Stabilization of the equity market cannot be a primary concern of the administration (any administration) because the equity market is an effect, not a cause.
ALL together now, "THE US DOLLAR IS A JOKE." Period. Exclamation point! Add expletive of your choice here _______. Why would anybody want to hold the currency of the USA? The country is broke. It's banks are insolvent. It's stock market is on a oneway ticket to never, never again land. The US Dollar is being debased in a fashion unrivaled in human history. Why would any sane individual or soveriegn nation want to buy and hold this steaming heap of dog dookie?
The US Dollar offers no guarantee of wealth protection, and possesses a promise of certain wealth destruction for those that cling to it. If you have ever wondered if the world has more stupid humans than wise, wonder no more. Stupid wins hands down. Holding the Dollar is a lose, lose, lose, and lose some more proposition. This then proves that stupid is synonymous with loser.
Many believe that by holding Dollars they will lose yes, but lose less relative to the other World Currencies.. LOL, if only it were that simple. That is a fools game. This then proves that a sucker is born ever minute, and a fool and his money will soon be parted.
This is a fact. The higher the Dollar goes, the lower the stock market will go. Why? The higher the Dollar goes the more expensive our exports become. Fewer exports equals lower corporate profits. Lower corporate profits equals lower stock prices. Hey, it's just the way it works.
Wanna stop the slide in the stock market? Devalue the Dollar relative to Gold. Bang! The stock market will bottom. Of course asset prices will then rise dramatically on the back of massive inflation, but isn't that what the Fed and the Government are in the midst of failing to accomplish? The one and ONLY thing holding back a reversal in this Global Economic Crisis is the suppression of the price of Gold.
And it is as plain as the nose on Pinocchio Ben Bernanke's face that the US Fed, Treasury, and Government are behind the suppression of the price of Gold. Look no further than today's Gold chart. Gold crapped out exactly as the equity markets opened today, at 9:30AM. 85% of the downward pressure on Gold, since reaching $1000 again, has occurred during the operating hours of the NY CRIMEX. This is no secret. What is shocking is that the rest of the World allows this to continue. I am 100% convinced that if the CRIMEX were wiped out, the Global Economic Crisis would cease accelerating to the downside.
And here is my shocker prediction of the month. The NY CRIMEX will be wiped out by the end of April...this year!
In case you missed it, Goldman Sachs remains OUT of the TOCOM Exchange in Tokyo. They have ZERO long positions, and more importantly ZERO short positions in the Japanese Gold futures markets. This is very unusual....ZERO positions.
Milton Freidman - Socialism vs. Capitalism [video]
From the way back machine.
I guess nobody was listening. "Free Markets" have gone the way of the buffalo, replaced by government subsidy...um socialism. The government can never hope to turn this mess around, they created it. Private capital is all that can save "the system"...and that capital has voted with it's feet and fled the system. The governmant cannot force "private capital" into the markets. Observe, with each new bailout, the markets plunge lower. Private capital is telling the government to "get lost".
The Congress is slowly waking up to "the game", and is ever closer to calling the Fed onto the carpet. The Feds days are numbered. There won't be a Fed within 3-5 years imo. The Congress is slowly coming to the realization that they and the country have been had by former Treasury Secretary Hank Paulson in one of the greatest rip-offs in human civilization. The only "risk" to the financial system was to the banks that have run the scam we refer to as a financial system for the past 35 years. There "control" of the government was the only thing at risk. Congress no longer controls the government, the banks do. Congress needs to wake up quick and take back the government from the banks, or the people are going to take back the government for themselves. Somebody needs to pass out copies of the Constitution these knuckleheads on Capitol Hill have supposedly swore to uphold.
The Challenge Before America [MUST READ]
First, some facts - some 2/3rds of all capital in the marketplace, whether in the form of credit or cash, is private. Some of it is owned by people like you and I, some by sovereign funds (e.g. Saudi Princes) and some by large foreign and domestic institutional interests (e.g. Pension funds.)
All of this capital has one thing in common: It cannot be forced to enter or stay in any particular market. It is, in fact, entirely possible for that capital to decide to head straight for "the mattress" (that is, to remain in cash) at any point in time, or to allocate itself in any particular asset class it so chooses.
Policymakers are incapable of replacing this capital with public funds (e.g. "new reserves", TARP or other such silliness.) To put this in proper perspective some numbers are in order - with some $50 trillion in total private and public debt outstanding in the United States the debt base alone involved here is roughly $30 trillion in private capital.
This is why The Fed's and Treasury's "commitment" of some $10 trillion (thus far) in loan guarantees and direct spending has done nothing to stem this crisis - and they can't possibly come up with another $20 trillion without collapsing the bond market and destroying both The Fed and The Government.
Policymakers must realize that there is exactly one - and only one - way out of this mess.
"The Bezzle" must be eradicated.
Every "private capital source" that has been enticed into this morass over the last two years has been destroyed, including Warren Buffett (Goldman Sachs and others) and The Saudis (Citigroup among others.)
Every last one of those "investments" has been wrecked as a direct consequence of "The Bezzle" - that is, our government's refusal to uphold the law and force the truth to be disclosed both publicly and to investors. Our government and its agencies have gone so far as to intentionally mislead in many cases, including claims related to nationalization of banks and respect for capital structures just before people were wiped out in investments that should have had preference.
What's worse, in some cases such as AIGs, not only has "The Bezzle" ripped off private investors it is also ripping off the taxpayers - multiple times - with no indication that we're going to stop this course of action any time soon!
The market no longer sees these "rescues" as positive - it now sees them as what they in fact are: coverups for papering over raw fraud and abuse, and thus when each new "rescue" is announced the market tanks instead of stabilizing.
Fact is that intentional and willful misconduct by our government agencies, both as acts of omission and commission, has resulted in these firms, institutions and nations suffering crippling losses.
These private sources of capital have quite reasonably withdrawn from the marketplace. They will not return until they can be assured that losses they suffer will result only from their own poor investment decisions and not from willful concealment of losses and even fraud by those in whom they invest nor from changes in the rules imposed by fiat from Washington DC. These private capital sources also want to see indictments, prosecutions and imprisonment - along with ejection of the parties responsible in both private enterprise and our government.
This is a serious problem for our capital markets and economy generally as without this private capital we are doomed to a massive economic contraction. Conservatively speaking, assuming our government can actually fund the $9-10 trillion they've promised, which I believe is a pure fantasy (it would represent nearly a tripling of the public float of US Debt!) we would suffer a 30% contraction in GDP over the next 18-24 months.
If they cannot fund those commitments much beyond the $1 trillion already spent, the contraction would be more on the order of 50%.
This would take us back to roughly 1994 levels in GDP terms, looking at constant dollars, a setback of some 15 years.
We either act now or suffer the consequences - the utter destruction of our middle class, a collapsed stock market with the DOW headed to 3,000 or worse and the S&P 500 headed into the 400 or lower range, unemployment topping 20% and GDP falling by 30% or more, complete destruction of both private and state-run pension systems, and a very real possibility that our nation collapses.
"The Bezzle" Defined [facsinating reading]
The Nightmare Unfolds
The continued secrecy around the destination of bailout funds continues. The Federal Reserve clammed up and wouldn’t reveal any names this week in congress. Taxpayers have no idea where their money is going. But I can tell you when a large bankrupt insurer receives bailout money as one has recently, the money flows out the back door to the counter-party.
I like to try and keep things simple...maybe to simple, but here is my explanation of the process. Let’s use my home as an example.
1. Only I can take out insurance on it. If my mortgage were like the structured products used on wall street today as many people that wanted to could purchase insurance on my home.
2. With thousands of people having insurance on my home they decide they want to collect, hence they burn down my home.
3. They collect the insurance money and take a vacation.
That is as simple as I can put it. The many people buying insurance are only buying it to make money and must force an entity or product into bankruptcy basically to collect the insurance. Taxpayer money goes to the many people/counter-parties who have insurance on something that they don’t own. And then we can’t even find out who is collecting the money. It’s fraud pure and simple and destroying everything in it’s path.
Getting From A To B
Are you scared yet? You should be because not many others are in spite of the growing carnage in the financial markets these days. This is set to change in a hurry however, where borrowing from the Kübler-Ross model on ‘death and dying’, which is the same process investors are going through right now, if I am right about this, in getting from A to B, with A being denial and B anger, the stock market could do the unimaginable. You can see it already, the spoiled brats, with Obama in the lead, are starting to realize reality does actually bite, and that no matter how much one attempts to change it, nothing will make it go away.
This is being accomplished by continued and persistent weakness in the stock market despite growing interference by the bureaucracy, where as I will show you below, people are now beginning to give up the ghost on their fantasies with respect to the economy, their wealth, and the future. And make no mistake about it; this will make the mob angry as they see their wealth vaporized. They will be out for blood, with the complacency presently gripping the collective psyche increasingly shattered as more and more people begin to realize their futures do not look so bright anymore. And this is why gold is not giving up its gains, because when angered, people will finally act, taking their money out of the stock market in attempting to secure what is left. Gold, of course, is a natural alternative in this respect.
This is scary stuff, no? And so is the nationalization of banks, collapsing economies, and the bureaucracy’s increasing inability to stop the slide. Such is life on the farm however, where the next ‘big card’ to drop will be when gold goes through four-figure resistance at $1,000 on it’s way to five. That’s right, once the cat’s out of the bag, meaning gold moves firmly into four-figure territory, you can begin entertaining such thoughts, especially since the socialists will not give up without a fight. Of course all the fiscal stimulus and bailouts are doing is delaying the inevitable, with systemic collapse unavoidable now. So don’t dismiss gold’s potential moving forward because as proved in last week’s analysis, the public is still in complete denial with respect to what the future holds, meaning they haven’t even started buying yet.