[Cold Iron]

Hume;244729 said:

Yeh America is going to go through a recession. It will get out of it too. (I'd fucken put money on that.)

Depends on your definition of 'getting out of it'. The causes of this recession aren't going to just go away. This is not just a simple cyclical downturn.

[Shinrei]

The US, with the help of foreign countries buying up our dollars and debt, has amassed a credit bubble of proportions that the world has not seen before.

Gold is rising for a reason.
----------------------------------------
A kiss is still a kiss. A sigh is still a sigh…

And a bubble is still a bubble.

When a kiss is over, it's over. When a bubble pops…well…that's all she wrote! All kisses end - even the wettest "French" kisses. And so do all bubbles - even sloppy mega-bubbles of liquidity. This one will be no exception. But of course, it's not the certainties that make life interesting…it's the uncertainties - the known unknowns and the unknown unknowns, as Mr. Rumsfeld says. We are all born of woman and end up where all men born of women end up - dead. But that doesn't mean we can't have some fun between baptism and last rites.

You'll remember we said that this worldwide financial bubble is both worldlier, and more financial than any in history.

And, for the moment, it is very much alive. So much alive that the media can hardly keep up with it. Forbes magazine, for example, tries to estimate the wealth of the world's richest people. But the rich don't typically give out their balance sheets, telephone numbers and home addresses. So, there's a fair amount of guesswork in the calculations.

But when it came to guesstimating the net worth of Stephen Schwarzman, founder of Blackstone, the Forbes crew wandered off into fiction. They put his wealth at about $2 billion. Recent filings in connection with the new Blackstone IPO show he earned that much in a single year!

In this phase of the bubble, it is as if your neighbors were throwing a wild party - and you weren't invited. You detest them…envy them…and want to join them, all at once. A very small part of the population is having a ball; everyone else is getting restless and wondering when the noise will stop.

We wish we knew. And we've given up guessing.

Meanwhile, the experts, commentarists, kibitzers and analysts are saying that there is a whole new phase of the giant bubble about to unfold; things could get a whole lot crazier. Even many of our respected colleagues are pointing to a text by the great Austrian economist, Ludwig von Mises, for a clue. What we have here, they say, is what Mises described as a "Crack-Up Boom."

Before we go on, readers should be aware that the "Austrian school" of economics is probably the best theory about the way the world works. Like The Daily Reckoning, it is suspicious of efforts to control the natural workings of an economy, in general…and suspicious of central banking, in particular. The fact that it was a one-time "Austrian," Alan Greenspan, who became the most celebrated central banker in history, only increases our suspicions. He was able to master central banking, we imagine, because he understood what it really is - a swindle.

What is a "Crack-Up Boom?" Von Mises explains (with thanks to Ty Andros for reminding us):

"'This first stage of the inflationary process may last for many years. While it lasts, the prices of many goods and services are not yet adjusted to the altered money relation. There are still people in the country who have not yet become aware of the fact that they are confronted with a price revolution which will finally result in a considerable rise of all prices, although the extent of this rise will not be the same in the various commodities and services. These people still believe that prices one day will drop. Waiting for this day, they restrict their purchases and concomitantly increase their cash holdings. As long as such ideas are still held by public opinion, it is not yet too late for the government to abandon its inflationary policy.'

"But then, finally, the masses wake up. They become suddenly aware of the fact that inflation is a deliberate policy and will go on endlessly. A breakdown occurs. The crack-up boom appears. Everybody is anxious to swap his money against 'real' goods, no matter whether he needs them or not, no matter how much money he has to pay for them. Within a very short time, within a few weeks or even days, the things which were used as money are no longer used as media of exchange. They become scrap paper. Nobody wants to give away anything against them.

"It was this that happened with the Continental currency in America in 1781, with the French mandats territoriaux in 1796, and with the German mark in 1923. It will happen again whenever the same conditions appear. If a thing has to be used as a medium of exchange, public opinion must not believe that the quantity of this thing will increase beyond all bounds. Inflation is a policy that cannot last."

Mises is describing the lunatic phases of a classic inflationary cycle.

At first, no one can tell the difference between a real dollar - one that is earned, saved, invested or spent - and one that just came off the printing presses. They figure that the new dollar is as good as the old one. And then, prices rise…and people don't know what to make of it. Later, they begin to catch on…and all Hell breaks loose.

You see, if you could really get rich by printing more currency, Zimbabweans would all be as rich as Midas, since the Mugabe government runs the presses night and day.

Von Mises died in 1973 - long before this boom really got going - let alone cracked up. He may never heard of a hedge fund…or even a derivative, for that matter. A world money system without gold? He probably couldn't have imagined it. People spending millions of dollars for a Warhol? Twenty million for a house in Mayfair? Chinese stocks at 40 times earnings? He would have chuckled in disbelief. He understood how national currency bubbles expand and how they pop, but he probably never would have imagined how insane things could get when you have a whole world monetary system in bubble mode.

He'd have recognized the beginning of this bubble…and he'd have recognized the end, but the middle…or the beginning of the end - that would have dumbfounded him. During his lifetime he saw a Crack Up Boom in Germany in the '20s…and a few more here…but he never saw a worldwide Crack Up Boom.

No, dear reader, no one, anywhere, has ever seen a worldwide Crack Up Boom. We're the first, ever. Pretty exciting, huh?

[Shinrei]

And Hume, I hope you're right, I really and truly do. I'm just deathly afraid that you're not, and the more I read, regardless of the source, I just get more and more pessimistic.

[Hume]

Quote

The US, with the help of foreign countries buying up our dollars and debt, has amassed a credit bubble of proportions that the world has not seen before.

Woah. I'd like to be pointed out a point in time in history where there is as much money in the world right now. It's pretty fucken obvious why it has never been seen before. The worlds economies have never been as big as they are now.

It's not as if America is getting totally fucked over (as in destroyed infastructure and the like) like Japan and Germany have been in the past and still recovered.
Then you have Russia's collapse and the Asian Stock market crash in.
Then there was also the Recession.

The World Got over it.
You underestimate Humans.

[Shinrei]

Hume;245128 said:

Woah. I'd like to be pointed out a point in time in history where there is as much money in the world right now. It's pretty fucken obvious why it has never been seen before. The worlds economies have never been as big as they are now.

It's not as if America is getting totally fucked over (as in destroyed infastructure and the like) like Japan and Germany have been in the past and still recovered.
Then you have Russia's collapse and the Asian Stock market crash in.
Then there was also the Recession.

The World Got over it.
You underestimate Humans.

Hume, you just made my point for me! The US is Trillions of dollars in debt. That's not so much a "big economy" as it is the result of fiat currency based on a promise rather than anything solid (like under the gold standard). Yes, economies are much bigger than in 1929, but that's as far as you can take the comparison. Whenever the government needs to spend, the federal reserve whisks up more moolah out of nowhere to keep the economy going. They cut interest rates so that people will borrow more and more (which raises inflation and hurts people who save money in banks). Where will that end? There is so much money in the world now because the world has been flooded with it! Sure, it's based on future promises of growth and expansion and continued manufacturing and consumerism but what myself and people who have more expertise than I are arguing that it is getting/has gotten out of control. Japan's bubble was the result of the belief that the markets and values can only go up up up because their economic machine was so strong. But that didn't keep it from toppling into a recession that is 17 years old and still going on!

I'm sure humans can "get over it" and it's not going to last forever, but that doesn't change the possibility that we're in for some real rough times ahead. And those rough times could last for more than a mere couple of years. A depression is NOT an out of this world fantasy. We had a depression only 70 years ago! People were out of work and in bread lines! How is it that we're suddenly safe from that in 2008?

Let's also throw into the picture the possibility of peak oil and the end of cheap energy which supports most of modern lifestyle as we know it. My single biggest fear about moving back to Japan is because they rely on imports for so much of their food - they can't grow enough on their limited land to support their population. Ships and planes run on oil, and probably won't run on anything else for a long time. You can't make an airplane run on solar and wind, and at best ships will go back to coal. Either way, food prices on those islands are going to get expensive.

Silver lining: Whenever bad economic times happen, people lose money, but it is also a wonderful opportunity for some people to take advantage of wealth changing hands. If you are prepared for hard economic times and invest in the right things, you stand the chance of becoming wealthy as a new period emerges as the economy rights itself again. Opportunities exist, even in recessions and depressions. At the very least you can protect the value of your assets with gold and silver, which have and will continue to hold their relative value to goods and services.

[Shinrei]

Sorry for the double post, go to the last post on page 3 to see my other comment.

Another Mogambo Guru article:

by The Mogambo Guru

Total Fed Credit, that magical spigot from which drops bank credit, from which money is created when somebody borrows the money, fell $22 billion last week! $22 billion! My God! This is horrible news for those (like Congress, Wall Street, the banks and the Federal Reserve) who are so preposterously and laughably stupid that they think that constantly creating more money, and more credit, and more debt, and more inflation in prices is (hahahaha!) good for an economy!

Sorry about that inserted "hahaahaha" in that last sentence, but I could not hold the laugh inside me any longer, as it is just too, too, too ridiculous that so many people could actually believe something so childishly stupid and suicidal as to be dying for inflation! Hahahaha!

And I use the phrase "dying of inflation" because that is what happens when a country is so stupid (audience shouts out, "How stupid, Mogambo?") as to elect morons who let an idiotic central bank conduct bizarre experiments with the money and the banks, and thus the economy, with their new theories and ludicrous equations that "prove" that constantly increasing the money supply will not lead to inflation in prices, and if it does, then just create more money and credit in order to "fix" it! Hahaha!

And speaking of morons who get elected, I am pleased that Senator Christopher Dodd has dropped out of the Presidential race, as I consider him to be the most incompetent, malfeasant loser in Congress, and the whole subprime fiasco can be laid right at his door since he was the chairman of the Senate Banking Committee for all those years and he did not raise one objection to any of that Federal Reserve crap that got us here! The whole time, not one objection! Pity Connecticut's shame for having elected this loser.

But let's not dwell on shame, as this will undoubtedly prompt my wife to give everybody a loud earful of her, "What it's like to be married to The Mogambo" crap, which quickly bores me to death, as it seems like I have heard it every damned day of my life, and, to make it worse, she doesn't add the new stuff that she is upset about until the end, which could be freaking hours from now, and believe me when I say that it is not worth the wait to find out what is new.

On the other hand, Federal Reserve chairman Ben Bernanke has no such qualms about shame, and said he is ready to take "substantive additional action", which the media and markets took as saying, "Rates are going down, dudes!", although The Mogambo Inter-Planetary News Service (MIPNS) interpreted it as "Inflation in prices is going up, dudes!"

But nobody wants to talk about inflation, since they know that it freaks me out so much that I seldom stop yelling about it once anyone gets started talking about it, or mentions it in passing, or even permits a freaking lull in the conversation, and so you can be sure that they don't want to get me cranked up about how rough society becomes when the monster of price inflation is given steroids during some "substantive action" by the Federal Reserve.

Instead, people want to know the meaning behind the latest hit recording from The Fabulous Mogambo All-Star Band about this very subject, "How low, low, low will interest rates go, go, go when the Fed's 'substantive action' kicks in good and hard?" They notice that while it has a good beat and it's easy to dance to ("I give it a 70, Mr. Clark!"), the lyrics never actually say how low, low, low rates will go, go, go.

I resist having to admit that forecasting actual numbers is completely beyond my limited skill set, for one thing, and it involves actual work to derive for another Big, BIG Reason (BBR) why forecasting always fills me with dread, probably because Chaos Theory and Taleb's Black Swan probability theory prove that forecasting is a waste of time. Not to mention how people forecast that marriage will be "good" for me, which is another forecast gone horribly awry.

This is why my standard answer to a forecasting question is to shrug it off and look at my watch as my clever way of saying "Hey! It's almost lunchtime! Or coffee break time! Or I have to leave because I have to be someplace important that I forgot all about until just now, like maybe just discovering that my watch is broken!"

Fortunately, Bill Bonner here at The Daily Reckoning either does that kind of forecasting work or knows someone who does, whereas the only people I know are the kind that can chug a whole can of beer in one quick pull and burp real loud, which always seems funny to us for some reason, probably because we are all drunk as hell and it is too early to start throwing up.

But I am cold sober now, which doesn't help to disguise my fear and outrage when Mr. Bonner notes that "The Fed is already lending money at real rates near zero. Subtract the inflation rate from the Fed funds rate and there is nothing left. If they cut the rate again, they will be lending substantially below zero."

Instantly, I run to my desk and find a piece of paper, but finding only bills with "Last Notice!" stamped on them in red ink, like I am going to somehow miss the fact that it is written in 60-point type across the whole top of the stupid letter or something. Anyway, the bottom of the last page is blank, under the part where some dork from, "The Collections Department" has signed off with, "P.S. See you in court, loser!"

So I look at the Fed Funds rate, which is at 4.25%, and that means that Mr. Bonner thinks that, if the Fed is truly lending money at real rates "near zero", that inflation must be about 4.25%, too, which I think is too low, as I glean from the Infallible Mogambo Indicator (IMI), which was developed out of noticing how much more I have to pay for things all the freaking time and how I note that every time I pay for something, it costs than the last time, and how I think of Alan Greenspan and how I hate him all the more for it, more and more and more, until I start waking up after having a nightmare where I am frozen in place and Alan Greenspan is a big scorpion of inflation, with big teeth and a horrible grin on his face, and he is slowly eating my legs off while his barbed tail is reaching over and stuffing the poison of too much money, too much credit, too much debt, and too much government down my throat, and I want to scream and scream and scream and call out for help, but I can't make a sound, until I wake up and find that the reason that I can't scream or call for help is because my wife has her hands around my throat, choking me in a death drip while she is yelling, "Wake up! Wake up, damn it! You're just having another nightmare about your stupid inflation and your stupid Alan Greenspan!", which is, of course true, but which doesn't explain why she is choking me to death.

Mr. Bonner is no help, and ignores my red face, the fact that the IMI is at redline, my protruding tongue and my pleading eyes to say, "The Fed is also running the loosest regime in the Western world", despite the fact that "Real lending rates in both the Eurozone and Britain are higher than they are in the United States, and inflation rates in both areas are lower than those in the United States."

And he knows, as I know, as we all know, that it will get worse and worse, as he makes plain when he says, "Still, just listen for the helicopters…the noise will get louder and louder."

And the results of this fabulous Congressional oversight of the banks by the egregious Mr. Dodd and his coterie of Congressional losers? Larry Edelson at MoneyandMarkets.com says that, "latest data shows the broad supply of money in the U.S. - formerly known as the M-3 Money Supply - is growing at an annual rate of more than 34%. That's super inflationary!" 34%! Yike! He's right; that is super inflationary! We're freaking doomed!

Nobody wants to join me in condemnation of Mr. Dodd and the other halfwits on his stupid little incompetent committee and in Congress (except Ron Paul, the only guy there who even vaguely understands what they are supposed to be doing and why he should be the next President of the United States), or the Federal Reserve, or the banks. Nor does anyone want to share their pizza with me or even let me have a sip out of their stupid beer, so I have to distract them by saying, "Hey! Look out the window! It's a UFO!" and then snagging a little food and beverage from them while they look away.

And why the parsimony? Probably because we are all broke, as Mr. Edelson says that "All told, our debts have now reached 460% of national income - an all-time high - with no end in sight."

And that is why soon, all across the world, people will be sitting in restaurants and bars and saying. "Hey! Look out the window! It's a UFO!" and snag your grub. Look out!

Editor's Note: Richard Daughty is general partner and COO for Smith Consultant Group, serving the financial and medical communities, and the editor of The Mogambo Guru economic newsletter - an avocational exercise to heap disrespect on those who desperately deserve it.


The Mogambo Guru is quoted frequently in Barron's, The Daily Reckoning and other fine publications

[Sir Thursday]

http://news.bbc.co.u...ess/7199552.stm

It seems something is beginning .


Sir Thursday


EDIT: 600th post! Yay!

[Cold Iron]

Everyone wave goodbye to your inheritance :wave:

[MrXIII]

Look at all those damn red arrows. Yet Northen Rock is doing well.

Still plenty of people made their fortune off the back of the great depression no reason we can't do the same!

[Shinrei]

Right on MrXIII:

It's called transfer of wealth

[Cold Iron]

Yeah, and it's actually the singular beauty of our silly little civilisation. It means poor parents can have rich kids

[Lost Marine]

I wonder how much of this is actually being driven by people who were told they need to be scared of a recession, so now they're acting like they should be, which could well cause one...

[Cold Iron]

Reality is manifest through belief?

[Shinrei]

@Lost Marine, this article kinda addresses your point.
-----------------------------------------------------
From: The Daily Reckoning

The big guns came out on Monday. Mr. Market shot down almost every stock in the entire world.

He would have caused U.S. stocks to crash and burn too…but it was a holiday behind the American lines. U.S. shares never raised their heads.

And then, at dawn on Tuesday, the other side opened up with its big guns. The Fed made a "once in a generation" rate cut - taking it two key rates down 75 basis points each. Now, it's official. Favored borrowers can get money for substantially less than the rate of consumer price inflation.

After this volley, it was still early morning in the Eastern Standard Time zone. We sat on the edge of our chair waiting to see how Mr. Market would react. Would the rate cuts be enough to stop him? Or would he still do to U.S. stocks what he had already done to those in Japan, India and France - that is to say, roughly what Sherman did to Atlanta?

In the event, the fireworks from the Fed slowed Mr. Market's advance…but did not stop it completely. The Dow retreated down as much as 400 points…staged a counterattack…and ended up with a 128-point loss.

Which was enough for most commentators to pronounce the Fed's counteroffensive as a success. We'd call it a draw.

The bigger news is that the forces of deflation - led by Mr. Market - are on the move. They've wiped out $5 trillion of value from equity markets all over the world in just the last three weeks.

This is the "biggest finance crisis since WWII," says George Soros.

"Wall Street is in deep trouble," says TheStreet.com.

The trouble now comes in waves - like a Soviet army assault. There are the ARMs…then the SIVs…then the SWAPS…then the credit cards…then the home equity loans…then corporate debt… One problem after another…one loss after another.

Each assault takes its toll on the defenders. Fannie (NYSE:FNM) and Freddie (NYSE:FRE) - two of the largest mortgage lenders in the nation - could see losses of $16 billion, says Credit Suisse. Wachovia has seen its earnings "vaporize," says TheStreet.com. Bank of America's net has been cut by 95%.

Mortgage defaults in California are running 114% ahead of last year. They're at a 15-year high.

And dispatches from the front lines suggest that pockets of real estate holdouts are being overwhelmed and wiped out. The national figures show declines of only about 10% so far. But in some areas, the damage is said to be catastrophic. Houses go up for auction…and no one bids. Banks are taking back thousands of them. And when a house sells…it goes for only half of what it costs to build.

Against these crushing attacks…the authorities seem to be both out-gunned…and out-maneuvered. Mr. Bush's rebate package is only $145 billion. U.S. stocks lost more than twice that much in the first few seconds of trading yesterday. And the whole idea of providing more cash and credit is the wrong strategy anyway. These efforts at Keynesian stimulus were designed to overcome a different kind of enemy…a case where consumer demand was low…or where consumers saved too much money. Keynes worried that people had a "propensity to save," which needed to be corrected by reducing the returns to savers. But the real rate on savings now is less than zero. And the savings rate is down to minus 0.5% of disposable income.

No, dear reader, the problem is not that consumers spend too little, but that they spend too much they don't have. Nor is the problem that consumers save too much, but that they don't save enough. And while the feds might slow down Mr. Market's deflationary campaign with more cash and credit…they will not be able to stop it.

In the meantime…the battle rages on…

*** What happened to gold, oil and commodities yesterday?

If our theory is right, when Mr. Market was knocking the stuffing out of stocks…gold and oil would get beaten down too, but not as much. What happened was that gold fell $25…and then bounced back. At the end of the day, it was ahead $8.60 cents…closing at $890. Oil held at $89.

So far, so good.

*** But what will be the effect of the feds' attempt to stop a recession and reverse the bear market?

We expect the bear market on Wall Street to continue, almost no matter what. But the recession is another matter. Surely consumers could be encouraged to spend more? And surely, enough consumer spending would stop a recession. Currently, the U.S. Congress is considering the alternatives. At the top of the list - at least among Democrats - is the curious idea of giving tax "rebates" to people who never paid taxes in the first place. The nation already has plenty of circuses, say the deep thinkers in the imperial capitol; what is needed is more bread. And the people most likely to consume their bread are those who have the least of it. Barely half the people in the United States pay any taxes anyway…so it is not hard to find non-taxpayers. And it's not hard to encourage them to consume. Most live hand to mouth; just put something in their hands. And if you put enough bread in their hands, would not a recession be averted?

That's what most people think.

But where does the manna come from? Ah, there's the rub, isn't it? Yes, a recession could theoretically be sidestepped. But it would be like dodging a bicycle…and stepping in front of a bus.

Colleague Dan Amoss sent these words of advice yesterday:

"Emotion - not rational decision-making - is driving the selling this morning, so don't panic with the crowd and sell quality stocks when they are cheap. This is not 1987. Thirty-year Treasury bond yields are not spiking toward 9%, as they were in the months leading up to the 1987 crash. Instead, they have been plummeting toward 4%:

"The Fed's emergency 75 basis point cut sparked a late morning recovery, but it's more of a psychological move than anything. Investment banks must still take losses on toxic mortgage-related securities that they had assumed were covered by bond insurers MBIA and Ambac. It remains to be seen whether these companies will be able to pay claims as they arise.

"But those banks with access to the discount window now have access to Fed credit that's nearly a percentage point cheaper this morning and will get even cheaper in the coming weeks. The yield curve is still flat after this rate cut, but it will eventually become positive. Inflation is coming down the pike, but right now, the market is fearful of unknown financial sector write-offs

[Shinrei]

Dollar fall down go BOOM. Sorry for the long articles, but they explain what I happen to believe is happening better than I can.
------------------------------------------------------------
BANANA REPUBLIC, WITHOUT THE BANANAS…OR THE REPUBLIC
by Bill Bonner

The dollar is falling against almost everything…even against Iraq's dinar.

Both Bernanke's rate cuts and Bush's 'tax rebate' plan have a fruity odor to them. The tax 'rebates,' for example, will not return any money to its rightful owners. The U.S. government can't afford it. Instead, they'll send out checks to 117 million people - including many who never paid any tax in the first place, encouraging people who have already spent too much to spend even more. Where will the money come from?

The Bernanke/Bush team isn't saying. They're so eager to avoid a serious correction that they are throwing caution to the wind - and the dollar too. Let it fly wheresoever it wouldst - as long as it goes down. Besides, who cares? Most of the world's dollar reserves are held by foreigners. And foreigners don't vote in U.S. primary elections. "It may be our dollar," Treasury Secretary John Connelly once shrewdly observed, "but it's your problem."

But overseas dollar holders are beginning to notice the tropical flavor of U.S. finances. The dollar has lost 30% of its purchasing power during the last 7 years. Against gold, oil and other key commodities - and other major currencies - it is down much more. In many sunny places with shady finances, this must seem all-too familiar. The 'banana republics' did business this way themselves - running up huge debts to overseas lenders…selling off their capital assets to foreign savers…printing money by the boatload…and generally making themselves look ridiculous. Now, the kvetchers are labeling the United States as "the world's largest banana republic." One calls the dollar a "Bernanke peso." Another says the United States is following "Zimbabwe economics."

Here at The Daily Reckoning, we have been critical of the U.S. economy in the past. But today, we rise not to carp and criticize, but to defend it: The United States has little in common with a banana republic. It has no bananas. It is not a republic. And its weather is not as good.

That said, there are similarities. Real wages for men are lower today than they were 37 years ago. Robert Reich, former Secretary of Labor, writing in the Financial Times, explains that Americans were only able to increase their standards of living by putting their wives to work, putting in more hours on the job, and finally, going deeply into debt.

In the last seven years of the Bush administration, the federal debt increased by two-thirds while U.S. household debt doubled. Despite all this extra spending, median real incomes have continued to go down. Practically all new jobs have been created either by government, or in housing, health care, bars or restaurants. Jobs in manufacturing are now at levels not seen since just after WWII.

"This is the profile of a third world economy," says former Under Secretary of the Treasury Paul Craig Roberts.

How does an economy like this keep going? It depends on the kindness of strangers and the stupidity of friends. Who but a fool or a friend would buy a U.S. 30-year treasury bond at a 4.28% yield? This number is only a few basis points from the number for annual increases in consumer prices. Which means, if all goes well, investors can expect to make a return of zero on their investment over the next 30 years. And if all this talk of Zimbabwe economics and banana republic finances turns out to be true, they can expect to suffer another round of losses - measured in the trillions. And why shouldn't it be true? The American Empire is a bit like General Motors, says Martin Hutchinson. It has heavy fixed costs, an aging workforce, worn-out equipment, mammoth debts, and it is losing market share. At immense cost, America maintains its legions in more than 100 overseas garrisons. At home, the mobs call for bread. And every candidate for office - save the forgotten man, Dr. Ron Paul - offers more of it. "We cannot afford another year without decent wages because our leaders could not come together and get it done," said Barack Obama in South Carolina.

GM, of course, cannot print money. But as Ben Bernanke himself put it, the United States, like Zimbabwe where inflation is running at 150,000%, "has a technology called the printing press." What can you expect? We would modestly predict that those 30-year T-bonds, sometime between now and 2048 when they mature, will become worthless.

Maybe sooner rather than later. Because both friends and strangers are wising up. The Gulf Sates have the largest foreign currency reserves in the world. But at the end of November, Sultan Nasser al-Suweidi, governor of the central bank of the UAE told The Wall Street Journal, "the connection to the dollar has contributed much to our economy…in the past. Nevertheless, we come to a bifurcation…" Kuwait already switched away from the dollar; for its reserves it now uses a basket of currencies.

Meanwhile, China is said to have about 70% of its $1.53 trillion pile in U.S. dollars. Cheng Siwei, Vice President of the Popular National Congress: "In terms of the structure of our international reserves, we must take advantage of the appreciation of strong currencies in order to offset the depreciation of weak currencies." 'Sell the buck,' he must have whispered to his broker.

And in even the formerly weak currency zone of Latin America - the home of the real 'banana republics' - the dollar is wilting. Central banks in Argentina, Peru and Colombia have had to intervene to hold up the greenback. According to Mario Bodersohn, in the Buenos Aires paper, La Nacion, there's "no precedent for such an intense sell-off of a reserve currency." Usually, it's their own pesos, reals, colons, and australs that people are laughing at. Now, it's the gringo notes that get the punch lines.

[Morgoth]

A true inflation crack in the US would be a terrible thing I think, but it would seem they've got no one to blame but themseleves. Thanks for the article Shin.

When that's said, I cannot but pray for a continuing of the fall as I'm going to Chicago in April and want to buy some dominican sigars cheap

[Mentalist]

Well then...a this thread is very encouraging.
it further convinces me that my decision to eventually move back to the bradbasket of Europe in the middle of nowhere is a correct one...