It has been said that Great Britain has twice averted disaster over the past century by a timely humiliating crash in its own currency. Is this what the US needs? Do we need a humbling humiliating crash in the USD and subsequently the US Treasury Market to finally get our fiscal house in order.
We hear many people keep saying, don't worry about deficits, we have to get out of this debilitating deflationary death spiral. We need to get through this massive deleveraging phase first, then we can work on the deficits. To which I say "Bullshit!" We live in a global economy with interconnected financial markets. One cant purposefully damage one's own currency day after day and have no one notice. The simple reason foreigners still buy US Treasuries is that they are still diluting themselves to think that American consumers will bailout the global economy. They have this ludicrous idea that once the American consumer gets re-liquefied all will be OK again. For the life of me I am still searching for a reason why foreign central banks still buy or Treasuries when they know we are purposefully killing and devaluing or own currency every single day. I understand that we have a massive trade deficit that needs to be dwindled down, a cheaper USD helps that. I am also aware of massive global imbalances that persist, but one only needs to look to China and their Madoff like economy to realize where the problem lies. Why do we continually hammer or own currency without putting the crews to China? Market Rates cant stay at near zero forever, its mathematically not feasible or healthy. I have spoken of the ultimate Black Swan moment before.
/tradersutra.blogspot.com/2009/06/black-swans-and-unthinkable-stuff.html
Rates will almost sky rocket overnight.
Trillions in Interest Rate Swap contracts would implode. I don't think the Treasury or the Fed have the vaguest of clues about how to handle such a mess. If the way they handled Lehman's collapse is any indication, we are all in serious trouble when the USD and Treasuries get crushed while LIBOR soars. What are these guys going to do then? Print more worthless currency? Sorry.. been there and done that. Continue to Bailout Insolvent Zombie Institutions? Sorry.. been there and done that. Continue to lie to the American Taxpayer and not give any indication or proper accounting for Treasury and Fed disbursements? Sorry..Been there and done that. Its not going to fly anymore the next time. Because the next time, real heads are going to roll. Real blood is going to be spilt in the streets.
tradersutra.blogspot.com/2009/08/meltdown-soon-social-unrestrevolution.html
tradersutra.blogspot.com/2009/09/i-love-smell-of-revolution-in-air.html
Banks continue to use Tax Payer money to make leveraged bets in a game of heads I win - Tales you lose. They continue not to make loans and then lie about it. They continue to cut bank credit lines and then lie about it. They continue not to modify mortgages and then lie about it. They continue to kill consumers with ridiculous fees and then get the lobbyists/Congress to rubber stamp it. They continue to take excess reserves and hoard it. The amount of excess reserves in the banking system in 2008 was $2.4B. The figure was $1.4B in 2007. That figure is currently $800B in 2009. They have effectively taken the money from Treasury and Fed and financed their trading operations. They have used that money to run up commodity prices so that every day Americans can again pay $4 a gallon for gas.
tradersutra.blogspot.com/2009/09/bank-credit-m3-money-supply-keeps.html
The three headed monster which consists of Wall Street, K-Street, and Congress think they have pulled the wool over taxpayers eyes. They think they have effectively squashed Financial regulation. They may have for the time being, but lets just wait until all of those ARM mortgages reset and the foreclosures come like an avalanche. Lets wait and see when the Perfect Storm Black Swan moment happens.
The HFT trading systems will not be able to save the stock market then. Then we will really find out what these systems were in fact stock manipulation schemes from the get go.
We are on the eve of a such an event.
Its going to happen sooner rather then later.
I have called for nationalizing the banks from day one. I will not ever take those words back. The banks are all zombie institutions that can not be reformed. They are 100% insolvent even today.
It took the humbling of the Sterling in 1992 to get the British off their asses and fix their fiscal house.
We also need a humbling humiliating moment.
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