March 5, 2010
Foreign owners of U.S. government debt reduced their holdings by the largest monthly amount ever in December, with China offloading so many Treasury securities that it is no longer the largest foreign holder. Total foreign holdings of Treasury securities plunged by $53 billion in December. China led the sell-off reducing its holdings by $34 billion, while Japan increased its holdings by $11 billion to become the new largest foreign holder of Treasuries.
This news has seriously bearish implications for the U.S. dollar and is extremely bullish for precious metals. If China stops buying U.S. debt, the Fed will be forced to monetize a greater portion of the auctions, creating currency at a blistering pace and sending the dollar much lower in an inflationary tailspin. This news also calls into question the U.S. government’s triple-A credit rating and could lend further support to my belief that investors will stop turning to the dollar as a safe haven in the near future and instead begin turning to precious metals. Jason Hamlin, Editor, GoldStock Bull
On February 17, the President of the Federal Reserve Bank of Philadelphia gave a speech to the Philadelphia chapter of the World Affairs Council. The President of the Philadelphia Fed, Charles Plosser, titled his speech, “The Federal Reserve System: Balancing Independence and Accountability.” This sounds boring. For those who understand the function of the Federal Reserve and its influence, the speech is not boring to read. The target of the first half of the speech was Ron Paul. It was a warning against Ron Paul’s bill in the House of Representatives that would authorize the Government Accountability Office to audit the Fed. The House’s leadership has kept the bill from coming to the floor for a vote, despite the fact that a majority of the membership has officially supported it, and despite the fact that a majority of the House Financial Services committee voted for it, 43 to 26, in November 2009. The Fed has consistently opposed this bill. The official explanation is that this would in some way constitute interference with the Fed’s policy-making. This argument has never been clear. The fact that the General Accountability Office will verify the numbers in no way constitutes interference with Fed policy, unless Fed policy has been carried on under false numbers. Nobody at the Fed will say what is really at stake: an independent audit of the government’s gold holdings, which are officially held for the government by the Fed for safekeeping. If the gold is gone, or if there are legal claims against it by foreign central banks as a result of Fed swaps, this would constitute fraud on a massive scale.
The real power in the Fed has always been the Federal Reserve Bank of New York. In all textbook accounts of the years leading up to the Great Depression, the focus is on Benjamin Strong, the President of the New York Fed. He set policy, not the Board of Governors. The bulk of the world’s gold holdings are stored in the vault of the New York Fed. This includes most of the deliverable gold (99.9%) owned by the Fed as trustee of the U.S. government’s gold. The gold at Ft. Knox (probably coin melt, 90% fine) constitutes a second holding area, said to be 20% of the nation’s gold. No one knows. It has not been audited since the early 1950’s, not even by the private accounting firms that audit the Fed on an annual rotation basis.
The Fed demands secrecy. It proclaims that it pursues transparency, but does not on any issue of substance.
Bloomberg News in November 2008 sued the Board of Governors under the Freedom of Information Act to find out which institutions received how much money in October 2008 bailouts. The Board of Governors refused to comply on this legal basis: this would expose trade secrets of the recipient banks. Gary North
March 2, 2010
Another dangerous power toward which we are moving, bit by bit, on the installment plan, is the power of politicians to tell people what their incomes can and cannot be. Here the resentment is being directed against “the rich.”
The distracting phrases here include “obscene” wealth and “unconscionable” profits. But, if we stop and think about it – which politicians don’t expect us to – what is obscene about wealth? Wouldn’t we consider it great if every human being on earth had a billion dollars and lived in a place that could rival the Taj Mahal?
You can see the agenda behind the rhetoric when profits are called “unconscionable” but taxes never are, even when taxes take more than half of what someone has earned, or add much more to the prices we have to pay than profits to.
Thomas Sowell
February 24, 2010
“True to their mission as the organs of the liberal establishment, Time magazine and The New York times ran stories in the midst of the great snowmaggeddon warning us against drawing any politically incorrect conclusions. ‘Skeptics of global warming,’ cautioned The Times, ‘are using the record-setting snows to mock those who warn of dangerous human-driven climate change – this looks more like global cooling’, they taunt. Most climate scientists respond that the ferocious storms are consistent with forecasts that a heating planet will produce more frequent and more intense weather events. Time agrees: ‘There is some evidence that climate change could in fact make such massive snowstorms more common, even as the world continues to warm.’
“Note how The Times contrasts ‘skeptics of global warming’ with ‘climate scientists.’ Bill Nye the Science Guy, appearing on MSNBC, used the same tactic, accusing skeptics about manmade global warming of ‘denying science.’
“Those who now protest that any particular weather pattern should not be confused with global climate have short memories. Only yesterday, they were attributing every forest fire, drought, hurricane and toad disease to global warming. Remember the ‘plight’ of the polar bears? Turns out that polar bear populations have been increasing, not decreasing, for the past 30 years.”
Mona Charen, Editor
December 10, 2009
“Scooped by Fox News, conservative blogs and talk radio on the exploding ACORN scandal, the New York Times whitewashed its own role in covering up the community organizing racket’s financial shenanigans last fall when it cut off a reporter’s investigation a few weeks before Election Day. Jill Abramson, the Times’ managing editor for news, acknowledged that her staff was ‘slow off the mark’ and blamed ‘insufficient tuned-in-ness to the issues that are dominating Fox News and talk radio.’ They assigned a new ‘opinion media monitor’ to track the competition, but refused to identify the watchdog for fear that he/she would get too many mean, intrusive e-mails and phone calls.
“More recently, the paper’s website demonstrated that its real motto is ‘All the inconvenient news that’s fit to suppress.’ The Times’ lead environmental blogger, Andrew Revkin, haughtily refused to reprint damning e-mails leaked by a hacker in the burgeoning ‘ClimateGate’ scandal. The documents reveal a long trail of manipulated data, but Revkin balked at the ill-gotten trove. The blabbermouths at the Times had no problem exposing national security secrets to undermine Bush. But shed light on scientific hoaxes that undermine Al Gore? Unethical!”
Michelle Malkin
“The holders of Dubai’s real estate assets and sovereign debt are the major Western financial institutions already weakened by their escapades at home. Though the government of Dubai has distanced itself from the mess, the bursting of the ‘Dubai bubble’ will mean even more write-downs for Anglo-American investment banks.
“This may prove to be the first of a new wave of defaults as the commercial mortgage markets begin to buckle. Worse still, any news series of major defaults could spread rapidly to and within the derivatives market. If that were to happen, a sudden cascade of settlement defaults could cause a devastating implosion of international financial markets – one that central banks may be powerless to contain.”
John Browne
November 9, 2009
“The most severe economic downturn since the onset of the Great Depression continues, as does the systemic liquidity crisis. The employment and unemployment numbers remain coincident, not lagging indicators of broad economic activity, and their ongoing deterioration in October means that the economy is not recovering. At best, activity in key areas such as retail sales, housing and production has flattened out at extremely low levels. Those levels also have enjoyed short-lived support from one-time stimulus gimmicks that largely have run their courses. . . . .
The Fed continues in panic mode, spiking the monetary base at annualized paced not seen since the ‘worst’ of the crisis a year ago. At the same time, broad money supply is contracting at a pace that even in the best of times would a promise a recession in the months ahead.
“The broad outlook remains unchanged. I cannot remember stock market prices ever being so far removed from reflecting underlying economic and financial-system reality. Irrespective of near-term market gyrations, the long-term outlooks remains extremely bearish for U.S. equities and the U.S. dollar, and extremely bullish for gold and silver. The economy still faces an eventual hyperinflationary great depression, with high risk of that circumstance beginning to unfold in the year ahead.”
John Williams
“Maria Shriver’s new report, ‘A Woman’s Nation Changes Everything,’ has received a full dress media rollout. . . . . . .
“Hundreds of pages, lots of photos and charts, and it’s the same old song. It completely misses the most important fact about modern women’s lives – the decline of family stability. And not just women’s lives. The decline of marital stability and the rise of unmarried parenting (currently almost 40 percent of children are born to unmarried parents) has not only been a catastrophe for children, it has also made combining work and family harder than ever. Just at the moment women entered the workforce en masse, marriages – so essential to providing stability to home life – unraveled.
“The solution, says the Shriver report, is for our ‘social insurance’ programs to ‘recognize’ how family life is changing and increase benefits for a range of domestic needs. See how it works? The more that families disintegrate, the more demands are made upon the government to step in to fill the gaps. That’s a downward spiral from which there may be no escape.”
Mona Charen
October 30, 2009
“In the past week, both Chis Matthews and Keith Olbermann have rolled out the Willie Horton ad, claiming that it marked the beginning of vicious personal attacks in politics, as opposed to what it was: The most devastatingly relevant campaign commercial in all of American history.
- In the 80’s, the Massachusetts Supreme Court ruled that a prison furlough policy had to be extended to convicted murderers, who were ineligible for parole.
- Even the Massachusetts Legislature, which contained about three Republicans, realized this was insane, and quickly passed a bill excluding first-degree murderers from the weekend furlough program. But in a desperate bid for the ACLU’s Brain-Dead Liberal of the Year Award, Gov. Michael Dukakis vetoed the bill.
- Horton, who was later released under this program, was in prison for carving up a teenager at a gas station and then stuffing his body into a garbage can. (He had already been convicted of attempted murder in South Carolina – through no fault of his own, the victim survived.)
- Even after Horton used his Dukakis-granted furlough to rape and torture a Maryland couple in their home for 12 straight hours, the Greek homunculus issued a statement reaffirming his strong support for furloughing murders.
- The Bush campaign commercial about Dukakis’ furlough program never showed a picture of Horton. In fact, the actors playing ‘criminals’ passing through a revolving door in the ad were all white.
- Voters considered it relevant that a candidate for president was so beholden to the ACLU that he backed an idiotic furlough program that released first-degree murderers.
“Every informed student of the 1988 campaign knows that the Bush ad didn’t show Horton’s picture. And yet in Keith’s discussion of Bush’s allegedly vile, racist use of Willie Horton, he used a phony version of the ad, doctored to include a photo of Horton.
I don’t blame Keith personally for this blatant distortion: He gets all his research material from Markos Moulitsas and other left-wing bloggers, so he cannot be held responsible for the content of his show. Keith’s principle contribution to the program is his nightly display of self-congratulation and pompous douche-baggery.” Ann Coulter
October 28, 2009
“The worst remains ahead for the economic and systemic-solvency crises. Economic reporting has shown no meaningful signs of business recovery, with the current depression likely to evolve into a great depression, in conjunction with the collapse of the value in the U.S. dollar and a hyperinflation. Risks are high for these crises to explode in the year ahead. The general outlook is not changed.
“A full review of the economic outlook will follow with next week’s third-quarter GDP commentary. In the interim, some selling pressure has continued against the U.S. dollar, along with continued strength in oil and gold prices, generally reflective of the Federal Reserve’s ongoing efforts to debase the U.S. currency.
“Rarely have market expectations (economic recovery, contained inflation, contained solvency crisis) been so far removed from underlying economic and financial-system fundamentals and reality. That circumstance leaves open the possibility of extreme, negative market reactions, with highly volatile and disorderly markets possible. Such is true particularly for U.S. equities and the U.S. dollar.” John Williams
“Meanwhile, a great bull market starts . . a bull market that mirrors the demise of the dollar. Gold is priced in dollars, and as the dollar weakens, it takes an increasing amount of fiat dollars to buy an ounce of gold. Beginning in 1999, gold started up a primary bull market. In my personal opinion, this is fated to be one of the greatest bull markets in history. It will be a bull market built on not one, but tow powerful human emotions – greed and fear. The speculative third phase lies ahead. Slowly but surely, the US public will finally realize that the US government is bankrupt both morally and monetarily. People will panic into gold . . . I believe that there will be a world panic to buy gold. This will set off one of the wildest and most explosive bull markets in history.” Richard Russell
October 27, 2009
“History has shown us time and time again that the masses never seem to understand what is happening to them until it is too late. This is providing us with an exceptional opportunity to profit and make spectacular gains for being smart, informed and able to make key decisions at moments when most others have no clue or feel caught like a deer in the headlights. Have confidence in your decisions to own the physical metals and quality mining shares. You re doing the right thing.
“The truth is gold is going to go much higher whether John or Mary Q. Public get it or not. This reminds me of the great quote from Arthur Schopenhauer, which says: ‘All truth passes through three stages. First it is ridiculed. Second it is violently opposed. Third, it is accepted as self-evident.’
“Take the example of poor Galileo who was ridiculed, persecuted and eventually prosecuted for his belief that the earth revolves around the sun. What is taken as being self-evident now was total heresy when it was then believed that the sun revolved around the earth.
“We have similar flawed thinking in today’s society when you look at how the masses believe in politicians who keep creating money out of thin air to fix anything that ails us. The general public votes for and believes in deficit spending as if there are no consequences simply because a majority of Americans don’t want to take responsibility for themselves. They have a sun-revolves-around-the-world entitle mentality that the government can and should take care of us from cradle to grave. How pathetic! Turning over your destiny to government fools is the antithesis of what the founding fathers stood for.
“Unfortunately for all of us, this entitlement fantasy will not have a good conclusion as the government runs the country into the ground trying to do what simply cannot be.”
Greg McCoach
October 20, 2009
“Rep. Diane Watson said, in praising Cuba’s health care system, ‘You can think whatever you want to about Fidel Castro, but he was one of the brightest leaders I have ever met.’ W.E.B. Dubois, writing in the National Guardian (1953) said, ‘Joseph Stalin was a great man; few other men of the 20th century approach his stature. . . . But also – and this was the highest proof of his greatness – he knew the common man, felt his problems, followed his fate.’ Walter Duranty called Stalin ‘the greatest living statesman . . a quiet, unobtrusive man.’ George Bernard Shaw expressed admiration for Mussolini, Hitler and Stalin.
“John Kenneth Galbraith visited Mao’s China and praised Mao and the Chinese economic system. Gunther Stein of the Christian Science Monitor admired Mao Tsetung and declared ecstatically that ‘the men and women pioneers of Yenan are truly new humans with spirit, thought and action,’ and that Yenan itself constituted ‘a brand new well integrated society, that has never been seen before anywhere.’ Michel Oksenberg, President Carter’s China expert, complained that “America (is) doomed to decay until radical, even revolutionary, change fundamentally alters the institutions and values,’ and urged us to ‘borrow ideas and solutions’ from China. . . . .
“The most authoritative tally of history’s most murderous regimes is in a book by University of Hawaii’s Professor Rudolph J. Rummel, ‘Death by Government.’ Statistics are provided at his website: (http://www.hawaii.edu/powerkills/welcome.html). The Nazis murdered 20 million of their own people and those in nations they captured. Between 1917 and 1987, Stalin and his successors murdered or were otherwise responsible for the deaths of, 62 million of their own people. Between 1949 and 1987, Mao Tsetung and his successors were responsible for the deaths of 76 million Chinese.”
Walter Williams, Editor
October 13, 2009
“The U.S. government is bankrupt, but that isn’t stopping it from dramatically increasing its share of the economy. The deficit will soon skyrocket due to $63 trillion in baby boomer retirement obligations. New taxes and social programs grafted to an already bloated government will further drain the private sector, push productive endeavors offshore, and leave large numbers of the heavily indebted middle class out of work and out of luck come retirement. This will trigger a negative feedback loop, as the unemployed, underemployed, and senior boomers become increasingly dependent on the state for the basic necessities of life. The shift now underway is not that associated with a typical business cycle but rather with a long-term restructuring.”
Casey Research
September 21, 2009
“Since the Federal Reserve and the administration are both determined to continue "stimulus" policies, it is more likely that the bounce will continue for another six to 12 months, with the stock market getting back towards 2007 levels, removing the effect of the credit crunch, pushing oil prices above $100 and sending gold past $1,500 per ounce.
“In that case, by next spring, inflation will be running around 5%. Bulls will chortle that the recession is over, and will attempt to ignore the excessive prices of stocks, commodities and bonds (with real yields on 10-year bonds being by then negative), but the market will not allow them to do so for long.
The rebound will end in one of three ways. The least likely is that Ben Bernanke and the administration will come to their senses and begin to withdraw the excessive fiscal and monetary stimulus. They won't dare withdraw much, but even the beginning of withdrawal will cause panic in overextended financial markets. Since politicians generally and Bernanke in particular are above all determined to avoid blame, it's unlikely they will choose this course, which would leave their fingerprints too clearly on the subsequent unpleasantness.
“The second possibility, as I discussed last week, is a bond market strike, in which yields shoot upwards and the market refuses to absorb the ever increasing amounts of Treasury confetti Tim Geithner attempts to offload. In that event, the Fed would almost certainly step in to buy Treasuries, intensifying the monetary stimulus.
“That would then bring about the third possible denouement, in which rapidly accelerating inflation and rapidly accelerating commodity prices cause a collapse in real demand, plunging the United States into renewed recession. That process is likely to take longer than the others, perhaps a year. At that point, the Fed will also be forced to stop buying Treasury bonds, or watch the United States slide into the situation of 1923 Weimar, with wheelbarrows needed for daily cash.”
Martin Hutchinson
September 16, 2009
“Three stories bubbled up in the past week, although if you read The New York Times and the administration’s other airbrushers you’ll be blissfully unaware of them: The resignation of Van Jones, former (?) communist and current 9/11 ‘truther,’ from his post as Obama’s ‘Green Jobs Czar.’ The reassignment of Yosi Sergant at the National Endowment for the Arts after he was found to be urging government-funded arts groups to produce ‘art’ in support of Obama policy positions. And, finally, the extraordinary undercover tape form Andrew Breitbart’s Big Government Website in which officials from ACORN (the Obama chums who’ll be ‘helping’ with the next census) offer advice on how pimps can get government housing loans for brothels employing underage girls from El Salvador.
“What do all these Obama associates have in common? I mean, aside from the fact that Glenn Beck played a key role in exposing them. We are assured by the airbrushing media and ‘moderate’ conservatives that Beck is crazy, a frothing spokesnut for the lunatic fringe. By contrast, Van Jones, Yosi Sergant and ACORN are all members of the lunatic mainstream, embedded philosophically and actually in the heart of Obamaland.
“What all these individuals share is a supersized view of the state, from a make-work gig coordinating the invention of phony-baloney ‘green jobs’ to Soviet-style government-licensed art in support of heroic government programs to government-funded ‘community organizers’ organizing government funding for jail bait bordellos. OK, government-funded child prostitution’s a bit of an outlier even for this crowd – for the moment. But you get the general idea.”
Mark Steyn
“Government is a parasite economy. Parasites cannot succeed if they kill the host. And yet, the government is killing its economic host, the U.S. economy. The same thing happened in the 1930s in the U.S. and in Japan in the 1990s. It’s not the end of the world and it’s not doom and gloom, but I does create hard economic times for those not suckling on the government teat.”
Adam Brochert
September 3, 2009
“Because the central banks of the world have flipped the lever on the printing presses and the global economy is drowning in liquidity, the new game in town is to get hold of printing press money, preferably first and to convert it into a ‘store of value.’ Flipping cash for stores of value is the way to go. Cash burning a hole in your pocket has a whole new meaning.”
Sarel Oberholster, Anaylst
“A double dip recession is more than just a danger in my book it is more like a probability. . . . Make no mistake the credit crunch is like a smoldering bush fire and the embers are everywhere. . . .”
Neil Charnok, Analyst
“I know the media is now rife with folks predicting the end of the recession. I even know ‘smart’ analysts who are saying the same at independent research firms. In terms of the REAL economic picture, these folks are completely misguided and wrong. The US is facing the worst economic contraction since the Great Depression. This is NOT a plain vanilla recession.”
Graham Summers, Newsletter Editor
“The stimulated revival of housing is not the pivot upon which the economy will turn, nor will it be the epileptic stimulus spending that will do the trick. The economy will only turn when bank balance sheets acknowledge the truth, depositors and investors (both foreign and local) take their losses and new industries begin to produce real products using local people.”
Peter Souleles, Analyst
“The White House is finally admitting that there is a substantial and extensive gap between its earlier rosy economic forecast and reality. What? Higher unemployment rates and higher deficits all around. A nightmare brewing? Unemployment is headed to double-digit figures and add to that the fact that unemployment benefits are rapidly coming to an end for the vast majority of those unemployed.”
David N. Vaughn, Newsletter Editor
“The number of people calling for a new bull market, saying the recovery is upon us and saying that the stock market ‘sees’ a future recovery and is discounting it is funny to me. Funny in a sad way, because I know what comes next and how upset many retail investors are going to be in a few short months. I have taken my licks and learned a lot about trading bear market rallies over the past few months, to be sure. Mr. Market never fails to humble.”
Adam Brochert, Editorialist
“The corruption of government and finance is total. It has become so bad, I have to laugh! Market prices we see today are all phony. This will be the case until our foreign creditors put an end to the monetary and fiscal insanity of our Keynesian ‘Policy Makers.’ Expect lower asset prices and higher CPI inflation to result from this.”
Mark J. Lundeen, Analyst
“As the balance sheet of the Fed has blown up, as the deficit of the U.S. and the debt has increased, people have asked the obvious question: will there be inflation in the future? Right now we’re facing deflation, but sometime in the future, there will be consequences.”
Joseph Stiglitz, Economist
“The global financial crisis, which began with the collapse of the U.S. subprime-lending market in 2007 has led to almost $4 trillion of write-offs and credit losses at banks and other financial institutions around the world. . . . .
“What about the People? How much wealth have they lost in their homes, stock portfolios, and other financial assets? Such a number is difficult to calculate, although various estimates have been given by different ‘authorities’ – running from $25 trillion to $50 trillion. This sum is staggering and equals the yearly GDP of the entire world.”
Gold & Silver Report
“Most economists think that we are going to see a clear recovery between late 2009 and early 2010, although they argue about how strong or weak this recovery will be. The bearish minority mostly fears an inflationary blow-out sooner or later. We are clear about seeing a deeper downturn or depression starting next year, with the markets very likely to turn downward by early September.”
Harry Dent, Author
“The US has lent or committed $13 trillion to prop up its collapsing financial system and economy . . . . . It is still our view that the total cost to the US alone of the current crisis will be at least $25 – 30 trillion. And where is the money coming from? Governments believe they can manufacture endless amounts of money and that this will create eternal wealth for their economies.
“But governments are not just creating money out of thin air. They are also looking after their affairs better than any other group in the economy. The only net increase in jobs in the last few years has been in the government sector, both in the US and the UK. Whilst the rest of the economy is suffering and cutting down, government is adding hundreds of thousands of jobs. Also pay and pensions in government jobs are superior to the private sector. So the main growth sector in the economy in the last few years has been the government sector that produces nothing but consumes 50% of GDP. No wonder we are all in trouble. Government spending has gone from 10% of GDP in 1932 to almost 50% in 2008.”
Egon von Greyerz, Asset Manager
“To those who study the numbers, it is now obvious that America’s fiscal situation is hopeless. Given the country’s current debt and unfunded liabilities of $75,000,000,000,000, an amount growing by a least $5,000,000,000,000 per year, it will be statistically impossible for the United States to pay its obligations unless it repudiates them in large measure, or the dollar is sacrificed on the altar of searing society-altering inflation.”
“Congress and much of the nation are in utter denial about the country’s unfolding fiscal catastrophe, as evidenced by federal spending that is accelerating, producing all-time debt and deficit records that exceed anything ever experienced by any nation on earth, at any time in history.
“Denial is a psychotropic, mind-altering drug that by comparison makes crack cocaine look like health food, and addiction to it shuts down the brain. America’s denial about its out-of-control spending, non-repayable debt, financial sector fraud and deceit, decadent political institutions, epic dereliction of leadership duty, fiscal and monetary immorality, and disastrously dishonest system of cronyism is leading the nation into an economic nuclear winter of desolation and chaos.”
Stewart Dougherty, Analyst
August 31, 2009
“With the U. S. now hopelessly insolvent, it’s imperative for the U.S. government to convince the world that demand for its debt remains strong. Should the foreign creditors who hold a mortgage over the U.S. economy see such demand evaporate, this would cause interest rates to immediately soar – followed shortly by a downgrade to the U.S.’s national credit rating, which still holds the same farcical “AAA” rating as trillions of dollars of Wall Street scam-products . . . . .
“In a post from his blog on Thursday, Chris Martenson revealed that during the previous week’s Treasury auctions that the Federal Reserve secretly bought nearly half of the Treasuries which were auctioned. . . . . .
“It reveals that demand for U.S. dollar-products is much lower than what is pretended by the Obama regime. Secondly, the much greater degree of “monetizing debt” (i.e. printing money to pay the interest payments on its debt) reveals much greater money-printing (i.e. dilution) of the U.S. dollar than what is claimed by the U.S. government.”
Jeff Nelson, Analyst
“There are, as always, isolated bargains to be found in equities, but ‘the markets’ themselves are anything but a bargain today. Instead stocks are pricing in a powerful economic/earnings recovery that is expected to materialize just as the U.S. consumer looks prepared to go down for the count. Can monetary and fiscal stimulus measures alone really do for the economy and markets what the unprecedented housing/credit bubbles did during the 2002-2007 ‘recovery’? There is also the risk that as the Fed eyes removing some of its emergency easing strategies and/or interest rates begin to rise (possibly because of decreased foreign demand for U.S. debt?), that an economic relapse will come to pass. Can economic stability in the U.S. really be sustained if interest rates jump sharply higher? Finally, there is the threat that policy makers will be unable to sustain their attack against the deflationary monsters still threatening to devour markets and asset prices across the globe. Thanks to QE measures and China’s seemingly robust (bubble?) recovery, the deflation argument has recently lost some of its backers. This could quickly change . . .
Brady Willett, Analyst
July 9, 2009
“The problem for us is that Bush, Obama, Geithner, and Summers are all following the Keynesian playbook, with Nobel laureate Paul Krugman serving as head cheerleader. If instead we just allowed the free-market process to work, the economy by now would likely have already bottomed; companies like AIG would be emerging from bankruptcy and the unemployment rate would be dropping instead of continuing to rise.”
Mark Thornton
July 8, 2009
“The most ridiculous argument is that the average American is so tapped out he can’t borrow anymore so the money supply can’t grow. This totally ignores the multi-trillion dollar expenditure of the US government which is multiples of its tax revenue and is being funded by money that is created by the Federal Reserve. The US Government can spend into existence as much money as it deserves to create. For the critics who say that M3 is not yet reflecting the monetary debauchery I would remind them that inflation is relatively more money chasing relatively fewer goods and services. So a contraction of things to spend money on with even a static money supply will lead to an increase in the general price level.”
Adrian Douglas
July 2, 2009
“It has now become clear that the new regime in Washington is intent on inserting itself into every aspect of the economy and private business, without regard to the consequences, the rule of law, or even common sense.”
Brien Lundin
June 16, 2009
“Why is DEPRESSION inevitable? With a President, a solid Democrat controlled Congress as well as a bi-partisan consensus believing that deficit spending is vital in fighting the RECESSION, there is absolutely no constraint on government spending. The sky is the limit with deficit spending, now approaching two trillion (with a T) plus dollars over each of the next two years alone and that’s not counting healthcare reform. There are only two ways to pay for it: (1) By printing more money, which debases the currency causing inflation, and (2) By hiking taxes, which kills investment, businesses and jobs, destroys what is left of the housing market and results in a Depression. Or, as in this case, the worst of both worlds – AN INFLATIONARY DEPRESSION.”
Aubie Baltin
“Spurring the growth of the California budget was the State’s phenomenally large capital gains tax base. The top one percent of earners generates 40% of the state’s revenues; 250,000 people have been doing the heavy lifting for a state with a population around 36 million. From 1994 to 2007, this top-heavy tax system flourished as virtually every class of investment vehicle, including stocks, residential real estate, commercial real estate, commodities, art, collectibles, oil, gold and U.S. Government bonds participated in a bull market. During this period of economic expansion, the state was collecting roughly $25 billion in capital gains driven taxes. Since the middle of 2008, most investments have declined precipitously in value. The losses associated with all investments have created tax-loss carry forwards that will offset about 80% of any capital gains tax liabilities for the next 5 years."
Chriss Street
June 10, 2009
“How can you trust a government that first creates the biggest financial bubble in history and then, as proof of their total idiocy, attempts to solve the problem by massively increasing the size of the bubble!
It is totally comprehensible that the rest of the world is not prepared to buy the currency which is not worth the paper it is printed on. The dollar is going to disappear into oblivion and run down into the Atlantic and the Pacific and if there is anything left, this will trickle down into the Gulf of Mexico. In the next few years there will only be one buyer of US Government debt namely the US Government itself. This will of course exacerbate the fall of the dollar and of US T debt in an ever faster spinning vicious circle.
So, Who is Paying the Bill?
Nobody, of course. The bill will never be paid. It is like a gigantic Ponzi scheme where the issuers and the arrangers - the government and the financiers - are the beneficiaries whilst the US people, who are burdened with this massive debt, become paupers.
So far in history no country has abolished poverty by printing paper. How can the government continue to issue paper that they know will never be repaid? Because it gives them temporary power and perceived glory. And by the time the debt is due for repayment, that will be the new government's problem. The Government is socialising every entity that is powerful enough to effect their popularity or can line their pockets. But the people who are on their way to poverty and destitution are getting no help whatsoever.”
Matterhorn Asset Management
June 9, 2009
"The Fed is buying up all this government paper in an attempt to keep interest rates low. Its plan is to spur economic activity via artificially low interest rates. THEY NEVER LEARN. There is only one main problem that all Socialists seem to overlook: Nature’s Laws of Supply and Demand. Thus their problem is that it's not working. Even with all that firepower at their disposal, because of the Laws of Supply and Demand, they cannot keep rates from rising. As such, just as I have been warning you since January 2009, the next major financial bear market crash will be in U.S. government bonds including Muni’s and although is started back in January, it has not yet been recognized by Wall Street."
Aubie Baltin
June 4, 2009
"If there is one thing above all others that would snuff out any talk of "green shoots of economic recovery" sprouting across the US, it is a spike in mortgage rates. Not only would this greatly increase the already record levels of foreclosures and simple abandonment of housing of all descriptions, it would deter anyone who can still get a mortgage loan from taking advantage of the depressed housing prices already available. It would be the broken straw pushing the US from recession into depression."
Bill Buckler
June 3, 2009
"Based on these official US reports, it is clear that there will be no fiscal moves made by the Obama administration as long as it is in office towards a balanced US budget. It is equally clear that neither will any moves be made to diminish the US budget deficit. The federal government intends to continue to roll on towards bankruptcy. On these plans, the only thing that will stop it IS bankruptcy."
Bill Buckler
May 29, 2009
"The Fed recently said that there were $US 12.1 TRILLION in US mortgages. Other estimates go to $US 14.1TRILLION. It is estimated that 30-35 percent of those areunderwater regardless of the interest rate.
That, roughly, leaves $US 4 TRILLION in mortgage loansexposed! The entire US financial system only has about $US1.4 TRILLION in capital. It is horribly exposed - recentstress tests to the contrary notwithstanding - to a new wave ofcapital losses. This is what happens in a credit money systemwhen the collateral foundation crashes out from under thefinancial system. Shrink that collateral foundation far enoughand the banking and financial system becomes insolvent. Thisis the REAL US ‘stress test’."
Bill Buckler
May 21, 2009
"The American economy cannot tolerate a stagnant or contracting state for very long. The economy does not generate sufficient cash flow to meet debt obligations, requiring strong economic growth in order to avoid a collapse of the bond markets. Should the economy not respond to the present stimulus, even the federal government may not be able to borrow. A collapse of the bond markets not only takes away the ability of the government to stabilize the banks and the economy, but the resulting high interest rates will bring America down both economically and politically."
John Kutyn
"It now takes over $7.00 of new debt stimulus to produce only $1.00 of GDP growth. Like trees that can’t grow to the sky, a debt pyramid can only grow so much before imploding. Believe it or not, deflationary forces have now caused the Federal Reserve to lower short-term rates to zero thus setting the state for a Treasury Bond Collapse that will end up destroying all savers."
Dr. Aubie Baltin
May 20, 2009
"The stunning thing about the proposed budget is that nothing announced looks like it will improve the efficiency of the economy. Nothing looks like it’s in the direction of freedom or liberty. Nothing looks like it has any faith whatsoever in markets. It’s all about rewarding interest groups: unions, the green lobby, the education lobby, and the health care sector."
Jeffrey Miron
"Fiscal conditions continued collapsing in April 2009, as the big tax collection month had a sharp enough fall-off in deficit in a quarter century. The severe, deepening recession and surging government outlays have continued to pummel the government'’ finances.""
John Williams
May 15, 2009
"Off we go, into the wild red yonder -- President Obama, how could they have done this to you? You listened to the Wall Street crowd, and it's going to destroy your presidency. Why? The latest White House estimate for this year's deficit has been raised 5% from its earlier February estimate to the new estimate of (deep breath) $1.84 trillion. And the deficit for next year will be $1.25 trillion. That's over three trillion dollars in two years! Who in hell is going to buy all the securities that will have to be offered? "Who the gods would destroy, they first make mad." Welcome to mad America."
Richard Russell
May 14, 2009
"After virtually every disaster created by Beltway politicians you can hear the sound of feet scurrying for cover in Washington, see fingers pointing in every direction away from Washington, and watch all sorts of scapegoats hauled up before Congressional committees to be denounced on television for the disasters created by members of the committee who are lecturing them.
The word repeated endlessly in these political charades is "deregulation." The idea is that it was a lack of government supervision which allowed "greed" in the private sector to lead the nation into crises that only our Beltway saviors can solve.
What utter rubbish this all is can be found by checking the record of how government regulators were precisely the ones who imposed lower mortgage lending standards— and it was members of Congress (of both parties) and who pushed the regulators, the banks and the mortgage-buying giants Fannie Mae and Freddie Mac into accepting risky mortgages, in the name of "affordable housing" and more home ownership. Presidents of both parties also jumped on the bandwagon.
Most people don't have time to spend digging into the Congressional Record and other sources to find out the ugly truth being covered up by the blizzard of lies coming out of Washington and echoed in much of the media."
Thomas Sowell
May 11, 2009
"The U.S. economy remains in a deepening depression that will prove to be particularly protracted and unresponsive to traditional stimuli…. Despite all efforts by the Fed and Treasury to debase the U.S. dollar, broad money growth has stalled anew, suggesting an intensifying solvency crisis, with new or expanded Fed actions likely. Broad money growth should pick up, however, with escalating Fed monetization of Treasury debt. Although the U.S. dollar generally has held its recent relative strength in the currency markets, global investors increasingly will shun the greenback, and intense dollar weakness eventually will push dollar-based prices such as oil much higher, igniting consumer inflation that ultimately will feed into a U.S. hyperinflation." John Williams
"We find ourselves facing the horror of what has always been the Achilles’ Heel of the left wing: its abysmal ignorance of economic science. The ideological tendency has gone from Keynesianism to outright socialism in a matter of a few weeks. And the trajectory seems to be accelerated mainly by the logic of the interventionist cycle: bad policy leads to bad results that are addressed through bad policy, and so on, straight down the fast track to serfdom." Llewellyn H. Rockwell, Jr.
"Federal government loans, spending or guarantees to rescue the financial system now total more than $US 12.8 TRILLION since the international credit crisis began in August 2007, according to data compiled by Bloomberg as of March 31. That includes the $US 2 TRILLION on the Fed's balance sheet. This amounts to lending, spending or guaranteeing 89.5 percent of current nominal US GDP! That, on the face of it, should make it obvious that the US has entered into the land of the economically absurd." Bill Buckler
May 7, 2009
"The book that permanently made me a sadder – and hopefully, wiser – man was Edward Gibbons’ The Decline and Fall of the Roman Empire. To follow one of the greatest civilizations of all time as it degenerated and fractured, even before being torn apart by its enemies, was especially painful in view of the parallels to what is happening in America in our own times. The fall of the Roman Empire was not just a matter of changing rulers or political systems. It was the collapse of a whole civilization – the destruction of an economy, the breakdown of law and order, the disappearance of many educational institutions. It has been estimated that a thousand years passed before the standard of living in Western Europe rose again to the level it had once had back in Roman times. How long would it take to recover from the collapse of Western civilization today – if we ever recovered?" Thomas Sowell
"While many in the media are now saying that things are looking up, and that the worst may now be over, I think it’s just begun. For several reasons… For starters, stocks are cheap relative to where they’ve been over the last five years, but they’re not cheap relative to historic bottoms (e.g., 1 times book, around 6.6 times earnings – after big earnings cuts – and 6-10% dividend yields). Treasuries are in a bubble. And, as hard as it has fallen, residential property has not yet bottomed. But the worst is yet to come. And I’m not talking about student loans, car loans, and credit card debt. Or Social Security, Medicare, and Medicaid. Or the looming bankruptcy of most states and many municipalities. The real crisis will be in pension funds, commercial real estate, and life insurance companies. The life insurers own mostly commercial real estate, mortgages, and bonds; many will be totally busted, even before people start cashing in their whole life policies. You don’t even hear about these three things in the press yet. Of course that’s all in addition to the fact half of U.S. hospitals are currently running at a loss – even before legions of the poor start really overwhelming their emergency rooms. And the balance of trade deficit has yet to turn around and go positive – which will be devastating to both the dollar and the average American’s standard of living. Sorry to be unremittingly bearish. But the Greater Depression is still very early days. Hang on to your hat." David Galland
"The real big danger is derivatives, not sub-prime mortgages. The Bank for International Settlements (BIS) has issued a report stating that Derivatives are now $1.14 quadrillion dollars. That is a one with 15 zeros after it. AIG has now been given $180 billion dollars, with a good portion of that money going to Merrill Lynch, Goldman Sachs, J.P. Morgan, Deutsche Bank and a list of others covering one whole page. These are the counter parties to insurance contracts (DERIVATIVES) written by AIG which, like the money given to the banks, is supposed to keep the world’s financial system afloat. But as large as these monies are, it is just like spitting in the ocean. As these Derivatives implode, there will be no end to the monies given to AIG, which has on its books $400 billion of OTC Derivatives and $200 billion of sub-prime mortgages (in a large measure directly due to government malfeasance). But remember the size of the problem. As AIG comes to the feeding table for more and more money, they are not the culprits the Government is making them out to be. They are the Government’s RED HERRING to deflect scrutiny away from themselves AND to funnel taxpayer money into the banks in their effort to prop up their prime campaign contributors and ‘frat-buddies.’ Perhaps by the 10th time, John Q. Public will finally get it with regards to the enormous FRAUD that Socialism really is, as you the taxpayer, are being asked to pay for it. But the taxpayer is completely taxed out and there will be a great many tax defaults since people cannot pay as they just try to survive. How much Capital Gains Taxes do you think will be collected next year, regardless of what Congress raises the rates to? What I am saying is that the tax short fall will be tremendous." Aubie Baltin
"Fannie Mae had a yearly loss of $59 billion dollars and Freddie Mac lost $50 billion for 2008 alone and there is no end in sight to their losses. And that’s after buying $5 billion of their Bonds. If the FED is determined to continue to buy up all the defaulted Derivatives, then the easy conclusion is that the Fed will ‘debauch’ the currency. I’ve also come to the conclusion that hyper-inflation is the inevitable outcome, as there is not enough money in the world to take care of the Derivatives….. Sell your long term Treasuries, Corporate and most Municipal Bonds. Most have escaped the real blood bath thus far, but they are living on borrowed time. Sooner rather than later, the FED will be forced to raise interest rates in a futile effort to defend the US Dollar. So sell while the selling is good. This Recession/Depression, whatever you want to call it, is not going to be a short term affair, more likely it will last years and Government deficits will grow larger than even the most pessimistic are projecting." Aubie Baltin
May 4, 2009
"The government today is marshalling every resource and every means at its disposal to prop up a failing system of the past. Meanwhile, we live in completely new times. These new times are characterized by systematic destruction of the establishment in media, banking, and finances. What is emerging to replace them is something that no government on the planet can stop. Markets will not be crushed and they resist control as never before.
"These new times are not the 1930s when a few eggheads in Washington could set most prices and wages and gather the captains of industry to cobble together business cartels. The economic and financial world moves at the speed of light and is so diffuse that no political authority can act quickly enough to control it. The establishment is going down. This is another reason that all believers in freedom have reason to rejoice today."
Llewellyn H. Rockwell, Jr.
April 23, 2009
"The bond market may be ‘backing off’ for fear of rising inflation. Fed Chief Ben Bernanke has embarked on an all-out policy of ‘print and spend.’ The government is creating trillions of Federal Reserve Notes in a massive effort to support a debt-laden economy. Today a trillion is the new billion. The sheer amount of fiat money that is being created is frightening many of our creditors, such as China and Germany. Frightening them to the point where the talk is of a ‘new world reserve currency.’ The new currency will be a basket of currencies including the yuan, the euro, the dollar and gold, and it will be run by the IMF. As Bernanke goes wild in printing, our creditors become increasingly worried about the dollar as a store of value. ‘Let the dollar take care of itself,’ thinks Bernanke. ‘Our first priority is to ward off deflation and another depression.’"
Richard Russell
April 22, 2009
"Without one iota of doubt the U.S. is between a rock and a hard spot. Increasing money supply via QE [Quantitative Easing] will indeed keep interest rates low. Consequently, this will help alleviate the real estate debacle (i.e. failing banks and tidal waves of foreclosures throughout the land). On the other hand near zero interest rates, coupled with massive monetization of the ballooning national debt to finance President Obama’s overtly ambitious Rescue (bailouts) and Stimulus Programs, will inadvertently cause a draconian devaluation of the U.S. greenback. It is as sure as rain is wet.
How To Protect Your Accumulated Wealth?
We all know what is coming down the pike: Continued exploding money supply; Massive debt monetization, and; Eventual hyper-inflation. This begs the question: What can an investor do to mitigate the government’s efforts to effect WEALTH DISTRIBUTION?
Lamentably, all uninformed investors are destined to suffer material loss of the purchasing power of their savings (accumulated wealth) – as QE relentlessly evolves in the coming years of Obama’s planned annual Trillion Dollar Budget Deficits. However well-informed smart investors will recognize that as the value of the dollar declines, the value of gold and silver will inexorably appreciate (as will most other commodities)."
Oracle
April 16, 2009
"The book that permanently made me a sadder – and hopefully, wiser – man was Edward Gibbons’ The Decline and Fall of the Roman Empire. To follow one of the greatest civilizations of all time as it degenerated and fractured, even before being torn apart by its enemies, was especially painful in view of the parallels to what is happening in America in our own times.
The fall of the Roman Empire was not just a matter of changing rulers or political systems. It was the collapse of a whole civilization – the destruction of an economy, the breakdown of law and order, the disappearance of many educational institutions.
It has been estimated that a thousand years passed before the standard of living in Western Europe rose again to the level it had once had back in Roman times. How long would it take to recover from the collapse of Western civilization today – if we ever recovered?"
Thomas Sowell
April 15, 2009
"While many in the media are now saying that things are looking up, and that the worst may now be over, I think it’s just begun. For several reasons…
For starters, stocks are cheap relative to where they’ve been over the last five years, but they’re not cheap relative to historic bottoms (e.g., 1 times book, around 6.6 times earnings – after big earnings cuts – and 6-10% dividend yields). Treasuries are in a bubble. And, as hard as it has fallen, residential property has not yet bottomed.
But the worst is yet to come. And I’m not talking about student loans, car loans, and credit card debt. Or Social Security, Medicare, and Medicaid. Or the looming bankruptcy of most states and many municipalities. The real crisis will be in pension funds, commercial real estate, and life insurance companies. The life insurers own mostly commercial real estate, mortgages, and bonds; many will be totally busted, even before people start cashing in their whole life policies. You don’t even hear about these three things in the press yet.
Of course that’s all in addition to the fact half of U.S. hospitals are currently running at a loss – even before legions of the poor start really overwhelming their emergency rooms. And the balance of trade deficit has yet to turn around and go positive – which will be devastating to both the dollar and the average American’s standard of living.
Sorry to be unremittingly bearish. But the Greater Depression is still very early days. Hang on to your hat."
David Galland
April 10, 2009
"My overall advice here is to ‘do nothing.’ The odds are that what ever you do in this area is going to be WRONG. It'’ observing time, as far as I'’ concerned. The markets are saying, 'Things are happening – so move.’ I’m doing just the opposite.
Subscribers who bought the DIAmonds have been doing well. Profits, no matter where they come from, are always welcome.
OK Russell, so those are your thoughts, but what do we really know?
- The US is continuing to run massive deficits with the national debt climbing annually by units of trillions of dollars.
- The US consumer is strapped for money and still loaded with debt.
- Unemployment across the US is climbing dangerously and rapidly.
- The average American (with little or no savings) is not positioned to withstand an extended recession or a depression."
Richard Russell
April 8, 2009
"We’ve averted" the risk of a depression, Federal Reserve Chairman Ben Bernanke said this week. "Now the problem is to get the thing working properly again.
Appearing on CBS network’s 60 Minutes, Bernanke told correspondent Scott Pelley that concerted efforts by the government likely averted a depression similar to the 1930s. He also stated the nation’s largest banks are solvent, and that he doesn’t expect any of them to fail; and that the U.S. recession will come to an end "probably this year."
Is this finally the light at the end of the tunnel for the U.S. economy?
We don’t want to appear as perpetual gloom-and-doomers, but fact is, when Bernanke tries to predict the future, he’s usually wrong."
Casey Research
April 3, 2009
"Job destruction is a relentless force behind this economic downturn. Unfortunately, real unemployment is grossly underreported almost every month because of the government’s Birth Death Model (see.www.bls.gov), which magically adds jobs for firms that are estimated to have been started. For example, in the February 2009 job release, the Birth Death Model added 134,000 imaginary jobs. (How silly is that?) Therefore, the actual job loss in February was 758,000 not the 651,000 reported.
"The mainstream financial press also fails to report that only 60 percent of people who lose their jobs are eligible to file for unemployment. Many millions of workers are independent contractors or private business owners who don’t qualify for unemployment benefits. Even if you’re a real estate agent, mortgage banker, insurance salesman, etc., good luck trying to file for unemployment. So, when initial claims are reported as being 600,000 for a week, you can safely assume one million people actually lost their jobs that week."
Richard Benson
April 2, 2009
"The ability of the United States Federal Reserve and the United States Department of the Treasury to administer the national currency and bank account is being severely undermined by policy moves that erode the faith of international holders of U.S. debt. The situation is exacerbated by the disingenuous attempts by these same offices to obscure the severity of the dilutive effects of unbridled money fabrication in press release language that is blatantly dissembling.
George Orwell should be slapping himself on the back in congratulations for the foresight with which he predicted the advent of DoubleSpeak, whereby the government pretends that negatives are positives. Assisted in large part by broadcast media, who lend the appearance of legitimacy by debating the pros and cons of the sundry policy machinations in all seriousness, the rest of the world is not so easily fooled.
Take, for example, the Fed’s announcement that it was going to spend $300 billion in the purchase of long term U.S. Treasurys. Does that agency honestly believe that that press release would obscure the simultaneous rollout of expanded Toxic Asset, or, as they have been translated into DoubleSpeak, ‘Legacy Assets’ expenditures totaling an additional $1.5 trillion?"
James West
April 1, 2009
"The truth is that this stimulus will be impossible to remove without bringing about another collapse in the economy; hence, inflation will be with us for a very long time. However, an inflationary path is seen as the Holy Grail by the Fed. Ben Bernanke, a ‘student’ of the Great Depression, was apparently absent from class when the part of history that dealt with the hyperinflationary economies of South America and Africa was taught. Banana Ben believes inflation could have saved us from the Depression of the 1930’s. He couldn’t be more wrong. Depressions are caused by debt, not by a decrease in the money supply.
"The truth is inflation completely destroys an economy by wiping out savers, crushing those who exist on a fixed income and crippling those at the lowest end of the income scale by raising prices of the most basic goods.
"Further, what might surprise the new President-allegedly a champion of the poor – is that an increased supply of money is never evenly distributed throughout the economy; it always finds a home with the nation’s most wealthy citizens who have access to credit first. Skyrocketing prices relegate the middle and lower classes to use all their available funds for the basic necessities of life. Since the demand for discretionary purchases collapses, unemployment rates explode and the economy is left in shambles.
"Investors would be wise to continue trading in measurable portions of their cash holdings for gold. It may also be prudent for some to speculate in the beaten-down bank and home building sectors for a brief period of time, as I believe the entire market will benefit from the initial stages of inflation – the Fed and Administration may be able to provide a truncated period of ersatz prosperity before the terror begins. But because of their decision to monetize away what would have been a deep-and-necessary-recession, the economy and country will be far worse off in the long run."
Michael Pento
March 31, 2009
"Quantitative easing is the word of a euphemism for monetization or the printing of money, to buy U.S. Treasuries or debt by the Federal Reserve. Why this attempt at debasing the dollar would be deemed as a reason to buy stocks is beyond me. Once again the herd mentality is well and alive – jump on the bandwagon and buy because everyone else is buying. This rally will fail and meet the same fate as its predecessors. Why am I so confident in my prediction? It is high valuations and low demand. Valuations are not low enough in most sectors to support a sustained rally. That is especially true in, the often lusted after, technology stocks. Not only are valuations high but the outlook for earnings is negative and the economy is deteriorating. Just because some stocks are down 50% from their all time highs does not mean that they are undervalued or that they make good investments.
Ghassan Abdallah, Ph.D.
March 30, 2009
"Last week a very dangerous precedent was set when the Fed announced that it is going to start overtly intervening to backstop the ailing Treasury market. The market’s verdict on this announcement was immediate and unequivocal. While Treasuries rallied sharply as one might expect, the dollar cratered and gold staged a dramatic turnaround to close sharply higher. The reason that this precedent is so dangerous is that once they start monetising this debt, which means creating money to buy that portion of newly created Treasury debt that cannot be sold off, there will be no end to it – they will eventually find themselves buying more and more of it, as foreign buyers continue to withdraw, deterred by a combination of pitifully low yields and any prospective capital gain being wiped out by the continued combination of pitifully low yields and any prospective capital gain being wiped out by the continued decline in the dollar that must transpire as a result of diluting the currency by creating money to absorb unsold Treasury paper."
Clive Maund
"Let me tell you something. While we are all working (those of us with jobs) and living, the entire financial and political world is in a panic over what is happening, but we only see a small picture. But your leaders are panicking right now and will be for a while. Our world is in the process of turning inside out. If you think things are going to normalize much at all in the next several years, I think you will be surprised by what’s going to happen."
Chris Laird
March 24, 2009
"As time passes, more people are realising the fact that the world’s monetary system is fraud and that gold and silver is real money and not the paper money that the world uses today. The traffic is one-way, more, not less people come to the realisation that paper money is fraud and ditch it for gold and silver (the potential is huge). Maybe, right now someone who is reading this is ditching paper money for gold and silver. This fact is what makes me most bullish about silver, since it is the form of money that has the greatest potential due to the fact that is has more room to move from where it is (a demonetized monetary asset) to a fully monetized asset.
"The debt levels in the world are enormous, and it is an inescapable fact that debt can only be properly and fully settled with real assets. Some assets are better than others when it comes to discharging debt. Gold and silver are real assets, and due to the fact that they are money, they are the ultimate form of payment and settlement of debt.
"Due to these enormous debt levels, assets that are acceptable as proper settlement of debt will be in huge demand if these debts are to be properly settled; and this holds true whether debt levels are extinguished by default as well. Gold and silver is in huge demand, and this will accelerate.
"Should the big debtors of the world attempt to ‘settle’ their debt with more debt (inflationary) such as paper promises (like what is currently happening), then paper prices of real assets will explode, with gold and silver leading the way.
"Paper money, bonds and other promises to pay are all subject to possible default, and during these times, default is a very common occurrence. Real assets are not subject to default, and gold and silver are real assets that you can hold in your hand, and are financially liquid (liquidity is even more essential during such times)."
Hubert Moolman
March 23, 2009
"The political response to this economic downturn has differed from previous responses to downturns in a number of ways, the most economically significant of which lies in the extent to which failure has been subsidized. Counterproductive economic pathologies have been encouraged, financial structures that endangered global prosperity have been bailed out and trillions of dollars have been poured into industries that obviously needed to downsize. Far from providing ‘stimulus,’ such subsidies both deepen the recession moderately and extend its duration inordinately."
Martin Hutchinson
March 18, 2009
"The Manhattan Bank (later merged into Chase-Manhattan and then to J.P. Morgan) established a chair of economics at Harvard University for John Kenneth Galbraith. Galbraith was one of a group of crackpots who said that, if the bankers are given the privilege to legally counterfeit money, this is the road to plenty for the society. Harvard was not going to hire Galbraith on its own. But when the Manhattan Bank waved around its money, they grabbed it. Using the prestige of Harvard (which they had just bought and paid for) these bankers took over the economics departments of first the most prestigious and later all the schools of economics in the country."
Howard S. Katz
March 17, 2009
"Lest one is not yet convinced of the stupidity of government (and yes we do mean all governments, even those with popular and charismatic leaders), one need only take a gander at the latest Obama budget. On top of having the inane title, ‘A New Era of Responsibility: Renewing America’s Promise’, the document is chock full of grossly overoptimistic assumptions, that show a government in abject denial of reality. Firstly, they project GDP growth of –1.2% for this fiscal year, i.e. a mild recession. Based on the huge negative revision to 4th quarter GDP just released (which, incidentally, is the first quarter of this fiscal year), for the budget’s projection to be even close implies that the US is already out of recession this quarter and will grow strongly for the remainder of the year! Absolute nonsense, but it gets even more ridiculous. The budget then projects strong economic growth next year of 3.2%, to be followed over the next three years by real GDP growth of 4.0%, 4.6%, and 4.2% up to fiscal 2013. After this period of superlative growth under Obama’s watch, the economy will then return to a ‘normal long term growth rate’ of 2.6% per year thereafter. All told, according to the budget, for the six years 2008-2013 inclusive (a period that includes a severe global financial crisis and a once in a lifetime global depression) the US economy is projected to grow a cumulative 17.1% which, moronically, is even greater than it would have grown if it grew by the ‘long term growth rate’ of 2.6% over this six year period (16.6% cumulative) instead. In short, the depression, the financial crisis and the banking catastrophe are good for the economy!! The US is projected to grow by more with them than it would have grown if they had never happened in the first place. Truly mind boggling logic!"
Eric Sprott and Sash Solunac
March 13, 2009
"The US government currently possesses the largest bureaucracy in the country’s history and we’ve never had as many laws as we do now. So, despite calls from people like Barney Franks we don’t need any more laws or bureaucrats, we have too much as it is. The SEC has thousands of people and yet they ignored all their own reports about Bernard Madoff. The IRS is one of the largest employers in the United States, they knew that Stanford owed taxes for years, and yet nothing happened. Donations to the right people count more than your rights. That’s the society that has been meticulously crafted, and that’s the society that will find itself standing in bread lines in another year or two. It’s a hell of a price to pay for trying to avoid what cannot be avoided."
Dow Theory Analysis
March 11, 2009
"Since 2000, The New York Times Company has generated a respectable cumulative net income of $1,598,062,000. Yet management, over the same period, has paid out $2,779,601,000 for stock buybacks and dividends. This means, during the present decade, stock buybacks and dividends have exceeded cumulative net income by an astonishing $1,181,539,000. Is it any wonder The New York Times’ balance sheet is such a train-wreck? Operationally, this company has done well during the past nine years. Conversely, the company’s balance sheet has been hideously mismanaged by an incompetent executive management team – as supervised by a grossly negligent board of directors.
The New York Times, most certainly, is encountering a difficult operating environment. The internet has posed a serious challenge to companies involved in print media. Advertising revenues, moreover, are dropping dramatically due to the current economic depression. Nonetheless, had executive management been prudent and conservative with respect to balance sheet management, the Times would have had a war chest full of cash, strong working capital, and strong equity; thus, allowing it the financial flexibility to survive these very challenging times. As things stand today, in my opinion, the Times’ strategic alternatives are probably limited to either seeking an acquirer or reorganizing under Chapter 11 Bankruptcy.
In closing, it is appropriate to bring The New York Times’ op-en columnist, Maureen Dowd, into the picture. She recently savaged executives from A.I.G., Bank of America, Citigroup, Merrill Lynch and the U.S. automakers; deeming them to be incompetent, self-serving charlatans. In this January 28, 2009 op-ed piece titled Wall Street’s Socialist Jet-Setters, she calls these executives ‘boobs,’ ‘dumb,’ ‘obtuse,’ and ‘…careless ghouls who murdered the economy.’ So Ms. Dowd, what do you think of the executives who ‘murdered’ The New York Times Company’s balance sheet? What names would you like to call them.?"
Eric Englund
March 4, 2009
"Personally, I find these bail-outs absurd, unethical and a total waste of valuable resources! Who gave these politicians the authority to act like investment bankers? Mr. Geithner is not a qualified ‘merger & acquisition’ expert, so how does he have the audacity to use other people’s money to take over insolvent banks? Likewise, Mr. Bernanke is now using American taxpayers’ money and buying distressed debt! I find this outrageous! Is he going to act like a debt collector when people default on their loans?
"Mark my words – the establishment is only making matters worse and prolonging the pain. Moreover, by printing insane amounts of paper, the politicians are setting everyone up for an inflationary nightmare! One thing is for sure – before this drama ends, the viability of the U.S. dollar as the world’s reserve currency will come under question. When the U.S. dollar starts to implode, hard assets will go through the roof. Remember, commodity prices went ballistic in the late 1930s as well as during the 1970s. We should expect similar action in the years ahead."
Puru Saxena
"Now that the credit crisis is about one and a half years old, since Aug 07, bank/financial pressures have expanded to a new phase. First causing credit markets to freeze, then threatening bank and business solvency worldwide, the new phase is currency instability.
"To give a partial list: The Russian Ruble, UK Pound, Hungarian Forint, Korean Won, Swiss Franc unbelievably, and the Euro are all having serious problems. Other places like Ireland, the Baltic states, the Southern/East European states, Ukraine are on the verge of insurrections. The EU is quite concerned.
"At some point, the USD would be threatened as well. What happens is that countries have to do a blanket guarantee to stop a run on their entire banking establishment, and thus assume huge public liabilities that in some cases dwarf the size of their entire economy. For example, Iceland’s banks had made bad loans totaling over 8 times the size of their GDP. Ireland is in a similar predicament, after they did a blanket guarantee. Russia is in a similar situation, having to use their 30% of their foreign reserves to prop up the Ruble.
"So, the gigantic losses in the financial markets not only paralyzes credit and is causing massive business shrinkage, but as nations nationalize the losses, their bond markets come under pressure, and thus their currencies too become threatened. This currency phase is already well underway, and is a new and pernicious phase of the credit crisis."
Chris Laird |
