Steve Keen And Chris Martenson Explain Why "It's All About The Debt"

Steve Keen has long been one of the most accurate economic prognosticators. This, and the fact that he does not conform to the prevalent mold of economic thinking, has made him, and his blog Debt Watch, one of Zero Hedge's must reads. Today, as part of Chris Martenson's recently launched "Straight Talk" series, Keen answers a variety of questions on the economy, and demonstrates why at the end of the day it is "all about the debt" and why deleveraging is the primary force that the Fed has to battle, and the only important outcome for the future of capital markets is whether the Fed's response will be too much (hyperinflation), or too little (deflationary crunch).

A Dollar-Devaluation Adjusted Market Has Barely Moved Above Its 2009 Lows

While nominal stocks will soon be reaching for new all time highs, very much in the spirit of the Zimbabwe stock market, all of these so-called price levels (and the associated "wealth effect") are increasingly irrelevant as they continue to come at the expense solely of ongoing global currency devaluation, whose only alternative is the purchasing of hard currencies such as gold and silver. Which is why when expressed in terms of gold, it may be surprising to some that the stock market has barely moved from its generational lows recorded in March 2009. In other words, over the past two years there has been no real growth in asset values, as it has all come at the expense of every central bank's ongoing, and accelerating, debasement of its currency.

Is An ATM Cash Shortage Coming?

Some potentially troubling news out of ATM land: "I work with a business partner in the [region redacted] . We have combined between us 180 ATM machines that we service, Cash Load. In order to do this we NEED to order the money, 20's only from several banks on a weekly basis. This is a considerable amount weekly, 380k plus. Here is the interesting piece that is developing: In the past several weeks 4 of the MAJOR banks have informed us that they can no longer provide us with the cash for our business."

Last QE Lite POMO Closes As Fed Monetizes $6.3 Billion In Debt

As of 11 am the last QE Lite POMO ended, resulting in a resumption in a sell off in risk right on schedule, as even today's $6.3 billion in monetized notes due between 2016 and 2020 is insufficient to keep stocks higher with a jumping dollar. The submitted to accepted ratio was 4.38, up from 3.49 previously. The market is now looking to November 10 when the brand new, and much larger QE2 POMO schedule is announced by the FRBNY.

Ron Paul Comments On QE2, Says Fed Will Self Destruct, Shocked That Krugman Has "Any Credibility Whatsoever"

There were few surprises in today's commentary by Ron Paul on QE2: the only man in Congress (with Grayson now gone) who is sufficiently intelligent to realize that the primary culprit behind the US economy's boom-bust cycle is the Federal Reserve, continues to press for the termination of Ben Bernanke's public "service" which has resulted in a collapse in American purchasing power in the 100 years since the first Jekyll Island meeting. Yet Paul takes a 'John Lennon' approach to the problem, believing that active intervention may not even be needed, as the Fed ends up cannibalizing itself: "I think the Fed will self-destruct. People will desert the dollar. I think the Chinese are hinting that already. They are not wanting our dollars as much as raw materials. This is a deeply flawed monetary system. Here we have a small group of people who can create $600 billion with the stroke of a pen... I don't know where people are coming from to think that this can work. What really astounds me me is how tolerant the people are, the people in Congress and the financial market, where did this authority come from? Now somebody outside of the government can spend trillions of dollars and not think anything about it. It doesn't work, it's a failure. And next year it will be more. Bernanke is very clear on what he is going to do - he is going to create money until he gets economic growth and there is no evidence to show that just creating money causes economic growth." All logical and expected. Which is why nobody will endorse the Paul stance, it as it means an end to the trillion dollar wealth transfer system from the middle class to the kleptocracy.

John Hussman On Our Fed-Inspired Bubble, Crash, Bubble, Crash, Bubble (etc) Reality

Given that interest rates are already quite depressed, Bernanke seems to be grasping at straws in justifying QE2 on the basis further slight reductions in yields. As for Bernanke's case for creating wealth effects via the stock market, one might look at this logic and conclude that while it may or may not be valid, the argument is at least the subject of reasonable debate. But that would not be true. Rather, these are undoubtedly among the most ignorant remarks ever made by a central banker. - John Hussman

Daily Highlights: 11.8.2010

• CEOs most optimistic on US profits since 1999 in bull signal for S&P 500: Bloomberg.
• China is 'available' to support Portugal through financial crisis, Hu says.
• China's trade surplus likely rebounded in October after narrowing in September.
• ECB rejects request for files on Greek derivative use, cites 'acute' risks.
• Euro falls as concern over Irish bond sales, Greece damps investor demand.
• G-20 conflict risk eases as US says current-account targets unrealistic.
• Oil extends longest rally since April as US jobs report beats forecasts.
• World Bank Chief: G20 should consider adopting a global reserve currency based on gold as part of structural reforms.
• World Bank’s IFC plans to offer benchmark debt in US dollars.
• AIG hopes to complete its government exit before year end. Posts $2.4B loss in Q3.