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Economy of the Living Dead
Motivations for world government are behind elite manipulations of credit in US economy, credit crunch is getting louder, financial system continues to implode, intrigues of politics in Georgia, war but no response in gold and oil prices, markets too chaotic to make money anymore due to extreme volatility, contemplating the systemic failure of the financial system
The Illuminati are worried and filled with fear over what they have done. In their attempt to continue the fleecing of the sheople, they have watched in horror as the inevitable outcome of their unparalleled fraud, corruption and greed has manifested itself right before their eyes in what can only be described as the ultimate in poetic justice. In their attempt to collapse the US economy and impoverish the US middle class to pave the way for world government, they have destroyed their power base, the bond and derivative markets. It is beyond repair, and even the transfer of losses to the sheople through the stealth tax of hyperinflation imposed by continual bailouts dripping with moral hazard won't change that. The system is broken, and trust between participants in the system, including the always-fragile trust between sovereign nations, is now nonexistent. Bank's won't lend to each other, much less to non-bankers, so the fractional banking multiplier is broken and the banksters are unable to restore their vaporized balance sheets despite a half a trillion of monthly Fed largesse created out of thin air to keep the "living dead" fraudsters walking. Here we are a year later, and the credit-crunch is getting worse instead of better. That is because the system is unregulated, corrupt and opaque, and the major players are all lying pathologically to hide their financial destruction from the public. The solution proposed by our corrupt Treasury Secretary, Hanky Panky Paulson, is to hand over the regulatory reins of our entire financial system to the Fed, which is the mastermind behind the whole evil, devious, fraudulent scheme to bring down our economy. Yeah, like that will inspire confidence in our broken financial system! Further, loan defaults are progressing geometrically as the fraud-laden loans that the Illuminist players made to keep the system afloat, and to ward off recession and depression in the wake of the failure of the dot.com Ponzi scheme, continue to implode in every imaginable category of debt one could think of. As the direct result of this loan fraud, and the accompanying profligate creation of money and credit and totally outrageous interest rate policies implemented by the Fed in collusion with the evil schemers in the executive offices of the corrupt Wall Street fraudsters, much higher interest rates, that will run into double digits sooner than most would think, are now on their way. These destructive new economy-killing interest rates will be imposed by the markets by necessity in order to compensate for massively increased risk caused by mounting defaults and by wildly negative rates of return caused by hyperinflation. The Fed and the ECB are now both irrelevant. They are both impotent to stop these higher rates of return from coming to fruition. They are boxed in and they cannot get out. They have painted themselves into a corner where the raising of interest rates will destroy the economies they are supposed to be protecting and promoting, and where the lowering of interest rates will rapidly stoke hyperinflation which will eventually destroy both US and European economies in any case. Therefore, the ensuing destruction of the multi-trillion dollar bond market and the quadrillion dollar mountain of credit default and interest rate swaps, which is nothing short of being a smoldering volcano with a caldera of toxic waste that is about to blow, are now both a lock. In the wake of this unprecedented Illuminist financial criminality, we are left with a "zombie economy" that it is already dead, but which has been reanimated by Illuminist lies about economic statistics and by deceitful corporate and banking financial statements that are the product of "creative accounting," also known as "lying-through-your-teeth." And all these lies continue unabated with the blessing of our so-called "regulators." From the mouth of Buck-Busting Ben Bernanke to God's ears, all of our problems here in the United States Goldilocks Matrix will soon "moderate." And if you believe that, we have a bridge for sale in Brooklyn, real cheap, but you will have to act quickly before one of the many dollar-dumping sovereign wealth funds grabs it first.
fina As the destruction of the Illuminist's financial power base has transpired, rising superpowers Russia and China have stood by laughing hysterically as the Illuminati have bungled their way through wars in Iraq and Afghanistan in pursuance of the phony "War on Terror." Russia and China must be smiling like the cat that ate the proverbial canary as they have watched the inept, inane forces of "Chaos" not only destroy their financial power base, but their military power base as well. Our struggling military is stretched to the limit, and financially we can no longer support it. This is what Russia and China have been waiting for - the fall of the American Empire. Russia and China have been building huge trade surpluses as the US has been building unsustainable trade deficits, becoming the world's greatest debtor nation when only a few decades ago it was the world's greatest creditor nation. And now, the Illuminati, in their unbelievable arrogance, are stoking the flames for World War IV, as they use their puppet country, Georgia, a former province of the Soviet Union, to bat the Russian hornet's nest. Zbigniew Breszinski, aka Dr. Strangelove, the Brainiac of the European Illuminists, and foreign policy advisor behind-the-scenes for Barack Obama, and who incidentally is madder than a hatter, apparently thinks he can weaken Russia and China, and restore the balance of power, by picking a fight with the Russians right along their border and by eventually causing civil unrest for the Chinese by unleashing Muslim terrorist attacks out of China's heavily Muslim, westernmost Xingjian province. Russia just swatted Georgia like a fly, and the Illuminists gained nothing but Russian ire. Their efforts in China will net similar results.
The Illuminist hope is to eventually distract Russia and China with conflicts of their own along their borders or in nations with which they have crucial economic ties, like Iran, thereby reducing the wealth and military resources of Russia and China as they attempt to level the playing field and keep feeding the US military-industrial complex. They want to try to break up China and Russia in preparation for the implementation of world government, and instead we will get World War IV. The Illuminati will be consumed in the resulting death and destruction. This is nothing short of psychopathic madness.
Making matters worse, Israel has been involved in this whole crazy process. Due to the crucial Baku-Tbilisi-Ceyhan oil pipeline that runs from Azerbaijan, through Georgia, to Turkey and the Black Sea, where the oil is then transported to the Mediterranean for Western consumption and to Israel for its own use and for export to Asian nations by transport to Eilat and the Red Sea, both US and Israeli military advisors are running the military operations in Georgia. This is going to rile the Russians, and that is the last thing that Israel needs. There has been much prophetic talk for decades about a Russian invasion of Israel based on the book of Ezekiel, and now we can certainly see why this might happen. That's right, just keep batting that hornet's nest, and soon we will add nukes to our economic woes. This madness at the behest of big oil is nothing short of surreal. We also note that it is of course okay if Kosovo breaks away from Serbia, but heaven forbid that South Ossetia should break away from Georgia. That is because there is one set of rules for the would-be lords of the universe, and quite a different, and less favorable, set of rules for everyone else.
You may have noticed that oil and gold prices did not respond one iota to all the madness in Georgia and Southern Ossetia. This shows you in spades that gold prices are being suppressed by the cartel, and that oil prices are not driven by news, but rather, the news is used as a pretext for big oil to move oil prices to levels, which they have predetermined in advance. After all, the Illuminati control both the events themselves, and the news coverage about those events. They can push gold down all they want, but it will bounce right back up again because the fundamentals demand it.
In spite of some spectacular one-day gains in the market, which are very common in a bear market what we are witnessing is ongoing de-leveraging. That is why the “Working Group on Financial Markets” is having such a difficult time keeping the stock market up. That is why commodities and precious metals (PM’s) have had such a quick move to the downside. Stocks, bonds, commodities and PM’s with gains have been sold to cover losses elsewhere. Markets are changing gears. This has nothing to do with the issues and their values and everything to do with de-leveraging. Lenders have cut back in a major way and the amount of speculative funds available has diminished in a big way. This isn’t a bust in all the above, it is a correction in everything. The only areas of relative strength are stocks and the dollar and that is because they are being manipulated by our government.
The dynamics are changing. We may be headed back to market normality. A market in which the antics of the PPT would stick out like a sore thumb; where no one professional or otherwise will have any doubt what the elitists in our government are up too. The speculative bubble has burst and a new game is in play. A game of value. The decline in speculation has already seen formerly market neutral strategies foundering. The results at hedge funds have been dismal, victims of wild volatility and creeping illiquidity. The easy days of leveraged spread trades, such as borrowing cheaply and lending at higher levels has become more difficult. All world markets are performing poorly so making successful bets on the long side of the market gets more difficult. That brought about spread trades, long commodities and short financials. That was for specs a trade made in heaven. Both sides were enormously profitable. At the same time everyone was short the dollar – another sure fire winner. The specs were almost all drawn to the same trades. When they exited you saw the results of falling commodity and PM prices and rising prices in the financials. About that juncture, because of further pending bad news, the Treasury and other central banks decided to take the dollar back up if only for the short term. That caused some bullish short covering that drove the USDX from 71.77 to today’s levels close to 76. The results of all this is we have seen massive de-leveraging that has probably not as yet been completed. Now that we better understand what has transpired we are in a better position to deal with it. What is important is that we can see that the stock market and particularly the financials will remain under downward pressure. The dollar’s strength will soon dissipate and commodities and PMs will resume their upward bull markets. Leveraged speculation did play a strong role in commodities price gains, but the basic gains in this venue were due to exceptionally bullish fundamentals that are still strongly in place.
The extreme market volatility in all markets has made trading conditions next to chaotic. The worst volatility that we’ve seen in 48 years. All we are seeing in stocks and the dollar are melt- up bear market rallies.
What most investors do not consider because they are not involved in all markets is that agency debt is under severe pressure as are Treasuries and MBS spreads which have widened, while global bond prices have offered little performance help. Corporate debt has performed poorly and junk bonds even worse. Mortgage related derivatives are in the tank and the municipal market is almost frozen. The gains in financial stocks peaked a week ago. The short covering rally is over.
Earnings reports are fair to poor and they are going to get worse as corporations scramble to pass on increased costs to the consumer. Tightened credit is going to make life miserable for corporations, small businesses and consumers. That will grind on the stock market in a major way. Fannie is not making any more subprime and ALT-A loans, not just because of the risk, but because they do not have the funds to do so. It’s 20% down and good credit or you do not get loan. Both Fannie and Freddie are no longer lenders of last resort. This will further depress an already deeply depressed housing market.
There has been a significant unwinding of short positions and for the time being it has probably exhausted itself. Commodities and PMs have been oversold, but the stock market hasn’t been. Nor has the dollar as yet felt the sting of de-leveraging. At the end of the year expect major hedge fund redemptions, which could wreck havoc on the stock market right after the November election. Commodities and gold and silver have already had their correction. It is time to set new positions in the biggest gold and silver bull market in history.
Over the past 37 years since gold was abandoned and the dollar became a fiat currency, every time the economy got into trouble interest rates were lowered and the supply of money and credit was increased. We believe this time it is going to be different. The banking system is broke and on its knees. A scenario far different than any of the previous crisis situations. Banks cannot lend support because half of them are broke and the other half is trying to shore up their balance sheets. Of course, the Fed could go for broke by lowering interest rates to 1% and increasing the supply of money and credit by 30%. We expect they will eventually do that in desperation. That would collapse the dollar, bring 25% plus inflation, much higher gold, silver and commodity prices and a collapsing dollar and stock and bond markets. The only question we have is when will the Fed go to the next level? We can envision the Fed supplying $2 trillion a month to the financial sector.
It could also be that the Fed has lost control. We don’t think they are there just yet. The signal will be when foreigners start selling Treasuries and refuse to buy more without substantially higher interest rates. In that scenario interest rates would rise rapidly in the real market. That would force a rise in the Fed funds rate, which in turn would take the US economy and the world into depression. That would virtually freeze the issuance of credit to business to business and consumers. We are into credit contraction and de-leveraging. This will strangle economic growth and further deflate asset prices. Gold and silver will continue to be the best place to store your value and watch your assets appreciate.
One thing some of the top banking CEO’s have in common is that they are liars. John Thain of Merrill Lynch has done it three times, Jamie Dimon at Citigroup twice and one each for Richard Fuld of Lehman Brothers, Kerry Killinger of Washington Mutual and Ken Thompson of Wachovia. As we have often recently said, lying has become politically and socially acceptable. Their comments were not opinions. They were outright lies.
Banks may have lost $480 billion but we can assure you they have much further to go. All Wall Street firms have yet to cut operating costs significantly, and have yet to meaningfully write down portfolio assets in stated losses. This shows us that the bankers and the Street are victims of their own fraud and greed. Underwriting and structured products are only now talked about when referring to the history of Wall Street. It tells us like Fannie and Freddie, the banks and perhaps insurance, vehicle manufacturing and our airlines that Wall Street is waiting for nationalization as well. What comes with that nationalization is massive inflation, currency devaluation and eventually a collapse into a total fascist state.
Corporate earnings are falling and many companies are in serious trouble. The banks are the worst off. We do not know what they have on and off the books they haven’t declared. That is why banks won’t lend to each other, or when they do, it is only for several days, Libor is just under its highest yield ever.
The subprime monster won’t have completed its damage until the end of next June. ALT-A loans are in play to reset over the next three years. They are double the volume in dollars of subprimes. Now beginning for the next five years we have Option Arm pick-an-pay loans, whose dollar value is five times greater than subprime and ALT-A loans. $500 billion in ARMs will reset this year more than half of which will become foreclosures, far more than anticipated are simply walking away from their homes. The worst is ahead of us. Three to five years to the bottom and at least five years on the bottom after that. As we predicted bank losses will be over $2 trillion, plus in excess of $2 trillion in losses for Fannie and Freddie. Worse yet, interest rates are higher than a year ago and we forecast mortgage rates ½% higher by the end of the year.
What we have is systemic failure in our banking system; that is being drawn out as long as possible by the Fed, which is hoping for a miracle. All kinds of gimmicky is being employed by the Fed, banks, Wall Street and corporate America. As we said banks alone are looking at $2 trillion in losses. It is not only American banks that are in trouble. The ECB banks took down 40% of the toxic CDOs and SIVs. Housing markets in Spain, Ireland, England, Italy, Australia and New Zealand will take trillions in losses. The amount of money in US banks that is uninsured is more than $2 trillion. America will hit the wall some time within the next three years and when it does there will be no banking system left and what will be in the banks will be worth 50% or more less than it is today due to inflation. Gold is where it is because of de-leveraging and negative bullion borrowing rates. Take advantage of this great opportunity to buy more gold and silver related assets. We also warn you to remove any excess funds from banks and put them in gold and silver assets and Swiss franc government bonds.
Health and life insurance companies now have access to a health credit report drawn from databases containing prescription drug records of more than 200 million Americans. Next is data from clinical and pathological laboratories. If you want insurance in America you have to submit. If you do not, you do not get insured.
When Wall Street wants something done Washington gets it done. That is because the White House and Congress are paid off via campaign contributions and other goodies. This is called selective generosity for influential financial losers, a process that defames and deforms our democracy. All parties are fast nationalizing our country into a powerful corporate fascist state. In spite of Fed money and credit creation to keep financial firms afloat banks face huge losses ahead. The biggest bailouts will come after the election and they will be giant. No one wants to upset voters by talking about it now. The debate has been silenced. Already the Fed has given over $500 billion in relief money secretly to the largest and most prestigious mega-banks and investment firms, while homeowners get thrown crumbs if anything at all.
These bailouts are going to the elitists and their institutions whose greedy and reckless behavior caused this financial mess. They get everything and give absolutely nothing. These are the all-knowing masters of the universe who live on Park Avenue in $420 million mega condos. The public is bankrolling these pukes.
How is it that the American public guarantees $29 billion of Bear Stearns in a case of financial assassination, yet it can’t come up with $4 billion for Cleveland, Detroit and other urban areas? These same bankers are kicking people out of homes that the bankers should have not lent to in the first place. What we find is that markets do not make wiser decisions than governments. This leaves us with a marriage of business and government that the taxpayer gets to pay for. Banking and Wall Street makes billions and when they fail we get to pay for it. As we said, before it took place, the repeal of Glass-Steagall Act would be a disaster. Thus ten years after its passage it has become a disaster. It has led back to incestuous self-dealing and fraudulent stock and bond valuations, the same combination that led to the market crash and the Great Depression. Yes, we have a repeat on our hands.
First it was the elimination of usury laws in the 1980s that led to outrageous credit card interest and payday loans and then graduation to subprime mortgages. All historical moral principles have been thrown to the wind. It is capital over labor, creditors over debtors, and finance over real economy. A process that led to free trade, globalization, offshoring and outsourcing, which has led to the destruction of our economy. It targeted wages first for corporate profit by allowing our country to be flooded with illegal aliens to provide slave labor. Government, under George and the neocons has refused to enforce regulations that restrained the excesses of banking and finance, just like they have refused to execute the laws selectively throughout a wide spectrum. A glaring example is the illegal alien problem. All these instances of refusal to apply regulatory laws have destabilized the overall economy.
The Fed cannot be blamed for making mistakes or de-reflection of duty. That is because they planned it this way. Instead of the Fed being run out of town on a rail by Congress, they and the Treasury want to give the Fed new super cop powers. They want to expand Fed powers over banking to include the investment houses and brokerage firms. Why should we reward failure and everyone with a brain knows the Fed has not only failed us, but is the epicenter of failure. This shows you the power the elitists hold over Congress. They own Congress. We have been betrayed by the Fed and the foreign and domestic bankers that own the Fed. Isn’t it obvious that the Fed is an unreliable watchdog biased and compromised by its conflicting obligations and its favoritism toward its owners?
If congress allows the Fed’s expansion and its new stolen powers the privileged group of protected financial interest will grow larger and many major elitist conglomerates will come under its wing. Big corporations and private equity groups would all want to be included. American’s chances of stopping this new power grab is almost nonexistent. McCain, Obama and Congress have already been purchased so the elitists will again have its way with us. The exception to that is if we could defeat most of the incumbents in Congress.
While this charade continues, catastrophe looms. This problem dwarfs the “Great Depression” and no one wants to know or hear about it. Today we have a balance of payments deficit of 6% of GDP and are in debt up to our eyeballs. They didn’t have those problems in the 1930s and we were still on a gold standard. Foreigners own trillions of dollars of our debt and our dollars. We are already in the vicious cycle that was the Great Depression and there is no way out until the system is purged. Once deflationary forces take hold, and they will in time, you can kiss it all good-bye unless you own gold.
Economy of the Living Dead
Motivations for world government are behind elite manipulations of credit in US economy, credit crunch is getting louder, financial system continues to implode, intrigues of politics in Georgia, war but no response in gold and oil prices, markets too chaotic to make money anymore due to extreme volatility, contemplating the systemic failure of the financial system
The Illuminati are worried and filled with fear over what they have done. In their attempt to continue the fleecing of the sheople, they have watched in horror as the inevitable outcome of their unparalleled fraud, corruption and greed has manifested itself right before their eyes in what can only be described as the ultimate in poetic justice. In their attempt to collapse the US economy and impoverish the US middle class to pave the way for world government, they have destroyed their power base, the bond and derivative markets. It is beyond repair, and even the transfer of losses to the sheople through the stealth tax of hyperinflation imposed by continual bailouts dripping with moral hazard won't change that. The system is broken, and trust between participants in the system, including the always-fragile trust between sovereign nations, is now nonexistent. Bank's won't lend to each other, much less to non-bankers, so the fractional banking multiplier is broken and the banksters are unable to restore their vaporized balance sheets despite a half a trillion of monthly Fed largesse created out of thin air to keep the "living dead" fraudsters walking. Here we are a year later, and the credit-crunch is getting worse instead of better. That is because the system is unregulated, corrupt and opaque, and the major players are all lying pathologically to hide their financial destruction from the public. The solution proposed by our corrupt Treasury Secretary, Hanky Panky Paulson, is to hand over the regulatory reins of our entire financial system to the Fed, which is the mastermind behind the whole evil, devious, fraudulent scheme to bring down our economy. Yeah, like that will inspire confidence in our broken financial system! Further, loan defaults are progressing geometrically as the fraud-laden loans that the Illuminist players made to keep the system afloat, and to ward off recession and depression in the wake of the failure of the dot.com Ponzi scheme, continue to implode in every imaginable category of debt one could think of. As the direct result of this loan fraud, and the accompanying profligate creation of money and credit and totally outrageous interest rate policies implemented by the Fed in collusion with the evil schemers in the executive offices of the corrupt Wall Street fraudsters, much higher interest rates, that will run into double digits sooner than most would think, are now on their way. These destructive new economy-killing interest rates will be imposed by the markets by necessity in order to compensate for massively increased risk caused by mounting defaults and by wildly negative rates of return caused by hyperinflation. The Fed and the ECB are now both irrelevant. They are both impotent to stop these higher rates of return from coming to fruition. They are boxed in and they cannot get out. They have painted themselves into a corner where the raising of interest rates will destroy the economies they are supposed to be protecting and promoting, and where the lowering of interest rates will rapidly stoke hyperinflation which will eventually destroy both US and European economies in any case. Therefore, the ensuing destruction of the multi-trillion dollar bond market and the quadrillion dollar mountain of credit default and interest rate swaps, which is nothing short of being a smoldering volcano with a caldera of toxic waste that is about to blow, are now both a lock. In the wake of this unprecedented Illuminist financial criminality, we are left with a "zombie economy" that it is already dead, but which has been reanimated by Illuminist lies about economic statistics and by deceitful corporate and banking financial statements that are the product of "creative accounting," also known as "lying-through-your-teeth." And all these lies continue unabated with the blessing of our so-called "regulators." From the mouth of Buck-Busting Ben Bernanke to God's ears, all of our problems here in the United States Goldilocks Matrix will soon "moderate." And if you believe that, we have a bridge for sale in Brooklyn, real cheap, but you will have to act quickly before one of the many dollar-dumping sovereign wealth funds grabs it first.
fina As the destruction of the Illuminist's financial power base has transpired, rising superpowers Russia and China have stood by laughing hysterically as the Illuminati have bungled their way through wars in Iraq and Afghanistan in pursuance of the phony "War on Terror." Russia and China must be smiling like the cat that ate the proverbial canary as they have watched the inept, inane forces of "Chaos" not only destroy their financial power base, but their military power base as well. Our struggling military is stretched to the limit, and financially we can no longer support it. This is what Russia and China have been waiting for - the fall of the American Empire. Russia and China have been building huge trade surpluses as the US has been building unsustainable trade deficits, becoming the world's greatest debtor nation when only a few decades ago it was the world's greatest creditor nation. And now, the Illuminati, in their unbelievable arrogance, are stoking the flames for World War IV, as they use their puppet country, Georgia, a former province of the Soviet Union, to bat the Russian hornet's nest. Zbigniew Breszinski, aka Dr. Strangelove, the Brainiac of the European Illuminists, and foreign policy advisor behind-the-scenes for Barack Obama, and who incidentally is madder than a hatter, apparently thinks he can weaken Russia and China, and restore the balance of power, by picking a fight with the Russians right along their border and by eventually causing civil unrest for the Chinese by unleashing Muslim terrorist attacks out of China's heavily Muslim, westernmost Xingjian province. Russia just swatted Georgia like a fly, and the Illuminists gained nothing but Russian ire. Their efforts in China will net similar results.
The Illuminist hope is to eventually distract Russia and China with conflicts of their own along their borders or in nations with which they have crucial economic ties, like Iran, thereby reducing the wealth and military resources of Russia and China as they attempt to level the playing field and keep feeding the US military-industrial complex. They want to try to break up China and Russia in preparation for the implementation of world government, and instead we will get World War IV. The Illuminati will be consumed in the resulting death and destruction. This is nothing short of psychopathic madness.
Making matters worse, Israel has been involved in this whole crazy process. Due to the crucial Baku-Tbilisi-Ceyhan oil pipeline that runs from Azerbaijan, through Georgia, to Turkey and the Black Sea, where the oil is then transported to the Mediterranean for Western consumption and to Israel for its own use and for export to Asian nations by transport to Eilat and the Red Sea, both US and Israeli military advisors are running the military operations in Georgia. This is going to rile the Russians, and that is the last thing that Israel needs. There has been much prophetic talk for decades about a Russian invasion of Israel based on the book of Ezekiel, and now we can certainly see why this might happen. That's right, just keep batting that hornet's nest, and soon we will add nukes to our economic woes. This madness at the behest of big oil is nothing short of surreal. We also note that it is of course okay if Kosovo breaks away from Serbia, but heaven forbid that South Ossetia should break away from Georgia. That is because there is one set of rules for the would-be lords of the universe, and quite a different, and less favorable, set of rules for everyone else.
You may have noticed that oil and gold prices did not respond one iota to all the madness in Georgia and Southern Ossetia. This shows you in spades that gold prices are being suppressed by the cartel, and that oil prices are not driven by news, but rather, the news is used as a pretext for big oil to move oil prices to levels, which they have predetermined in advance. After all, the Illuminati control both the events themselves, and the news coverage about those events. They can push gold down all they want, but it will bounce right back up again because the fundamentals demand it.
In spite of some spectacular one-day gains in the market, which are very common in a bear market what we are witnessing is ongoing de-leveraging. That is why the “Working Group on Financial Markets” is having such a difficult time keeping the stock market up. That is why commodities and precious metals (PM’s) have had such a quick move to the downside. Stocks, bonds, commodities and PM’s with gains have been sold to cover losses elsewhere. Markets are changing gears. This has nothing to do with the issues and their values and everything to do with de-leveraging. Lenders have cut back in a major way and the amount of speculative funds available has diminished in a big way. This isn’t a bust in all the above, it is a correction in everything. The only areas of relative strength are stocks and the dollar and that is because they are being manipulated by our government.
The dynamics are changing. We may be headed back to market normality. A market in which the antics of the PPT would stick out like a sore thumb; where no one professional or otherwise will have any doubt what the elitists in our government are up too. The speculative bubble has burst and a new game is in play. A game of value. The decline in speculation has already seen formerly market neutral strategies foundering. The results at hedge funds have been dismal, victims of wild volatility and creeping illiquidity. The easy days of leveraged spread trades, such as borrowing cheaply and lending at higher levels has become more difficult. All world markets are performing poorly so making successful bets on the long side of the market gets more difficult. That brought about spread trades, long commodities and short financials. That was for specs a trade made in heaven. Both sides were enormously profitable. At the same time everyone was short the dollar – another sure fire winner. The specs were almost all drawn to the same trades. When they exited you saw the results of falling commodity and PM prices and rising prices in the financials. About that juncture, because of further pending bad news, the Treasury and other central banks decided to take the dollar back up if only for the short term. That caused some bullish short covering that drove the USDX from 71.77 to today’s levels close to 76. The results of all this is we have seen massive de-leveraging that has probably not as yet been completed. Now that we better understand what has transpired we are in a better position to deal with it. What is important is that we can see that the stock market and particularly the financials will remain under downward pressure. The dollar’s strength will soon dissipate and commodities and PMs will resume their upward bull markets. Leveraged speculation did play a strong role in commodities price gains, but the basic gains in this venue were due to exceptionally bullish fundamentals that are still strongly in place.
The extreme market volatility in all markets has made trading conditions next to chaotic. The worst volatility that we’ve seen in 48 years. All we are seeing in stocks and the dollar are melt- up bear market rallies.
What most investors do not consider because they are not involved in all markets is that agency debt is under severe pressure as are Treasuries and MBS spreads which have widened, while global bond prices have offered little performance help. Corporate debt has performed poorly and junk bonds even worse. Mortgage related derivatives are in the tank and the municipal market is almost frozen. The gains in financial stocks peaked a week ago. The short covering rally is over.
Earnings reports are fair to poor and they are going to get worse as corporations scramble to pass on increased costs to the consumer. Tightened credit is going to make life miserable for corporations, small businesses and consumers. That will grind on the stock market in a major way. Fannie is not making any more subprime and ALT-A loans, not just because of the risk, but because they do not have the funds to do so. It’s 20% down and good credit or you do not get loan. Both Fannie and Freddie are no longer lenders of last resort. This will further depress an already deeply depressed housing market.
There has been a significant unwinding of short positions and for the time being it has probably exhausted itself. Commodities and PMs have been oversold, but the stock market hasn’t been. Nor has the dollar as yet felt the sting of de-leveraging. At the end of the year expect major hedge fund redemptions, which could wreck havoc on the stock market right after the November election. Commodities and gold and silver have already had their correction. It is time to set new positions in the biggest gold and silver bull market in history.
Over the past 37 years since gold was abandoned and the dollar became a fiat currency, every time the economy got into trouble interest rates were lowered and the supply of money and credit was increased. We believe this time it is going to be different. The banking system is broke and on its knees. A scenario far different than any of the previous crisis situations. Banks cannot lend support because half of them are broke and the other half is trying to shore up their balance sheets. Of course, the Fed could go for broke by lowering interest rates to 1% and increasing the supply of money and credit by 30%. We expect they will eventually do that in desperation. That would collapse the dollar, bring 25% plus inflation, much higher gold, silver and commodity prices and a collapsing dollar and stock and bond markets. The only question we have is when will the Fed go to the next level? We can envision the Fed supplying $2 trillion a month to the financial sector.
It could also be that the Fed has lost control. We don’t think they are there just yet. The signal will be when foreigners start selling Treasuries and refuse to buy more without substantially higher interest rates. In that scenario interest rates would rise rapidly in the real market. That would force a rise in the Fed funds rate, which in turn would take the US economy and the world into depression. That would virtually freeze the issuance of credit to business to business and consumers. We are into credit contraction and de-leveraging. This will strangle economic growth and further deflate asset prices. Gold and silver will continue to be the best place to store your value and watch your assets appreciate.
One thing some of the top banking CEO’s have in common is that they are liars. John Thain of Merrill Lynch has done it three times, Jamie Dimon at Citigroup twice and one each for Richard Fuld of Lehman Brothers, Kerry Killinger of Washington Mutual and Ken Thompson of Wachovia. As we have often recently said, lying has become politically and socially acceptable. Their comments were not opinions. They were outright lies.
Banks may have lost $480 billion but we can assure you they have much further to go. All Wall Street firms have yet to cut operating costs significantly, and have yet to meaningfully write down portfolio assets in stated losses. This shows us that the bankers and the Street are victims of their own fraud and greed. Underwriting and structured products are only now talked about when referring to the history of Wall Street. It tells us like Fannie and Freddie, the banks and perhaps insurance, vehicle manufacturing and our airlines that Wall Street is waiting for nationalization as well. What comes with that nationalization is massive inflation, currency devaluation and eventually a collapse into a total fascist state.
Corporate earnings are falling and many companies are in serious trouble. The banks are the worst off. We do not know what they have on and off the books they haven’t declared. That is why banks won’t lend to each other, or when they do, it is only for several days, Libor is just under its highest yield ever.
The subprime monster won’t have completed its damage until the end of next June. ALT-A loans are in play to reset over the next three years. They are double the volume in dollars of subprimes. Now beginning for the next five years we have Option Arm pick-an-pay loans, whose dollar value is five times greater than subprime and ALT-A loans. $500 billion in ARMs will reset this year more than half of which will become foreclosures, far more than anticipated are simply walking away from their homes. The worst is ahead of us. Three to five years to the bottom and at least five years on the bottom after that. As we predicted bank losses will be over $2 trillion, plus in excess of $2 trillion in losses for Fannie and Freddie. Worse yet, interest rates are higher than a year ago and we forecast mortgage rates ½% higher by the end of the year.
What we have is systemic failure in our banking system; that is being drawn out as long as possible by the Fed, which is hoping for a miracle. All kinds of gimmicky is being employed by the Fed, banks, Wall Street and corporate America. As we said banks alone are looking at $2 trillion in losses. It is not only American banks that are in trouble. The ECB banks took down 40% of the toxic CDOs and SIVs. Housing markets in Spain, Ireland, England, Italy, Australia and New Zealand will take trillions in losses. The amount of money in US banks that is uninsured is more than $2 trillion. America will hit the wall some time within the next three years and when it does there will be no banking system left and what will be in the banks will be worth 50% or more less than it is today due to inflation. Gold is where it is because of de-leveraging and negative bullion borrowing rates. Take advantage of this great opportunity to buy more gold and silver related assets. We also warn you to remove any excess funds from banks and put them in gold and silver assets and Swiss franc government bonds.
Health and life insurance companies now have access to a health credit report drawn from databases containing prescription drug records of more than 200 million Americans. Next is data from clinical and pathological laboratories. If you want insurance in America you have to submit. If you do not, you do not get insured.
When Wall Street wants something done Washington gets it done. That is because the White House and Congress are paid off via campaign contributions and other goodies. This is called selective generosity for influential financial losers, a process that defames and deforms our democracy. All parties are fast nationalizing our country into a powerful corporate fascist state. In spite of Fed money and credit creation to keep financial firms afloat banks face huge losses ahead. The biggest bailouts will come after the election and they will be giant. No one wants to upset voters by talking about it now. The debate has been silenced. Already the Fed has given over $500 billion in relief money secretly to the largest and most prestigious mega-banks and investment firms, while homeowners get thrown crumbs if anything at all.
These bailouts are going to the elitists and their institutions whose greedy and reckless behavior caused this financial mess. They get everything and give absolutely nothing. These are the all-knowing masters of the universe who live on Park Avenue in $420 million mega condos. The public is bankrolling these pukes.
How is it that the American public guarantees $29 billion of Bear Stearns in a case of financial assassination, yet it can’t come up with $4 billion for Cleveland, Detroit and other urban areas? These same bankers are kicking people out of homes that the bankers should have not lent to in the first place. What we find is that markets do not make wiser decisions than governments. This leaves us with a marriage of business and government that the taxpayer gets to pay for. Banking and Wall Street makes billions and when they fail we get to pay for it. As we said, before it took place, the repeal of Glass-Steagall Act would be a disaster. Thus ten years after its passage it has become a disaster. It has led back to incestuous self-dealing and fraudulent stock and bond valuations, the same combination that led to the market crash and the Great Depression. Yes, we have a repeat on our hands.
First it was the elimination of usury laws in the 1980s that led to outrageous credit card interest and payday loans and then graduation to subprime mortgages. All historical moral principles have been thrown to the wind. It is capital over labor, creditors over debtors, and finance over real economy. A process that led to free trade, globalization, offshoring and outsourcing, which has led to the destruction of our economy. It targeted wages first for corporate profit by allowing our country to be flooded with illegal aliens to provide slave labor. Government, under George and the neocons has refused to enforce regulations that restrained the excesses of banking and finance, just like they have refused to execute the laws selectively throughout a wide spectrum. A glaring example is the illegal alien problem. All these instances of refusal to apply regulatory laws have destabilized the overall economy.
The Fed cannot be blamed for making mistakes or de-reflection of duty. That is because they planned it this way. Instead of the Fed being run out of town on a rail by Congress, they and the Treasury want to give the Fed new super cop powers. They want to expand Fed powers over banking to include the investment houses and brokerage firms. Why should we reward failure and everyone with a brain knows the Fed has not only failed us, but is the epicenter of failure. This shows you the power the elitists hold over Congress. They own Congress. We have been betrayed by the Fed and the foreign and domestic bankers that own the Fed. Isn’t it obvious that the Fed is an unreliable watchdog biased and compromised by its conflicting obligations and its favoritism toward its owners?
If congress allows the Fed’s expansion and its new stolen powers the privileged group of protected financial interest will grow larger and many major elitist conglomerates will come under its wing. Big corporations and private equity groups would all want to be included. American’s chances of stopping this new power grab is almost nonexistent. McCain, Obama and Congress have already been purchased so the elitists will again have its way with us. The exception to that is if we could defeat most of the incumbents in Congress.
While this charade continues, catastrophe looms. This problem dwarfs the “Great Depression” and no one wants to know or hear about it. Today we have a balance of payments deficit of 6% of GDP and are in debt up to our eyeballs. They didn’t have those problems in the 1930s and we were still on a gold standard. Foreigners own trillions of dollars of our debt and our dollars. We are already in the vicious cycle that was the Great Depression and there is no way out until the system is purged. Once deflationary forces take hold, and they will in time, you can kiss it all good-bye unless you own gold.
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