Phase Two Of Greater Depression II Begins Now
We all know what caused the 2008 banking crisis killing Lehman and others. It was reckless lending, too low interest rates, loosy-goosy credit for consumers and most of all, instigation of derivatives by greedy bankers hungry to make billions on the quick. Now that central banks have bailed them out of their insolvency and replenished minimum capital standards by stealing TARP funds from taxpayers, we find the next LARGER MESS looming on the horizon. Governments grasping for tax income will be grubbing, and taking all at a new furious pace. Consumers that are able will simply drop-out of the system and down-size.
If you thought Lehman was fun get ready to see new price controls and acceleration of existing capital controls, with inflation that will knock your socks off. We have at least two to five more years of crash and burn in the financial markets before a new base is found. Then, toxic trade policies and old grudges open the door to a new World War, which obviously no one can afford. This is simply historical fact and not any wild forecasting by me although some may consider me crazy.
Many of the very large global banks will be nationalized and some will fold into insolvency or merger. Roughly 90% of the derivatives and real estate toxic paper trash remains hidden on banker balance sheets. Not only was the problem never fixed, they’ve been piling on more bad loans-paper at a furious pace. The Banker’s Motto is “Steal while you can. You never know when the party ends.”
Credit is the life blood of any positive economy. Yet, lending to commercial companies is almost non-existent. Further, the administration is piling on new and higher costs in health care, payroll taxes, benefit costs and SS withholding, crippling the only real source of new jobs and employment-small business. There is no strong, positive engine of growth on the horizon except precious metals and commodities trading and investing.
What few have noticed is the current inability of banks, bankers and investment banks to make any income. In a depression, income becomes paramount. Banks’ ability to earn money is diminishing on all fronts; credit cards, corporate loans, investment banking, commercial banking, real estate, and of course consumer loans for toys and stupid junk that composes 70% of the entire USA consumer spending economy. If Paulson and Bernanke had not conspired to give bankers TARP and other stolen billions, the big banks would now be insolvent.
Banks are stuck with earning a puny 1-3% on the stolen TARP funds they have invested in US Government paper. When the bond market tanks, that stolen cash is toast and so it will be with their 3% earnings. How fitting is that? Paybacks!
The losses are so beyond comprehension they simply cannot be measured due to derivatives and credit default swaps. Yes, the swaps are allegedly insured but the counter-parties simply have no hope of paying what they owe. They will be overwhelmed and the scary fall-out can only be broadly considered and not even estimated. For now, it’s all hiding in the back rooms of banks. If the mark-to-market they are insolvent.
American commercial and residential real estate is wrecked for two decades. Property ownership, banks, credit unions, title companies, loans, lender loan ownership and ability to pay are all simply destroyed.
Corporate insiders, CEO’S, presidents, and other officers have been selling gobs of stock at a rate we last heard of as 1600 to 1. That’s 1600 shares sold for each one purchased. Mr. Ballmer, chief honcho at Microsoft is dumping well over $1 billion as we speak…that is only one example. Others are selling entire companies, some taking a lifetime to build, in order to cash out and run with the money.
These people know exactly what is coming. Insurance companies thrive and live on earnings from investments they make using policy holders’ cash. If commercial real estate sinks some more, as we think it will, it’s adios income for the insurers. Further, policy holders, having paid into whole life, will cash them out to live; taking capital out of the insurance companies’ till. This further removes insurance company balance sheet cash.
The next big government taking will be to steal the pension pools of national and international corporations. This is the last remaining honeypot for government theft and has already been practiced in South America.
Those companies that are smart and can see it coming are off-shoring piles of assets, cash and investment paper to keep it away from the takers. How this can work out, lord only knows.
Individuals holding pensions and government paper will wake-up one morning to find its all been seized and piled into 30-year USA bonds, which are sinking like the Titanic. There will be no buyers and no exits for those assets. The owners could get totally wiped out. We strongly suggest you plan accordingly while being very careful. Old rules will not apply any longer. Bonds stink and they are getting stinky-er.
The real estate industry is such a tangled web of messes, the government plan (in our view) is to gather all the bad loan paper into Fannie and Freddie over the next 2-3 years. Congress gave them an open check book to buy as much garbage as possible. At the appropriate moment, the F&F’s will be forced into bankruptcy and presto, all the bad stuff goes away.
If this is true, we wonder, where does this leave the banks and home owners’? Do the banks get paid twice? No surprise to us if this happens. Would the homeowners be free and clear…interesting dilemma? Who owns the properties? Who owns the loans? How would you like to be in the title insurance business guaranteeing all the suspect properties?
The 4th quarter sales period for larger retailers, department stores and big box stores is when they make their entire year. One bad 4th quarter can take them down. We hope they have at least a decent quarter and can remain in business. Some of them after the January, 2011 returns and mark-downs will be filing bankruptcy. We forecast only a minimum of Xmas spending by Americans as a final result. By February, we’ll see who’s headed to the BK courts. Sales are mildly stronger but profits are toast on these give-aways.
We got the news today that the massive A&P grocery chain intends to file bankruptcy as early as Monday, December 13, 2010.
If the Congress fails to pass the Bush tax cut extensions before Christmas 2010, we forecast the later January, 2011 broader market selling cycle will occur before the end of December to reduce taxes.
QE2 Presents Our Largest Global Disaster.
We said years ago after the derivative mess and negative housing news came to light that Bernanke would have only one chance; and that is to print phony money and paper. This is exactly what he is doing and will continue to do until the financial system implodes.
Keep in mind the USA is the worst culprit originating digital cash and paper. China and Japan have had enough. They are sellers not buyers and further, they are beginning to produce the same problems in their own currencies and bonds. Japan’s central banker said yesterday he plans to overwhelm their system with QE2 that could make Chopper Ben’s paper dump appear to be play-school. Not too smart to say it.
System weaknesses we see are (1) A Chinese real estate bubble is popping and taking down their stock markets. Fallout from this will cause a chain reaction moving into other markets in Europe, Asia and North and South America. It doesn’t take a genius to figure out where this race to the bottom goes next. (2) First we get capital controls, price controls and then inflation. This produces some real economic pain and struggle. (3) However, the last phase is the really bad one-hyperinflation!
The first inflation phase is followed by hyperinflation and then a banking-system collapse. It’s not the end of the world as life goes on; but for millions of spoiled American brats; they will simply not be able to cope. They’re headed for major denial, and all kinds of social problems. It’s too bad it’s come to this as created by a bunch of greedy bankers and One-Worlder’s. It’s not nice to say but we wish them the worst and no mercy. They have literally destroyed our entire economic world for decades.
In the 1919-1923 European hyperinflation following WW I, hundreds of bankers and politicians were simply assassinated. (Read the book “When Money Dies” by Adam Fergusson). Could this possibly come again? We hope not but keep in mind Americans own millions of guns. When these people get very angry after being totally cleaned out, you tell me what happens next?
Most of these problems have been caused and created by the US Federal Reserve. This is a private banker enterprise not the US Government. We suggest that before all this is over, that bunch of snakes will be eliminated for good-one way or another. Never, until recently, since the birth of this gang in 1913, have there been so many responsible, authoritative calls and demands to first investigate them and second, shut them down for good. Its unfortunate the Federal Reserve born in 1913 could not have been still-born.
My beloved country and those throughout the world can manage to pass through this huge economic trauma. Our largest concern is for the freedom and liberty of America. Who will be in charge after this ends? What will be the fallout? Can we simply return to a strict U.S. Constitution and Bill of Rights? Or, will we be stuck with something much different? What happens to the dollar? What happens to other currencies?
One way or the other, I believe Americans will fight and struggle for what is fair and correct. Those that choose another path will pay the price. I am a non-violent journalist, a reporter, an analyst, a trader, and a market forecaster. I am a student of economic history and somewhat rely upon the past to forecast our present. I just wish it could be different. Buckle-up for a rough ride, use common sense and you’ll be able to manage this adventure.
Roger Wiegand
Editor Trader Tracks Newsletter
