Central Banks Failing to Solve Crisis - Depression on the Way

A few weeks ago, I mentioned that the central banks had put up collectively $3 trillion worth of stimulus/backing to financial markets. I also noticed that the big bailouts had about only a one day boost to the financial markets till they did a thumbs down. Now, as of Monday Oct 13, the Europeans came up with a mammoth 1.3 trillion Euro bailout package (close to $ 2 trillion worth). The markets rallied for ONE day. Then, add another unlimited Fed dollar swap package to anyone (they trade dollars to central banks who need them for their currency because those central banks need dollars for people leaving foreign markets). So using my rough math, since August 07, the central banks have now put out over an astonishing $5 trillion plus worth of what is mostly short term liquidity (loans to financial institutions). And, with all that money, the markets are down Wednesday across the world again? Only two days after the Europeans add almost $2 trillion worth of backing to their financial system? And the Fed had just added unlimited dollar swaps? What the heck is going on? Relentless deleveraging What is going on is relentless deleveraging of over $1000 trillion of financial leverage (it’s more than that but the figure gets the idea across. So, over a period of a year, the US and ECB /Europe alone have added $5 trillion worth of financial backing to the world, but that is against $1000 trillion deleveraging – the bailout efforts are simply miniscule compared to what is driving markets down – at a ratio of 1000 to 5 so far. The bailouts and liquidity injections simply cannot work. And, the markets relentlessly tail down, even within a day or two of major new bailout announcements. I think this kind of makes the point. Which is that $5 trillion is not near enough to stop $1000 trillion from deleveraging worldwide. Gold, USD, and oil here And then, we see gold and silver and precious metals selling off big at times, but gold kind of holds its own. But basically, gold is being tugged between big selling for money for margin calls on big investors like hedge funds. Then gold comes back a week later. Gold is reacting most strongly to the credit crisis worldwide, as big investors flee into the most secure ‘money’ they can find. And even though the initial epicenter of the real estate collapse and the banking crisis is in the US, the USD is strengthening too. One reason is that people are selling emerging/foreign markets and repatriating that back to the US in dollars. Another is that the USD is still regarded as a safer haven than most. Just take a look at the Ruble and Russian markets – way way down, but last year regarded as a possible resource currency financial haven. Well, that sure proved wrong. Resource sector And then, the resource sector is just getting killed. And so are the resource nations stocks. And, get this, China is slowing markedly. Not to mention the China stock markets are WAY down from their highs, like 70% or so do...

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