The similarities between 2008 and today are growing even more eerily similar. We’ve seen a mega-bailout similar to Hank Paulson’s “Bazooka,” we’ve also seen short-selling bans and sovereign bailout rumors (China and Middle East for Wall Street in 2008 vs. China for Europe today).
Let’s be honest here. Neither China, nor the ECB, nor the Federal Reserve can stave off the collapse that’s coming. Indeed, the Fed spent $900 billion and nearly one year to prop the markets up… and we’ve wiped out ALL of those gains in just one month.
Folks, this is the hard truth: the US is broke and our leaders have no clue how to solve any of the structural issues our economy and markets are facing. They’ve spent TRILLIONS propping up the stock market but haven’t created new jobs nor have they improved Americans’ quality of life in the last two years.
In order for a move of that caliber to occur in the US Dollar, we’ll need to see a full-scale crisis to hit the markets (the last two US Dollar rallies occurred during the 2008 collapse and the 2010 Euro Crisis). So expect greater downside risk in stocks in the near future.
We’re heading into the END GAME for the markets. What’s coming will see debt defaults in Europe and the US, a stock market Crash that makes 2008 look like a picnic, civil unrest and more.
I fully believe that the financial system is now more in danger of systemic collapse than at any point in history (including 2008). Do NOT be fooled by the rally of the last few days. We saw rallies of 8%, 11%, even 17% during 2008. Those investors who bought into them got taken to the cleaners.
I’ve said many times before that QE 3 won’t be coming any time soon unless the market Crashes or a major bank goes under. The reason is that QE (and Ben Bernanke for that matter) have been politically toxic: we’ve already seen that the Fed will be a major political issue in the 2012 Presidential election.
We have now wiped out almost all of the gains of the last week and a half and it looks as though we are heading rapidly into the 2008-type Collapse I've been warning about for weeks.
I will be blunt here. Systemic risk is higher today than it was in 2008. Anyone who claims that the financial system is stable can look at either Treasuries or the credit markets. Look at Europe where the entire banking system is collapsing.
Note that the Fed is now suing its favorite firm, Goldman Sachs. This move is not without context. Bernanke and pals are aware of the political tide turning in the US. They’re also aware of what’s happening in Greece and Europe. And they’re going to try to pin the blame on Goldman and others.
The Fed has already gone too far with QE. QE 2 spent $600 billion and didn’t accomplish anything (as I and several commentators have recently noted). The Fed’s balance sheet (roughly $3 trillion) is already larger than the economies of the UK and Brazil. Has anyone bothered to ask how exactly the Fed going to unwind this? Everytime the Fed halts QE the markets implode. Do you really think the Fed could withdraw even $1 trillion in liquidity without forcing systemic collapse?
This is hardly what I’d call a bullish chart. Gold actually looks to have peaked in mid-August and is now correcting. Indeed, if it doesn’t rally hard now, this pattern could see prices down to $1650 in short order.
QE 3 won’t solve this mess (assuming it even arrives). Neither will the European bailout fund. We’re already in the Second Round of the Great Crisis which will see the EU broken up, the US economy implode, and a market collapse that will make 2008 look like a joke.
Do you really think the Fed hasn’t already discussed QE 3 and every other insane intervention you can imagine over since the Financial Crisis began in 2008? Do youreally think that the Fed’s magically going to come up with something new that will fix the Financial System?
The Euro could be in the final stages of intervention/ bailouts. On September 8, a German court will be ruling whether it is constitutional for Germany to participate in EU bailouts. Consider that 6% of Germans feel the Euro has brought economic disadvantages and that the German elections are scheduled for just a few weeks later, and we could very well see the court rule to end Germany’s participation in the bailouts.
