Putting Out Fires With Gasoline

”Everything predicted by the enemies of banks, in the beginning, is now coming to pass. We are to be ruined now by the deluge of bank paper. It is cruel that such revolutions in private fortunes should be at the mercy of avaricious adventurers, who, instead of employing their capital, if they have any, in manufacturing, commerce, and other useful pursuits, make it an instrument to burden all the interchanges of property with their swindling profits. Profits which are the price of no useful industry of theirs.” (1813).
-Thomas Jefferson


A Doozy of a Depression
By Bill Bonner
02/16/09 Los Perros de San Jose, Nicaragua
Remember our dictum: the force of a correction is equal and opposite to the deception that preceded it. As we looked out over the absurd hallucinations, delusions and lies of the Bubble Years – oh, those happy days! – we warned that the coming correction “would be a doozy.”

And a doozy it is.

‘Doozy’ is a technical term we feral economists use. “Depression” is what most people call it.

The downturn is going to be tough for almost everyone, almost everywhere. The French have to learn to live with fewer tourists at home and fewer bottles of champagne exported abroad. The English have to learn to with less revenue from financial services. The Chinese – and Asians generally – have to figure out what to do with all those TV sets that junk Americans aren’t buying anymore. Arabs wonder what to do with their oil.

Americans, meanwhile, have to figure out how to get by in a world where strangers aren’t so kind. You’ll remember what made the world go round this last quarter century. Those nice strangers made things and shipped them to Americans. The Americans paid for them with I.O.Us. The foreigners were so accommodating, they never asked for payment. Instead, the I.O.U.s just piled up in their vaults.

All that has come to an end. Trade is collapsing. And now it’s every man for himself. Sauve qui peut. Americans aren’t buying. Chinese aren’t selling. So far, the strangers are still being nice about America’s I.O.U.s. They’re politely holding onto their Treasury bonds and not insisting on payment. But they’ve made it clear that they’re not exactly looking for a lot more of them…not when the value of America’s collateral is falling so sharply. And they’ve made it clear that if the United States lets these I.O.U.s go down anymore, they won’t be very happy about it.

But what we’re wondering is whether we should add a corollary to our dictum: Yes, the force of a correction is equal and opposite to the deception that preceded it. And the measures taken to stop the correction will be just as absurd as the crackpot ideas that got the economy into trouble in the first place.

We don’t know what particular good this insight does for us. But it just shows that the show isn’t over. One hallucination may have run its course, but there are plenty more. And they have consequences too.
http://www.dailyreckoning.com/a-doozy-of-a-depression/

The Obama Stimulus: Truth and Consequences
by Martin D. Weiss, Ph.D.
Will the new Obama stimulus and banking bailouts succeed or fail?

What will be the immediate and ultimate consequences?

let’s not waste time digging for causes — the economic blunders of Washington, the financial greed of Wall Street, or the big debts and risky bets by almost everyone.

Let’s also not waste time pointing fingers — the Clinton administration for creating the tech bubble, the Bush administration for creating the housing bubble, or the Obama administration for giving us what promises to be a whole new government debt bubble.

Most important, let’s not waste our breath debating whether the plethora of government actions and programs since 2007 are philosophically right or wrong.

The fact is, they have failed.

In addition to the $152 billion Bush stimulus package in the spring of last year and the $700 billion Troubled Asset Relief Program (TARP) in the fall, the U.S. government has loaned, invested or committed $200 billion to nationalize the world’s two largest mortgage companies, Fannie Mae and Freddie Mac … over $42 billion for the Big Three auto manufacturers … $29 billion for Bear Stearns, $150 billion for AIG, and $350 billion for Citigroup … $300 billion for the Federal Housing Administration Rescue Bill to refinance bad mortgages … $87 billion to pay back JPMorgan Chase for bad Lehman Brothers trades … $200 billion in loans to banks under the Federal Reserve’s Term Auction Facility (TAF) … $50 billion to support short-term corporate IOUs held by money market mutual funds … $500 billion to rescue various credit markets … $620 billion for industrial nations, including the Bank of Canada, Bank of England, Bank of Japan, National Bank of Denmark, European Central Bank, Bank of Norway, Reserve Bank of Australia, Bank of Sweden, and Swiss National Bank … $120 billion in aid for emerging markets, including the central banks of Brazil, Mexico, South Korea, and Singapore … trillions to guarantee the Federal Deposit Insurance Corporation’s new, expanded bank deposit insurance coverage from $100,000 to $250,000 … up to $500 billion in Fed purchases of asset-backed securities … plus trillions more for other sweeping guarantees.

Grand total: Over $9 trillion … and counting!

These efforts were designed to stimulate the economy, avoid a housing bust, restore public confidence, contain the credit crunch, reduce the danger of a global debt collapse, and shore up sinking banks.

But based on the overall net results to date, every single one is an outright, unambiguous, proven failure:

The economy was not stimulated.

The housing bust was not avoided.

Public confidence was not restored.

The credit crunch was not contained.

The danger of a global debt collapse was not reduced.

The finances of the nation’s banks were not shored up.

The Objective Evidence Shows That the Massive Bush
Administration Actions to Save the Economy Have Failed.
Now, the Same Evidence Shows That the Massive
Obama Efforts Are Likely to Meet the Same Fate:
Failure!

Never forget: Everything you see today — the collapsing economy, the failing banks and the continuing danger of a global debt collapse — is happening despite the most numerous, most radical and most expensive government rescue efforts in history.

Yet, rather than recognize their futility, the Obama administration is pushing forward with even larger actions — always with the same general goals (to prevent collapse) and forever using the same blunt instrument (more government money).

The Obama stimulus package is $787 billion, five times larger than the Bush package just one year earlier. They promise larger attempts to save the sinking housing market … more money to avoid an even broader credit crunch … more money to prevent a more catastrophic debt collapse … and more money to shore up banks that have now sunk into an even deeper hole.
http://www.moneyandmarkets.com/the-obama-stimulus-truth-and-consequences-2-29735

The sequence of global insolvency begins
Contrary to what political leaders and their central bankers seem to believe worldwide, the problem of liquidity that they are striving to solve by means of historic interest rate drops and unlimited money creation, is not a cause but a consequence of the current crisis. It is in fact a problem of solvency which is digging « black holes » where liquidities disappear, whether we call these holes bank balance sheets (1), household debt (2), corporate bankruptcies or public deficits. In consideration of the fact that a conservative estimation of these “ghost-assets” reaches already USD 30,000-billion (3), our team considers that the world is now facing a situation of general insolvency affecting in the first place the most indebted countries and organizations (public or private) and/or those depending most on financial services.

...the situation prevailing today throughout the entire global financial system, a large part of the world economy and all the economic players (including States) who based their growth on debt in the past years. The crisis translates and magnifies a problem of global insolvency. The world is becoming aware of the fact that it is a lot poorer than it used to believe in the last decade. And 2009 is the year when all the economic players must try to assess their real level of solvency, knowing that many assets are still losing value. Moreover a growing number of investors no longer trust the traditional instruments and indicators of measurement. Quoting agencies have lost all credibility. The US Dollar is just a fiction of international monetary unit and many countries are striving to get away from it as quickly as possible (6). Thus, quite rightly, the entire financial sphere is suspected of being a giant black hole. Concerning companies, no one can tell if their order books are reliable (7) because in every sector customers cancel their orders (8) or just stop buying, even when prices are discounted, as indicated by dropping retail sales in the past few weeks (9). Concerning States (and municipalities), slumping fiscal revenues are likely to result in even higher deficits and then bankruptcies. As a matter of fact, Russian billionaires (10), Gulf oil-monarchies, Chinese commercial Eldorados (11), all the « golden-egg geese » of companies and financial institutions of the planet (namely European, Japanese and North-American ones (12)) turn out to be insolvent or hardly solvent. The question of the solvency of the US federal State and federated states (13) (as well as of Russia or the United-Kingdom) is beginning to be asked by some big international media; as well as the question of the solvency of large capital-based pension funds, major players in this past twenty years’ globalised economy.

According to LEAP/E2020, the trend is clear: the sequence that has begun this year is a sequence of global insolvency.
http://www.leap2020.eu/GEAB-N-31-is-available!-Phase-IV-of-the-systemic-crisis-The-sequence-of-global-insolvency-begins_a2688.html

'Paper gold market will crash at Comex'
Do you want to see gold in the big picture? Read an interesting interview with Marc Gugerli by Oliver Disler. Marc Gugerli isFund Manager & Advisor of Gold 2000 Ltd and the Julius Baer Gold Equity Fund.

Oliver Disler: Is Gold an alternative to treasury bonds, since the yields are so low?

Marc Gugerli: That is a great question. Treasury bills are the next big bubble (to burst). Investors and most asset managers have in average 20% cash and 30% invested in short-term treasuries. For a certain period this might be the right asset allocation.

Since the yields on cash and short-term treasuries are almost 0% in major currencies, Gold is getting more attractive as an investment. Now you have to ask yourself, if you rather want to be fully invested in classical assets only where the supply is exploding by the new money printed or at least add some Gold which can’t be copied, printed and is nobody’s liability?

Oliver Disler: This is interesting, but again, why is the price of Gold not trading much higher?

Marc Gugerli: The majority of investors purchase Paper-(Gold)-Futures at the COMEX. The sellers or counterparties of those Gold-Futures are just a few very dominant players. Some of them have an in-official close link to the US government. So far most of the investors didn’t exercise the gold futures and have accepted cash instead of physical settlement.

This is about to change. I believe that the comex will default and the entire paper gold market will „crash“ and gold could rise very quickly to 2000 until 3000 US Dollars. When this happens it will be too late to exercise or to try purchasing physical gold. It’s the same with a house insurance, which you need before the beds are burning!

Oliver Disler: What is your view about the price of Silver?

Marc Gugerli: The situation in the paper silver market is even worse. At the actual levels, Silver is extremely cheap and investors are divided if Silver is rather an industrial or still a precious metal or both. But having a look at the price development it is rather treated like other industrial metals as well. Silver is the Gold of the poor Man.

I believe that the price of Gold becomes extremely expensive and will be considered rather as “store of wealth” than money. What concerns Silver I can imagine that for example China or Mexico could accept Silver to be money and mean of payment (Silver Standard). I expect that Silver could outperform the price of Gold.

Oliver Disler: What is your opinion about the US Dollar?

Marc Gugerli: The question is always compared to what? I believe that basically most industrial countries are trying to weaken their currencies with the goal to boost exports. To remain competitive other countries needs to do the same and start the money printing press and the devaluation carousel is launched.

Central banks are devaluating their currencies against limited available and tangible hard assets like land, commodities and precious metals like Gold or Silver. The ECB is far behind the curve and the printing machine runs slower than the one of the Federal Reserve. But all this can change very fast.
http://www.commodityonline.com/news/Paper-gold-market-will-crash-at-Comex-14981-1-1.html

The Goldsmiths—Part XXXIII [an excellent read and series of essays]
By R. D. Bradshaw
With the introduction of the Socialist welfare state in the Christian West (by the Rothschild Cabal, so that we all could be more addicted to paper money and so that the process for world government could be speeded up), many people in the West (and especially in the US and Britain) have begun to be quite lazy. To feed the consuming society, nations like the US have turned to outsourcing and the importation of goods from producing countries—primarily in the Third World, like China, India, Malaysia, etc.

In this process, many Third World nations have gained huge stacks of US dollars, bonds and notes. While these countries have willingly accepted this increasingly fiat money, the handwriting is now on the wall that those days are about to end. When we reach that point, the reaction seems clear enough.

Those so-called Third World nations are first of all going to say—no more worthless fiat dollars. Now while we wiped Iraq off the map for this attitude, and while we have plans to knock off Iran for this thinking, we are not in much of a position to attack the world and particularly nations like China and Russia. The rejection of fiat, worthless, US dollars will be a normal and logical move by many nations in the coming days in 2009.

So what will the thinking Chinese, Indians and Malaysians do with their hoards of dollars and dollar instruments when they wake up and say no more dollars? Well, they are going to have to start spending that money for whatever it may still buy. I am convinced that they will commence a program of buying gold.

One of the developments in 2008, spurred on by goldseek.com and silverseek.com and some of their contributing writers, has been a move to encourage people to start buying gold futures for delivery from COMEX. Wouldn’t it be great if the wealthy Chinese were to do this in 2009? They have the dollars and could do it easily enough as long as gold is suppressed and the dollar has value.

“It normally is rare to find such doom-and-gloom commentary appearing in general financial circles. It is even more uncommon for commentators to reveal that some of the dominant players in the gold market have a close link to the U.S. government or that the price of gold could soon double or triple. Lately, mainstream financial analysts have been much more willing to talk about gold, to recommend owning gold for having better appreciation prospects than other assets, and to specifically recommend purchasing physical gold rather than shares in gold exchange traded funds or gold ‘certificates.’

“The tide has been turning toward gold for the past eight years, partly because it has been one of the top performing of all asset classes. Still, the proportion of Americans who own gold is minuscule - estimates I have seen range from only 3-9 percent of all U.S. investors. There is much more room for future appreciation despite how far prices have already climbed this decade.

“The money supply of all of the world's major currencies is now increasing by 10-30 percent annually. With the gold supply increasing by less than 2 percent annually, it is a virtual certainty that all currencies will fall in value against gold. In the past several weeks, several investment advisors have become more positive about gold because of the relative strength in the price of silver! In the past, silver has led the way for higher precious metals prices, which is just what has been happening so far this year. Late last year, the gold/silver ratio was over 80. Now it is under 70 and falling. I like the prospects for both silver and gold (though I continue to expect silver's price to outperform gold).
http://news.goldseek.com/GoldSeek/1234508820.php

How Banks Are Worsening the Foreclosure Crisis [recommended reading]
The bad mortgages that got the current financial crisis started have produced a terrifying wave of home foreclosures. Unless the foreclosure surge eases, even the most extravagant federal stimulus spending won't spur an economic recovery.
http://finance.yahoo.com/news/How-Banks-Are-Worsening-the-bizwk-14351718.html

Diluted to Oblivion, Dead Banks
By: Jim Willie CB
The response by the USGovt, the USFed, Wall Street banks, and the USCongress will result in very little remedy since their first objective is to keep in place the cover-up to their gigantic fraud, much of which still eludes the financial press. By the time conditions worsen, rescues will not be the primary objective any longer. Rather, prevention of collapse will become the urgent priority. Desperate official actions will result in turning the corner on inflation, from the so-called deflation toward hyper-inflation. The gold & silver price will find release. Already, their prices are disconnected from the USDollar. Gold & silver serve as panic meters, systemic breakdown meters, monetary meters, and official desperation meters. The USEconomy has entered an acceleration phase in its breakdown. Gold & silver are poised to make new highs and not look back. They have responded to growing monetary disasters. Incredibly powerful events are in the works, to be unleashed within the next several months.

The attempts to revive the banks will lead to desperate measures. The Obama Stimulus plan is not a good start. It is much more of the same failed junk tossed into a hasty package, founded on desperation, called urgent expedience. Little is designed to rebuild the US industrial base, which would provide a strong legitimate income source. Most economists fail to recognize this missing piece. The tax cuts are not permanent, thus will change little in spending propensity. The tax credit for home buyers will lift mainly the homebuilders, who need to go out of business. The pork amounts to 11% to 13% of the total spending bill. Little is done to alleviate the high corporate tax burden, where the US is not competitive. Sorry, but this is just another spending bill loaded with garbage and a few half-baked ideas that seem constructive.

The USGovt, complete with Dept Treasury henchmen from Goldman Sachs, and compromised USCongress committee wonks, still has not addressed the underlying problem: Billions of dollars of toxic securities and loans languish on banks balance sheets. The big banks are flailing, reluctant to make sharp writedowns, urging accounting boards to exclude mark to market methods, hiding assets off the balance sheets, anything to buy another day. In the meantime, the USEconomy suffers from credit seizures and basic deprivation. Much of the funds authorized for rescues, bailouts, and nationalizations have been squandered, not by waste, but in fighting credit derivative fires. These activities are not publicized for many reasons. Attention is not wanted on the flimsy foundation to the US banks. Attention is not wanted to reveal the location of financial nuclear bombs of great potential destructive force. One informed contact to the Hat Trick Letter expects at least $30 trillion and perhaps over $50 trillion to blow up eventually in credit derivatives, with uncertain consequences.
http://news.goldseek.com/GoldenJackass/1234544400.php