Tout va très
bien Madame la Marquise: the recovery is around the corner!?
Posted November 7, 2010 - The Worst is yet to come: This applies BOTH to the
USA and Europe - ! As a matter of fact, because of the social
mattress, the situation in Europe is even worse. The more regulation, the harder
it is for society to recover.
Posted May 21, 2010
"No recovery is possible as long as
REAL* unemployment figures are not improving!"
* : direct and indirect
government employment is a joke as government jobs are unproductive and
each of them takes away 2
productive jobs in the private sector.
Posted on July 14, 2008
and updated September 23, 2009
The question never was whether
Fannie and Freddie would be allowed to go bankrupt. It was whether
the FED would nationalize or bail them out. In the end, what we see here is just
the same subtle difference as there is between taxation and inflation. Both
inflation and taxation take the money out of our pockets and nationalization
and/or a bailout of the Banks and Financials brings more billions of fiat money
created out of thin air and inflation in the system. Or how to keep the flames
of hyperinflation alive.
(scroll down for the video clip with English
The markets seem to have forgotten
that Bear Stearns was (bailed out) taken over by Morgan Stanley. As of
June 1, total borrowings from the FED to the financial system have increased
from $ 150 bn to $ 170 bn. Not only were Fannie and Freddie bailed out, but the
IndyMac has been taken over by Federal Deposit Insurance Corp (not
guaranteed by the Federal Government) and
we have probably not seen the end story of Lehman Bros. Earlier this
month a financial report of Fortis issued a warning that about 6,000 mid
sized American banks were also in trouble.
IndyMac could have been one of these. Last Friday there was a run on this
bank. Which one will be the next one? Hopefully not mine, or yours...
what the balance of the FDIC (fed. dep. ins. corp.) looked like on Dec 31, 2006
Net assets (mostly
SEC line of credit $1.0b
Bank consortium line of credit $1.0b
Total funds available to pay claims $3.4b
...and this is how bad it
looks as of September 23, 2009:
...and October 2009, they need
additional funds from the Government in order to survive!
...and March 2010, the
FDIC would be bankrupt if the Government would not have stepped in.
Banking has traditionally been built
and was able to survive because the depositors trusted these institutions. Today
however because of Fractional
Reserve Banking, both the depositor and the borrower now think they own the
same money. The least one can say, is that this is rather a dangerous situation.
Borrowers are going belly up (CDO subprime, Credit Cards, Mortgages, etc.)
taking the money with them. As depositors start to claim the same money because
they now also need it in order to survive in this bad economy, the Federal
Reserve and Central banks have to print more Fiat Money in order to keep panic away and the system
liquid hereby feeding (hyper)inflation.
The same situation is unfolding in the
UK and in the EU in a more secretive way. Strange things happened or are
happening with Fortis, Soc. Generale, UBS, Crėdit Suisse, Crėdit
Agricole, Royal Bank of Scotland, Northern Rock, ..just to name some of them. We must admit, the leaders of the
European countries have a lot more expertise. History has seen plenty of similar
Gresham). However the day is coming close where
‘we the people’ will again ‘realize’ the emperor has no clothes.
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.
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. (Ludwig von
This is where Gresham’s law
comes into action: "bad money drives good money out of circulation". In
other words, people keep the good money and spent the bad paper money. In
Zimbabwe this law was translated in a stock market explosion of + 76,000 %. The
advance stalled after Mugabe imposed price controls. Ex post, buying stocks was
still better than loosing 9,000.000 % per annum because of inflation. A lot
better would have been to keep the savings in Real Money.
We have a paradigm shift. Few see and
even understand what is happening. Personally, I don’t think it will be funny
to find out how it is to be a billionaire in a country like Zimbabwe where
a bunch of baked beans cost Zim$ 30 billion.