Category: Conservative Economic Viiews

I’ve been saying “Depression”

By , November 9, 2009 7:07 pm

MONEYANDMARKETS»


Monday, November 9, 2009

 

[«] Money and Markets 2009 Archive View This Issue On Our Website [»]

Massive Revolutionary Changes
by Martin D. Weiss, Ph.D. Dear Subscriber,

Martin D. Weiss, Ph.D.

I’ve just returned from Munich, Germany, where Claus Vogt and I addressed the 8th Annual Conference of Sicheres Geld subscribers.

Here are the highlights of my side of the presentation. (Claus will give you his side in a future issue).

Massive Revolutionary Changes

A few years ago, when we first began this journey together, we warned that the U.S. government was leading us to a future banking panic.

We warned about the housing bubble that was about to burst.

We told you about the giant monster of derivatives that could someday explode.

And we showed you how the U.S. real estate bust and the derivatives monster were likely to strike the largest financial institutions of Wall Street, threatening a meltdown in global financial markets.

Then, three years ago, we described the coming crisis in greater detail, naming the large financial institutions we believed were most likely to fail:

  • Bear Stearns and Lehman Brothers, two of America’s largest investment banks
  • Countrywide Financial and Fannie Mae, America’s largest mortgage lenders
  • Washington Mutual, America’s largest savings and loan corporation
  • Citigroup, America’s largest consumer ban

Virtually no one believed this was possible.

When we gave the story of the Citigroup failure to a reporter of a major business magazine, the editor nixed the story. When we told other banking experts that Citigroup was on the brink of failure, they laughed. When we told government officials, the company executives simply told them we were crazy.

 

Internal Sponsorship

Have you claimed your free membership?

The Weiss Forecast Contest for 2010 will be ending soon, and we’d hate for you to miss out on your opportunity to get a free, no-strings-attached subscription to any one of the FIVE wealth-building newsletters we publish.

So why not take a few seconds to tell us what you see ahead for key investments next year.

Click here to learn more …

 

As it turned out, the crisis was not less severe than we expected. Nor was it as severe as expected. Rather, the crisis was actually more severe — for two reasons.

First, in addition to the companies that we named as candidates for failure, several other giant companies that we had not named also went bankrupt or required a bailout.

The failed Wall Street firms included not only Bear Stearns and Lehman Brothers, but also Merrill Lynch.

The failed commercial banks included not only Citigroup, but also Bank of America.

The bankrupt institutions were not only in the U.S., but also in the U.K., Germany, and even Switzerland — Royal Bank of Scotland; IKB and Hypo Real Estate in Germany; and UBS in Switzerland.

They included not only banks and brokerage firms, but also the largest single insurance company in America, AIG.

But whether we named them ahead of time or not, the salient fact is that, in nearly every major financial industry — commercial banking, investment banking, consumer banking, brokerage, mortgage lending, and insurance — the companies that failed, or almost failed, were not small- or medium-sized. They weren’t the third largest or fourth largest. They were the single largest in the world.

Think about that: The world’s largest companies in every single sector of the financial industry. Failed. Bankrupt.

Now, fast-forward to today, November 7, 2009. Suddenly and miraculously, the same economists who told you this crisis could never happen are now telling you that this crisis is “over.” And the same government officials who scoffed at the notion of giant financial failures are claiming they have the final solution to those failures.

But the derivatives we warned you about are not gone. They are still there. Nor are the bad debts on the books of major banks. And most important, the government policies which created the crisis in the first place have not been modified or reduced. They have actually been accelerated, as we’ll demonstrate in a moment.

And therein lies the second reason the crisis is actually worse than we expected. With its deliberate policies, the U.S. government, along with governments here in Europe, have now transformed the Wall Street debt crisis into the Washington debt crisis.

They have transformed a crisis that was bankrupting individual institutions into a crisis that could threaten to bankrupt sovereign governments. Worst of all, they have converted a crisis of debt into a crisis of our currency.

U.S. Monetary Expansion

This chart shows the monetary base of the United States. It represents the most basic form of money supply — cash currency in the coffers of U.S. banks plus their total reserves.

As long as this basic measure of money supply is growing at a moderate pace, you can generally expect stability in the U.S. dollar, gold, and other markets. There will be ups and downs, of course, and sometimes, due to other global events, those ups and downs could be sharp. But they will not turn the world upside down.

Indeed, this had been the pattern since World War II: relatively moderate expansion. Up until September of last year, when Lehman Brothers failed, it took the U.S. Federal Reserve a total of 5,012 days to double this measure.

But then, look what happened: Fed Chairman Ben Bernanke doubled the U.S. monetary base in 112 days. Not in 5,012 days as his predecessors had done — but in a meager 112 days! He accelerated the pace of bank reserve expansion by a factor of 45 to 1.

Imagine a crowded highway with most cars traveling at an average speed of 100 km per hour. Then imagine a new driver appearing on the scene with a jet-powered engine that accelerates to a supersonic speed of 4,500 km per hour. That’s the same magnitude of change Fed Chairman Bernanke has presided over.

Ladies and gentlemen, this is not just more of the same trend that we have witnessed over the decades. It’s a massive, revolutionary change in the entire structure of the U.S. economy.

Even in the most extreme circumstances of history, the Fed never pumped in this much money in such a short period of time.

For example, before the turn of the millennium, the Fed was afraid of a computer catastrophe at the banks caused by the widely publicized Y2K bug. So it rushed to provide liquidity to U.S. banks and increased the monetary base by $73 billion in three months. At the time, that was considered huge. But this time, Mr. Bernanke has increased the monetary base by over $1 trillion, or 14 times more!

Lehman Failure

Here’s another example: In the days following the terrorist attacks on September 11, 2001, the Federal Reserve rushed to flood the banks with liquid funds. That time, it added $40 billion in less than 14 days. However, Mr. Bernanke’s recent trillion-dollar deluge of money is twenty five times larger.

Here’s the most astounding fact of all: After the Y2K and 9/11 crises had passed, the Fed promptly reversed its money infusions. It pulled out the extra liquidity from the banking system.

Monetary base surged to new, all-time highs.

But this time, Mr. Bernanke has done precisely the opposite. Since he doubled the currency and reserves at the nation’s banks with his 112-day money-printing frenzy in late 2008, he has thrown still more money into the pot. And late last month, the monetary base surged to new, all-time highs.

Ladies and gentlemen, this is not just more of the same trend that we have witnessed over the decades. It’s a massive, revolutionary change in the entire structure of the U.S. economy.

This is the elephant in the room — the situation that everyone knows is there, but no one wants to admit.

Now, let’s take a look at this same elephant from another perspective — the largest federal budget deficits in the history of mankind.

If the U.S. federal deficit were growing by 20 percent, 30 percent, or even as much as 50 percent, the pundits could have argued that it was just the continuation of a long-term trend, that it was simply more of the same.

Worst deficit of all time

But just in the last 12 months, the U.S. federal deficit has exploded from $454.8 billion in fiscal 2008 to $1.4 trillion in fiscal 2009. It has tripled in size in just one year’s time.

I repeat: This is not just more of the same trend that we have witnessed over the decades. It’s a massive, revolutionary change in the entire structure of the U.S. economy … and it’s totally unprecedented in history.

Now let’s turn to the consequences of these events — first, the intended consequences and then some of the unintended consequences.

Consequence #1 is a recovery in the U.S. economy. When the government creates that much monetary and fiscal stimulus, it naturally has some impact, of course. That’s why a recovery is now under way and why it is likely to continue for a few more quarters.

Consequence #2 is the rally in the U.S. stock market. Again, when so much liquidity is pumped into the economy, it’s only natural that some of it would flow into equities.

Consequence #3 is a recovery in emerging markets. Here, unlike the U.S. and other Western economies, not only are the economies benefiting from government stimulus, but they are also benefiting from strong domestic fundamental growth factors.

Consequence #4 is the decline of the U.S. dollar. The greenback is falling against the euro and virtually every major currency on the planet, and it will probably continue to do so. The U.S. Dollar Index, which measures the dollar against a basket of six major currencies, is now nearing its lowest level in history. Once that level breaks, the pace of the dollar’s decline could accelerate sharply.

Consequence #5 is the decline in the value of paper money as a whole, and the parallel rise in gold. Friday, gold pierced the $1,100 per-ounce level. Next, despite any intermediate setbacks, it could rise to $1,300.

Consequence #6 is rising interest rates. Yes, the Federal Reserve can hold its official short-term interest rates near zero, and this is precisely what it’s doing. But the Fed does not exert the same control over long-term interest rates. Nor can it control foreign central banks, some of which are beginning to raise interest rates. And most important, the U.S. government cannot control foreign investors who now own over half of the publicly traded U.S. government securities.

Meanwhile, the forces driving long-term interest rates higher are powerful and enormous — the same forces we told you about earlier: massive monetary inflation and equally massive federal deficits.

Consequence #7 is an anemic U.S. economy overall, weighed down by high unemployment, low spending, and most important, the largest debts of all time. Don’t expect this recovery to last very long. A second recession could come quickly on its heels.

I am often asked: Is the recession over? My answer is “yes.”
But to the more important question — is America’s long-term depression over? — my answer is a firm “no.” In the years ahead, we’re likely to see a series of longer-than-usual recessions interrupted by shorter-than-normal recoveries, all adding up to a long depression.

Such is the inevitable consequence of the massive, revolutionary changes that have already taken place … with more changes of similar magnitude still ahead.

P.S. Our whitelisting instructions have changed! To ensure you don’t miss out on any breaking news or alerts, please take a moment to add the below addresses to your address book. Or click here to see step-by-step whitelisting instructions.

 


 About Money and Markets

For more information and archived issues, visit http://www.moneyandmarkets.com

Money and Markets (MaM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Nilus Mattive, Claus Vogt, Ron Rowland, Michael Larson and Bryan Rich. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MaM, nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MaM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical in as much as we do not track the actual prices investors pay or receive. Regular contributors and staff include Kristen Adams, Andrea Baumwald, John Burke, Amy Carlino, Selene Ceballo, Amber Dakar, Dinesh Kalera, Red Morgan, Maryellen Murphy, Jennifer Newman-Amos, Adam Shafer, Julie Trudeau, Jill Umiker, Leslie Underwood and Michelle Zausnig.

Attention editors and publishers! Money and Markets issues can be republished. Republished issues MUST include attribution of the author(s) and the following short paragraph:

This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com.

From time to time, Money and Markets may have information from select third-party advertisers known as “external sponsorships.” We cannot guarantee the accuracy of these ads. In addition, these ads do not necessarily express the viewpoints of Money and Markets or its editors. For more information, see our terms and conditions.

View our Privacy Policy.

Would you like to unsubscribe from our mailing list?

To make sure you don’t miss our urgent updates, add Weiss Research to your address book. Just follow these simple steps.

© 2009 by Weiss Research, Inc. All rights reserved.

15430 Endeavour Drive, Jupiter, FL 33478

If you like this post then please subscribe to the RSS feed.

I still believe “Depression Ahead”

By , November 2, 2009 7:04 pm

MONEYANDMARKETS»


Monday, November 2, 2009

 

[«] Money and Markets 2009 Archive View This Issue On Our Website [»]

The Great Hoax of 2009-2010
by Martin D. Weiss, Ph.D. Dear Subscriber,

Martin D. Weiss, Ph.D.

Before he died, Dad warned me of false profits … and fake promises.

“Beware,” he said, “of shaky gains hyped up by Wall Street.

“Watch out,” he insisted, “for unsustainable economic recoveries trumpeted by Washington.

“And no matter when or where you may be, don’t be fooled by illusions of wealth and prosperity.

“If they’re built on a foundation of shaky debt, they’re suspect. If they’re driven by unbridled speculation, they’re pure fluff. And if they’re bought and paid for by Washington, they will certainly end in catastrophe.”

Sure enough, in the years that followed, millions of Americans were fooled by illusions of wealth created by the Great Tech Bubble of 1998-1999.

Millions more were fooled for a second time by illusions of prosperity in the Great Housing Bubble of 2005-2006.

And now, despite these blatant lessons of history, they are being fooled again — this time, in …

The Great Recovery Hoax of 2009-2010

There can be no debate that, in each of these episodes, things did go up: The Nasdaq soared before it crashed. The median price of U.S. homes skyrocketed before it collapsed. And now, the U.S. economy has reversed course — from four consecutive quarters of contraction to at least one quarter of expansion.

There also can be no doubt that these trends do not end overnight. They can continue for months — often plowing over skeptics and even exceeding the expectations of believers.

Most important, however, there can be no question that all three of these episodes have had one key element in common that ultimately self-destructs: Massive intervention, support, and free money from Washington.

External Sponsorship

YOU WORKED HARD FOR YOUR MONEY …
ISN’T IT TIME YOUR MONEY
WORKED HARD FOR YOU?

Weiss Capital Management is pleased to offer you an investment strategy designed to provide …

  1. Higher current INCOME in a low-yield climate …
  2. A DIVERSE mix of securities to help reduce risk …
  3. GROWTH potential to help stay ahead of inflation!

To Learn More, watch our exclusive Web video now:

Earning Higher Income in a Low Yield Market

 

To get a solid sense of how that’s unfolding this time around, pay close attention to these three independent economists:

Jim Grant, Founder and Editor,
Grant’s Interest Rate Observer

Jim Grant, originator of the “Current Yield” column in Barron’s and founder of Grant’s Interest Rate Observer, demonstrates not only that today’s recovery is bought and paid for by Washington … but also that the relative size of Washington’s intervention is even larger than you might think.

  • In the ten prior U.S. postwar recessions, the government responded, on average, with fiscal stimulus of 2.6 percent of GDP plus monetary stimulus of another 0.3 percent of GDP.

Combined stimulus: only 2.9 percent of GDP.

  • In contrast, during the current recession, the government has counter-attacked with fiscal stimulus amounting to an estimated 18 percent of GDP … plus monetary stimulus of an estimated 11.9 percent of GDP.

Combined stimulus: a whopping 29.9 percent of GDP.
That’s an unprecedented — and unimaginable — ten times more than the average stimulus of prior recessions.

Grant’s comparison of today’s government stimulus with that of the Great Depression is even more striking:

  • He points out that, in the early 1930s, GDP fell 27 percent, while the government responded with monetary and fiscal stimulus adding up to 8.3 percent of GDP.

Thus, using Grant’s numbers, I calculate that, for each percentage point our economy contracted, the U.S. government came forward with 0.31 percentage points of stimulus.

  • In contrast, in the current recession, U.S. GDP contracted 1.8 percent (at the time of Grant’s study) … while, as we just noted, the government’s stimulus has amounted to 29.9 percent of GDP.

Thus, for each percentage point that our economy contracted, the U.S. government has jumped in with 16.61 percentage points of stimulus.

Conclusion:

Relative to the disease, the government’s “cure” for the Great Recession today packs 54 times more firepower than the government’s response to the Great Depression of the early 1930s. And this does not even include trillions more in U.S. government guarantees to shore up the financial system.

Proponents of the government’s intervention may try to convince you “this is what it takes to avoid another depression: We’ve got to attack the contagion with big guns!”

However, Grant worries, rightfully so, that the cure may be far worse than the disease:

“If it’s taking this much to revive today’s economy,” he asks, “what kind of jolt might be necessary to succor tomorrow’s? An even bigger shock, we surmise, if tomorrow’s economy is no less encumbered than today’s. But it’s almost certain to be more encumbered, since the active ingredient of the Bush-Obama palliative is credit formation, the very hair of the dog that bit us. Skipping down to the bottom line, we renew our doubts as to the staying power of the paper currencies and to the creditworthiness of the governments that print them.”1

John Williams, Founder and Editor,
Shadow Government Statistics

John Williams is the economist who has single-handedly and repeatedly poked big holes in the government’s data that tracks price inflation, unemployment, money supply and the economy as a whole.

In his Shadow Government Statistics alert of October 29, he pokes an equally large hole in Washington’s pitch that the third-quarter rise in GDP announced last week is “sustainable.” His main points:

  • All U.S. recessions in the last four decades have had at least one positive quarter-to-quarter GDP reading, followed by a renewed downturn. This one could turn out to be no different.
  • The estimate of 3.5 percent annualized real growth for third-quarter GDP included a 1.7 percent gain from auto sales, a 0.6 percent gain from new residential construction, and a 0.9 percent gain from a largely-involuntary inventory buildup (caused by sales declines which are deeper than corporate planners expect).
  • In sum, these one-time stimulus or inventory items represented 92 percent of the reported quarterly growth.2

Chris Edwards, Director of Tax Policy Studies
Cato Institute

Martin D. Weiss, Ph.D.

Chris Edwards — formerly a senior economist on the congressional Joint Economic Committee examining tax issues and currently a Director at the Cato Institute — exposes another gaping hole in the 3.5 percent growth reported by the government last week:

While the government’s share of the economy has grown steadily … the contribution from private investment has fallen through the floor.

He writes:

“The third quarter GDP numbers show that the economy is only starting to ‘recover’ because of growing government and expanding consumption, which has been artificially inflated by large government transfers.

“Business investment continues to be in a deep recession. Companies are simply not building factories or buying new machines and equipment.

“Why not? I suspect that many firms are scared to death of higher taxes, inflation, health care mandates, increased labor regulation, and other profit-killers coming down the road from Washington.”3

Edwards goes on to say that it’s too soon to speculate on underlying causes. But I would add that an equally bloody killer of private investment is the diversion of scarce credit from small and medium-sized businesses to wild-and-wooly Wall Street speculation, as Mike Larson has pointed out here week after week.

It’s all part and parcel of the Great Recovery Hoax of 2009-2010.

Like the great bubbles of recent memory, it could continue. But it will ultimately end in disaster.

My Recommendations:

First, don’t fall for the hoax. Instead follow independent thinkers like Grant, Williams and Edwards. You can

Bernanke going berserk! Again!

Second, don’t expect Washington to back off immediately.

In fact, right now, the Fed Chairman Bernanke is doing precisely the opposite. He’s buying even more mortgage-backed securities and boosting the monetary base (currency and reserves at the nation’s banks) to a record high, reached just last week.

Third, don’t wait around for the next disaster before taking protective action. For several weeks now, we’ve been warning you of a sharp stock market correction, and with Friday’s 250-point plunge in the Dow, it’s clear that correction is here.

Fortunately, Mike Larson, Claus Vogt and other Weiss Research editors recognized the “Dow 10,000” euphoria this month as a signal to take some profits off the table for their subscribers — and even buy hedge positions for a decline. If you haven’t done so already, it’s probably not too late to follow their lead.

Fourth, no matter what your trading approach may be, don’t forget the importance of cash. Even with a declining dollar and near-zero interest rates, it’s still prudent to keep a good chunk of your wealth out of the market entirely.

Fifth, we will soon provide our forecasts for 2010. But in the interim, please let me know what you think the consequences of this great hoax will be. Just click here to go to my blog and post your comments there.

Good luck and God bless!

Martin

1 Grant’s Interest Rate Observer, Vol. 27, No. 7a, April 3, 2009.

2 John Williams’ Shadow Government Statistics, Commentary Number 254, October 29, 2009.

3 Cato@Liberty blog post by Chris Edwards, “The Death of Private Investment,” October 30, 2009.

 


 About Money and Markets

For more information and archived issues, visit http://www.moneyandmarkets.com

Money and Markets (MaM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Nilus Mattive, Claus Vogt, Ron Rowland, Michael Larson and Bryan Rich. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MaM, nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MaM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical in as much as we do not track the actual prices investors pay or receive. Regular contributors and staff include Kristen Adams, Andrea Baumwald, John Burke, Amy Carlino, Selene Ceballo, Amber Dakar, Dinesh Kalera, Red Morgan, Maryellen Murphy, Jennifer Newman-Amos, Adam Shafer, Julie Trudeau, Jill Umiker, Leslie Underwood and Michelle Zausnig.

Attention editors and publishers! Money and Markets issues can be republished. Republished issues MUST include attribution of the author(s) and the following short paragraph:

This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com.

From time to time, Money and Markets may have information from select third-party advertisers known as “external sponsorships.” We cannot guarantee the accuracy of these ads. In addition, these ads do not necessarily express the viewpoints of Money and Markets or its editors. For more information, see our terms and conditions.

View our Privacy Policy.

Would you like to unsubscribe from our mailing list?

To make sure you don’t miss our urgent updates, add Weiss Research to your address book. Just follow these simple steps.

© 2009 by Weiss Research, Inc. All rights reserved.

15430 Endeavour Drive, Jupiter, FL 33478

 

If you like this post then please subscribe to the RSS feed.

Bernake gone berserk! Bank reserves explode!

By , October 19, 2009 5:44 pm

MONEYANDMARKETS»


Monday, October 19, 2009

 

[«] Money and Markets 2009 Archive View This Issue On Our Website [»]

Bernanke gone berserk! Bank reserves explode!
by Martin D. Weiss, Ph.D. Dear Subscriber,

Fed's Money Printed Gone Absolutely Wild

Martin here with the most shocking new numbers I’ve seen in my lifetime.

My conclusion: Fed Chairman Bernanke has dumped so much funny money into the U.S. banking system and has done so little to manage how that money is used, the fate of our entire economy has now been cast under a dark shadow of doubt.

This is not conjecture or exaggeration.

Nor are the underlying facts subject to debate.

They are blatant, unambiguous, and fully supported by the Fed’s own data …

Fact #1. Up until the day Lehman Brothers collapsed in September of last year, it took the Fed a total 5,012 days — 13 years and 8 months — to double the cash currency and reserves in the coffers of U.S. banks.

In contrast, after the Lehman Brothers collapse, it took Bernanke’s Fed only 112 days to double the size of U.S. bank reserves. He accelerated the pace of bank reserve expansion by a factor of 45 to 1. (Click here for the proof.)

Imagine a crowded interstate highway with a speed limit of 55 miles per hour and with a long tradition of allowing no one to exceed the limit by more than 20 or 25 mph.

Suddenly, a new driver appears on the scene with a jet-powered engine that accelerates to a supersonic speed of 1,350 mph.

That’s the same magnitude of change Fed Chairman Bernanke has presided over.

Fact #2. Even in the most extreme circumstances of recent history, the Fed never pumped in anything close to this much money in such a short period of time. Indeed …

  • Before the turn of the millennium, the Fed scrambled to provide liquidity to U.S. banks to ward off a feared Y2K catastrophe, bumping up bank reserves from $557 billion on October 6, 1999 to $630 billion by January 12, 2000. And at the time, that was considered unprecedented — a $73 billion increase in just three months. In contrast, Mr. Bernanke’s recent money infusion is $1.007 trillion or 14 times more!
  • Similarly, in the days following the terrorist attacks on the World Trade Center and the Pentagon, the Fed rushed to flood the banks with liquid funds, adding $40 billion in the 14-day period between 9/5/01 and 9/19/01. Mr. Bernanke’s recent trillion-dollar flood of money is twenty five times larger.

Fact #3. After the Y2K and 9-11 crises had passed, the Fed promptly reversed its money infusions and sopped up the extra liquidity in the banking system. But this time, Mr. Bernanke has done precisely the opposite: Since he doubled the currency and reserves at the nation’s banks with his 112-day money-printing frenzy in late 2008, he has thrown still more money into the pot.

Fact #4. With no past historical precedent, no testing, and no clue regarding the likely financial fallout, Mr. Bernanke has invented and deployed more weapons of mass monetary expansion than all prior Fed chairmen combined.

The list itself boggles the imagination: Term Discount Window Program, Term Auction Facility, Primary Dealer Credit Facility, Transitional Credit Extensions, Term Securities Lending Facility, ABCP Money Market Fund Liquidity Facility, Commercial Paper Funding Facility, Money Market Investing Funding Facility, Term Asset-Backed Securities Loan Facility, and Term Securities Lending Facility Options Program.

None of these existed earlier. All are new experiments devised in response to the debt crisis.

Fact #5. The single biggest new facility is the Fed’s purchases of mortgage-backed securities (MBS). This massive operation began on January 7 of this year with only $10.2 billion. Now, just nine months later, the Fed has bought up a cumulative total of $924.9 billion, the largest money infusion by any central bank into any single market sector of all time.

Simply put, the Fed has been buying up virtually all the junk and nonjunk mortgages it can lay its hands on.

Fact #6. Mr. Bernanke would have you believe that he can carefully control how the banks use all this free money, with an eye toward preventing a sudden bout of inflation.

In practice, however, he’s doing nothing of the sort.

For example, the theory is that if the Fed merely arranges for the U.S. Treasury Department to borrow back most of the excess bank reserves, the Fed could keep the money out of the banks’ hands, prevent them from multiplying it with big lending, and ward off the ultimate inflationary consequences.

Bernanke and Geithner

But, as pointed out by Econbrowser.com, the reality is that the Treasury is absorbing only a small fraction of the banks’ bloated reserve balances (green area in chart).

The bulk of those reserves (green area) are readily available to start multiplying through lending — and to set off an uncontrollable vicious cycle of too much money chasing too few goods.

Fact #7. If the bank lending were mostly to American businesses, it might at least help rebuild the U.S. economy. However, right now, the only big lending we see is to finance a new speculative fever that has swept the globe — the borrowing of cheap dollars to buy high-yield investments. (See Mike Larson’s “Easy-Money Fed Fueling Dollar Carry Trades” and “Getting Inside the Fed’s Head.”)

Fact #8. The nation’s money supply is exploding. In August, money in circulation and in checking accounts (M1) expanded at the breakneck speed of 18.6 percent compared to the year earlier. That was …

  • Three times faster than the average M1 growth rate of the 1970s, which helped create the worst inflation of our era;
  • Over SIX times faster than theaverage M1 growth rate during the half century prior to September 2008; and
  • The single fastest M1 growth rate ever recorded by the Federal Reserve.

The Consequences

This overabundance of high-powered money flooding into the nation’s banking system and money supply can have only one consequence: To cheapen the value of each dollar you own.

Yes, Mr. Bernanke has temporarily tamped down the Wall Street debt crisis. And yes, he has managed to replace fear with greed … convert the flight to safety into the lust for risk … and transform falling markets into rising markets.

But look at the price we are paying:

  • The solvency concerns regarding major financial institutions have now been replaced by looming solvency threats to the U.S. government itself.
  • The debt crisis of 2007-2008 has been transformed into the dollar crisis of 2009-2010.

Clearly, in this environment, following traditional investment norms with conventional investment vehicles could be dangerous; and evidently, an entirely different approach to investing is now a must.

For specific instructions, be sure to view (or review) our recent 1-hour video, Washington’s War on the Dollar. But do not delay. It goes offline this week.

Good luck and God bless!

Martin

P.S. Here’s the proof of the 45-to-1 acceleration in reserve growth: On December 21, 1994, the cash currency and reserves at U.S. banks was reported by the Fed at $426.6 billion. Subsequently, it took 5,012 days for that figure to double, reaching $849.9 billion on September 10, 2008, the Fed’s last reporting period prior to the failure of Lehman Brothers.

Following that date, however, as the Fed responded with new, unprecedented open market operations, it took a mere 112 days to double, reaching $1,702.2 billion on December 31, 2008. (To return to the article above, click here.)

Fed data series: U.S. aggregate reserves of depository institutions plus the monetary base. To download my spreadsheet showing the Fed data and my calculations, click here.

 


 About Money and Markets

For more information and archived issues, visit http://www.moneyandmarkets.com

Money and Markets (MaM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Nilus Mattive, Claus Vogt, Ron Rowland, Michael Larson and Bryan Rich. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MaM, nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MaM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical in as much as we do not track the actual prices investors pay or receive. Regular contributors and staff include Kristen Adams, Andrea Baumwald, John Burke, Amy Carlino, Selene Ceballo, Amber Dakar, Dinesh Kalera, Red Morgan, Maryellen Murphy, Jennifer Newman-Amos, Adam Shafer, Julie Trudeau, Jill Umiker, Leslie Underwood and Michelle Zausnig.

Attention editors and publishers! Money and Markets issues can be republished. Republished issues MUST include attribution of the author(s) and the following short paragraph:

This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com.

From time to time, Money and Markets may have information from select third-party advertisers known as “external sponsorships.” We cannot guarantee the accuracy of these ads. In addition, these ads do not necessarily express the viewpoints of Money and Markets or its editors. For more information, see our terms and conditions.

View our Privacy Policy.

Would you like to unsubscribe from our mailing list?

To make sure you don’t miss our urgent updates, add Weiss Research to your address book. Just follow these simple steps.

© 2009 by Weiss Research, Inc. All rights reserved.

15430 Endeavour Drive, Jupiter, FL 33478

 

If you like this post then please subscribe to the RSS feed.

The Economy

By , October 5, 2009 5:06 pm

MONEYANDMARKETS»


Monday, October 5, 2009

 

[«] Money and Markets 2009 Archive View This Issue On Our Website [»]

Three Government Reports
Point to Fiscal Doomsday

by Martin D. Weiss, Ph.D. Dear Subscriber,

Martin D. Weiss, Ph.D.

When our leaders have no awareness of the disastrous consequences of their actions, they can claim ignorance and take no action.

Or when our leaders have no hard evidence as to what might happen in the future, they can at least claim uncertainty.

But when they have full knowledge of an impending disaster … they have proof of its inevitability in ANY scenario … and they so declare in their official reports … but STILL don’t lift a finger to change course … then they have only one remaining claim:

INSANITY!

And, unfortunately, that’s precisely the situation we’re in today: Three recently released government reports now point to fiscal doomsday for America; and one of the reports, issued by the Congressional Budget Office (CBO), says so explicitly:

  • The CBO paints two future scenarios for the U.S. budget deficit and the national debt. But it plainly declares that fiscal disaster will strike in EITHER scenario. Furthermore …
  • The CBO states that its fiscal disaster scenarios could cause severe economic declines for decades to come, including hyperinflation and destruction of retirement savings.
  • The CBO then proceeds to admit that even its worse-case scenario could be understated by a wide margin due to panic in the financial markets or vicious cycles that are beyond control.
  • Separately, in its Flow of Funds Report for the second quarter, the Federal Reserve provides irrefutable data that we are already beginning to witness the first of these consequences in the United States: an unprecedented cut-off of credit to businesses and consumers.
  • Meanwhile, the Treasury Department shows that America’s fate remains, as before, in the hands of foreigners, with the U.S. still owing them $7.9 trillion!
  • And despite all this, neither Congress nor the Obama Administration have proposed a plan or a timetable for averting these doomsday scenarios. Their sole solution is to issue more bonds, borrow more, and print more without restraint.

That, dear Subscriber, is the epitome of insanity.

Yes, the great government bailouts of 2008 and 2009 have bought us some time … but they have promptly proceeded to sell us into bondage.

Yes, they have given us safe passage over tough seas … but only to throw our assets onto the global auction block for the highest bidders.

The one bright spot: Unlike some governments, ours does not conceal the evidence of its folly. Quite the contrary, the proof pours forth from these three government reports in relatively blunt language and unmistakably blatant numbers …

Report #1
Congressional Budget Office (CBO):
The Long-Term Budget Outlook

CBO Reort

The CBO opens with a chart predicting the most dramatic surge in government debt of all time.

It shows that even in proportion to the larger size of the U.S. economy today, the government debt has ALREADY surpassed the massive debt loads accumulated during World War I and the Great Depression … and will soon surpass even the massive debt load of World War II.

“Large budget deficits,” write the authors of the CBO report, would …

  • Reduce national saving,” leading to …
  • More borrowing from abroad” and …
  • Less domestic investment,” which in turn would …
  • Depress income growth in the United States,” and …
  • Seriously harm the economy.”

Worse, on page 14, the CBO warns that:

  • “Lenders may become concerned about the financial solvency of the government and …
  • Demand higher interest rates to compensate for the increasing riskiness of holding government debt.” Plus …
  • “Both foreign and domestic lenders may not provide enough funds for the government to meet its obligations.”

The magnitude of the problem cannot be underestimated. The CBO declares on page 15 that:

  • “The systematic widening of budget shortfalls projected under CBO’s long-term scenarios has never been observed in U.S. history” and …
  • It will also be larger than the debt accumulations of any other industrialized nation in the post-World War II period, including Belgium and Italy, the two worst cases of all.

But the CBO admits that even these frightening projections may be grossly understated because:

  • “The analysis omitted the pressures that a rising ratio of debt to GDP would have on real interest rates and economic growth.”
  • “The growth of debt would lead to a vicious cycle in which the government had to issue ever-larger amounts of debt in order to pay ever-higher interest charges.”
  • “More government borrowing would drain the nation’s pool of savings, reducing investment” and …
  • “Capital would probably flee the United States, further reducing investment.”

But none of these are factored into the analysis. On page 17 of its report, the CBO writes …

“The analysis … does not incorporate the financial markets’ reactions to a fiscal crisis and the actions that the government would adopt to resolve such a crisis. Because [our] textbook growth model is not forward-looking, the analysis assumes that people will not anticipate the sustainability issues facing the federal budget; as a result, the model predicts only a gradual change in the economy as federal debt rises.

“In actuality, the economic effects of rapidly growing debt would probably be much more disorderly as investors’ confidence in the nation’s fiscal solvency began to erode. If foreign investors anticipated an economic crisis, they might significantly reduce their purchases of U.S. securities, causing the exchange value of the dollar to plunge, interest rates to climb, and consumer prices to shoot up.(Bolding is mine.)

Report #2
U.S. Federal Reserve:
Flow of Funds Accounts
of the United States

Flow of Funds

The Fed’s data on page 12 tells it all: The impact on the U.S. credit markets is not just a future scenario. It’s happening right now.

Yes, the government is getting its money to finance its exploding deficits (for now). But it’s hogging all the available supplies, while American businesses and average consumers are getting shut out or even shoved out.

Specifically …

  • In the first half of last year, the U.S. Treasury raised funds at the annual pace of $411 billion in the first quarter and $310 billion in the second quarter.
  • But if you think that was a lot, consider this: THIS year, the Treasury has stepped up its pace of borrowing to annual rates of $1.443 TRILLION in the first quarter and $1.896 TRILLION in the second quarter. That’s 3.5 times and over SIX TIMES MORE than last year’s, respectively.

Meanwhile, the private sector is getting killed …

  • Last year, banks provided new credit at the annual pace of $472.4 billion in the first quarter and $86.7 billion in the second. This year, they’re not providing ANY new credit — they’re actually LIQUIDATING loans at the rate of $857.2 billion in the first quarter and $931.3 billion in the second. So if you’re running a business, you may want to think twice before asking your bank for more money. Instead, they may decide to TAKE BACK the money they’ve already loaned you!
  • Ditto for mortgages. Last year, mortgages were being created at the annual clip of $522.5 billion and $124 billion in the first and second quarters, respectively. This year, on a net basis, mortgages haven’t been created at all. Quite the contrary, the Fed reports that, on a net basis, they’ve been liquidated at an annual pace of $39.3 billion in the first quarter and $239.5 billion in the second.
  • Getting cash out of credit cards and other consumer credit is even tougher. Last year, folks were able to add to their consumer credit at annual rates of $115 billion and $105 billion in the first two quarters. This year, in contrast, they’ve been forced to CUT back on their credit at annual rates of $95.3 billion in the first quarter … and at an even faster pace in the second quarter — $166.8 billion.

Never before in my lifetime have I witnessed a more severe case of crowding out in the credit markets!

And never before has the CBO been so right in its forecasts of fiscal doomsday: One of its dire forecasts was already coming true even before it issued its report.

Report #3
U.S. Treasury Department:
Treasury Bulletin

Treasury Bulletin

Each and every month, the Treasury reminds us of the single fact that no one in the Treasury wants to face:

The U.S. is deep in debt to the rest of the world, and on page 48, it provides the evidence: total liabilities to foreigners of $7,898,435 million (nearly $7.9 trillion)!

This isn’t a new record. It was actually slightly more last year. But the fact is NOTHING has been done to reduce our debt to foreigners. Quite the contrary, it is the deliberate policy of our government to pile up more — to sell foreign investors and central banks on the idea that they must continue to lend us money.

The fact that this could potentially put our nation into deeper jeopardy is overlooked. And the dire forecast by the CBO that foreign investors might pull the plug is pooh-poohed.

Tomorrow at 2 PM, in our online seminar, we’ll tell you why that could be a serious mistake. More importantly, we’ll show you precisely how you can harness these potentially overwhelming forces and even harvest them for profits.

If you’re already signed up, great! You should have your login instructions.

If not, TODAY is your last day. If you don’t register by midnight tonight, you’ll miss it.

Click here. It’s free. And it takes only a few seconds.

Good luck and God bless!

Martin

P.S. If you want to see exactly where I get my quotes and data, just click on the page numbers cited above, and you’ll see the relevant pages I’ve extracted from the government reports with the critical information highlighted in yellow.

 


 About Money and Markets

For more information and archived issues, visit http://www.moneyandmarkets.com

Money and Markets (MaM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Nilus Mattive, Claus Vogt, Ron Rowland, Michael Larson and Bryan Rich. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MaM, nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MaM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical in as much as we do not track the actual prices investors pay or receive. Regular contributors and staff include Kristen Adams, Andrea Baumwald, John Burke, Amy Carlino, Selene Ceballo, Amber Dakar, Dinesh Kalera, Red Morgan, Maryellen Murphy, Jennifer Newman-Amos, Adam Shafer, Julie Trudeau, Jill Umiker, Leslie Underwood and Michelle Zausnig.

Attention editors and publishers! Money and Markets issues can be republished. Republished issues MUST include attribution of the author(s) and the following short paragraph:

This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com.

From time to time, Money and Markets may have information from select third-party advertisers known as “external sponsorships.” We cannot guarantee the accuracy of these ads. In addition, these ads do not necessarily express the viewpoints of Money and Markets or its editors. For more information, see our terms and conditions.

View our Privacy Policy.

Would you like to unsubscribe from our mailing list?

To make sure you don’t miss our urgent updates, add Weiss Research to your address book. Just follow these simple steps.

© 2009 by Weiss Research, Inc. All rights reserved.

15430 Endeavour Drive, Jupiter, FL 33478

If you like this post then please subscribe to the RSS feed.

The FED does not know what’s it is doing.

By , September 25, 2009 5:52 pm
MONEYANDMARKETS»
Friday, September 25, 2009

 

[«] Money and Markets 2009 Archive View This Issue On Our Website [»]

Preemptive Tightening from THIS Fed?
You Can’t Be Serious.

by Mike Larson Dear Subscriber,

Mike Larson

This week’s Federal Reserve meeting was supposed to be a big deal. Ahead of the two-day gathering, I don’t know how many stories I read suggesting that the Fed might start laying the groundwork for “preemptive” tightening in one form or another. They wouldn’t raise rates. But they would start pulling back on their extreme easy money policies, the argument went.My response: “Are you kidding me?!”THIS Fed?The one with “Helicopter” Ben Bernanke at the helm?No way!

Internal Sponsorship
Protect Yourself and ProfitRecord-shattering federal deficits and debt … the largest treasury auctions of all time … out-of-control money printing at the Fed … all factors contributing to the erosion of the U.S. dollar. But there’s still time! You can shield yourself, your family, your savings and your investments from disaster as this great dollar decline crushes the value of your money. More than that: There are many ways to harness this historic convulsion to keep your wealth growing.Click here to learn more about our FREE online seminar …
 

I thought a much more likely scenario would be: They’ll keep the monetary spigot wide open … they’ll move extremely gradually … and they’ll likely screw things up again, helping encourage new bubbles in other parts of the asset markets.

Bernanke's message on Wednesday: Party on!
Bernanke’s message on Wednesday: Party on!

Sure enough, that’s exactly what happened! The news released on Wednesday:

  • The Fed kept its interest rate target unchanged at 0 percent to 0.25 percent.
  • The Fed said the economy was getting better, but that it didn’t care. It would still maintain “exceptionally low levels of the federal funds rate for an extended period.”
  • And the Fed said it will stick to its plan to buy $1.45 trillion in mortgage backed securities and “agency” debt sold by the likes of Fannie Mae and Freddie Mac. It even extended the program from year-end through the first quarter of 2010.

In other words, the message to the markets from the Fed is clear: Party on!The Fed Consistently Errs On the Side Of
Easy Money — Over and Over and Over
Why am I being so blunt? Why am I so sure we’re going to see the same movie … again? Because of recent history.Starting with Alan Greenspan two decades ago — and continuing under Ben Bernanke — the Fed has become a gigantic enabler of financial risk-taking. The prescription for every downturn in the economy or financial market shock has been the same: Throw money at the problem!Long-Term Capital Management blows up? Cut rates! Y2K bug threatens banks? Flood the system with cheap money! Dot-com bust? Housing bust? Recession? Drive rates into the gutter!The risk of this strategy is abundantly clear … it keeps fueling new bubbles in the wake of the old ones. Even the Organization for Economic Cooperation and Development weighed in on this topic a few days ago, warning that a key risk right now is “the reigniting of rolling asset bubbles through easy monetary policy.”But the Fed shows no sign of changing course. Worse, the Fed has consistently maintained this asinine asymmetric policy toward asset bubbles.

External Sponsorship
Six Relentless Dividend Payers to Get You Through Any MarketThese six stocks have all the things you need to look for in today’s market. They’ve been paying increasing dividends for decades — even centuries. They’re attractively valued. And best of all they’re now yielding 34% more than usual.Get the full story here …
 

What do I mean by that? Policymakers openly admitted to a policy of IGNORING bubbles as they inflated. They justified doing so by saying that:

  1. It was too hard to identify bubbles, and
  2. Even if they could identify them, they’d have to raise rates so much to tamp them down that the economy would suffer.

Instead, the Fed claimed the better approach was to wait until the bubbles popped, then try to clean up the mess with cheap money.No I’m not joking. This is what went for serious economic thinking at the Fed.You and I can easily see how that policy has laid waste to the economy and investors twice over — once in tech stocks and then in real estate. But the Fed still doesn’t appear to be making a wholesale shift in its policy toward asset bubbles.The Fed-Fueled Consequences —
And How to Protect Yourself from Them
That brings me to the present …

The Fed fueled the housing bubble by continually chopping interest rates to the bone.
The Fed fueled the housing bubble by continually chopping interest rates to the bone.

Why would anyone seriously think the Fed will preemptively hike rates? Or take steps to pull back its extraordinary financial support BEFORE it creates another bubble? In recent years, the Fed has NEVER proven itself willing to do so.Why do you think we had the biggest housing bubble of all time? Because the Fed kept money too cheap for too long (among other reasons). Then when they did start hiking rates, they did so in predictable, quarter-point steps spread out over a span of more than a year.Why do you think the dollar is falling out of bed right now? Because other central banks in places like Norway and Australia are sending out signals that they might raise rates soon, while our Fed is making no such shift in its policy stance.Why do you think gold has exploded above $1,000 an ounce? Crude oil has more than doubled from its lows? Sugar prices are up 88 percent? Copper is up 105 percent? Lead has soared 125 percent? Some of it is fundamentally driven — tighter supply, stronger demand. But a significant chunk of those moves is pure monetary policy-driven asset inflation.

Now is the time to protect your wealth by investing in contra-dollar assets, like gold.
Now is the time to protect your wealth by investing in contra-dollar assets, like gold.

And you know what? Bernanke doesn’t care! He doesn’t care if that means we pay more at the grocery store or the gas pump. He doesn’t care if it costs more to travel overseas, or if the purchasing power of our currency collapses. He doesn’t give a hoot about the fact that his monetary policy is enabling the biggest debt binge Treasury has ever embarked on.But I hope you care. And I hope you’re taking steps to protect yourself — by investing in contra-dollar assets (including gold) and avoiding long-term bonds. The Fed sure as heck isn’t watching out for your interests, which means that you need to!Until next time,Mike 


 About Money and MarketsFor more information and archived issues, visit http://www.moneyandmarkets.comMoney and Markets (MaM) is published by Weiss Research, Inc. and written by Martin D. Weiss along with Nilus Mattive, Claus Vogt, Ron Rowland, Michael Larson and Bryan Rich. To avoid conflicts of interest, Weiss Research and its staff do not hold positions in companies recommended in MaM, nor do we accept any compensation for such recommendations. The comments, graphs, forecasts, and indices published in MaM are based upon data whose accuracy is deemed reliable but not guaranteed. Performance returns cited are derived from our best estimates but must be considered hypothetical in as much as we do not track the actual prices investors pay or receive. Regular contributors and staff include Kristen Adams, Andrea Baumwald, John Burke, Amy Carlino, Selene Ceballo, Amber Dakar, Dinesh Kalera, Red Morgan, Maryellen Murphy, Jennifer Newman-Amos, Adam Shafer, Julie Trudeau, Jill Umiker, Leslie Underwood and Michelle Zausnig.Attention editors and publishers! Money and Markets issues can be republished. Republished issues MUST include attribution of the author(s) and the following short paragraph:This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com.From time to time, Money and Markets may have information from select third-party advertisers known as “external sponsorships.” We cannot guarantee the accuracy of these ads. In addition, these ads do not necessarily express the viewpoints of Money and Markets or its editors. For more information, see our terms and conditions.View our Privacy Policy.Would you like to unsubscribe from our mailing list?To make sure you don’t miss our urgent updates, add Weiss Research to your address book. Just follow these simple steps.

© 2009 by Weiss Research, Inc. All rights reserved. 15430 Endeavour Drive, Jupiter, FL 33478

     

If you like this post then please subscribe to the RSS feed.

weakening dollar

By , September 17, 2009 5:40 pm

Dear Subscriber,

This morning, we awakened to the news that the U.S. dollar has now fallen to its lowest levels in about a year — in freefall against the euro, the British pound and many other major currencies.

This is precisely the danger I’ve been warning you about.

Just yesterday, I showed you how Washington’s massive debt and entitlement obligations have grown to well over $100 trillion — far more than our nation could ever hope to service — let alone ever repay.

U.S. Dollar in Freefall!We took a look at Bernanke’s secret solution to our massive, record-shattering debt: That only by destroying the value of the U.S. dollar can Washington ever even hope to service our skyrocketing debt — by satisfying its Social Security, Medicare and Medicaid obligations with ever-cheaper dollars.

We saw how this strategy is already being implemented … how it has already begun to crush the dollar’s value on world markets …

And we’ve seen how, by destroying your buying power, it can only drive your cost of living through the roof … push retirees living on fixed incomes into abject poverty … and trigger massive new waves of bankruptcies from coast to coast.

The simple truth is, if Bernanke’s secret debt solution was the ONLY threat to the U.S. dollar, it would be enough to crush the greenback’s value.

But this intentional destruction of the dollar by our leaders is only ONE of FOUR factors that are about to crush the value of your income, savings, investments and retirement in what will go down in the history books as the single greatest confiscation of personal wealth in world history.

Today, we’re going to examine a second crucial reason why I am convinced that the U.S. dollar is doomed:

Foreign investors are abandoning the dollar in droves.

Anyone who buys long-term U.S. treasuries these days is virtually begging to get his head handed to him for three very simple reasons:

FIRST, long-term treasuries are paying bupkis. To many, tying up money for 30, long years in return for a paltry 4.2% yield isn’t an investment decision; it’s an IQ test.

SECOND, foreign investors aren’t blind, deaf or dumb: They know full well that U.S. deficits and debt are exploding. And they’re also keenly aware that Bernanke’s secret debt solution means the yield they earn in those treasuries will be worth much less with each passing year — as the dollar continues to fall in value.

AND THIRD, the sheer size of Washington’s debt has many foreign investors wondering if long-term U.S. treasuries really are a prudent investment in the first place. As our national debt continues to explode, so does the risk that at some point, Washington may have no choice but to default on that debt.

Put simply, foreign investors are disgusted with Washington’s unprecedented spending binge. They’re haunted by Bernanke’s seemingly intentional failure to defend the dollar. They’re sick and tired of footing the bill for our spendthrift ways. And they’re increasingly skeptical of our ability to pay what we owe them.

And now, they’re beginning to recoil in horror; snapping their checkbooks SHUT.

This is serious: Overseas investors fund fully 50% of our borrowing addiction, holding $6.2 trillion in U.S. securities — including almost $4.6 trillion in bonds.

But over the last year, central banks have been actively replacing portions of their dollar reserves with the euro, the Canadian and Australian dollars, and most of all gold. China alone recently announced it has quietly increased its gold reserves by more than 75% over the last seven years!

All this has enormous implications for the value of your money, your buying power and your standard of living: As demand for U.S. treasuries wanes, so does demand for dollars to buy them. And as worldwide demand for dollars declines, so does the value and spending power of every dollar in your pocket.

Worse: As more foreign central banks, overseas fund managers and investors flee the dollar, Washington has no choice but to pump out more and more unbacked paper dollars and dump them into the economy — further eroding your buying power.

It’s a perpetual cycle that can only lead to one thing: Printing presses blazing on overdrive … a collapse of bond prices … a massive surge in interest rates … an explosion of inflation … and the total destruction of our standard of living — at least, for those who aren’t aware or prepared for what is happening.

That’s why I believe it is absolutely essential that we pull out all the stops to help you weather the greenback’s ultimate collapse.

So please be sure to watch your inbox tomorrow and over the next few days for the next installments of this series — and to discover what we’re doing to help you protect your wealth and profit.

In the meantime, I stand ready to help any way I can. Just CLICK THIS LINK to jump over to my personal blog and give me your comments.  Ask anything you like and we’ll do our best to get you the answers you need to shield your wealth.

Best wishes,

Larry Edelson


Would you like to edit your e-mail notification preferences or unsubscribe from our mailing list?

Weiss Research, Inc.
15430 Endeavour Drive
Jupiter, FL 33478
tel: 800-291-8545
fax: 561-625-6685

If you like this post then please subscribe to the RSS feed.

Joint session of Congress/Health Care

By , September 10, 2009 6:56 pm

Joint session of Congress/Health CareI watched the President’s 50 minute address to the “Joint Session of Congress” last night. I was not disappointed at the delivery and certainly not at his ability to excite a crown. Though I may be a hard core right wing/faith-based conservative, I am not an evil, revengeful, “my way or the highway” radical; I will be fair and respectful to our President. That does not mean, however, that we should close our eyes and ears and simply accept what this Administration is trying to shove down our throats, and deceitfully done to a level that would make us look stupid by accepting it without dissent. Right off, as has been so often with this President, he was running late. Most “cocky” and “arrogant” individuals do often run late because they normally have little regard for the feelings and time of others, especially any that would dare disagree with them. If I had not read the current bill in the house and had kept up with all of the news coverage on the subject I certainly would have converted to the Democratic Party immediately after the address to Congress; our President sounded good and made all the right promises. However it is not what he said that matters, certainly not as important as what he didn’t say. He did not say that the 1100 page bill in the House would be scraped and a NEW BILL (covering only those promises he made) would be initiated with input from both parties. Here is why that is so important: Every item he touched on and every promise he made is contradicted by the current 1100 page bill in the House. Mr. President, I’ve accepted the fact that you are a Progressive, a Liberal and that you sincerely believe that Government should solve all our problems and take care of our needs, I can live with that (I really have no choice, you’re the Man at the Top), but, good grief, get some advisors that give good, solid facts for your speeches. Contrary to what the radical left is telling you, most of us conservatives and faith-based really are not stupid and lazy. By the way, you called some of us liars for providing “misinformation” on certain areas of the “House Bill”; funny thing here is that some of your “CZARS” have made statements that support our feelings (misinformation).

If you like this post then please subscribe to the RSS feed.

Paying Uncle Sam First

By , August 12, 2009 7:14 pm

Paying Uncle Sam FirstJust about the time that Bush took office, Americans worked until the middle of April for no pay, everything they earned until then was basically eaten up in the various taxes we pay at all levels of Government. Federal income tax, state income tax, capital gains, sales tax, property taxes, etc., you get the picture.In 2008 this span of time had increased to Jul 16, an increase of 4 months over eight years. WOW’’’’’ George Bush-that is terrible; that is an additional month of work without pay for every two years you were in office.In the short seven and a half months that Barack Obama has been in office the span has increased from July 16 (2008) to August 12 (2009).Do the math: George Bush: additional month work without pay every two yearsBarack Obama: additional TWO months work without pay every year.

If you like this post then please subscribe to the RSS feed.

Things look good, they say: I say Depression ahead

By , July 15, 2009 5:54 pm

Things look good, they say: I say Depression ahead//15 Jun 2009   I wrote yesterday that I would continue this line of thinking next week; it cannot wait until next week. Here is what I heard from various sources throughout the week: Labor department, the FED, Wall Street analyses, various economic experts throughout the TV news and talk shows and of course the political pundits that will say anything to make this White House look good.1.                   Yield on 10-year note up 20 percentage points: that’s good2.                  Gold went up for the first time in six weeks: that’s good3.                  Mortgage applications up for 2 or 3 weeks going: that’s good4.                  Stock Market  recovering some losses and actually up 2 % as of Monday: that’s good5.                  Report that the CPI is up .07% in Jun, higher than expected: that’s good?My question mark there is because inflation also rose in Jun by 1.8%, double what expected. Some out there are beginning to softly speak of the possibility that this “Bust” is close to the bottom and another “Bubble” is just around the corner; and some of these economic analysts I have followed for years and like their line of thinking; however I believe they are all wrong this time. I am sticking to what I wrote back January, in May, in June and yesterday, and that is, we are bracing for a Depression unlike anything in 200 years. This “Real Estate/Credit Markets” bust is not over until commercial real estate takes a plunge and some 90-160 banks fail(conservative figure). This commercial real estate and bank failures will add to the unemployment woes. Our Nation is going deeper in debt and just tripled the budget; and we haven’t even added the cost of Universal Health Care and the Energy Bill. All of these combined with the hundreds of billions in bailout for companies which will fail regardless will certainly create inflation. I fully accept that there various models for identifying “inflation” and certainly this White House will use a formula or model advantageous to their agenda; however, the bottom line on identifying inflation is the “decreased buying power” of the dollar.All of this is not even the worst case scenario, there is something coming that will have us wishing for the days of inflation. I’m talking about deflation and I will express my thoughts on this next week and share with you some historical data that has me convinced of the coming depression.

If you like this post then please subscribe to the RSS feed.

Real Unemployment / Depression ahead

By , July 14, 2009 6:51 pm

Real Unemployment / Depression ahead I wrote back in January and then again in May and on 25 Jun that this administration would lie and deceive the American People on the actual health of the economy. I stated in January that we would see real unemployment rates of 19 t0 25% by the fall of 2010.Today, summer of 2009, the national unemployment rate is at 9.5 % according to the “official” numbers from the labor department, the labor department works for the Obama administration.Administrations (Democratic and Republican) have economists that will always support the philosophy of their president and are more  than able to make the numbers appear to be what their president wants them to be. I submit to you that the real and actual unemployment rate right now as I write is at no less than 16.5% and I further believe that there are economists out there that would be able to present data to support this. But since these economists are non-partisan; this liberal Congress and President have no use for their opinion or research analysis.It would easy to question my belief that unemployment will be at 19-25% by next fall if today’s rate is only 9.5%; but if it is actually 16.5%, then it is not so farfetched. The unemployment rate in 1929 was 3.2%; in 2007 it was 3.4%. In 1930 it was 8.7, a yearly increase of 5.5 %; in 2008 it was 6.1 (September), a yearly increase of 2.7 %. In 1931 it was 15.9 a two year increase of 12.70 %; in 2009 (July) it is 9.5 (or 16.5), a two year increase of 6.10 (or 13.10) %.Let’s look at it like this: 1929 to 1931 a 12.70% increase in the unemployment rate with the rate at 15.9. 2007 to 2009 a 6.10% (or my real numbers) 13.10% increase in the unemployment rate with the rate at 9.5 (or my numbers of 16.5).It will be interesting to see the numbers next summer to fall time frame to see if I’m right. If I’m right the unemployment rate this time next year will be at no less than 20.8%. In 1932 the unemployment rate was 23.6, a 77% or 20.4 percentage points’ increase in four years from the low in 1929 of 3.2.I wrote back in January that we were facing a depression so severe that it would make the Great Depression of 1929-1934 look like a Boy Scout weekend outing. I still believe that, in spite of the folks in Washington, Wall Street and all the Financial Analysts telling us that we have too many modern day mechanisms in place which never allow another depression like that of 1929. Let’s take a close look at some of those “safe guard” mechanisms: big and powerful financial institutions controlling hundreds of billions of our wealth, they failed; big, powerful, and global insurance companies which would take care of us during hard times and losses, they failed; FDIC, close to insolvency, Government controlled mortgage giants (Fanny MAE/Freddie MAC), they failed; giant auto industry, they failed; the FED, it failed the day it got in bed with the Treasury and our U.S. Constitution is failing when a Congress allows a President  to own auto companies, financial institutions, energy and our health care and that president allows the labor unions to dictate who works, who don’t and that labor union unconstitutionally takes part ownership of companies ahead of contractually secured bond holders.All of the above would not of itself create that severe of a depression, the fact that our government pumped hundreds of billions on these “to big to fail” companies will though  and in fact set up our own government to be “to big to fail”, but who will bail out America. Governments only get bailed out by “future economic progress” but I don’t see that “future economic progress” any time soon and here is why: right now as I write, our national deficit just hit the one trillion dollar mark, the budget is three trillion and the white house just admitted that unemployment will rise to 11% (that would make my number 18%), taxes will be raised not only on the rich, but on average households making $40,000, when more of your money goes to taxes, you buy less and more business will fail, when a business with debt fails, banks fail, when banks fail folks lose their jobs, when more people lose jobs, less money is collected for the treasury so the government has less money to support its people; all this at a time when this President has driven our country into more debt than the last three presidents together; that’s right, Barack Obama has created more government debt in seven months than in the last 20 years.I will continue this line of thought next week, and we haven’t even talked about inflation.

If you like this post then please subscribe to the RSS feed.

Panorama Theme by Themocracy