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Elliott Wave Trading

Essential Investor Preparations for The Big Crisis

Stock-Markets / Financial Markets 2012 Feb 03, 2012 - 10:12 AM GMT

By: DeepCaster_LLC

Stock-Markets

Best Financial Markets Analysis ArticleThe U.S. economic and systemic-solvency crises of the last five years continue to deteriorate.  Yet they remain just the precursors to the coming Great Collapse: a hyperinflationary great depression.  The unfolding circumstance will encompass a complete loss in the purchasing power of the U.S. dollar; a collapse in the normal stream of U.S. commercial and economic activity; a collapse in the U.S. financial system, as we know it; and a likely realignment of the U.S. political environment.  Outside timing on the hyperinflation remains 2014, but events of the last year have accelerated the movement towards this ultimate dollar catastrophe.  Following Mr. Bernanke’s extraordinary efforts to debase the U.S. currency in late-2010, the dollar had lost its traditional safe-haven status by early-2011.  Whatever global confidence had remained behind the U.S dollar was lost in July and August.  That was in response to the lack of political will—shown by those who control the White House and Congress—to address the long-range insolvency of the U.S. government, and as a result of the later credit-rating downgrade to U.S. Treasury debt.


The economy has underperformed and likely will continue to underperform consensus forecasts by a significant margin.  In turn, weaker-than-expected economic growth will mean significantly worse-than-expected federal budget deficits, Treasury funding needs and banking-system solvency conditions. 

With the U.S. election just nine months off, political pressures will mount to favor fiscal stimulus measures instead of restraint. …Consistent with the precedent set in 2008, the Fed, and likely the Treasury, also will remain in place to do whatever is needed, at whatever cost, to prevent systemic collapse in the United States.  All of these actions, though, have costs in terms of higher domestic inflation and intensified dollar debasement.

The U.S. dollar remains highly vulnerable to massive, panicked selling, at any time, with little or no warning.  The next round of Federal Reserve or U.S. government easing or stimulus could be the proximal trigger for such a currency panic and/or for strong efforts to strip the U.S. currency of its global reserve currency status.

As the advance squalls from this great financial tempest come ashore, the government could be expected to launch a variety of efforts at forestalling the hyperinflation’s landfall, but such efforts will buy little time…”

 

 

John Williams, shadowstats.com, “Hyperinflation 2012”, 1/25/12

Ominously, just last December 2011, Ostensible U.S. Ally Japan, and China, agreed to a currency Swap Arrangement. This move further eroded the status of the U.S. Dollar as the World’s Reserve Currency.

More importantly it underlines the Fundamental Flaw not only in the U.S. Dollar, but also in the world’s other major Currencies – they are Pure Fiat Currencies… Keynesian Spawn.

Having no intrinsic value, Fiat Currencies facilitate a variety of destabilizing phenomena. One is that their Purchasing Power is easy to debase whether by Avaricious Mega-Bankers or by Politicians who want to reward their constituents, but not have them pay for their borrowed benefits currently. A typical result is The Great Currency Purchasing Power Degradation we are now seeing.

The U.S. Dollar has lost over 95% of its Purchasing Power since the Private for-Profit Fed was established in 1913 and the amount of Interest Taxpayers have paid the Mega-Bank Owners of the Fed since then is in the $Trillions.

Earlier this week an informative and widely read newsletter pompously intoned: “Washington has decided to kill the dollar.” We and a few others have been saying so for years. (See e.g.,”Dire Economic Forecast Reveals Profit Opportunities & Cartel ‘End Game’ Threat” (6/20/08) in the Articles by Deepcaster at deepcaster.com.

The U.S. now continues on such a path (with the Euro following along) and it has already led it to the threshold of Hyperinflation with 10.57% per year Real Inflation per shadowstats.com, (Note 1) Official Figures are Bogus.

Shadowstats Proprietor, Economist, and Statistician Extraordinaire John Williams tells it like it is (Rara Avis!).

The U.S. is at the threshold of a Hyperinflationary Great Depression.

Consequences and Essential Preparations:

“The effects of QE2 included debasing the U.S. dollar.  As the dollar weakened against other currencies, oil prices soared, and that spiked U.S. consumer inflation.  Although the Fed likes to tout “core” inflation, net of food and energy costs, the oil inflation also has begun to spread into the broader economy.

 

“The economic and systemic crises, triggered by the collapse of debt excesses that had been encouraged actively by the Greenspan Federal Reserve, have been centered on the U.S. financial system. … then-Federal Reserve Chairman Alan Greenspan played along with the political and banking systems.  He made policy decisions to steal economic activity from the future, fueling economic growth of the last decade largely through debt expansion.

“The Greenspan Fed pushed for ever-greater systemic leverage… Also complicit in this broad malfeasance was the U.S. government, including both major political parties in successive Administrations and Congresses.

“As with consumers, though, the federal government could not make ends meet.  Driven by self-serving politics aimed at appeasing that portion of the electorate that could be kept docile through ever-expanding government programs and spending, political Washington became dependent on ever-expanding federal deficit spending, unfunded obligations and debt.

“While Wall Street may hail any artificial propping it can get from the Fed’s efforts to support the markets, more than “moderate” related declines in the U.S. dollar’s exchange rate destroy any illusions of stock gains and savage the U.S. consumers’ dollar purchasing power.  A declining dollar can turn U.S. stock profits into losses for those living outside the dollar-denominated world, as funds are converted back to the strengthening currency domestic to the investor.  Inflation driven by dollar weakness will do the same for those in a U.S. dollar-denominated environment, where, eventually, inflation can turn U.S. stock profits into real (inflation-adjusted) losses.”

John Williams at shadowstats.com, “Hyperinflation 2012”, 1/25/12

Essential Preparations

The U.S. Dollar’s Ultimate Crash will likely be Rapid, and because of its (then former) Reserve Currency Status will be felt around the world. Williams puts the no-later-than date at 2014.

Only very few Assets will be Relatively Immune to its dramatically Negative Effects.

But before then there will be as he says, “Advance Squalls” coming ashore, (the 2008-2009 Crash was one and MF Global bankruptcy another) so it is important to prepare now.

Just consider that the Fed-led Cartel ‘End Game’ Plan is set. (See Note 4 re Cartel) All that Prior and Ongoing Cartel Money and Credit Creation will likely lead to Hyperinflation followed by Collapse and a Depression (Think Weimar Republic or Zimbabwe).

Bob Chapman describes one likely course of events.

Here we have QE 3 in the works as we predicted months ago. We said it would consist of the Fed buying the banks garbage so they have cash to follow the Fed’s orders. Those orders will be to buy Treasuries, Agencies and to make loans to small and medium companies. Before the Fed bought $1.4 trillion of this paper, mostly MBS and CDO’s. We never found out what the Fed paid for previous purchases and we won’t this time either. This is another gift the Fed, or should we say taxpayer gifts to the banks. What we are seeing in Europe and again shortly here is another stuffing of the system with money and credit. The Fed is headed down the road of no return and they know exactly what they are doing. That is playing money and credit creation to the bitter end. Historically no central bank has had the power to do this. If played out to the end we have to expect hyperinflationary depression, which will end in a deflationary depressionary collapse. This will destroy the value of the US dollar and its purchasing power. The entire system will probably collapse to a great extent including perhaps 60% of commerce, 40% to 50% unemployment, and the end of the financial system and resorting to bartering, the social support system and government. They will all collapse, so you had better prepare for it. All this will be expedited if Ron Paul is not elected our next president. If he were to be elected he could short-circuit many programs and policies that are destroying our nation.

 

Bob Chapman, The International Forecaster

theinternationalforecaster.com, February 1, 2012

 

Recommendations and Observations

  1. Buy Physical Gold and Silver to be held in Personal (not Bank Vaults) Possession, and Mining Shares with a Caveat.
  2. The Caveat re Mining Shares is that they are “Paper”/Digital Securities. Thus because a Dollar Crash and the “squalls” leading up to it will affect all Paper/Digital Money flows, invest in solid Miners Now, but be prepared to continue to re-evaluate the “Money Flows Risk” before The Great Dollar Crash.
  3. That Impending Great Crash will lead to numerous Counter Party Failures. It is thus essential to be out of Assets with Great Counter-Party Failure Risk prior to The Great Crash.
  4. But Prior to that Crash, it is reasonable to Incur Counter Party Risk, provided one plans to be “out” in time (a challenging task!).

In making this Critical Timing Determination to evaluate the Financial and Economic Squalls as they come ashore. One of Deepcaster’s Ongoing Primary Goals is to help our readers make such Timing Judgments. Thus we include Forecasts for most Major Sectors in each week’s letter or Alert. 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.

  1. Given the aforementioned Real Inflation Reality, it is essential that one Aim for Total Return (Gains plus Yield) in excess of that (10.57% Real Inflation in the U.S., e.g.). Deepcaster has designed its High Yield Portfolio with that Aim. Those selections had recent Yields of 18.5%, 8.6%, 10.6%, 26%, 6.7%, 8%, 10.6%, 10% and 15.6% when added to the Portfolio. (See Note 2)
  2. Become familiar with the ongoing Cartel ‘End Game’ which we have described in several articles including “Gold-Freedom versus The Cartel ‘End-Game’ & A Strategy for Surmounting It (09/23/10)” and “Surmounting The Armageddon Scenario & Cartel ‘End Game’(2/26/10)” in “Articles by Deepcaster” Cache at deepcaster.com.
  3. As well as investing in Precious Metals, Invest in Tangible Assets in relatively Inelastic Demand. We specifically, for example, have recommended Specific Agricultural investments in recent Alerts. (See Note 3)
  4. Consider seriously getting out of variable-rate debt and into fixed rate debt.
  5. Get regular Input from Independent News Sources. Several Financial and other Mainstream Media periodically Manufacture or Censor or Spin Real News.
  6. Prepare to Barter. Silver coins and Canned Food are useful barter items.

And Bill Gross properly blames The Fed for

“We are witnessing the death of abundance and the borning of austerity, for what may be a long long time. Monetary and Fiscal Excesses carry with them explicit costs…significant costs that may be ahead for a global economy and financial marketplace still functioning under the assumption that cheap and abundant central bank credit is always a positive dynamic.”

 

Bill Gross, PIMCO 2/1/12

True, but perhaps the Understatement of the Year.

By DEEPCASTER LLC

www.deepcaster.com
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© 2012 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

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