Global Debt Crisis Implosions, Use Gold and Silver to Protect from The Big One, Coming SoonEconomics / Global Debt Crisis Nov 25, 2010 - 04:31 AM GMT
“Attempts to bail out the Irish banking sector via multinational loans will only increase debt burdens in Europe and lead to a nightmarish scenario there, says New York University economist Nouriel Roubini.
There is too much private debt in Ireland, and aid from the International Monetary Fund, the European Union or whoever merely amounts to pushing the payday down the road and ultimately increasing the total amount owed in the end.
"Now you have a bunch of super sovereigns – the IMF, the EU, the eurozone — bailing out these sovereigns," Roubini tells CNBC, adding nobody "from Mars or the moon" will bail out the IMF or the eurozone once Ireland's debt is socialized.
"At some point you need restructuring," he told CNBC. "At some point you need the creditors of the banks to take a hit — otherwise you put all this debt on the balance sheet of government. And then you break the back of government — and then government is insolvent."…
"If Spain falls off the cliff, there is not enough official money in this envelope of European resources to bail out Spain. Spain is too big to fail on one side — and also too big to be bailed out."
“Roubini: Debt Nightmare Unfolding in Europe”
Forrest Jones, Moneynews, 11/19/10
"History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling money and its issuance."
President James Madison
“Americans over-consumed and over-leveraged, but who enabled that trend to take place? Only the lenders could have facilitated such a spending spree. So then it was the predatory lending of banks? In part, but we must go further to the root of the problem. Who directs the lending capacity and practices of the big banks? Why the central bank, of course! Ever since the Depository Institutions Deregulation and Monetary Control Act passed in 1980, all banks fall under the purview of the Federal Reserve. It was the Federal Reserve that artificially lowered interest rates and borrowing costs to historically low levels in order to excite the debt bubble which then burst in 2008. Credit was easy. In fact, it was so easy that big banks practically threw money at people unqualified to handle mortgage payments.”
“Economic Implosion Sets The Blame Game In Motion”
Giordano Bruno, Neithercorp Press, 11/19/2010
“Ben Bernanke has said that the Fed is trying to promote inflation, increase lending, reduce unemployment, and stimulate the economy. However, the Fed has arguably - to some extent - been working against all of these goals.
For example, as I reported in March, the Fed has been paying the big banks high enough interest on the funds which they deposit at the Fed to discourage banks from making loans. Indeed, the Fed has explicitly stated that - in order to prevent inflation - it wants to ensure that the banks don't loan out money into the economy, but instead deposit it at the Fed…
This is a bad policy even if the banks approve. The correct policy now should be to slowly reduce the interest paid on bank reserves to zero and simultaneously maintain a moderate increase in the money supply by slowly raising the short term market interest rate targeted by the Fed. Keeping the short term target interest rate at zero causes many problems, not the least of which is allowing banks to borrow at a zero interest rate and sit on their reserves so they can receive billions in interest from the taxpayers via the Fed. Business loans from banks are vital to the nations' recovery.
The fact that the Fed is suppressing lending and inflation at a time when it says it is trying to encourage both shows that the Fed is saying one thing and doing something else entirely.
I have previously pointed out numerous other ways in which the Fed is working against its stated goals, such as: Reinforcing cyclical trends (when one of the Fed's main justifications is providing a counter-cyclical balance);Increasing unemployment (when the Fed is mandated by law to maximize employment); and Encouraging financial companies to make even riskier gambles in the future (when it is supposed to stabilize the financial system).”
“Fed's Hidden Agenda of Driving U.S. Into a Second Great Depression”
Washingtons Blog, marketoracle.co.uk, 11/21/10
“There’s a hard rain a ’comin’, and now its just beginning to sprinkle.”
Nearly every week recently we get more Premonitory Signs that The Big One – Another International Financial Crisis of Magnitude of the 2008 Crisis, or even Greater -- is Coming Soon to all of us around the world.
Thus, we first consider these Signs, and then some steps to take to Profit and Protect.
Recently, for Example, we learn The Big Greek Bailout (of a few months ago in which the Eurozone just kicked the Greek Can down the road) did not really Fix The Greek Problem.
Results: More Austerity Coming, and, Probably, eventually a Sovereign Default.
And Ireland needs and has just received a Bailout (how long will that Prop last?). And Portugal, And likely Spain and Italy and Perhaps France and Great Britain!
Given the increasing Interconnectedness of which The Globalists (but not necessarily the Nationalists or Internationalists) are so fond, what happens in the Eurozone or the USA affects all Major Nations.
U.S. Case in Point: The private for-profit Fed’s Q.E. 2 $600 billion ($900 Billion including all items bought e.g. Agency debt) in Money Printed/Digitized actually reduces the Purchasing Power/Wealth of those who already hold their Assets in Dollars. (Similar Argument per Eurozone Q.E. for those who hold their Wealth in Euros.)
Of course, this further impoverishes Consumers and Small Businesses, 70% of U.S. GDP and Job Creation respectively.
Thus Q.E. 1 and 2 hurt Consumers and Small Business, but helps the Mega-Banks (some of whom are shareholders of the Private for-profit Fed) who allow the funds to fatten their Balance Sheets and/or deploy them for speculation.
Yes, we know Q.E. 2 was deployed to buy U.S. Treasuries, but that just piles more interest expense on Taxpayers, while Making the Fed’s Mega-Bank Primary Dealers richer. They handle the U.S. Securities Transactions for a fee after all and since some of them are Shareholders of the Private for-profit Fed, they get a share of The Fed’s profits as well. Note a recent estimate that of the $12 Trillion U.S. National Debt run up as of 2009, some $8 Trillion was interest expense paid to, guess who, The Mega-Bankers.
[Here we take issue with excellent analyst Ellen Brown, who claims Q.E. 2 is not about Saving the Mega-Banks, as was, we agree, Q.E. 1, but rather about “saving” the government from having to raise taxes or cut programs. Yes, Q.E. 2 does in some part have that subsiding effect, but it is nonetheless mainly about continuing to save, and Fatten the Balance Sheets of the Mega-Banks, some of whom are The Fed’s Shareholders, because the additional interest expense (incurred by U.S. Taxpayers via the newly issued Treasuries) is paid to the Mega-Bankers.
Even if the Fed is rebating 85% of its profit on the 2.66% it “earns” from the hundreds of Billions of Government Bonds it Buys (and who knows since we do not, yet, Audit it), 15% is still a tidy sum, and does not include the profits handed to the Mega-Banks via its POMO Operations – i.e. Fees on as much as $20 billion of Transactions per week in September as Graham Summers has documented. (See Summer’s analysis in our “Opportunities to Profitably Escape Paper “Wealth” into 2011” (10/07/10) in the ‘Articles by Deepcaster’ Cache at www.deepcaster.com.)
And that large chunk of the Q.E. 1 and TARP Funds which the Mega-Banks have not otherwise sequestered on Bank Balance Sheets in used, Brown admits, for Speculation and the Dollar Carry-Trade, which she then, strangely, denies has inflated commodities prices. Indeed if the ratio of interest expense to principal payments noted in the Estimate referenced above, holds about 2/3 of the funds use to purchase Treasuries will likely be then used to pay interest on the National Debt, to whom…who else, but the Mega-Banks.]
Thus The Fed fails again, to help the Real Economy.
Moreover, one stated purpose of Q.E. 2 was to support the Bond Market, thus keeping interest rates low, thus helping the housing market.
No success on this Front either. In fact, The Fed’s actions have been counterproductive. Since Q.E. 2 was announced, Bond Prices have fallen and thus interest rates have risen; some 40ish Basis Points (as we write) on the 10-Year over the last three weeks.
Why? Probably in Part because China and Japan have and will likely continue to slow (or stop in the case of China) their buying of U.S. Treasuries.
Indeed, to suppress their own inflation and keep their currency from strengthening, China may actually start seriously selling U.S. T-Securities. It is already moving away from using the U.S. Dollar in Business Transaction e.g. vis a vis bilateral deals with Russia.
So, given the Flak and Counterproductive Results the Fed created with Q.E. 2, it will likely be much harder for them to implement Q.E. 3 and Q.E. 4.
But then who buys U.S. Sovereign or California, or other States Debt late in 2011 and beyond? Q.E. 1 and Q.E. 2 have neither created Recovery nor boosted employment, not a jot.
Indeed, the Prospect of Further Q.E. will likely further harm the bond markets, raise rates, thus further dampening business activity, thus creating More Uncertainty, which leads to even greater unemployment. And Q.E. has already led to carnage in the Muni Bond Market.
What happens when/if The Fed becomes de facto the only Buyer of U.S. Treasuries?
That leaves it to the U.S. Congress (and Eurozone Parliament) to reduce expenditures and create jobs.
And the chances of that successfully and substantially happening?
So what is the Prospect for 2011?
Dramatically Increasing Inflation (and consequent worsening Housing Market) and Unemployment and decreasing Economic Activity.
Indeed high U.S. Inflation is already happening. Real U.S. CPI is already 8.51% per year per Shadowstats.com – see below.
In a word: Stagflation. In our More Appropriate Word: a likely Hyperstagflation.
The result of all this Kicking The Can Down the Road and Main-Street-Injurious Policy from private for-profit The Fed: a Massive Collision of Forces -- China The Fed, U.S. Congress and the Eurozone and other Major Nations, as all increasingly position to Save their own Skins in 2011.
The consequences for the Equities Markets in particular will not be pretty. And other Sectors? Here are some suggestions regarding how to Profit and Protect.
Part of the answer is to liquidate most long Equities positions very soon, by the end of our forecast year-end Santa Claus rally in our view. But then what?
Fortunately, there are Opportunities to insulate oneself from the risks of holding one’s “wealth” in Paper (and to profit as well), Paper which the Takedowns of 2008 and 2009 (and those which we anticipate) have revealed to be less valuable than earlier thought.
Fortunately also, employing Strategies which provide insulation from such Takedowns also provides opportunities to profit, as we indicate below.
But to insulate oneself from the risks, and to position oneself to take advantage of these opportunities for profit, one must first understand the requirements which Paper must meet in order to genuinely represent Value which is likely to endure.
First, thinking one's wealth resides SECURELY in Paper Assets-in-general (or, even more intangibly, in Evanescent Electronic Data stored on some Remote Server) is often unjustified, and, quite risky, as the aforementioned Market Savagings and recent spikes up in the Precious Metals, Crude Oil and Grains have shown.
Consider first that 'Paper/Electronic Assets' typically have NO INTRINSIC VALUE.
Indeed, Paper/Electronic Assets typically have no value at all unless they REPRESENT (or can, if liquidated, reliably generate) 'Purchasing Power' to obtain goods and services, or ownership rights in Tangible Assets.
Here we do NOT focus on Paper/Electronic Data representing Ownership rights in Tangible Assets such as Real Estate. We focus instead on publicly traded securities which, for example, typically represent 'Equity' Ownership in various business enterprises.
We do focus more narrowly on those Equities which, prior to the aforementioned Takedowns, were thought to be Secure Repositories of Wealth but which, as those Takedowns have demonstrated, were not. We characterize these “Assets” as “De-legitimized Paper.”
As the aforementioned Market Takedowns, U.S. Dollar Degradation, and recent Foreclosure Suspensions, inter alia, have demonstrated, the value of de-legitimized paper measured in market terms is often not SECURELY determined -- it fluctuates according to the vagaries of the marketplace. Over the past two-and-a-half years, that market fluctuation for equities has ranged from a high of just over 14,000 in 2007 to a low of about 6,400 and back up to over 11,150ish (basis the Dow) today. That still represents a considerable (over 20%) loss since the 2007 high, and an even greater one if inflation is factored in.
Consider also that to have relatively secure REPRESENTATIONAL value a publicly traded security must:
- Be able to be LIQUIDATED for SIGNIFICANT value (i.e. Profit, or, at least, not a significant loss) in the market regardless of general market fluctuations, and/ or
- Pay dividends, and/or
- Have Genuine Appreciation Potential.
But as the recent Market Crashes including the recent infamous “Flash Crash” show, many “Paper” (and arguably most) Securities do NOT RELIABLY have ANY of the above. They have thus been shown to be “De-legitimized Paper.”
In addition, many publicly traded securities (i.e. Paper/electronic) which can be liquidated for a NOMINAL profit (i.e. considering appreciation and dividends together) do NOT have a REAL Profit but rather only an Illusory one, because of four additional factors:
4. Inflation – Investments, which are subsequently liquidated, must, to show a genuine profit, show a profit in excess of Real Consumer Price Inflation. But Real Consumer Price Inflation is now running at about 8.51% annualized, according to the very credible statistics of Shadowstats.com, and given all the present and prospective Q.E. looks to go much higher.
Shadowstats.com calculates key statistics the way they were calculated in the 1980s and 1990s before Official Data Manipulation began in earnest.
Consider the following Bogus Official versus Real Numbers
Bogus Official Numbers vs. Real Numbers (per Shadowstats.com)
Annual U.S. Consumer Price Inflation reported November 17, 2010
1.17% 8.51% (annualized October, 2010 Rate)
U.S. Unemployment reported November 5, 2010
U.S. GDP Annual Growth/Decline reported November 23, 2010
U.S. M3 reported November 16, 2010 (Month of October, Y.O.Y.)
No Official Report - 3.29%
In sum, to be liquidated for a ‘Real’ Profit, a Security must show a Total Return (gain plus yield) totaling well in excess of CPI currently at 8.51%. (This is why Deepcaster recently recommended Securities yielding 18.5%, 10.6%, 26%, 8%, and 15.6%, when we added them earlier this year to our High-Yield Portfolio.)
5. Fiat Currency Purchasing Power Degradation: (The ‘Flip Side’ of the Inflation Coin) The U.S. Dollar has over the past eight years lost over 30% of its purchasing power. In the middle and long term, the U.S. Dollar’s Purchasing Power will almost surely continue to degrade.
6. Market Intervention by the Fed-led Cartel* of Central Banks in the Precious Metals, Strategic Commodities, and Equities Markets. Such Market Intervention has (and can still) convert otherwise “Safe Haven” Assets (such as paper shares in Precious Metals Producers) into quite vulnerable, and (for some) ultimately, de-valued “Assets.”
*We encourage those who doubt the scope and power of Overt and Covert Interventions by a Fed-led Cartel of Key Central Bankers and Favored Financial Institutions to read Deepcaster’s December, 2009, Special Alert containing a summary overview of Intervention entitled “Forecasts and December, 2009 Special Alert: Profiting From The Cartel’s Dark Interventions - III” and Deepcaster’s July, 2010 Letter entitled "Profit from a Weakening Cartel; Buy Reco; Forecasts: Gold, Silver, Equities, Crude Oil, U.S. Dollar & U.S. T-Notes & T-Bonds" in the ‘Alerts Cache’ and ‘Latest Letter’ Cache at Deepcaster’s website. Also consider the substantial evidence collected by the Gold AntiTrust Action Committee at www.gata.org, including testimony before the CFTC, for information on precious metals price manipulation. Virtually all of the evidence for Intervention has been gleaned from publicly available records. Deepcaster’s profitable recommendations displayed at Deepcaster’s website have been facilitated by attention to these “Interventionals.” Attention to The Interventionals facilitated Deepcaster’s recommending five short positions prior to the Fall, 2008 Market Crash all of which were subsequently liquidated profitably.
But The Cartel’s capacity to Suppress Precious Metals prices has been substantially weakened in recent months. See our recent articles and Forecasts for Precious Metal prices in the ‘Alerts’ and ‘Letters’ Caches at www.deepcaster.com.
7. The (Increasing!) Risk of Hyperinflation which we describe in our recent Article “Velocity–Armageddon Antidotes, & Just Say “No” to 401(k) & IRA Confiscation (09/01/10)”, which can be found in the ‘Articles by Deepcaster’ Cache at www.deepcaster.com.
One Key Point documented in our referenced Article is that Hyperinflation can, and usually does, occur in a Flash resulting in a Lifetime of Paper-Assets-Building Wiped Out, as Weimar Republic Citizens can Attest.
Thus, to realize a Genuine Profit, an investment must actually and potentially “overcome” all seven of the aforementioned, not to mention overcoming typical Adverse Market Action as well.
Given the above hurdles and the magnitude of recent Takedowns, one inference is clear: Any 'Buy and Hold' Strategy will in most cases be doomed to failure.
Thus The Solution to the aforementioned Challenges must be A Strategy.
Indeed, The “Opportunities to Escape Paper ‘Wealth’ in 2011” reside in adopting such a Strategy.
Successful Investors must be Position Traders with a long-term perspective. Deepcaster has developed such a Position Traders Strategy (particularly relevant to the Gold and Silver markets) additional specific details of which are available in Deepcaster’s 3/28/08 Alert "Defeating the Cartel...with Profit" in the 'Alerts' Cache at www.deepcaster.com.
Moreover, that Strategy must not only take account of Fundamentals and Technicals, but also Interventionals as the Summers excerpt above and our Articles demonstrated. In addition, there is a strong preference in that strategy that one’s Paper Assets be linked to Tangible Assets as we describe below.
Generally speaking, with the Major Caveats listed herein, the more closely
one's assets are linked to Tangible Assets, and especially to those Tangible Assets which are in great and relatively inelastic demand, the more secure and potentially profitable one's investments will be, in the long term.
This means, for example, that the Opportunities to Profitably escape Paper Wealth in 2011 lie in Precious Metals, Agricultural products, Consumer staples, selected Energy and similar Tangible Assets Sectors, BUT taking into account the Caveats we note.
Deepcaster has long been, and still is, an advocate of Gold and Silver, as not only the best hedges against Inflation or Deflation, but as having the best Profit Potential. Indeed, These Ultimate Monetary Metals, are our #1 and #2 Selections as the best Fortress Assets for Profit and Protection.
Therefore, Deepcaster has recently made ‘Buy’ Recommendations on a particular form (Resistant to Cartel Takedowns) of these Metals. And, as Regular Readers know, Deepcaster has for weeks maintained these open ‘Buy’ Positions notwithstanding ongoing and prospective Gold and Silver Price Suppression Attempts by the Fed-led Cartel* of Central Bankers.
However, regarding Gold and Silver, as we indicated several Months ago, The Cartel’s* Precious Metals Price Suppression Capacity has been weakened considerably by Recent Revelations catalyzed by GATA, Deepcaster, and others, that e.g. certain Major Gold Repositories have very little of the actual Physical Metal that they claim they have.
This has, thankfully, led to an increased demand for delivery of and possession of Physical Gold and Silver.
Deepcaster sees this late 2010 through early 2011 period as critical for The Cartel. Will they continue to be able to suppress Precious Metals Prices? The next few weeks should tell the tale. [To see Deepcaster’s Forecast regarding whether The Cartel will be able to continue the recently launched Precious Metal Takedown, which we earlier forecast, see our latest Forecast in the ‘Alerts Cache’ at www.deepcaster.com.] Or has the intensified buying and taking possession of Physical Precious Metals made Precious Metals prices immune from substantial suppression?
In any event, in the Middle and Long Term, Gold and Silver are the World’s Best Bets to rise dramatically in terms of all Fiat Currencies.
Thus they are the best Assets to Acquire on Dips and the best way to prepare for The Big One, Coming Soon.
By DEEPCASTER LLC
DEEPCASTER FORTRESS ASSETS LETTER
DEEPCASTER HIGH POTENTIAL SPECULATOR
Wealth Preservation Wealth Enhancement
© 2010 Copyright DeepCaster LLC - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.
DEEPCASTER LLC Archive
© 2005-2013 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.