As horrible as the financial news for currencies and paper assets has been since mid-2007, it looks like the worst is yet to come - perhaps as early as next month.
Over the weekend the Managing Director of the International Monetary Fund (IMF), Dominique Strauss-Kahn, told a gathering of Southeast Asian central bankers that the world's advanced economies are already in a depression and that the financial crisis may deepen unless the banking system is fixed.
On Febr. 4, Paul Wolfowitz, the former president of the World Bank, said the IMF and similar institutions are incapable of coping with the global financial crisis because they do not have enough resources.
For the past eight weeks, Treasury bond prices have indeed been generally declining (i.e. interest rates have been rising). The U.S. government is almost certain to intervene again, as the Treasury debt is the most important in the world, and whose collapse could wreak havoc across the global financial system.Yeah. I've been wondering about that.
The problem is that the U.S. government is going to have to float massive additional amounts of new Treasury debt in order to immediately finance the second $350 billion of the bank bailouts and the nearly trillion dollars for the new so-called "economic stimulus" program. If almost everyone else is selling and the U.S. Treasury is the primary buyer of its own outstanding bonds, who is going to buy the newly issued debt?
Before you say it: I'm always suspicious of the gold-gold-gold guys. The precious metals fanatics usually strike me as being rather too -- well, fanatical. That's why I'm not saying that the prognostications given here are something you can take to the bank.
So to speak.
4 comments:
Who'll buy US government debt? Probably the same guys who are behind the, ahem, "private equity" funds which have been slowly buying up the West. There is a lot of real money in big private hands. Amply sufficient. It's easy to think of one big sector right away in which all retail trade is done in cash.
The next question is what will they demand in return for helping out the State? The programme is likely to be much more vicious than anything the IMF has ever imposed.
Debt/credit is increasing ... increasing ... increasing. And the propaganda about the "credit crunch", although admittedly it's now seeming a bit old-fashioned, was designed to assist in that. As in, what everyone needs is for credit to start flowing quickly again. Yeah, right.
What does it mean to say the banking system could be "fixed"? I think the reality is that those who control it have got the entire world by the short and curlies!
Third question - what kind of technological revolution will happen during this Depression. During the Long Depression, there was electrification, a revolution in steel-making, and the birth of the car industry. During the Great Depression, there was the birth of mass production, later enabling mass consumerism. What will it be this time?
I am convinced there will be a revolution in the form of money, based on a qualitative leap in surveillance and control. RFID, spy chips, you got it. Technofascism, as a man writing about the "controllers" once called it
:-)
b (still wondering how China figures in this - which is the fourth question)
I've never been a lover of gold, but I recommend buying gold now, not as an investment, but to protect capital. And I'd say buy the gold itself, not stocks in gold mines. Right now we're in a deflationary spiral, but I'm convinced that all that debt will not be paid with higher taxes, but with inflated dollars.
Dhyana, we agree completely. Inflating our way out of this mess is the only real solution. It's a trick that usually ends in disaster. SOMETIMES it works. But what else can we do?
Worse case scenario, we re-live the German experience. People forget that Germany recovered. The pain lasted months, not years.
Having some balance in your investments is always a good idea, but putting everything in one basket isn't.
Also, for every power group there is an opposing power group -- remember that. Hence we seem to have an out of control situation that wants to bust wide open, but we also have another in control situation that is working towards bringing "order to chaos". Don't ask me why because I'm not allowed to tell you.
Marty Didier
Northbrook, IL
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