More basic suggestions for those who are seeking shelter from the coming storms of global financial crisis and recession (part 1 here).
One of today’s most common economic fallacies is that the soaring stock market is evidence of economic recovery. Nothing could be further from the truth. The Fed’s balance sheet has grown more than fourfold since 2008 — to $4.3 trillion — and was used to prop up the “too big to fails.” That money had to go somewhere. Paper money promotes the “quick buck” syndrome like narcotics peddling and hookers on the streets. In a paper money society, the social order visibly deteriorates. Fiat promotes an illusory reality where non-substance like financial speculation and gambling replaces the substance of industrial production and long-term value.
Financial markets are complex in normal times. When government is actively supporting them, they only become more so and more dangerous. If today’s financial markets were rated like movies, they would be rated “R” (perhaps, “X”). Whether the “R” stands for risky or restricted is immaterial.
"First they ignore you, then they ridicule you, then they fight you, and then you win." Mahatma Gandhi
"It is no crime to be ignorant of economics... but it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance." - Murray Rothbard
If you want to gather honey, don’t kick over the beehive. This was how Dale Carnegie titled the first chapter of his 1936 personal development masterpiece—How to Win Friends and Influence People. But based on the way the US is acting, you’d think they were test-driving an entirely different manuscript - How to Lose Friends and Alienate People. Between FATCA and the BNP debacle, it appears politicians fail to realize how important the US banking system is to holding together the US economy. With all of its debt and all of its money printing, the US banking system was one of America’s last economic competitive advantages; but now we are going to see more and more foreigners curtailing their use of the US banking system... and by extension... the dollar. Without that mass of people to export dollars to, inflation will really kick in back home.
"Does society ever wake up?"
While the "mysterious, indiscriminate" buyer of US stocks has been fully unmasked now, what most likely do not know is that just this is happening at a comparable record pace nowhere else but the place which is mirroring and repeating every single Fed mistake tit for tit. Japan... “Share buybacks have the effect of supporting the market when it’s weak,” Daiwa Securities Group Inc. quantitative analyst Masahiro Suzuki wrote in a report on June 10.
Yellen has got to be the most dovish Fed chairperson going into the most important policy initiative withdrawal phase ever to be recorded since the inception of the Federal Reserve!
"In retrospect, the spark might seem as ominous as a financial crash, as ordinary as a national election, or as trivial as a Tea Party. The catalyst will unfold according to a basic Crisis dynamic that underlies all of these scenarios: An initial spark will trigger a chain reaction of unyielding responses and further emergencies. The core elements of these scenarios (debt, civic decay, global disorder) will matter more than the details, which the catalyst will juxtapose and connect in some unknowable way. At home and abroad, these events will reflect the tearing of the civic fabric at points of extreme vulnerability – problem areas where America will have neglected, denied, or delayed needed action.” - The Fourth Turning - Strauss & Howe – 1997
According to a new Gallup pole, a record amount of Americans now disapprove of President Obama. Now, this is nothing new. Presidential approval ratings go up and down, and Mr. Obama has had a long-term slide thanks to… oh, we don’t know… a total avalanche of foul-ups ranging from the Obamacare fiasco to the IRS targeting his enemies to the VA scandal to the intelligence community’s surveillance of the press, et cetera ad infinitum. But here’s the interesting thing– this poll about the President’s approval rating. It’s about his image– who he is as a person. Do Americans think he’s a trustworthy person with strong character? Nope. Not even close.
Just how badly is Generation X doing? Bad enough to turn around the entire concept of middle-class prosperity in America - one where every next generation should do better than the preceding one - on its head. "Only one-third of Generation X households had more wealth than their parents held at the same age, even though most earn more, The Pew Charitable Trusts found." And there, in a nutshell, is your so-called recovery: two thirds of an entire generation - one which is in its prime working years - doing worse than the one before them!
Francine Lacqua (Interviewer): Jim, you also have this new book out, right, saying "The Death of Money" and this basically argues that if a number of things come together, we could have financial warfare, deflation, hyperinflation, market collapse. And yet the markets are merrily going along. Are we in a fictitious world?
Russia Ministry of Finance is ready to greenlight a plan to radically increase the role of the Russian ruble in export operations while reducing the share of dollar-denominated transactions. Governmental sources believe that the Russian banking sector is "ready to handle the increased number of ruble-denominated transactions". According to the Prime news agency, on April 24th the government organized a special meeting dedicated to finding a solution for getting rid of the US dollar in Russian export operations. Top level experts from the energy sector, banks and governmental agencies were summoned and a number of measures were proposed as a response for American sanctions against Russia.
With Western nations heavily indebted, including the hugely indebted U.S., Russia looks like the only realistic source of such funds. Geopolitical risk remains very much underestimated and there remains the risk of financial, economic and currency wars where the Kremlin uses gold as a geopolitical weapon to undermine the dollar.