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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 Howard Ruff
March 2, 2010
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Institutional investors aren't completely droolingly stupid (that we can prove). And most of the foreign investors are way smarter than Americans. They know that the dollar has no basis for value. They all know that inflation happens when governments print too much paper money with no underlying value. So, they can look into the future and see that they are going to receive payment in dollars that have shrunk in value. And they see that the more wildly Washington spends money, the more the dollar will shrink. Dollars that shrink in value means their buying power diminishes... the definition of inflation. The US Dollar has lost 95% of its value since the 1920s. Said another way, what now costs a dollar today only cost five cents in 1920.

This is the reason that the other nations of the world are looking for a new reserve currency. This is the reason that the oil producing nations would like an oil bourse, which would accept payment in currencies other than the dollar (Iran just started one). They know how bad off the dollar is and they don't want to get stuck with billions of dollars of worthless currency in return for their oil.

Here's something else that institutional investors know... that the value of these securities and dollars they hold is a soap bubble on a hot day. It will only last briefly and then it will pop and disappear. Investor confidence maintains most of the value of US Securities, and investor confidence is extremely shaky right now. If a couple of major holders of US Treasury securities tried to sell off their holdings next Monday, it would trigger a worldwide panic in the bond markets. Others holding US debt would also try to sell their holdings to try to get something for them as opposed to holding worthless bonds unsellable at any price. The bond market would collapse overnight, which would also collapse the rest of the financial markets, including the banking sector.

There are perhaps thousands of holders of US Treasury securities. To maintain the semblance of investor confidence, every bold holder would have to sell his holdings with perfect timing. But selling presumes that there is a willing buyer at some price, and that has yet to be proven. Any one of them that makes a mistake could cause the crash of the worldwide bond market, and inevitably the crash of the entire world financial system. Do you really believe that no one will make the mistake that crashes the system? Much of investor confidence is based upon PERCEPTION, not reality.

Once that happens, the banks and credit-card companies would cease to function, or at least, their operations would be curtailed indefinitely. The term for this event used to be a "bank holiday." Few will see the fun in that holiday. If you watch the news each week, you'll notice that lots of American banks have already closed. The bank examiners and regulators ALWAYS seem to close the banks on Friday. That gives them the weekend to fix things if possible.