-- Posted Friday, 13 February 2009 | | Source: GoldSeek.com
“We are no better off today than we were three months ago.”
Representative Paul Kanjorshi (D - PA)
Capital Markets Subcommittee Chair, January 28, 2008
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(Treasury Secretary Timothy Geithner)…has been dead wrong about everything for 15 years in a row… This (the rescue plan for Banks) is not going to solve the Problem, it’s going to make it worse”.
Jim Rodgers, CNBC, February 10, 2009
In order to identify Opportunities in today’s Markets, it is critical to first have a Realistic Overview of the Dangers.
Clearly the Bailout Bill (inter alia) of the Fall 2008 neither got credit Flowing again, nor saved The Financial System, as its proponents claimed it would do.
Considering the major provisions of the Stimulus Bill, which recently passed the House and Senate, we can conclude that it contains one Fatal (and several serious) Flaws which will render it ineffective or likely worse.
In its simplest terms, The Financial Crisis (which came to a head in 2008) was generated by excessive borrowing and spending (facilitated primarily by U.S. Federal Reserve policies). Thus, it can not be cured by the additional borrowing and spending mandated by the Stimulus Bill. Peter Schiff rightly claims that the Stimulus Bill will lead to “Unmitigated Disaster” because:
“The problem, he says, is the government is trying to perpetuate a ‘phony economy’ based on borrowing and spending. With the U.S. consumer tapped out, the government is ‘now taking on the mantle’ of consumer of last resort, he continues, predicting the bond bubble will soon burst – if it hasn’t already – ultimately leading to a collapse of the dollar and an ‘inflationary depression worse than anything any of us have ever seen’.”
“All the Stimulus Bill is going to do is to put us in a deeper hole price we have to pay. If Governments continue they will create an inflationary depression.
Peter Schiff: Stimulus Bill Will Lead to “Unmitigated Disaster”
Investing, Newsmakers, Recession, February 6, 2009
Nobel Laureate Economist Joseph Stiglitz has a better idea with which Deepcaster has considerable sympathy.
“The Government should allow every distressed bank to go bankrupt and set up a fresh banking system under temporary state control rather than cripple the country by propping up a corrupt edifice…
Stiglitz said any decision by President Barack Obama to establish a so-called bad bank to rid financial companies of toxic assets risks swelling the national debt… (and…)
…amounts to swapping taxpayers’ ‘cash for trash,’ Stiglitz said yesterday in a panel discussion at the World Economic Forum in Davos, Switzerland. ‘You shouldn’t chase good money after bad. We’re talking about a national debt that’s very hard to manage’.”
Nobel Laureate Joseph Stiglitz
And, Deepcaster adds, Secretary Geithner’s Bank Bailout plan to de facto “insure” a minimum value for Toxic Assets, (via some vaguely described public-private arrangement) amounts to the same thing. The U.S. Taxpayers would still be on the hook to swap their Cash for Toxic Trash.
But de facto “insuring” “Cash for Trash” is not all the U.S. Taxpayers are enabling.
Consider J.P. Morgan, which reportedly received one large bailout of $55 Billion from the New York Fed (guaranteed by Bear Stearns’ now nearly worthless assets) and then recently another $25 Billion in TARP funds.
According to John Olagues of Options for Employees, after those bailouts, the top 15 J.P. Morgan Executives were granted (on January 20, 2009) $81,405,000 in Stock Appreciation Rights and $30,500,000 in Restricted Stock Units. According to Olagues:
“J.P. Morgan’s executives, instead of receiving easy to detect cash bonuses, received very large bonuses in the form of Stock Appreciation Rights (SARs) and Restricted Stock Units (RSUs). These equity compensation securities are not easy to understand or value by other than experts in the field.
SARs are very similar to employee stock options and Restricted Stock Units are very similar to Restricted Stock.”
“J.P. Morgan’s Abusive Executive Bonuses”
Options for Employees, John Olagues, February 7,2009
It is difficult to discern how those SARs and Restricted Stock Unit Grants enhance the stability of the Financial System, increase lending, or relieve the overburdened American taxpayer.
Most Outrageous
“Dozen Banks receiving the largest Bailout Rescue packages totaling more than $150 Billion, requested Visas for more than 21,800 foreign workers over the past six years - - nothing in the current versions of the Senate or House Stimulus would prevent this practice from continuing!”
And
“300,000 or more Jobs generated by the … Stimulus Bill would go to Illegal Aliens.”
Carrying Capacity Network (CCN), February 5, 2009
Indeed, Congress rejected an Amendment to require Federal Contractors to use E-Verify, which would have prevented jobs going to Illegal Alien workers. So much for job protection for American workers!
Carrying Capacity Network (A Washington DC Nonprofit at www.carryingcapacity.org) also has an excellent Proposal for reducing American Workers Job Losses and reducing Federal and State Budget deficits. It advocates
- - NO BAILOUT OR STIMULUS FUNDS FOR ‘RESCUED’ BUSINESSES HIRING FOREIGN WORKERS!
- - A ZERO-NET-IMMIGRATION MORATORIUM ON MASS IMMIGRATION!
Stimulus Bill Jobs to 300,000 Illegals?! Rescued Banks Sought Foreign Worker
Carrying Capacity Network, February 5, 2009
A zero-net-immigration Moratorium is essential at this time because of the approximate five million annual U.S. Population increase, about 90% results from immigrants and their Offspring (about half from legal and half from illegal over the past decade).
This massive immigration flow causes job loss and wage depression for American Workers, and is a multibillion dollar annual net drain on Federal, Sate and local budgets because, in the aggregate, immigrants receive much more in benefits (e.g. for education and health care) than they pay in taxes, as studies by Heritage Foundation, Ed Rubenstein, the Center for Immigration Studies and CCN have shown.
A zero-net-immigration Moratorium would still allow 100,000 to 150,000 skilled workers to enter, while dramatically reducing massive job losses and budget deficits.
The Cartel End Game - - Implementation Begins
But what is also most Troubling is that the Economic and Market Travails are Serving as a Pretext for advancing the Implementation of The Cartel’s* End Game.
Already it appears that The Cartel* is heavily involved in Overt and Covert Markets and Data Manipulation. Now it appears they are beginning to take it one Giant Step Farther - - implementing their “End Game”.
*We encourage those who doubt the scope and power of Intervention by a Fed-led Cartel of Key Central Bankers and favored financial institutions to read Deepcaster’s December, 2008 Letter containing a summary overview of Overt and Covert Intervention entitled “A Strategy for Profiting from the Cartel’s Dark Interventions & Evolving Techniques” and Deepcaster’s July, 2008 Letter entitled “Market Intervention, Data Manipulation - - Increasing Risks, The Cartel End Game, and Latest Forecast” at www.deepcaster.com. Also consider the substantial evidence collected by the Gold AntiTrust Action Committee at www.gata.org for information on precious metals price manipulation. Virtually all of the evidence for Intervention has been gleaned from publicly available records. Deepcaster’s profitable recommendations displayed at www.deepcaster.com have been facilitated by attention to these “Interventionals.”
Indeed, The Very Establishment Wall Street Journal online on January 28, 2009 floated what amounts to a Trial Balloon for a Key Component of The End Game - - the destruction of the U.S. Dollar and its replacement by The Amero.
“The deflationary forces in the marketplace are pervasive, and the ‘other side’ of our current equation, hyperinflation, may be years away. Given the magnitude, breadth and pace of the global financial epidemic, however, we must explore each side of the twisted ride. Years ago, the Federal Reserve wrote a ‘solution paper’ regarding the need to combat zero-bound interest rates. The concern was the flight of capital from the U.S. and an option discussed was two-tiered currency, one for U.S. citizens and one for foreigners.
Canadian economist Herbert Grubel first introduced a potential manifestation of this concept in 1999. The North American Currency - - called the ‘Amero’ in select circles - - would effectively commingle the Canadian dollar, U.S. dollar and Mexican peso.
On its face, while difficult to imagine, it makes intuitive sense. The ability to combine Canadian natural resources, American ingenuity and cheap Mexican labor would allow North America to compete better on a global stage.”
How Realistic is a North American Currency?
Todd Harrison, WSJ Online, January 28, 2009
The Quiet Official Initiative to implement the End Game was launched at the so-called Summit Meeting among Presidents Bush, Fox of Mexico, and Martin of Canada, in Waco, Texas in March, 2006
In the Summer, 2006, Deepcaster was among the first to warn of a Massive Financial and Geopolitical Scheme (“Massive Financial Geopolitical Scheme Not Reported by Big Media,” August, 2006) with ominously negative consequences both for investors and citizens in general. Subsequently, on June 6, 2007, Deepcaster gave further warning in an article entitled “Profiting From the Push to Denationalize Currencies and Deconstruct Nations” (both available in the Articles Cache at www.deepcaster.com).
In these Articles we described this Scheme as The Cartel’s* “End Game.” Now there is increasing evidence that this “End Game” involves a heretofore hidden “Nasty Twist” which could seriously injure investors and non-favored (by The Cartel) financial institutions around the world. To understand this Nasty Twist we must provide a bit of background.
A key component of this multi-faceted Scheme is the replacement of the U.S. Dollar with the “Amero” as the Council on Foreign Relations (CFR) consultant Robert Pastor named it. This, of course, would entail the final destruction of the U.S. Dollar, a demise of which has already begun – or should we say, is being managed by The Cartel*. This Scheme appears to be an integral part of The Cartel’s Interventional Overt and Covert Regime, which involves manipulation of many Markets and Statistics.
Notwithstanding the recent and continuing (for a while) bounce in the U.S, Dollar which Deepcaster earlier Forecast, the long-term trend is “down” for the U.S. Dollar and will continue so because destruction of the value of the U.S. Dollar has been “baked into the cake” by The private-for-profit U.S. Federal Reserve.
It is ‘baked into the cake’ because The Fed has for years implemented “easy money” and easy credit policies by, inter alia, dramatically increasing the money supply. Thus the latest annualized rate for M3 is nearly 12%, and that rate has reached as high as 17% within the last year, per shadowstats.com. That rate virtually guarantees continued Consumer Price Inflation (now still at about 8% a year in the U.S. according to shadowstats.com). And it guarantees the Real U.S. Unemployment Rate will exceed the Real current level of 18% (per shadowstats.com). But it also guarantees the eventual demise of the U.S. Dollar.
Three of the many pernicious effects of the Destruction of the U.S. Dollar (a key component of The Cartel’s End Game Scheme) are:
1) The veiled destruction of the U.S. Middle Class (and middle classes throughout the industrialized world) through the destruction of its purchasing power and
2) The diminishment and/or outright confiscation of wealth of all economic classes and Investors world-wide whose wealth is held in U.S. Dollar-denominated assets and
3) The likely further enrichment of the owners of the private-for-profit U.S. Federal Reserve and those financial institutions, which it favors – clearly Bear Stearns and Lehman Brothers were not favored financial institutions.
Yes, the U.S. Dollar’s demise is already underway. Though very recently it has given the appearance of some buoyancy as a result of bottoming just above 71 on the USDX and then recently bouncing to around 85, it has nonetheless been in a sustained downtrend for several years now. Of course, this downtrend can NOT make the foreign government and other holders of over $2 trillion of U.S. Treasury Securities feel much comfort since the actual value (e.g. purchasing power) of their portfolios of U.S. Treasury paper has continued to diminish.
Another powerful factor determining the U.S. Dollar’s fate is that of the $683 Trillion in dark OTC Derivatives outstanding as of June, 2008, (www.bis.org, Path: Statistics>Derivatives>Table 19) many Trillions are Toxic or potentially Toxic.
Deepcaster has addressed the issue of the demise of the U.S. Dollar on other occasions. But the consequences of the demise are so significant that one should consider the possible alternatives to the U.S. Dollar and the implications of each.
There are two major Alternatives to the U.S. Dollar (and other similarly weakening fiat currencies). One is re-linking the (presently fiat) currencies to Gold and Silver, an approach that Deepcaster has long favored as fundamentally sound.
The other Alternative (doubtless favored by The Cartel of Key Central Bankers and certain other favored entities involved in international finance) is to catalyze or force the collapse of major national “fiat” currencies such as the U.S. Dollar in order to create a regional currency, such as the Amero, as part of their overall “End Game.”
Thus the battle lines are drawn for the Great Currency War of the next few years: Gold and Silver-based currencies versus the Amero and other Fiat Currencies.
Were the destruction of National Currencies (e.g. the U.S. Dollar) and the other nefarious components of The Cartel End Game not a very serious project of powerful organizations and persons, and had implementation of the “End Game” Scheme not already begun, the notion of denationalizing currency - - and specifically dissolving the U.S. and Canadian Dollars and the Mexican Peso into the Amero - - perhaps would be dismissed as only a matter of academic interest, or delusion.
However, in addition to the plans for the demise of the U.S. Dollar and its replacement with the Amero and other equally damaging aspects of the End Game (detailed in the aforementioned Deepcaster Articles), it appears to us that another, heretofore hidden, component of this nefarious scheme is being implemented.
Consider the following observation by Don Rich.
“A recent study from the Congressional Budget Office (CBO) has zero credibility. It pegged likely taxpayer losses in the Fannie Mae and Freddie Mac bailouts at $25 billion…the real cost of the bailouts will easily exceed $1.3 trillion. In fact, the real cost is likely to range between $1.3 trillion to $1.6 trillion, and is not unlikely to reach $2.5 trillion…”
“The Real Cost of a Full Bailout,” Don A. Rich, August 22, 2008
Specifically, now it appears (thanks in part to the revelations in the calculations made by Don Rich above) that we should expect yet another Nasty Twist to the attempted implementation of The Cartel “End Game” Scheme.
Consider that, as the Equities Markets Takedown trend proceeds, and as the deepening Hyperinflationary Recession about which we have written much continues, there will surely be more pain in the financial markets, including banking and investment house bankruptcies.
Indeed, on August 26, 2008 the FDIC announced that the number of troubled banks on its watch list has increased to 117. Doubtless this increase, and the increase in actual insolvencies, will continue. Billionaire Wilber Ross, who is in a position to know, estimates the likely number of bank failures at about 1,000.
And at the top of the list of de facto insolvencies are Fannie Mae and Freddie Mac, which hold $5 trillion worth of Mortgage and Mortgage-related “Assets.”
Warren Buffet has accurately described Freddie Mac and Fannie Mae as having “no net worth.” Thus, as Don Rich points out, the cost of bailouts of Fannie Mae and Freddie Mac alone to the U.S. Taxpayer is likely going to be more on the magnitude of trillions of U.S. Dollars rather than billions of Dollars.
The Bailout Bill passed in the Fall of 2008 will cost the U.S. Taxpayer $750 billion. And the Stimulus Bill passed in February, 2009 will cost the U.S. Taxpayer another $800 billion. But this does not count the Trillions of Dollars in guarantees, borrowings etc. to which The Fed and Treasury are committing the US. Taxpayer.
The Common characteristic of the Bailouts and Fed actions, and now apparently of the Fannie Mae and Freddie Mac debacle, is the reliance, ultimately, on the U.S. Taxpayer for a bailout.
Thus the Ominous Trend which appears to be developing as a central feature of The Cartel “End Game” is that:
1) The Toxic Waste of Failed Derivatives and other Failed or Failing “Financial Assets” including Bad Debt is laid off on the U.S. Taxpayer and disfavored financial institutions.
2) But the Fed-favored banking and other entities are allowed to scarf up the Performing Assets and/or the underlying collateral at fire sale prices. One wonders who will likely end up with Bear Stearns’ prize office building - - likely not the U.S. Taxpayer!
This “Nasty Twist” bears a remarkable resemblance to similar developments before and during the Great Depression in which The Fed then also first allowed easy credit and massive monetary inflation to drive up the prices of all assets in the 1920s, and then catalyzed the confiscation of Gold and Foreclosed Real Estate in the 1930s through bank and individual financial failures.
In that respect, the first years of the 21st century are quite like the 1920s (and even more like the years following The Panic of 1873) with its permissive credit and monetary inflation policies. Now we are seeing the beginnings of massive de-leveraging which, like that in the 1930s, allows The Cartel and its favored Agents and Allies to pick up assets at fire sale prices. In effect, this scenario allows, de facto, a Second Massive Performing Asset Seizure by The Cartel and its Allies as a result of the Foreclosures as well as allowing the laying off of Impaired Assets on Taxpayers and disfavored financial institutions.
Consider too that this “Nasty Twist” would be occurring against the backdrop of worsening Financial and Economic Realities catalyzed by The Cartel. The Key Real U.S. Data (contrary to the gimmicked Official Data) are, as we write: M3 is almost 12%, U.S. Unemployment is about 18%, Consumer Price Inflation is slightly below 8% and U.S. GDP is about a negative 4% (all annualized) according to the quite credible calculations of shadowstats.com.
These Real Statistics paint the picture of a Deepening Hyperinflationary Recession, which is bringing with it increasing pain to the average Citizen and Investor, and the Opportunity for Great Profit for The Cartel and its favored Agents and Allies.
Moreover, today, The Cartel Market Intervenors and their Allies quite likely know and understand in advance when and where the additional Takedown of Paper Assets will be coming. Before such Takedowns and insolvencies they will be able (and already are able) to use their access to the huge non-public Dark Liquidity Pools like “Turquoise” and “Baikal” to dump their Dollar-denominated assets in advance away from public view (see Deepcaster’s Alert of 4/8/07 entitled “Profiting From Dark Liquidity and Other Systemic Risks” at www.deepcaster.com). Thus they can begin to buy into depressed Tangible Assets “on the cheap” when they are near their bottoms and after their paper dump has been achieved. A Nasty Twist indeed!
In sum, the likely Nasty Twist to The Cartel’s “End Game” is that The Cartel and its Favored Financial Institutions will retain the Performing Assets, whereas the non-performing and devalued assets will likely be and are dumped on the U.S. Taxpayer and disfavored financial institutions. For more information on the Cartel “End Game” see Deepcaster’s July, 2008 Letter at www.deepcaster.com.
Opportunities
The key to short-term opportunities comes from considering The Bailouts, the Excessive Credit Creation in recent years and ongoing Rampant Monetary Hyperinflation. We reiterate the latest (as we write) figures, annual Money Supply Increase (M3) is still approximately 12% (M3 through 01/09 as reported by shadowstats.com). Earlier in 2008 M3 was at a record high of over 17% annualized. Of course, this Rampant Monetary Inflation has begun to show up in Real Consumer Price Inflation.
Contrary to the Official Figures “asserting” that CPI is nearly 6%, Real U.S. Consumer Price Inflation through the end of 2008 was well over 11% and almost 12% annually, as calculated by shadowstats.com. And the aforementioned M3 growth is massively inflationary!
The fact is that the private-for-profit Federal Reserve and U.S. Treasury have rolled over the generally clueless Congress (Ron Paul and a very few others excepted) and their actions are guaranteeing massive monetary, and therefore eventual price, inflation. The Fed’s balance sheet grew by 133% in 2008 according to a late Fall, 2008 Grants Interest Rate Observer Report. It used to be that a Fed Balance Sheet annual growth rate of 10% seemed high, if not excessive. Thus 133% is a staggeringly large increase.
Moreover, according to Grants, the Federal Reserve Bank’s credit was up 1,560% in the three Fall, 2008 months alone. This exploding Fed balance sheet is massively inflationary. The Fed increases its balance sheet by buying “assets” (albeit some “assets” of dubious value). How do they do this? They print money out of thin air! Deepcaster and others have shown what an unsustainable Ponzi scheme this printing out of thin air is (see “Private Ownership of U.S. Fed Unsustainable” of 1/4/08 in the Articles Cache at www.deepcaster.com).
Nonetheless, by massive loans, equity purchases and injections and expansion of the actual Money Supply by almost 12%, The Fed has guaranteed massive inflation. Similarly, key Central Banks around the world that have conducted similar actions and have thus bolstered massive inflation. What this means is that, in the long run, the U.S. Dollar and many other major currencies will buy less, much less, in the future.
However, given that the financial system and key heavyweight investors are awash Now with printed and borrowed money, certain Key Sectors should launch upward soon with the launch continuing until the long-term negative Economic Fundamentals drag them down again. Of course, this will not happen in one fell swoop, it will likely occur in Spurts. And, indeed, we think the first Spurt from this Monetary Inflationary Juice is not far off. Indeed, we have already forecast that this Monetary Infusion should be reflected in higher prices in certain Key Sectors identified in Deepcaster’s latest Alerts posted at www.deepcaster.com.
Thus, these considerations provide speculative opportunities, which have high profit potential as well as high risk. The Rampant Monetary Inflation reflected in M3 and in the various bailouts, guarantees, and loans are already several Trillion dollars. And this tremendously increased monetary base is available to inflate the paper value of certain Markets, when money managers first think the markets have a chance for a sustained (for a few months, or even weeks) rally, and, when The Cartel Interventional Regime “agrees” with them.
“It’s just a grab bag of every spending proposal that’s been banging around Congress for years.”
Steve Forbes, February 11, 2009
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“According to Bloomberg News (Monday, February 9, 2009), ‘The stimulus package the U.S. Congress is completing would raise the government’s commitment to solving the financial crisis to $9.7 trillion, enough to pay off more than 90 percent of the nation’s home mortgages…’”
“Ever since the Fed was created in 1913, America has been subjected to recession after recession, not to mention one Great Depression. Some are even predicting that the United States is now actually entering a second Great Depression. Please understand this: the Federal Reserve has manipulated every bit of this financial crisis for the express purpose of enriching the international bankers on the backs (and bankruptcies) of the American taxpayers. And what does our illustrious Congress do? They continue to give billion and even trillions of taxpayer dollars to the very same group of gangsters who created and perpetuate this financial fraud. And, as with Congress, Presidents from both major parties likewise promote and defend this chicanery.”
“’We’ve seen money go out the back door of this government unlike any time in the history of our country,’ Senator Byron Dorgan, North Dakota Democrat, said on the Senate floor Feb. 3. ‘Nobody knows what went out of the Federal Reserve Board, to whom and for what purpose. How much from the FDIC? How much from TARP? When? Why?’”
“President and Congress Grovel Before The Fed”
Chuck Baldwin, February 10, 2009
Deepcaster
February 13, 2009
-- Posted Friday, 13 February 2009 | Digg This Article
| Source: GoldSeek.com
