Creditors

Alright all you Zero Hedge bears, time to weigh in on my latest comment (sarcasm ON)...

What will happen to the U.S. economy and the dollar in the near term? Will inflation increase dramatically? What is the outlook for gold, and where should you put your money? BIG GOLD asked a world-class panel of economists, authors, and investment advisors what they expect for the future. Caution: strong opinions ahead...

The US is now being run by an oligarchy, with lip service being paid to the electorate in allowing the people to vote for the candidates that the parties and the powers will put forward. There will be no recovery for the middle class until they assert themselves. I know I have stated this often in my tag phrase, “The banks must be restrained…”

A butterfly flapped its wings in Tunisia creating a hurricane that is swirling across the globe, wreaking havoc with the existing social order and sweeping away old crumbling institutions and dictatorships. The linear thinking politicians, pundits and thought leaders have been knocked for a loop. They didn’t see it coming and they don’t know where it’s leading. An examination and understanding of history would have revealed that we have been here before. We were here in 1773. We were here in 1860. We were here in 1929. We are here again. The Fourth Turning has returned in its predictable cycle, just as Winter always follows Fall.

The European Union is facing a similar set of events as those leading up to the 2008 US financial crisis. In 2007/08 the US economy was teetering on the brink of recession and the talk among many was that of a goldilocks soft landing. Economic data was still somewhat positive including job growth while equity markets were still holding up. The housing market was beginning to show signs of exhaustion. Manufacturers were confronting rising input costs while consumers were paying more at the pump. The Federal Reserve introduced a new chairman who tried to calm markets with his infamous quote on March 28, 2007, "the impact on the broader economy and financial markets of the problems in the subprime markets seems likely to be contained."

On Friday, free and efficient market champion Ted Kaufman, previously known for his stern crusade to rid the world of the HFT scourge, and all other market irregularities which unfortunately will stay with us until the next major market crash (and until the disbanding of the SEC following the terminal realization of its corrupt and utter worthlessness), held a hearing on the impact of the TARP on financial stability, no longer in his former position as a senator, but as Chairman of the Congressional TARP oversight panel. Witness included Simon Johnson, Joseph Stiglitz, Allan Meltzer, William Nelson (Deputy Director of Monetary Affairs, Federal Reserve), Damon Silvers (AFL-CIO Associate General Counsel), and others. In typical Kaufman fashion, this no-nonsense hearing was one of the most informative and expository of all Wall Street evils to ever take place on the Hill. Which of course is why it received almost no coverage in the media. Below we present a full transcript of the entire hearing, together with select highlights. The insights proffered by the panelists and the witnesses, while nothing new to those who have carefully followed the generational theft that has been occurring for two and a half years in plain view of everyone and shows no signs of stopping, are truly a must read for virtually every citizen of America and the world: this transcript explains in great detail what absolute crime is, and why it will likely forever go unpunished.

As is customary in these times of uncertainty and economic turmoil, the quite timely intellectual giants at the ratings agencies pull up to a burned down house stating that they smell smell something asunder.
Alas, better late than never and yet the Greek government seeks to have even that very late Truth... "Adjusted"!

Other than THAT, it's free market capitalism ...

After serving as the inspiration for the Chairsatan's latest appellation with his February missive, Bill Gross now goes for the jugular with the $64,000 question: with "nearly 70% of the annualized issuance since the beginning of QE II
has been purchased by the Fed, with the balance absorbed by those old
standbys – the Chinese, Japanese and other reserve surplus sovereigns.
Basically, the recent game plan is as simple as the Ohio State Buckeyes’
“three yards and a cloud of dust” in the 1960s. When applied to the
Treasury market it translates to this: The Treasury issues bonds and the
Fed buys them. What could be simpler, and who’s to worry? This Sammy
Scheme as I’ve described it in recent Outlooks is as foolproof
as Ponzi and Madoff until… until… well, until it isn’t. Because like at
the end of a typical chain letter, the legitimate corollary question is –
Who will buy Treasuries when the Fed doesn’t?" Bingo, we have a winner. This is precisely the issue that Zero Hedge has been exposing over the past 6 months, and is the reason why the Fed is now locked in a QEasing corner from which there is no exit. To his credit, Gross attempts to provide an answer: "Someone
will buy them, and we at PIMCO may even be among them. The question
really is at what yield and what are the price repercussions if the
adjustments are significant... What I
would point out is that Treasury yields are perhaps 150 basis points or
1½% too low when viewed on a historical context and when compared with
expected nominal GDP growth of 5%." And the stunner: "Bond yields and stock prices are
resting on an artificial foundation of QE II credit that may or may not
lead to a successful private market handoff and stability in currency
and financial markets. 15% gratuities may lie ahead, but more than
likely there is a negative two-bit or even eight-bit tip lying on the
investment table. Like I did 45 years ago, PIMCO’s not sticking around
to see the waitress’s reaction." Translation: Pimco just issued a "sell" rating on everything.

Dear Minister, Congratulations on your new appointment. As you read the civil service briefings on the present crisis, you will come to appreciate that Ireland's problems would be much easier to manage if your administration could choose the country's own exchange rate and interest rate. However, your officials and your colleagues may believe that there is no practical way to leave the present European monetary union and so achieve this flexibility. In fact, there is. Leaving the euro is politically tricky and economically costly in the short-term. But it is far from impossible. The long-term advantages clearly outweigh the short-term costs, and the politics can be managed. The following outlines how it can be done...

Uprisings in Africa and the Middle East last week trumpeted any and all global investment themes. The hearts and minds of peoples against regimes played out on a global scale. Crude ended the week up 9.1%. CBOE Volatility Index, VIX, rose 15%. Global equity bourses retreated a few percent with the U.S. outperforming by a marginal percent on QUALITY flight. In some ways there is a marriage of both global and domestic themes alike as the peoples yearn for representation and the embodiment of what government REPRESENTS for people. Or doesn’t represent. Played out on a minor scale, one eye this week was on Wisconsin, Indiana, Ohio, New Jersey and the battles of the hearts and minds of public and private employees alike or better quantified as the high profile and human debate of the efficient allocation of private tax dollars and the consequent rate of return of public service. To oversimplify, it seems like the relevant and searching question everywhere in nation(s) is, how effective does government allocate public and private resources and consequently represent its peoples? This is the looming topic in the United States this week as both sides of the Congressional isle try to avert a government shutdown as lawmakers have funded our domestic "obligations?" only through this Friday. I guess obligation is a relative term. Federal agencies are scrambling to figure out how to handle a shutdown of government. Hey, mail would continue but Federal Parks would be closed. There are many other obvious fiscal and market iterations to be learned as to any auxiliary impacts of how a shutdown or our budgetary largess will shut us down from our creditors.

Of course, what sucks for the American worker is great for our Multi-National Corporate Masters and we all love a good puppet show, so they bought out the President to say "U.S. companies shouldn't worry about inflation if they're planning on expanding their business."

We have long claimed that in advance of the great "to be or not to be QE3" decision in June, there will likely be a major market swoon in March/April. The reason for that is that, as David Rosenberg explains in a very coherent fashion, the market will soon realize that the case for another bout of monetization is increasingly shaky: "when you go back to August 2010, when QE2 was announced, U.S. core
inflation was 1.1% and headline was 0.1%; by June of this year, we will
probably be looking at 1.5% on the core and as high as 3% on headline
inflation. That combined with the reality that the S&P 500 is 300
points higher now than it was then would certainly suggest that the case
for extension of the Fed’s QE program will not be there, at least not
by the time QE2 runs its course. So this is what we would be looking for
in terms of chronology (it may be too late to sell in May this year)." So unlike before, the context this time around will be one of much higher inflation, making the stimulation case that much more difficult. The downside? 300 points of downside due to a marginal hole that will no longer be plugged by the Fed. And with a fiscal contraction coming for more (see Koo's notes from yesterday), one can see why as Rosie says "it may be too late to sell in May this year." We agree that there will be a return to market volatility in the months ahead of June, but we believe that the Fed will have no choice but to continue monetizing sooner or later courtesy of the $4 trillion in bond issuance over the next two years. There is no way around it. What it means for the "inflationary" thesis we leave it up to readers.

Can the ECB outspend the Bond Markets? Is Portugal truly Insolvent? Will they default? What happens to rate sensitive assets that are already at depression levels, such as real estate, when rates spike world wide? Why am I asking questions that everybody already knows the answer to???? Well, just in case, here go those answers anyway.

A month ago, we wrote an article titled: "How Allstate Used Sampling To Confirm BofA/Countrywide Lied About Virtually Everything When Selling Mortgages" in which we described how the insurance company used sampling to confirm that Bank of America had misrepresented virtually every metric when selling mortgages: everything from loan LTV, to percentage of owner-occupied properties. The differentials in some cases were as large as 50%. Today, Allstate, again under the guidance of Quinn Emmanuel, has used the same technique to determine that JPM and WaMu are guilty of precisely the same criminal misrepresentation in its prospectuses when selling tens of thousands of loans. And once again, this will most certainly lead to absolutely nothing. The reason? Just read Matt Taibbi's Rolling Stone piece on why when it comes to crime, Wall Street has a limitless "get out of jail" card. The alternative is a domino-like fall out that would likely see most if not all Wall Street executives actually having to lose sleep over the possibility of jail time (which would also take down every single externally regulating and SRO organization created to "police" the greatest scam in history). And that, as the FCIC has determined, will never happen until the market is in an uptrend. What happens after the next (and final, unless intelligent and wealth extraterrestrial life is discovered, willing to bail out the entire world which has gone all in the ponzi recreation quest) crash is a different story.