We apologize for the size of the graph. It reads:

TOTAL AMERICAN (US) DEBT vs. National Income

RED: Total American (US) $48 Trillion (federal, state, local gov't - federal debt to trust funds + business + household domestic domestic financial sectors)

BLUE: National Income in US dollars (grig. method) 1957-2005:

• "It's the debt, stupid!
• 44 $Trillion unfunded liabilities - such as healthcare and retirement = 10X public held debt.
• 4 years of US GNP
• 99% of household net worth

Total American (US) debt is now 340% of GNP

The Greeks had a word for this reckless arrogance, which inevitably leads nations and people to disaster. They called it �hubris�. �It is the kind of supreme arrogance that causes an individual or a nation to boldly defy all the accumulated wisdom of the past, to ignore history, to break all the established rules and imagine themselves masters of fate. Or as the Greeks would put it, �to defy the immortal gods.'" The Kondratieff Wave Analyst. April, 1988. P.37). 

Hubris is always punished. In Greek mythology, those people or nations guilty of hubris were delivered to Ate, the goddess of infatuation and ruin. Her punishment was to confuse the judgment of her arrogant victims. The actions that they took, which they thought were good and could save them were, in fact destructive. Thus, those afflicted by hubris were deluded into becoming agents of their own ruin. 

Consider the actions of the Federal Reserve Board�s open market committee (FOME) As soon as it appears that the U.S. economy might be facing a slowdown, the Central Bank lowers administered interest rates and increases the money supply. This response the Bank obviously thinks is good, but in fact it is bad, because it grows becomes unsustainable, the bubble bursts. This then leads to the abject poverty and despair of many people and they will turn on the perpetrators of their misfortune. It is fitting that this catastrophe should begin during George Bush�s Presidency, for he has much to answer for, especially the Iraq War, which has resulted in the death of many thousands of innocent people. The war may not be an issue to many Americans, but an economic depression will be. Those in power at its onset will be treated with contempt and loathing. 

Perhaps, too, Henry Paulson as Secretary of the Treasury will experience the public�s wrath as the budding financial catastrophe unfolds; much like his counterpart Andrew Mellon in the early 1930�s. While the Federal Reserve Board should be singled out for its collective hubris, no one individual more deserves the punishment that hubris brings on those that practice it, than former Federal Reserve Chairman, Alan Greenspan. By his actions he has set in place, perhaps the greatest financial catastrophe that the world has ever faced. Despite his direct responsibility for this looming disaster, he was named a �national treasure� by a groveling U.S. Senator, given a honourary knighthood by Queen Elizabeth and dubbed the �Maestro� in a recently published book. 

Still, Sir Alan�s fawning fans lean on his every word. And his retirement has not dimmed his penchant for pontificating on current economic and other events. Indeed, one can reserve a table for 10 people at a cost of $4,000 (CAD) to attend a luncheon presentation by Alan Greenspan at the Vancouver Westin Bayshore hotel on Thursday, January 24, 2008. This of course, all sponsored by the BMO Financial Group. Now he is an advisor to the British Government. His fall from grace is likely to be very painful.

�Prosperity has this property-it puffs up narrow souls, makes them imagine themselves high and mighty and looks down on the world with contempt.� Plutarch, 46-120 A.D. 

There is plenty of hubris evident in the great stock bull markets, which are a once in a lifetime experience and always occur during the Kondratieff autumn. 

During the latter stages of these great bull markets, the investor herd, which has greatly benefited from the boom in stock prices ascribes to their investment gurus great power and treats them with a reverence normally reserved for the gods. This hero worship goes to their heads. Many of them believe that they are solely responsible for the investment success that the crowd enjoys. 

At these massive bull market peaks, these analysts continue to recommend the purchase of specific stocks and other newly contrived investment products. They believe that their advice is good, when in fact it is bad, because inevitably a terrible bear market follows and all the wealth that they take the credit for having created is destroyed.

While these analysts might have succumbed to hubris so too, did many of corporate leaders. Men like Bernie Ebbers, Denis Koslowski, Samuel Waksal, Kenneth Lay and Jeffrey Skilling and now Conrad Black have paid a humbling price for their undue arrogance. There will be more to follow as the next stage of the stock bear market gets underway. 

Following the previous Kondratieff autumn stock bull market in peak in 1929, many former heroes paid dearly for their hubris. Up to 1930, Andrew Mellon was touted as perhaps the greatest Secretary of the Treasury since Alexander Hamilton, who was appointed to that position in 1789. Thereafter, to save Mr. Mellon from possible impeachment, President Hoover appointed him as Ambassador to Great Britain in 1932. 

During the later stages of the 1920s, Samuel Insull built an enormous empire of utility companies, which were connected in a complex pyramid and financed with massive debt.

�His prestige was colossal. He was chairman of the board of directors of 65 different concerns and president of 11 others. His wealth was reputedly vast.� (The Lords of Creation. P.281). 

When the end came, the house of cards collapsed.  �Investigation, flight, indictment, refuge in Greece, capture, and trial in Chicago were still to come-grimly underscoring the tragic conclusion of financial adventure in which a brilliant career had been wrecked, and American investors had lost nearly three quarters of a billion dollars, and the economic system of the whole country had been gravely shaken.� (The Lords Of Creation. P.286). 

Richard Whitney, a scion of the Wall Street establishment, and acting President of the New York Stock Exchange at the time of the crash and in 1930 the President of the Exchange, resorted to embezzlement to make good his substantial losses during the crash. 

In 1938, the NYSE comptroller reported to his superiors his proof of Whitney�s theft. From that point events snowballed. Whitney and his brokerage company both declared bankruptcy. He was arrested, charged with embezzlement, found guilty and sentenced to a term of between 5 to 10 years in Sing Sing prison at Ossining, N.Y. His brother, George Whitney, a partner at J. P. Morgan, eventually made restitution on all the money that he owed. 

Charles Mitchell, President of the National City Bank, who defied the Federal Reserve in 1929 and one the main cheerleaders of the stock market boom was investigated by the US Senate committee where he admitted to speculating in his own bank�s securities and was fined $1.4 million. 

The Van Sweringen brothers, who built their fortune in railways and in Cleveland real estate by forming holding companies built upon holding companies. Their companies were well managed.

�But on this solid foundation of operating skill they had raised an immense financial pyramid built of debt and of hope.� (The Lords of Creation. P.299). 

�Then came October and November, 1929, and�worse than that the decline in values in the fall of 1930, and the slow avalanche of 1931 and 1932. An ugly time for borrowers and for lenders too.� (The Lords of Creation. P.301). 

�Not all the things done in those years of collapse make agreeable reading. Debt had hitherto weighed lightly on the Van Sweringens: now its burden was terrific. They had to have money.� (The Lords of Creation. P.301). 

But there was not any to be had. Ivar Krueger, the Swedish match king, did not limit himself to just matches, but also controlled most of the forest industry in northern Sweden. He was able to acquire the majority shares in the telephone company, Ericsson, the mining company Boliden and banks in Sweden and Germany. 

At the peak of his career in 1929 he controlled some 200 companies and his fortune was estimated to be 30 billion Swedish Kroner. It all came crashing down in 1932. The claimed assets of $250 million were non existent. On March 12th, 1932 Krueger was found dead in his Paris hotel room; apparently from self inflicted gunshot wounds. 

�Money has no Motherland; financiers are without patriotism and without decency; their sole object is gain.� Napoleon

This world-wide preoccupation with any investment scheme dreamed-up by Wall Street is unprecedented. There is nothing to compare this experience with anything in history. Perhaps John Law�s Mississippi stock scheme and its immediate successor the South Sea Bubble shares some comparisons such as the massive increase in the 

fiat money supply to fund share purchases and the huge increases in the respective share prices and the degree to which speculation engrossed lord and servant alike; or how the new found wealth gravitated to the purchase of luxury goods like carriages (automobiles today), gold and silver plate, furniture and lace. At the time the Regent�s mother wrote: 

�It is inconceivable what immense wealth there is in France now. Everybody speaks in millions. I don�t understand it at all, but I see clearly that the god Mammon reigns an absolute monarch in Paris.�

First two articles in this series by Ian Gordon:

1. THIS IS IT!
   
   
2. THE CREDIT CRUNCH
   
   
3. "FAR FROM THE MADDING CROWD�S IGNOBLE STRIFE�"

 NEXT ... IN NEW YORK, MONEY IS GOD AND GOD IS MONEY

*THE KONDRATIEFF CYCLE

The Kondratief cycle* was first described by Nicholai Kondratief, a Russian Economist early in the 20th century. He discovered a 50-60 year cycle in economic data series of the economies of the United States and other Western industrial nations. He used it to explain the underlying patterns of rises and falls in these economies.

"And important underlying feature of the cycle is a build-up in debt during the up-phase of the cycle, and a destruction of that debt as the economy collapses, in the crash phase at the end of the period, normally considered to be 50-60 years."

- Axis Editors

Spring

• Gradual increase in business activity and employment
• Consumer confidence increases in line with growing economy
• Consumer prices start a gradual increase from very low levels
• Stock prices begin a steady rise and reach a peak at the end of Spring
• Interest rises slowly from historic low levels in line with gradual credit expansion

Summer

•  Summer War � 1st Cycle: War of 1812
  2nd Cycle: US Civil War
  ; 3rd Cycle: Word War I 1914-1918
  4th Cycle: Vietnam War
• Financed by massive increase in money supply leads to large inflation which peaks at the end of Summer
• Gold prices reach significant peak at end of Summer
• Interest rates rise rapidly and peak at end of Summer
• Stock market under pressure and ends Summer with a bear market low

Autumn

• Massive stock bull market financed by fiscal and monetary largesse
• Stock prices reach euphonic peak to signal start of winter
• Inflation and commodity prices fall
• Real Estate prices rise and reach peak at beginning of winter
• Gold and Gold equities in bear market, reach bear market low at Autumn�s end
• Debt reaches astronomical levels by end of Autumn
• Massive consumer confidence due to stock prices, real estate prices and plentiful jobs

Winter

• Stocks start major bear market, the bear market is in proportion to the preceding bull market
• Debt repudiation significant
• Bankruptcies
• Banks and quasi banks in crisis
• Credit crunch � interest rates rise
• International currency crises � a la 1931-34
• Gold and gold equity prices rise as deflation takes hold