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Jim Cook



Every once in a while I switch the TV channel from Fox to CNBC to see what the liberals are saying.  After listening awhile I get a deep sense of hopelessness and foreboding for our country.  The most important thing for the left is giving money to people.  They are happy to see the growth of food stamps, disability payments, housing subsidies, free healthcare and all the other welfare benefits.  They utterly fail to see the damage it is doing to the recipients.  Whole cities that once flourished have deteriorated into rotting eyesores populated with shambling hulks of chemically dependent drones.  These people are no longer employable.  They have become incompetent and helpless and the liberals can’t see that it’s their doing.

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The Best of Jim Cook Archive

Best of Bill Buckler
August 3, 2010
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Forget The Talk - Watch The Action:

Annual US Treasury debt increases doubled every year from 2007 to 2009.  Over that period, they rose from about $US 550 Billion in the year ending on September 30, 2007 to just under $US 1.9 TRILLION in the year ending on September 30, 2009. To keep that “string” going, the debt increase this year would have to be almost $US 4 TRILLION. That is NOT going to happen. On its present trajectory, Treasury debt this year  will increase by less than it did in fiscal 2009.

Given the fact that the increase in Treasury “debt to the penny” over fiscal 2009 was $US 1.885 TRILLION, it is clear that official US federal government spending has hit the proverbial wall. Barring a huge new stimulus package and/or a new bout of Fed “quantitative easing” between now and the end of September, the US federal government is on track to officially borrow less this year than they did last year.
That leaves the global economy with a very nasty problem indeed. The dwindling private sector remains as moribund as ever. Even in China, spending has slowed down markedly in recent weeks. The toxic assets which have been hauled off the market by central banks to preserve commercial banking “solvency” remain quarantined. To subject them to the not very tender mercies of market pricing would be to instantly expose almost every major national banking system in the world as being insolvent. . .

Even The Fed Admits It:

On July 14, the Fed released the “minutes” of the June 22-23 FOMC meeting. Buried within all the usual “Fed-speak”, one line was enough to sent the markets reeling. The line? “The committee would need to consider whether further policy stimulus might become appropriate if the outlook were to worsen appreciably.” What “further policy stimulus” could the Fed fall back on? Well, to quote a 2002 speech from Mr Bernanke - “the US government has a technology, called a printing press.”

Here is the problem. The outlook HAS worsened appreciably. Everyone in the US, up to and including Mr Bernanke, knows it. That is why Mr Bernanke said that the Fed was “prepared to take further policy actions as needed” in his testimony to the Senate Banking Committee on July 21.

However, Mr Bernanke was not prepared to outline precisely what the Fed’s future game plan might be, saying that he and his colleagues haven’t decided yet. He also devoted most of his testimony to the Fed’s plans to exit from their stimulus measures - at some still undefined future point.

To continue the quote from Mr Bernanke’s 2002 speech on “deflation”, the government’s printing press -
“... allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to raising the prices in dollars of those goods and services. We conclude that, under a paper money system, a determined government can always generate higher spending and hence positive inflation.”

Please note this carefully. Mr Bernanke made that speech more than eight years ago in early 2002. That was before the US real estate bubble, before he became Fed Chairman in 2006 and before the GFC hit in 2007. Since he made that speech, Mr Bernanke has seen a full year of 1.0 percent official US interest rates in 2003-04. Since becoming Fed Chairman in February 2006, Mr Bernanke has taken more “policy actions” (including more than 18 months of keeping official US rates at ZERO percent) than all of his predecessors combined. What has it bought him? Nothing but a bit of time and the prospect of a bigger collapse than the one his policy actions postponed in late 2008.

A “Double Dip”?:

When Ben Bernanke was appointed Chairman of the Federal Reserve on February 1, 2006, the US Treasury’s “debt to the penny stood at $US 8.183 TRILLION. Today (July 20), it stands at $US 13.246 TRILLION. In just under four and a half years, US federal government funded debt has increased a bit more than $US 5 TRILLION or 62 percent. That’s an average annual increase of $US 1.125 TRILLION.

On top of this, there is the Fed’s balance sheet, stuffed full of financial paper which would not be sold on any kind of “open market” at more than a tiny fraction of its “book value” - if it could be sold at all. On top of this is the fact that in the US, in most of Europe and increasingly in Asia, nobody will lend on anything which is not explicitly “guaranteed” by government. Talking about being ready for more “stimulus” measures in the face of the fiscal and financial wreckage which has NOT been cleared away (but merely hidden from view) by previous “stimulus” is surreal. It is like claiming that another jolt of the electricity which is making the dissected frog’s legs move will bring the poor critter back to life.

The point is simple. The Fed says it is prepared to act as “needed”. Under Mr Bernanke, the Fed HAS acted - to an extent never before approached. So have all the other major central banks in the world – and most of the minor ones too. NONE of the debt problems which brought on the GFC (and all the previous downturns and recessions) has been addressed, let alone resolved.

At the height of the first crisis of the GFC in September/October 2008, The Privateer headlined an issue like this: “Who Bails Out The US Treasury?”. Since then, the answer has been the US Fed (with its quantitative easing), foreign central banks and investors scrambling for “safety”.

Foreign central banks are creaking under the pressure. The latest Fed “TIC” (Treasury International Capital) data shows that China’s holdings of US Treasuries fell to their lowest level in a year in May 2010. The Fed has not yet reimposed its quantitative easing, although more and more analysts are clamouring for it to do so. And yet yields are STILL falling as fear grows over the “double dip”.


Ó 2009 – The Privateer

(reproduced with permission)


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