Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
Stock Market Volatility (VIX) - 25th Mar 24
Stock Market Investor Sentiment - 25th Mar 24
The Federal Reserve Didn't Do Anything But It Had Plenty to Say - 25th Mar 24
Stock Market Breadth - 24th Mar 24
Stock Market Margin Debt Indicator - 24th Mar 24
It’s Easy to Scream Stocks Bubble! - 24th Mar 24
Stocks: What to Make of All This Insider Selling- 24th Mar 24
Money Supply Continues To Fall, Economy Worsens – Investors Don’t Care - 24th Mar 24
Get an Edge in the Crypto Market with Order Flow - 24th Mar 24
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Fed Chairman Warns of “RECOVERY ENDING EVENT” *Video*

Politics / Central Banks Apr 26, 2011 - 07:05 PM GMT

By: Mac_Slavo

Politics

Best Financial Markets Analysis ArticleWhile state sponsored media pundits and government spokespeople make every effort to dispel doubts about the economic recovery, we need look no further than the two highest level officials who preside over the monetary and financial workings of the United States.


In January, Treasury Secretary Tim Geithner all but confirmed that we are literally on the brink of catastrophic collapse when he wrote, in a letter to Congress, that “failure to raise the limit would precipitate a default by the United States” and “would have catastrophic economic consequences that would last for decades.”

In recent testimony before Congress, Federal Reserve Chairman Ben Bernanke echoed similar views, suggesting that not raising the debt limit would be a “recovery ending event.”

(Video follows excerpts and commentary)

It would be an extremely dangerous and very likely recovery ending event.

First, it would almost certainly create a new financial crisis, as firms that rely on receiving their interest and principal do not receive it, and they’re unable to make payments, and so that problem would cascade through the financial markets.

Then there would be a massive loss of confidence in US Treasury securities, which are the deepest, most liquid market in the world. Interest rates would spike, and that would in turn affect many other assets as well as Treasuries.

So, the near-term effect would almost certainly be a very sharp resumption of the kinds of instabilities we saw in 2008.

Even if we were able, somehow…to avoid those kinds of effects, very likely the interest rate that lenders would demand of the US to finance our debt going forward would be higher, reflecting the great riskiness and uncertainty associated with funding the US government, and that would make our fiscal problems all the more severe, because interest payments are part of the deficit. So, it means that cuts would have to be sharper, and taxes increases larger, and those things themselves would also be a negative for the recovery.

Broadly speaking, it would be, I think , a very, very bad outcome for the US economy.

If you’ve ever wondered what signs you should look for to let you know that the system is falling apart, Mr. Bernanke just gave you somewhat of a road map.

The very fact that Messrs. Geithner and Bernanke are discussing catastrophic collapse and recovery ending events suggests that no such recovery has taken place, the financial markets have not been stabilized, and a return to global economic pandemonium is assured.

Regardless of the actions Congress will take – our view is that they will likely further extend the debt ceiling, because kicking the can down the road is a favorite American politician past time – there is no way out. If the only way to hide insolvency is to borrow more money to avoid complete bankruptcy, then the end result, which will include everything Mr. Bernanke and Mr. Geithner outlined above, will happen. It can be no other way at this point.

China, Russia, Japan and out other creditors already know what’s happening and raising the debt ceiling is not going to change their minds.

All it really does is give everyone a little more time to take preventative measures on an individual level.

Assuming that the current state of affairs is the same as or worse than the problems facing the country in 2008, it is safe to say that when the system does finally come unglued, we can look forward to what then Secretary of Treasury Henry Paulson warned Congressional members would happen if they failed to pass the TARP bailout. We provided some details in a February 2010 commentary titled Are You 100% Sure They Saved the System?:

Many of us were told in private conversations that if we voted against this bill on Monday, that the sky would fall, the market would drop two or three thousands points the first day, another couple thousand the second day, and a few members were even told that there would be martial law in America if we voted no.

-House Representative Brad Sherman (D-California) Debate on the House Floor, October 2, 2008

Consider this: If the system was about to meltdown in 2008 when Henry Paulson et. al. told then President Bush and Congressional leaders that we would have soldiers and tanks in the streets if they didn’t get the $700 Billion in bailout funds, then how serious of a problem was this to begin with?

Try to envision this scenario.

The only reason for declaring martial law and for why tanks and soldiers would need to be deployed on our streets is because the entire system as we know it today collapses and a state of emergency through martial law has to be implemented.

We’re talking economic, political and social meltdown on a massive, unprecedented scale. Basically, America as you know it to be today would no longer exist. This is how serious it would have to be if tanks and soldiers were dispatched throughout America.

Assuming the financial and economic systems were, in fact, on the brink of complete and total systemic meltdown, how confident can we really be that we have avoided disaster?

As we’ve mentioned previously, what we are witnessing first hand is the largest debt crisis and collapse in the history of the world. The outcome, as Mr. Bernanke so succinctly put it, will be very, very bad for the US economy – and the American people.

Ben Bernanke testifies before Congress:

Hat tip Charlie McGrath

By Mac Slavo
http://www.shtfplan.com/

Mac Slavo is a small business owner and independent investor focusing on global strategies to protect, preserve and increase wealth during times of economic distress and uncertainty. To read our commentary, news reports and strategies, please visit www.SHTFplan.com

© 2011 Copyright Mac Slavo - 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.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in