RONALD CARNEY wrote:
Date: Saturday, August 28, 2010, 10:23 AM
Gleanings on the coming crisis:
Prof. Charles Hall, of SUNY Syracuse, says: “One of the great barriers to making policy in the U.S. is the large numbers of people whose minds have been ruined by the study of modern economics. They just don’t get how the world really works.”
Richard Russell writes: “Do your friends a favor. Tell them to ‘batten down the hatches’ because there’s a HARD RAIN coming [that’s Richard’s emphasis.] Tell them to get out of debt and sell anything they can sell… in order to get liquid. Tell them that Richard Russell says that by the end of this year they won’t recognize the country.”
According to Rubini it’s not going to be pretty for stock-holders in the U.S. or Europe. “There are some parts of the global economy that is now at the risk of a double-dip recession,… From here on I see things getting worse”.
Why the hard times? Business formation and job creation stinks. There are between five and ten applicants for every new job advertisement. The year’s college grads are having another tough time entering the workforce. Unemployment rates for minority groups in the U.S., under age 25, are in the 50% range. In areas of the U.S., that part of the U.S. economy has transformed into the “de-developing world”.
The dollars in your wallet now not only backs bankrupt U.S. Money, large banks and sub-prime home “owners”. They are also officially backing all the economies of Europe. The world’s monetary system has evolved into a new kind of global socialism. The European Central Bank (the ECB) will spend $1 trillion (750 billion euro) bailing out Europe’s sovereign borrowers (like Greece, Spain, and Portugal). It will also purchase billions of troubled assets from Europe’s largest banks – like UniCredit.
What does any of this have to do with the U.S. dollar? More than you’ll ever hear anywhere else. On paper, the money is supposed to come from Europe’s biggest governments and the IMF. But in reality, most of the money will be borrowed from the U.S. Federal Reserve, which just happened to re-open its trillion-dollar swap account with the ECB. Ironically, the Federal Reserve says these loans are risk-free because the counter party is a central bank (or at least the off-balance-sheet entity of a central bank).
The U.S. Federal Reserve has officially become the world’s lender of last resort. These policies will likely lead to a permanent loss of value for holders of U.S. dollars. The U.S. dollar has assumed all these risks.
Our currency has become a ticking time bomb.
- (Richard Russell is “the Granddaddy of Financial Newsletters).
- (Nouriel Rubini, Economist, founder of Rubini Global Economics, aka “permabear”)
- Added to the above, the Federal reserve was the buyer of last resort for the latest US Bond Auction.
- China, and The OPEC rich countries were non-bidders. Our country is like those people who pay one credit card bill with another credit card.
Please welcome Ron Carney our newest blog writer. Notice how long it took me to get this posted. I’m sorry, Ron for the huge delay. Please keep writing. I’ll be quicker to get them up (within 24 hours). Fantastic article!!