In Jim Cook's Archive


In his newsletter, Shadowstats, John Williams writes, “The government’s 2008 deficit was $454 billion. However, using generally accepted accounting principles it was $1,009 billion. Those numbers, however, did not account for the annual change in… unfunded Social Security and Medicare liabilities…. Counting those changes… the 2008 annual deficit was $5.1 trillion…. Total U.S. obligations [were] $66 trillion…. These numbers are unsustainable… and are deteriorating severely for fiscal 2009. They also doom the U.S. dollar to hyperinflation….

“Faced with collapsing economic activity, President-elect Obama has promised a massive economic stimulus package that likely will total close to $1 trillion…. All this will have to be funded by the U.S. Treasury, on top of its regular refunding needs.”

“U.S. Treasury funding needs exploded by about $500 billion in October 2008. Yet, even as Treasury issuance began to spike in calendar third quarter 2008, foreign purchases of these instruments began to falter… Nonetheless, the U.S. Treasury has relied on foreign net purchases of an average 80% of its net debt issuance since 2002. As foreign investors increasingly shy away from a losing proposition with the U.S. dollar, faltering demand for U.S. Treasuries will become a problem for the Federal Reserve, the U.S. Treasury buyer of last resort. At such time as the Fed monetization of U.S. debt accelerates meaningfully, the risk of hyperinflation will move in over the horizon.”

Elsewhere, Mr. Williams writes, “Concerns about the government’s fiscal condition can wait until the economy recovers, we are being told…. Unfortunately, with the economy in a structural downturn and with the U.S. government effectively bankrupt, there can be no rapid or normal recovery. As inflationary pressures mount anew and the financial markets increasingly shun U.S. Treasuries, an inflationary depression can evolve quickly into a hyperinflationary great depression.”

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Frank Shostak, chief economist for MF Global writes, “The current policy of fighting price deflation is a recipe for economic disaster. What is required is purging the economy of various false activities that severely undermine its ability to generate real wealth. Various policies aimed at fixing the symptoms rather than addressing the true causes are only making matters worse….To prevent a further destruction of the American economy, Congress must stop the reckless policies of the Fed and the Treasury as soon as possible.”

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International investment advisor, Puru Saxena, tells us, “It is interesting to note that the Federal Reserve (money-printer extraordinaire) has now started to inflate the supply of money. Over the past few weeks, the Federal Reserve has injected roughly US$300 billion into the banking system without a proportionate increase in its non-banking liabilities via deposits by the US Treasury. In simple terms, what this means is that the Federal Reserve is now increasing bank reserves without the US Treasury removing an equivalent amount of money from the system. Usually, when the Federal Reserves provides surplus reserves to its member banks, the US Treasury borrows this money from the market by issuing bonds; thereby offsetting the inflationary impact of the Federal Reserve’s monetary injections. However, this it not what is happening now and this has inflationary implications. Essentially, the Federal Reserve is now creating money ‘out of thin air’, debasing its currency and sowing the seeds for sky-high inflation.”

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Editorial director at Taipan, Justice Little, writes, “The more money a desperate Fed pumps into a non-responsive US economy, the closer we edge to systemic breakdown for the fiat currency system as a whole. My use of ‘breakdown’ in this case refers to the point at which the world loses faith… the point at which investors realize in dawning horror that the world’s reserve currency is doomed. The trouble lies in the fact that the Federal Reserve has staked its whole crisis response plan on the power of the printing press. The Fed, in other words, has but one play in the playbook… the play outlined in Bernanke’s deflation speech. If deflation’s grip is not broken soon, then Bernanke will double down on the printing press strategy… and then double down again. The Fed will pump and pump until the total pool of dollars in the system makes the United States look like a banana republic.”

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The Smolski Investment letter makes these points,

  • “Heavy government intervention appears to be easing the credit crunch and liquidity is flowing. Once deflation fears are squelched, treasury bills will collapse.
  • Deflation fears will quickly transform into inflation fears as the impact of the Fed’s ultra accommodative monetary policy is felt.
  • Deficits of over $2 trillion are predicted over the next two years, the US government will be issuing debt at levels never before seen. Near zero yields on bonds will sooner, rather than later, attract near zero interest.
  • The dollar’s continued decline will pressure foreign investors to abandon their enormous holdings of US debt. If the Chinese government chooses to dump or merely stop buying new T-Bills, it will create an unstoppable downward spiral with detrimental consequences.”


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Commodity analyst, Ty Andros writes, “Over the next 6 months the Fed is planning on buying over $800 billion of mortgage backed securities, credit card, auto and student loans, etc. Combine this with the $850 billion TARP (troubled asset relief program, $700 billion for the financial system and $150 billion for PORK barrel to persuade lawmakers and PAYBACK campaign contributors) of which $500 billion has yet to be spent. Then with OBAMA’s ultra capital destructive $800 billion to $1 trillion STIMULUS package to bail out deadbeat state and local governments who have FAILED to properly budget themselves or reduce spending, fund pork projects for campaign paybacks and create bridges to nowhere using exorbitant UNION wages. Think of it, borrowing from the prudent savers of the world and lending it to the insolvent with NO WAY to pay it back from income. Instead the bills will be paid by money printing. Obscene. Immoral. Imprudent.

He continues, “The only thing growing in the global economy is GOVERNMENT and piles of fiat currencies. Since savers no longer are willing to lend, then the government and federal reserve stand ready to do so, no matter how foolish the purpose, worthless the asset or the credit worthiness of the borrower. SPENDING, BORROWING and PRINTING MONEY AT ANY COST… Keynesianism will be an epithet before this is over…”

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Newsletter personality, Jim Sinclair issues this warning. “Weimar is here, the Dollar is DEAD… Protect yourselves because nobody else will protect you… In six months nobody will be able to help you.”

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