Archive - Apr 2011 - Blog entry

If you think that somehow the Fed’s money pumps will keep the system afloat and stop another 2008 type even from occurring, consider that we’ve gone from $50 billion to $200 billion per month in money pumps… and we’re still seeing sharp sell-offs occur. Indeed, at some point, and I cannot say specifically when, the Fed will lose control of the system. When that happens, the Crisis that follows will make 2008 look like a PICNIC.

"Our liquidity position is stronger than ever..."--Dick Fuld

But by launching his campaign with outrageous demagoguery, Pres. Barack Obama “made it clear” he will avoid fundamentals. He counts on emotional appeals to self interest – private and corporate welfare recipients, elderly who make old age a profession out of human tragedy, all interests vying for favor at the public trough.

Just like the Fed and banks ...

Things like this don't all happen at once, today just happens to be a day that the S&P happens to mention that we are standing dangerously close to the ledge. Brazil was much smaller than Greece when they defaulted in 1983 and they took the US economy down with them...

So it starts. Where will it end?

This leads one to ask, “what is the Fed combating now?” And it’s not just Japan (the adjusted monetary base went vertical back in January). So what is requiring $200 billion per month? Also, we need to consider just how desperate the Fed is. QE 1 saw the Fed pumping $50 billion per month into the financial system. QE 2 saw $100 billion. Now we’re at $200 billion per month.

D'oh!

There are TRILLIONS in liquidity sloshing around the system right now. Inflation is already guaranteed. Sure we might have another debt Crisis, but there is absolutely no question that we’re going to be seeing massive debt defaults in the coming months and years. Currencies will be taking major hits when this occurs.

So with that in mind, I continue to maintain that we’ll be major inflation in the markets before the end of 2011

However, this time around, bad news has resulted in stocks are tanking and the US Dollar is rallying hard. The implications of this are vast. Is the Fed telling its buddies (Goldman etc) behind the scenes that they won’t be engaging in QE 3? Is the tide of easy money finally turning? I doubt it. The Fed HAS to keep funneling the money into the insolvent big banks. Failing to do so will trigger a collapse in the interest rate-based derivatives market which currently stands at $180+ TRILLION in the US alone.

On Monday, the S&P ratings agency downgraded the US debt outlook to negative. The Triple A debt rating was maintained by S&P, but the outlook downgrade by the agency, which hit the U.S. stock market hard and also prompted a sell off in U.S. Treasuries. Yet gold prices closed in on major psychological resistance of $1500 per troy ounce... so here's the deal!

The Rate Storm that I have been preaching about is nigh upon us. Greece and the US today, who the hell knows tomorrow.

You got to know when to HoLDER 'em, know when to fold 'em-Know when to walk away and know when to run--You never count your bailout loot when you're sittin' at the table--There'll be time enough for countin' when the shitty dealing's done

As you may know by now, we’re not living in normal times...