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“Truth
would destroy U.S. economic system, Fed warns…
The
U.S. Federal Reserve asked a federal judge not to enforce her order that it
reveal the names of the banks that have participated in its emergency lending
programs and the sums they received, saying such disclosure would threaten
the companies and the economy…
"Immediate
release of these documents will cause irreparable harm to these institutions
and to the board's ability to effectively manage the current, and any future,
financial crisis," the central bank argued.”
Fed
Urges Secrecy for Banks in Bailout Programs
Jonathan
Stempel, Reuters, August 27, 2009
Via
The GATA DISPATCH 8/27/09 www.gata.org
“The
Social Security and Medicare Trustees Report for 2009…(shows) Social
Security and Medicare have a combined unfunded liability of almost $107
trillion…
The
nation can’t pay for Social Security and the health entitlement
programs it has now…
Are
Members of Congress Out of Touch with Reality?”
www.dailymail.com, opinion/editorial,
8/21/09
“What
is a crying shame is, if they were going to print 10 trillion dollars, they would
have done a lot more good rebating it to households, rather than sending it
down the black hole of too big to fail institutions. In the hands of
consumers, that cash would have trickled up to the larger institutions. As
taxpayers, wouldn’t you rather have the money and decide how it is
spent, rather than let the Central Planners have it and decide how it is
spent? If you decide, we have capitalism. If they decide, we have socialism. What
a blown opportunity. If the Central Planners change policy and decide to
defend the Dollar rather than let it devalue, interest rates will rise
sharply and destroy what is left of this fragile economy.”
Robert
McHugh, August 21, 2009
A key implication, not explicitly stated above, of McHugh’s
characterization of the $10 trillion in bailouts and stimulus money going
down the “black hole” of “too big to fail” financial
institutions is that those bailouts and stimulis did not provide a
sustainable “fix” to the economic and financial systemic problems.
Deepcaster mainly agrees with McHugh on this point. Consider for
example, the likely state of the Economy when the bailout programs are ending
and the stimulus funds have all been depleted and sent down the “black
hole”. (By the way this “ending” and fund depletion are all
coming in the next few months.) What then?
“Then” there is no sign that the U.S. Consumer/Taxpayer/and, often, Mortgage holder –
70% of the U.S. Economy – will be any better off. The bailouts and
stimulus have not helped them (i.e. most of us) significantly. Indeed, the
unemployment rate is still rising and no pundit or analyst has provided a
credible scenario regarding when Unemployment may begin to significantly
fall. This means increasing defaults on all sorts of credit
obligations from mortgages to credit card debt.
And lest one think the worst is over for the housing market,
consider that another huge wave of option resets begins in May, 2010 and will
not end until October, 2011. This time the loans held by the
already-financially-stressed middle class – the Alt-A’s, and
Option-Arms – will be the ones resetting. The consequences for that
“Sector” – the middle class Consumer/Taxpayer/and, often,
Mortgage holder -- will be disastrous, and will virtually ensure another
Major Equities Market Takedown.
Moreover, contrary to Official Statistics, Monetary expansion still
continues at a brisk pace with M3 at 5% (shadowstats.com – see below). Downstream,
hyperinflation is baked into the cake.
And U.S. and other government debt obligations continue to
skyrocket, with the stimulus and bailouts totaling at least the $10 trillion,
as McHugh noted, and with downstream unfunded. U.S. government liabilities from social security and
Medicare alone totaling over $100 trillion and growing. The money to repay
these liabilities will be provided mainly by U.S. Taxpayer borrowing at
interest from the private for-profit U.S. Federal Reserve.
Realistically, given their magnitude and rate of increase, these
debts can never be repaid without dramatically reducing the purchasing power
of the U.S. Dollar over the next few years, a development which will
significantly further reduce the wealth of those who hold U.S.
dollar-denominated Assets.
As the markets come to acknowledge these Hard Realities, the ongoing
Spring and Summer Bear Market Rally will end, and the catastrophic Takedown
in the markets and Economy which we earlier forecast will begin. But the
Takedown will not be linear, and Timing will be the key to profits and
protection. See Deepcaster’s latest Letter and Forecast at www.deepcaster.com and click on
‘Latest Letter’.
It is encouraging, in an ironic sort of way, to know that other
thoughtful and experienced writers agree with you, even if the shared vision
of the future is a dark one.
Among the very best whom we have long appreciated is Harry Schultz. We
take the liberty of quoting from his recent (23 August 09) letter as he
articulated several of the conclusions to which we have also come.
Note especially his comments below – “It was a
trap…a Ponzi Scheme” referring to The Fed and allied Mega-Bankers
(The Cartel* -- see below) easy-credit and monetary policies which “set
up” the Market Freeze-up and crash.
Yes, Harry, it was indeed “a trap” and a “Ponzi
Scheme” one which Deepcaster has long ago identified as one phase of
what we started describing a few years back as The Cartel’s* ‘End
Game’ (see “Massive Financial-Geopolitical Scheme Not Reported By
Big Media” (08/11/06), “Protecting Profits from "Dark
Liquidity" & Other Systemic Risks” (4/06/2007) and
“Increasing Systemic Risk Portends Cartel 'End Game' Attempt”
(03/07/2008) in the ‘Articles by Deepcaster’ cache at
www.deepcaster.com). In any event consider the delightful Harry
Schultz’s characterization of our current pickle.
“Housing
is still the Achilles’ heel of the US…& has yet to have its last word. It will. In
the run-up to the Oct 2007 stk mkts peak, the privately-owned US Federal
Reserve (under spinner Greenspan) openly encouraged bankers to lend & the
public to buy (without creditworth), & provided cheap interest rates. It
was a trap, about which more later. Banks resorted to gimmicks, like
adjustable rate mortgages (ARMs)-whose i/rates would later reset (like
guillotines). Enter subprime. But don’t worry, Greeny snarled,
“betting on higher house prices is the safest wager. If U get cash flow
probs, when ARMs reset, your casa will be worth a lot more, so U can sell it
& walk away with a nice profit.” Uh-huh…
Then
bankers got concerned, so they took out insurance via credit default swaps
(CDSs), a new invention, letting mortgages be sold and resold til they
leveraged 20x over! They became the shakiest part of a huge global
derivatives mkt with a nominal value in tens of trillions of $’s. This
was a Ponzi scheme, which stalled out as ARMs began resetting, &
defaults followed. Then the US economy slid & people were trapped; owed
more on homes than could sell for, sent keys to the bank & left town. Wall
St mortgage buyers were stuck, stopped buying, & couldn’t sell. Trust
& liquidity dried up…
…”deadly
water”, held back by the US Treasury dam, with leaks now visible, &
the middle class about to be destroyed…
…Who
wins US elections doesn’t matter; same people pull the strings…No
banker should be allowed to go into govt jobs…Bills in US Congress to
regulate Wall St are quietly neutered, off camera…is the US middle
class being targeted? Via buying mega & multiple houses on tricky
mortgages & now bearing new healthcare costs, paying both private
& govt…Govt bail outs and debt plus sharply deflating the US$, will
cause massive inflation. That will push middle class income brackets
higher, meaning higher taxes as the $ buying power shrinks…
I
predict the world will moderately trend toward deflation for the next 5-6
months, fed by more job cuts, half timers, wage reductions, foreclosures,
bankruptcies, & consumers in hiding…
Following
that, govt pumping will reverse the tide—or if they can’t, there
will be a monetary failure-where fiat money is suddenly shirked in favour of
“things” & we’ll begin (in either case) the start of
stage one of a major inflation period (food soars, taxes rocket, crime leaps,
interest rates leap, strikes dominate) for about 8 months, after which it
escalates into a Weimar or Argentinean hyper-inflation lasting for about 10-14
months—that will wipe out the poor, savage the middle class & badly
dent the rich. The US$ may be “revised” & gold will rise to
multiple of 3-5x. After that a new depression, bigger than others of record. The
start of that period will be the most dangerous, in getting out of the
over-inflated things before they turn sharply down to the mean…” (emphasis
added)
Harry
Schultz Life Strategies, 23 Aug 09
The first phase of this Climacteric which both Deepcaster and
Schultz forecast will likely begin after the ongoing Bear Market Rally Top
approaches. Deepcaster expects to be able to give you a more well defined
timeline in our Alerts, as we enter into Fall.
So that is the Threat, and that leads to the question of how one
best protects one’s wealth and profits.
The answer to this question must be considered and substantially
modified in light of the ongoing and very active Market Interventional Regime
conducted by the Fed-led Cartel*, as long time readers of Deepcaster
understand. Regular “Targets of Interventions are Equities Markets,
Precious Metals, and Strategic Commodities, inter alia.”
*We
encourage those who doubt the scope and power of Overt and Covert
Interventions 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 Intervention entitled “A Strategy
for Profiting from the Cartel’s Dark Interventions & Evolving
Techniques” and Deepcaster’s July, 2009 Letter entitled "A Strategy
For Profiting From The Cartel’s Dark Interventions & Evolving
Techniques - II" in the “Latest Letter” Cache 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.”
Investor Wealth Protection and Profit Goals must accommodate this
Interventional Reality. (In this regard Deepcaster has developed a Strategy
for Coping with and Profiting from these Interventions most recently laid out
in his Latest Alert “FORECASTS (MegaMoves Impending! & Buy Reco.)
Gold, Silver, Equities, Crude Oil & U.S. Dollar” available in the
‘Alerts Cache’ at www.deepcaster.com.)
Investor decisions must also be considered in light of the ongoing
gimmicking of Official Statistics, which are often far removed from the
Realities of the economy and market place. For example, consider the latest
Real Numbers versus the Official Versions, thanks to Shadow Government
Statistics.
Official Numbers vs. Real
Numbers
Annual Consumer Price Inflation reported August 14, 2009
-3% 5.5%
(annualized August Rate)
U.S. Unemployment reported August 7, 2009
9.5% 20.5%
U.S. GDP Annual Growth/Decline reported August
27, 2009
-3.9% -5.9%
All the above Real Numbers are calculated by Shadow Government
Statistics the old-fashioned way i.e. with the methods used before the
official gimmicking of these numbers began in the 1980’s and
1990’s. See www.shadowstats.com and click on ‘Alternate
Data’.
It thus becomes increasingly apparent that certain Mainstream Media
including key Financial MSM have 3 functions: Infotainment,
Infomanufacturing, and Viewer Conditioning!
Deepcaster’s General Strategy, as informed by the
aforementioned Considerations, is clear: Continue to Ride mainly long
positions (as in our portfolio) up to near the top of the ongoing Bear Market
Rally. Then liquidate most mainly long positions and switch to mainly short
positions including e.g. leveraged short ETFs for The Takedown to follow.
Of course the Equities and Commodities Choices and Sector Selection
and timing will depend on developments (including especially Interventional
developments) which unfold as we proceed into Fall. So, here is how we see
the Sectors we follow:
Gold & Silver
The Showdown at the Precious Metals Corral which we earlier forecast
appears to be ever closer. Indeed, the evidence of its approach is
increasingly strong. In our view it is not a question of “if” but
rather only of “when”. The “when” we still expect to
be in the next very few weeks. Same forecast for the Shares. Will the very
bullish Fundamentals and Technicals prevail to launch the precious metals
higher? Has The Cartel “lost control”? We address these questions
in our latest Letter and Forecasts at www.deepcaster.com and click on
‘Latest Letter’.
Equities
We have a fascinating situation in Equities. The past (since March
6, 2009) Bear Market Rally provides considerable evidence of Raw Cartel
Interventional Power.
Key technicals are Bearish and of course the Fundamentals are
rotten. Both the NYSE and Nasdaq summation indexes generated sell signals
last week. And the Bullish Percent Index for the NYSE is currently at its
highest level (i.e. overbought) in over 20 years!
Indeed, the only force keeping this Bear Market Rally going
in the past few weeks has been The Cartel.
It is clear to us that by boosting Equities over the past few
months, they are lessening some of the “heat” they have
justifiably been taking for their perfidy and mismanagement. The Cartel does
not want the Audit The Fed/Abolish The Fed Movement to gain any more traction
than it already has. Fortunately a large majority of U.S. House members has
endorsed the ‘Audit The Fed’ bill. The nonprofit organization
Carrying Capacity Network (www.carryingcapacity.org) is also pushing
hard for this bill.
Therefore in our view the main question for the Equities markets is when
the Climacteric will arrive, not whether. Visit www.deepcaster.com and stay tuned for
our future forecasts regarding that critical key: timing.
U.S. Dollar
It now appears that the U.S. Dollar Bounce we earlier Forecast is
now just beginning – We expect the U.S. Dollar to rise to the Target
announced in our Alert. Then The Great Fall begins. Stay tuned
regarding timing.
Crude Oil
The reversal in Crude Oil we earlier forecast now appears to have
begun. The substantial above-ground surplus (and Cartel Clout) should begin
to weigh Crude prices down soon, but for how long?
In several articles in the summer 2008 Deepcaster forecast a Market
Crash and had recommended five ‘short’ positions to subscribers
by early September, 2008. As the Market Crashed in The Fall, 2008, all five
were profitably liquidated.
Now we expect our forecast Climacteric to have an even greater
impact on all markets in 2009 and 2010. Be prepared.
Best
Regards,
Deepcaster LLC
Deepcaster.com
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