The Dow moved up 17 points on Friday, leaving it above the 10,000 mark. Gold rose too – it is at a new record high, only $5 below $1,100.
According to the news reports, the US economy is ‘growing’ again. Yes, that’s the official storyline.
But wait, what kind of growth is this? David Rosenberg:
“All we can say is that if the overwhelming consensus is correct that the recession is behind us, then what we have on our hands is the mother of all jobless recoveries and whatever economic growth is being squeezed into the system comes courtesy of the most dramatic intervention by the government in recorded history, including the New Deal 1930s era. President Obama is now running fiscal deficits that would have made FDR blush.”
The quacks at the Fed and the Treasury department have delivered the biggest jolt of adrenaline in history. People in the private sector won’t spend? Heck, the feds will spend for them!
It took the Fed nearly one hundred years to grow its balance sheet – which is the foundation of the US money supply – to $800 billion. Then, after Lehman Bros. went broke, it doubled its balance sheet…to more than $1.8 trillion.
Early last week, the Fed announced that it would keep the firehose-sized IV in place. Then, by the end of the week, the G-20 meeting of finance ministers confirmed said they were all sticking with their stimulus programs.
You can’t put that much cash into a financial system without getting some kind of reaction. Goldman is making record profits, for example. How does Goldman make money? It is finance business. It profits by offering credit. When credit expands, the moneylenders and speculators at Goldman make money.
The private sector isn’t borrowing. Every day brings more proof.
Consumer credit contracted again in September – the 8th month this year.
Unemployment just passed the 10% mark, reports The New York Times.
“Small Businesses Hunker Down to Survive,” says another headline story.
Another big bank went bust in California.
But while the private sector de-leverages, the public sector expands. Now, it’s the feds who are doing the borrowing – about $1.7 trillion this year.
This is great for the people who help the feds finance their spending. But all it does is add more debt to the system. And debt is the real problem.
If former OMB director David Stockman is right, we’ll see deficits over $2 trillion for a decade.
What people once took for absurd they now take for granted. Such as trillion-dollar deficits. For even with a hole in public finances equal to 13% of GDP the US House of Representatives passed a law overhauling the health care system, at a cost of more than $1 trillion.
What were they thinking?
Well, they were probably thinking that ‘deficits don’t matter.’ And they were probably justifying the expense on the grounds that it was ‘countercyclical spending’ that would help pull the US out of its slump.
Whatever they were thinking, they weren’t remembering what happened 20 years ago. It was 20 years ago today that the Berlin Wall fell, bringing to an end a 40-year demonstration project. The East Germans/Soviets wanted to show the world how well economists working for the government could run an economy.
And we found out!
Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America's most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind The Daily Reckoning. Dice Have No Memory: Big Bets & Bad Economics from Paris to the Pampas, the newest book from Bill Bonner, is the definitive compendium of Bill's daily reckonings from more than a decade: 1999-2010.
“It was 20 years ago today that the Berlin Wall fell, bringing to an end a 40-year demonstration project.”
We got one started last year or so between us and Mexico. Think of the possibilities! A vast construction project of walls between say the Rockies and California; Another on either bank of the Mississippi; the possibilities, O! the possibilities.
All I know is that I have had cash sitting on the sidelines for far too long, waiting for the bottom to fall out. Meanwhile I’ve given up 50-75% gains. I don’t know about all you guys, but I am going all in with my long term cash to avoid missing out on the rest of the run.
I wouldn’t want to miss out on the rest of the run, either.
Meaning…it IS going to end? And when?
“All I know is that I have had cash sitting on the sidelines for far too long, waiting for the bottom to fall out. Meanwhile I’ve given up 50-75% gains. I don’t know about all you guys, but I am going all in with my long term cash to avoid missing out on the rest of the run.”
The run will end the day you go ALL in. Why did you wait?
if what you claim below is true then who are Goldman lending (credit) to???
Goldman is making record profits, for example. How does Goldman make money? It is finance business. It profits by offering credit. When credit expands, the moneylenders and speculators at Goldman make money.
Goldman makes its profits mainly speculating with the feds’ money, ironically partly by lending it back to them. Public debt has never been a better deal for these (too) big (to fail haha) banks.
The feds have more cheap cash to bailout the entire economy, the banks make risk-free profits, so who’s going to complain ? Well the man of the street should denounce that fraud but unfortunately he doesn’t give a sh** about economic issues.
Also I wouldn’t be too surprised if there was a good deal of accounting handling in that “too good to be entirely true” story. Until the next bailout (see Fannie & Freddie for example )
In March/April I made 30% on stocks, then I got out. I, with BB, cannot tell when this bounce will crash back to earth.
So, since April, I’ve had cash on the sidelines as well. I could’ve made another 30% more if I had left it in.
But who can predict the exact upturns/downturns of the market? So I content myself with knowing that I made more in 2 months of investing than I would’ve made in 10 years in a 0% interest yielding savings account.
The laws of economics say, There is yet a crash to come. When? Soon…. But for now I’ll just warm my hands on the sidelines a bit longer.
The borrowers aren’t borrowing because they don’t think they will be able to repay the loan. And they are already burdened with too much debt. That said, the banks and credit cards aren’t lending because they know most people can’t pay their existing bills, so if people take on new debt it will leave the companies holding the bag. Yet if these companies would lower their rates, the system would start up again. If my credit cards would lower the rates to a manageable amount, I would be able to buy more. Instead I now have to deal with a 30% interest rate while the banks got that money at nearly 0%. If they think people will agree to be further screwed by these greedy banks, it’s not going to happen.
sharonsj, many people wish credit grew in trees and paper money or debt represented wealth. That’s just not how things work.
BDCs are soaring while banks are suffering. Banks are still working through nonperforming portfolios while regulators continue to restrict them.
There’s an easy recipe you can use to root out the strongest stocks on the market right now.
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