut reaction to the Meltdown of 2008, from Bear Sterns to Lehman Brothers, was to conclude that we had entered a new zone of economic extremes; that we were looking at the result of decades of over expansion of the financial system; a kind of eco- nomic financial insanity, greed gone wild. After experiencing a strong rally and mini-boom period for nearly two years (2009-2011) the stock market crashed again in August 2011, and it was that event that finally led me to the conclusion that not only is a massive Global Meltdown and Great Depression immi- nent, but in all likelihood, the Great Depression of the 21st Century had already begun with the Meltdown of 2008 (I believe that when historians write about this period decades from now they will come to that conclusion). From December 2007 to late 2013, over $20 trillion was deployed primarily by the U.S. Federal Reserve System (loans to major banks in the U.S. and Europe, government stimulus programs, quantitative easing programs (QE), etc.) to keep the world out of a deep economic deflationary depression. This was a massive undertaking, however, Fed Chairman Ben Bernanke and his coun- terparts in Europe and Asia managed to delay or postpone the global collapse into the deflationary abyss. But now a Great Reckoning is upon us and we cannot turn back or renounce the verdict. Greed to the nth power got us to this point in history, and engulfs the entire world: it was no longer a pleasure to just be a millionaire, the goal was billionaire status and the players took on enormous risks in the pursuit for enormous Warren Buffett-type wealth. Greed and finan- cial power drove the world into an economic ditch. The year 2012 was the defining moment for the global economy, the end of an era and super-long wave cycle, and the continued transformation of the Industrial Age. After having studied and writ- ten about the Information Age Revolution (as coauthor of Black Fu- turists in the Information Age: Vision of a 21st Century Technologi- cal Renaissance) I’m convinced that the grand recovery that will take place after the depression years will be centered in the Informa- tion Age Revolution of the 21st century. This digital and tech revo- x lution is going to be the perfect solution for the next economic re- covery (and that too will come with a price) but we will first have to go through a significant period of financial and economic purga- tory. As the research in this field continues to evolve, new ways of examining this exciting economic phenomenon will expand our understanding of what we are dealing with. Since the field of eco- nomics is not a science, but an art, economic data and events tend to bring about conflicting levels of interpretation. For instance, in the Meltdown of 2008 the world was presented with enormous economic and financial devastation on par with the Great Depression of the 1930s. Many mainstream economists and government leaders avoided using the word depression to describe this monstrous eco- nomic contraction, and that is understandable from a political point of view.