Most, if not all of financial crisis were the result of government mismanagement. No nation in recorded history has abused their currency as we have and not suffered severe consequences. It is human nature to think “it will never happen to you.”
40% of every printed dollar is borrowed
60% of our bonds are owned by … us and with printed dollars (a shell game)
17 Trillion committed financial debt
70+ Trillion in unrealized commitments
70% of spending on “dependence-creating programs”
The Fed’s entire balance sheet totaled around $800 billion before the 2008 crash
Estimates on the amount of derivatives out there worldwide vary. An oft-heard estimate is $600 trillion. (10 times the world’s annual GDP)
Athens was the world’s first democracy. It was the strongest city state in Greece for a time. Athens developed free enterprise and a tax system.
For over 750 years The Roman Empire used currency debasement to pay for wars, public works programs and social programs. There were various methods including:
I have written about Weimar at various times in the blog… most recently when explaining why manyGermans were strongly opposed to the European Central Bank’s monetary policy of unlimited bond buying (ie money printing) to bail out the likes of the PIIGS:
There is no tool except quantitative easing, and trying to force the hoards of cash deposits out of the banking system, in fear of being confiscated, into real estate, stocks, and other parts of the economy, and it is an extremely dangerous gamble.
Marc Faber: “We are creating bubbles and bubbles and bubbles. This bubble will come to an end. My concern is that we are going to have a systemic crisis where it is going to be very difficult to hide.”
from Bloomberg: “When you print money, the money does not flow evenly into the economic system. It stays essentially in the financial service industry and among people that have access to these funds, mostly well-to-do people. It does not go to the worker. I just mentioned that it doesn’t flow evenly into the system. Now from time to time it will lift the NASDAQ like between 1997 and March 2000. Then it lifted home prices in the U.S. until 2007. Then it lifted the commodity prices in 2008 until July 2008 when the global economy was already in recession. More recently it has lifted selected emerging economies, stock markets in Indonesia, Philippines, Thailand, up four times from 2009 lows and now the U.S. So we are creating bubbles and bubbles and bubbles. This bubble will come to an end. My concern is that we are going to have a systemic crisis where it is going to be very difficult to hide. Even in gold, it will be difficult to hide.”
Today I’m going to start off with a look at the big picture. The next chart pretty much says it all.
There is a fundamental reason why gold has been going up for 13 years. That same fundamental is driving the cyclical bull markets in stocks.
For gold the fundamentals are sustainable and that’s why the gold chart is rising almost parabolic inter-spaced with normal corrections/consolidations along the way.
For stocks the fundamentals aren’t sustainable. You can’t drive a true bull market in stocks by printing money. It just creates bubbles and crashes. That’s why each one of these bull markets is followed by a devastating bear market. It’s why the stock market chart has gone nowhere in 13 years while gold has gone up, up and away.
Until the fundamentals change this pattern isn’t going to change. Pretty soon the stock market is going to stagnate and start to drift sideways (followed by another bear market, probably due to bottom in 2016). Pretty soon gold is going to generate another C-wave leg up (followed by another sharp move down into the next 8 year cycle low, also due in 2016).
Gold: Did we bottom two days ago or not? I don’t know. What I do believe is that the QE4 manipulation has basically created a double B-wave bottom. As we saw last summer, B-wave bottoms are frustrating SOB’s that whipsaw back and forth until everyone is knocked off, or dizzy and ready to puke. Then they take off and leave everyone behind.
Minack provided these two charts to show the trajectory of GDP and earnings expectations. Notice the downward slopes. Except for Japanese GDP, expectations for everything have been deteriorating. Very ugly.
Gerard Minack, Morgan Stanley
Citi leads the way.
The craziness on Wall Street, the reckless for-the-moment-only behavior that led to the Financial Crisis, is back.
This time it’s Citigroup that is once again concocting “synthetic” securities, like those that had wreaked havoc five years ago. And once again, it’s using them to shuffle off risks through the filters of Wall Street to people who might never know.
What bubbled to the surface is that Citigroup is selling synthetic securities that yield 13% to 15% annually—synthetic because they’re based on credit derivatives. Apparently, Citi has a bunch of shipping loans on its books, and it’s trying to protect itself against default. In return for succulent interest payments, investors will take on some of the risks of these loans.