LOOK! Up in the sky! It's a bird. No, it's a plane. Nooooo, it's a helicopter! We're saved!
...or so we would like to think.
World Tires of Rule by Dollar
The dollar’s rise is temporary, and its prospects are bleak. The US trade deficit will lessen due to less consumer spending during recession, but it will remain the largest in the world and one that the US cannot close by exporting more. The way the US trade deficit is financed is by foreigners acquiring more dollar assets, with which their portfolios are already heavily weighted.
The US government’s budget deficit is large and growing, adding hundreds of billions of dollars more to an already large national debt. As investors flee equities into US government bills, the market for US Treasuries will temporarily depend less on foreign governments. Nevertheless, the burden on foreigners and on world savings of having to finance American consumption, the US government’s wars and military budget, and the US financial bailout is increasingly resented.
This resentment, combined with the harm done to America’s reputation by the financial crisis, has led to numerous calls for a new financial order in which the US plays a substantially lesser role. “Overcoming the financial crisis” are code words for the rest of the world’s intent to overthrow US financial hegemony.
Banks borrow record amount from Fed
With sources of credit still largely frozen, banks borrowed a record amount from the Federal Reserve in the past week, according to Fed data released Thursday.
The Fed reported that commercial banks borrowed a record $111.9 billion a day, on average, from the Federal Reserve's emergency lending window over the past week. That's up $6.1 billion from the $105.8 billion they borrowed in the previous week.
"Banks literally have an open checkbook to acquire cheap liquidity," said Matt McCormick, portfolio manager at Bahl & Gaynor Investment Council. "Borrowing will continue until morale improves."
"The unprecedented amount of liquidity coming from the Fed and Treasury will find a home eventually, and that will be good for the market," said McCormick. "It's taking a bit longer than the industry wants, but down the road it will make a significant impact across the board."
Impact? That's an understatement. That "impact" has a name too. It's name is Inflation.
In the past few weeks, the U.S. Federal Reserve has joined with the U.S. Treasury in an attempt to remedy the financial fiasco. In that effort, the Federal Reserve's balance sheet has ballooned by more than 50%. Never in peace time history has the central bank for the world's reserve currency so intentionally implemented policies that will destroy the value of that reserve currency. As a consequence of that massive monetary ease, the U.S. money supply, M-2, is now growing at a double digit rate. The deflationists can now quit worrying, the quantity of U.S. dollars is rising and the value of those dollars will therefore fall.
This most recent explosion of U.S. monetary growth is signaling that the return on Gold should begin rising dramatically. That would be as expected as the Federal Reserve is doing all possible to inflate, and reduce the value of the dollar. At the same time a massive short, real and psychological, position has been built such that a classic short squeeze in $Gold is extremely likely. Investors not mired in the thoughts of 1930 should be buying Gold at these prices, while they exist.
Is the silver futures market about to crack wide open?
The silver market has been looking interesting for months, despite the price collapse. Beneath the surface of the recent spot price falls the structure of the market is changing in such a way that a powerful bull market is being set up.
Metal holdings for Barclay’s iShares Silver Trust (SLV) have so overwhelmed selling pressure that the trust has added a total of 68,921,884 ounces of silver to its holdings so far this year, reported resourceinvestor.com. Yet late last week the COMEX futures market reportedly held 131,530,256 ounces of silver in its warehouses.
This so far in 2008 the leading silver exchange traded fund SLV has added the equivalent of 52.4% of all the silver metal that the COMEX futures market has in its vaults. That surely represents amazing buying pressure at a time when silver prices are in crashing. Something is not right clearly.
Resourceinvestors.com notes that over two million ounces of silver have fled the vaults of the COMEX in just the last five trading days alone. How long before that trickle becomes a flood and the futures market in silver is effectively shut down and the physical spot market takes over?
Expect to see silver prices head to the moon. In the late 1970s it was a bungled price manipulation by the Hunt Brothers that sent silver prices super high, and bust the market for the next two decades. Silver today is trading at around $10 an ounce compared with an average price of $24 an ounce in 1980. What else today costs a fraction of the price 28 years’ ago?
Now it will be a bungled price manipulation by US banks that releases the silver price from its artificially depressed state. Silver bugs have gotten silver hair waiting for this to happen, but it is finally upon us and nothing and nobody can stop it.
The Shallowest Generation
The Baby Boom Generation will never be mistaken for the Greatest Generation that survived the Great Depression and defeated evil in a World War that killed 72 million people. I hate to tell you Boomers, but putting a yellow ribbon on the back of your $50,000 SUV is not sacrifice.
Our claim to fame is living way beyond our means for the last three decades, to the point where we have virtually bankrupted our capitalist system. Baby Boomers have been occupying the White House for the last sixteen years. The majority of Congress is Baby Boomers. The CEOs and top executives of Wall Street firms are Baby Boomers. The media is dominated by Baby Boom executives and on-air stars. We have no one to blame but ourselves for the current predicament. Blaming Franklin Roosevelt or Lyndon Johnson for our dire situation is a cop out. Baby Boomers had the time, power, and ability to change our course. We have chosen to leave the heavy lifting to future generations in order to live the good life today.
Of course, not all Baby Boomers are shallow, greedy, and corrupt. Mostly Boomers with power and wealth fall into this category. There were 76 million Baby Boomers born between 1946 and 1963. They now make up 28% of the U.S. population. Their impact on America is undeniable. The defining events of their generation have been the Kennedy assassination, Vietnam, Kent State, Woodstock, the 1st man on the moon, and now the collapse of our Ponzi scheme financial system. They rebelled against their parents, protested the Vietnam War, and settled down in 2,300 square foot cookie cutter McMansions with perfectly manicured lawns, in mall infested suburbia. They have raised overscheduled spoiled children, moved up the corporate ladder by pushing paper rather than making things, lived above their means in order to keep up with their neighbors, bought whatever they wanted using debt, and never worried about the future. Over optimism, unrealistic assumptions, selfishness and conspicuous consumption have been their defining characteristics.
We spend more eating out than we give to charity. We spend as much on big screen TVs and stereos as we do on education. This may explain why 37 million (12.5%) of all Americans live in poverty and our high school students trail the students of 25 other countries (including Latvia) in science and math knowledge. Our school system processes many more clueless morons who don’t know the candidates for President, versus intelligent, thoughtful, hard working, driven young people. The $160 billion spent on gambling is indicative of the get rich quick without hard work attitude of the Boomer generation. Even worse, households with income under $13,000 spend, on average, $645 a year on lottery tickets, about 9 percent of all their income. Our government feeds this addiction by siphoning off billions in taxes from these gambling revenues to redistribute as they see fit.
This generation lacks self control, morals, a work ethic, and savings ethic. Based on the recent actions of our government and corporate leaders, we seem to lack any ethics at all. It is immoral for the Boomer generation to run up $53 trillion in unfunded future liabilities in Social Security, Medicare and Medicaid to leave as our gift to future generations, while we live it up today. Optimists like to point out that Europe and Japan have much worse unfunded liability problems than the U.S. That is like taking pride in being the best looking horse at the glue factory. In the end, we’ll all still be glue.
The Great American Empire has begun its long slow decline. It may take a few generations to reach its nadir, but the poor decisions already made and crucial decisions postponed in the last 25 years by our Boomer dominated leadership has put our country on a path to a declining standard of living. The U.S. is like a punch drunk ex-champion boxer who still thinks he has what it takes, but is living off his old press clippings. He lived the good life, got fat and didn’t do the hard work required of a champion. A slew of young brash fighters are itching to take him down. It is just a matter of time.
In our heyday during the 1950s, manufacturing accounted for 25% of GDP. In 1980 it was still 22% of GDP. Today it is 12% of GDP. By 2010 it will be under 10% of GDP. Our Government bureaucracy, which contributes nothing to the advancement of our society, now is a larger portion of GDP than manufacturing. Services such as banking, retail sales, transportation, and health care now account for two-thirds of the value of U.S. GDP. We have become a nation of bureaucratic paper pushers. Past U.S. generations invented the airplane; invented the automobile; discovered penicillin; and built the Interstate highway system. The Baby Boom generation has invented credit default swaps; mortgage backed securities; the fast food drive thru window; discovered the cure for erectile dysfunction; and built bridges to nowhere. No wonder we’re in so much trouble.
No one in Washington has shown an ounce of leadership in decades. True leadership requires strength of character, clear vision to see the future as it is, the bravery to make unpopular decisions, and the honesty to tell the public the unvarnished truth based on the facts.
The facts are: we have a $10.5 trillion national debt; $53 trillion of unfunded liabilities; a military empire that has U.S. troops in 117 countries and has spent $700 billion on a pre-emptive war that has killed over 4,000 Americans; a $60 billion trade deficit; an annual budget deficit that will exceed $1 trillion in the next year; a crumbling infrastructure with 156,000 structurally deficient bridges; almost total dependence on foreign oil; and an educational system that is failing miserably. We can not fund guns, butter, banks and now car companies without collapsing our system.
Texas Congressman Ron Paul gives the blunt truth that a true leader is willing to give:
Our government has lived beyond its means for decades. We now face a crucial juncture, at which we determine whether to continue down the path of debt, inflation, and government intervention or choose to return to the economics of the free market, which have been ignored for almost a century. Increased debt leads to higher taxes on future generations, while increased inflation diminishes the purchasing power of American families and destroys the dollar. No society has ever been achieved prosperity through indebtedness or inflation, and the United States is no exception. We cannot afford to continue our current policies of monetary expansion and unending bailouts. Unless we return to sound monetary policy, sharply reduce government expenditures, and realize that the government cannot act as a lender of last resort, we will drive our economy to ruin.
The Baby Boom generation has one last chance to change the course of U.S. history, keep us from wrecking in a storm of debt on the approaching jagged reef and shed the title of “Shallowest Generation”.
Stocks likely to recover no matter who's president
Yes and no. Politicians do influence the economy -- and they'll play a big role in how the country emerges from this current crisis. But analysts say neither presidential candidate can be a cure for what's ailing Wall Street.
"The economy is a big, big machine, and the president is one government bureaucrat," said Ron Florance, Wells Fargo Private Bank Director of Asset Allocation.
Moreover, most analysts believe the battered stock market has nowhere to go but up next year, no matter who ends up in the White House -- and history will probably give the victor credit even if he actually had little to do with the rally.
"The timing couldn't be better," Florance said.
Still, the stock market is just one part of the economy, and under either Barack Obama or John McCain, the United States needs to recover from a downturn whose severity has not yet been determined. And either candidate will face a budget deficit of around $500 billion when he's sworn into office -- a shortfall expected to climb to $1 trillion next year.
Because of the deficit, the financial climate might end up affecting the new president's policies more than his policies will affect the financial climate.
Make the time to vote tomorrow. It is your civic responsibility to vote. Vote for your candidate...and then say a prayer for him...and then say a prayer for your country. No matter which one of these knuckleheads should be unfortunate enough to win, neither of them has or offers the leadership necessary to pull America from the abyss now sucking her down. Borrowing money to pay back borrowed money is not the answer. Stimulus spending is not the answer. Printing money is not the answer. Pain is the answer. The truth hurts. All of America must STOP spending money it doesn't have, or there will be no happy ending. Good luck Mr. new President, whoever you are, you're gonna need it more than you're gonna need the cash to finance your campaign promises [lies]. The country is broke, and you're now the captain of a rudderless ship. I hope you're ready to go down with it....