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Originally Posted by randallscott35
Amazing what has gone on in this country from when this thread was started to now. The only asset class up in the roughly 2 years since I started this thread is in fact gold, despite the Chicken Little ribbing I took. And for those who think I am simply talking my book, I have no physical gold so I didn't take my own advice.
First off, the writing was on the wall over a year ago in my last post. Fraud is fraud. When you read reports like the ones Citigroup put out 2 years ago you knew what the outcome would be. I'm surprised the outrage isn't similar to Enron b/c the differences are minute. For instance the people in AIG who took on half a trillion in liability and put up no collateral are criminals, no different than anything that went on at Enron. Yet these people are allowed to keep their jobs at most levels. People at Merrill and BAC should be in jail. The fact that they are stonewalling an investigation into the bonuses given out under the tax payer's noses is disgraceful. But enough about the past, lets look at the future.
I'd like to be positive about some of this but I can't be. There are 2 choices facing this country, neither of them a happy outcome. One is to stop saving insolvent companies, including a more than half the banks in this country and sell off their assets to healthy banks at firesale prices. That would be a start.
As an aside notice that the negative savings rate has reversed, something people thought the US consumer would never do.
Ironically the dollar weakened to a staggering 1.62 against the Euro last summer and has since strengthened to the point of 1.26. Be clear, this is an example of being the prettiest ugly girl at the dance. The rest of the world is in worse shape if that can be imagined. Eastern European defaults are on the horizon because the European Union isn't "United" but more like puzzle pieces. And the PIGS, Portugal Italy Greece and Spain have debt to GDP issues that Germany doesn't want to help.
Hyperinflation vs. deflation---simply put we are a bankrupt country who is more bankrupt by the day with the policies of this administration. IF they monetize treasuries, aka buy bonds they are printing money and it will result in a dislocation in the bond market and likely a plunge in the currency within hours. Remember the bond market dwarfs the stock market. While Bernanke has hinted he would do this, he will in fact not do it. The truth is hyperinflation destroys governments. Deflation actually strengthens currencies but at the cost of imploding the general economy and setting off debt time bombs all over the place....The risks to the government and the Treasury are in fact real. In fact, allowing the stock market to continue to plunge is what they should do. The flight to safety in the bond market is needed in order to sell the massive amounts of treasuries needed to fund our deficit and the programs they are initiating. That capital has to come from somewhere or else we get a failure in a government bond market auction and you have no idea what that would do....Capital and credit were never the same thing, all we did in the country for decades is pull consumption ahead by borrowing against the future. Well the future is here. And it isn't pretty.
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1st we had the tech bubble of the late 90's
then we had the housing bubble in the early part of this decade
and
now we have a US Treasury bubble starting in late '08
as randall says folks it will not end pretty, get the guns now , get the supplies loaded into the house , there is no way out of this , we cannot borrow and spend our way out of this mess , it will not work the numbers are just too staggering