Waxing prophetic, just minutes after I posted the previous blog the Drudge Report profiled two headlines on the historic devaluation of the dollar: "Dollar Falls Sharply In Wake of Fed Move" and "Dollar No Haven After Fed Moves Rate Near Zero."
I mentioned also in the previous posts Schiff and Turk & Rubino (S,T&R) on their predictions about economic crisis. Most deserving of consideration is why Bernanke, Paulson, Dodd, Frank, and company don't seem to have a clue about the effects of their inflationary policies, yet market experts like S,T&R predicted events of late...years ago.
Schiff presciently declared:
"Here are some of the scenarios...The real estate bubble, already losing air, could pop first, sending the economy quickly into recession, which could cause a run on the dollar, force up long-term interest rates, create hyperinflation, and force defaults, refinancing, or other settlements with respect to personal and national debt...Insolvency at Fannie Mae, Freddie Mac, or the Pension Benefit Guaranty Corporation could create an international crisis of confidence in the country's ability to make good on its financial promises." --Schiff in 2006
Turk & Rubino predicted a scenario:
"The dollar is in full retreat on foreign exchange markets, and panic is building on both Wall Street and Main Street. Dollar-denominated bonds plunge in value, which is another way of saying that long-term interest rates soar. Spiking mortgage rates and restrictions on access to new lending burst the housing bubble in overheated markets like California and New York. Home prices drop by 50 percent or more in the space of a few months, and the leaders of the structured finance sector, mortgage giants Fannie Mae and Freddie Mac and derivatives players like JP Morgan Chase, are revealed as the time bombs they are. Their stocks, and most others associated with the U.S. credit bubble, begin to slide. The euro and yen soar against the dollar, while gold blows through $1,000 without a backward glance." --Turk & Rubino in 2004
Friday, December 19, 2008
Wednesday, December 17, 2008
Apocalypse Now...or soon?
I've been diving into literature, media, history, and all things political-economic to better understand and anticipate the uniqueness of our present economic crisis. Before I share with you some of those details, allow me a brief proviso: I'm not a doomsdayer or Chicken Little by any stretch; I'm a rather optimistic guy. As the adage goes, I expect the best and prepare for the worst.
Of the information I've digested from all sources, two pieces stand out. Crash Proof by Schiff and The Collapse of the Dollar And How to Profit From It by Turk and Rubino. What's clear is that a sober review of the not-so-distant past, circa 1929, reveals some interesting clues. Now, we Americans generally have a sense of history that goes all the way back to, perhaps, yesterday's lunch. Credit due in large part to the US public education system, few Americans can even place Hoover and FDR in the right century, much less recognize that they were at the helm during the greatest economic crisis in history (see also VP-elect Joe Biden's giving credit to FDR for his comments on TV in 1929).
The gist of these two books is this: the federal government's response to this crisis amounts to a sort of spend-your-way-out-of-debt inflationary policy that gives no credit to lessons learned in the aftermath of '29. The drunken sailor bailout strategy will feign economic security but ultimately aid and abet the coming free-fall of the US dollar. In the words of Yogi Berra, "This is like deja vu all over again."
Three things are clear. First, the obvious: the federal government (i.e. The Fed, Congress, US Treasury Dept, etc) are either galactically stupid or scandalously hiding vital information from the American public concerning the true status of the US economy. Second, the multiple bailouts are not loans from the US Treasury, rather they are giveaways of newly printed dollars. Last, with trillions of new treasury notes in circulation, it's only a matter of time before the dollar is so over-inflated that a crash is unavoidable.
Here's the one key difference between then and now. In 1929, the US dollar was tagged to gold in reserve with the treasury. Nowadays, the dollar is free-floating and backed only by the "full faith and credit of the United States." Inspires confidence doesn't it?
More to come...
Of the information I've digested from all sources, two pieces stand out. Crash Proof by Schiff and The Collapse of the Dollar And How to Profit From It by Turk and Rubino. What's clear is that a sober review of the not-so-distant past, circa 1929, reveals some interesting clues. Now, we Americans generally have a sense of history that goes all the way back to, perhaps, yesterday's lunch. Credit due in large part to the US public education system, few Americans can even place Hoover and FDR in the right century, much less recognize that they were at the helm during the greatest economic crisis in history (see also VP-elect Joe Biden's giving credit to FDR for his comments on TV in 1929).
The gist of these two books is this: the federal government's response to this crisis amounts to a sort of spend-your-way-out-of-debt inflationary policy that gives no credit to lessons learned in the aftermath of '29. The drunken sailor bailout strategy will feign economic security but ultimately aid and abet the coming free-fall of the US dollar. In the words of Yogi Berra, "This is like deja vu all over again."
Three things are clear. First, the obvious: the federal government (i.e. The Fed, Congress, US Treasury Dept, etc) are either galactically stupid or scandalously hiding vital information from the American public concerning the true status of the US economy. Second, the multiple bailouts are not loans from the US Treasury, rather they are giveaways of newly printed dollars. Last, with trillions of new treasury notes in circulation, it's only a matter of time before the dollar is so over-inflated that a crash is unavoidable.
Here's the one key difference between then and now. In 1929, the US dollar was tagged to gold in reserve with the treasury. Nowadays, the dollar is free-floating and backed only by the "full faith and credit of the United States." Inspires confidence doesn't it?
More to come...
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