Risk of deflationary collapse greater now than in 2007.

Travakoli on deflation, collapse and derivatives

"Regarding the outlook, my analysis is grim. I am not a doomsayer, I follow the cash, and so far, I’ve been correct, and the government has been wrong. Here’s the situation. We are at greater risk of a total meltdown due to a deflationary collapse than we were in 2007. After the greatest Ponzi scheme in the history of the capital markets, we’ve seen history’s greatest fiscal and monetary expansion, but it hasn’t worked. Debt levels of consumers and business exceed the capacity to repay."  - Travakoli

Travakoli on deflation:

1. Our fundamental financial and economic problems, i.e. overleveraging, lack of transparency, have not been solved.
2. Since 2008, capacity utilization has plummeted; businesses have no pricing power; U.S. lost 6.7 million jobs but numbers are underreported; personal income tax receipts are down 21%; corporate tax receipts are down 58%; U.S. deficit will exceed $1.8 trillion; govt. spending is now 185% of tax receipts; 13% of mortgages are seriously delinquent and/or in foreclosure; huge decrease in personal net worth; 15 million mortgages exceed the home value. We’re on a massive debt spending spree.
3. Income on all levels is not sufficient to make debt payments.

Travakoli on the role of derivatives.





By the way, the reason we are worse off than in 2007 is because of the Fed's, response, the Treasury's response, the Obama Administration's response, and the Congressional response.

That's quite a lethal combination.

None of the structural problems regarding consumer debt, excess capacity, or malinvestments have been addressed. Instead the government's solution is to pile on more debt and bail out failed institutions at taxpayer expense.

One cannot cure a debt problem by going further in debt. It's as simple as that.

(NOTE: from Mish's "Trend Analysis")