Articles & Blogs - US Commentary

User Rating: / 0
PoorBest 

I have pointed out several times previously that there would be severe consequences if the Plunge Protection Team (“the President's Working Group” on Markets) failed to halt the slide of U.S. equity markets.

Years of unsustainable returns, derived from a pair of U.S. asset-bubbles (each, successively the largest in history) led to unrealistic expectations – and projections – for the rates of return which could be earned by U.S. pension funds. This, and an over-dependence on U.S. financial stocks has brought pension funds all over the United States to the point of crisis.

Anecdotally, reports have already started of pensions funds liquidating assets to meet current revenue demands for disbursements and administrative costs. For those plans, the war is already lost, and only a government bail-out can make them whole. But with each week, more U.S. pension funds slide closer to the point where the possibility of regaining long-term solvency is no longer realistic.

If the Obama regime thinks sentiment in the U.S. population is poor now, think about how much worse it would get with an aging population if there were widespread fears of the collapse of many of these pension funds – are just a few large ones.

Before it gets to that point, President Obama will have no choice but to once again reach for the cheque-book of the U.S. Treasury Department to write a big cheque – this one for several trillions. Many of the Wall Street fraud-factories will never recover from their losses and mismanagement – and bailing out near-100% losses in some of the largest holdings in U.S. pension plans will NOT come cheap.

The problem is that there are too many of these expensive holes to plug in the U.S.S Titanic. The U.S. bond market has already, obviously topped. For the U.S. government to suddenly attempt to finance trillions more in U.S. debt, it is all but inevitable that foreign buyers will recoil in horror – and stop buying.

With absurdly low yields (especially for a bankrupt economy), there is no appetite for a further increase in supply of this increasingly worthless paper. At that point, U.S. interest rates would have to rise very sharply to bring the buyers back.

Before that point, the U.S. Treasury Department (and the corrupt Federal Reserve) would have to act: “buying” their own bonds. This is a VERY nice way of saying that the U.S. will get “Helicopter” Ben to pretend to pay U.S. bills by simply printing money (“monetizing the debt”).

Once a country is forced to monetize its debt, and where such a trend is likely to continue for several years, the chances of avoiding hyperinflation become slim. Printing money to “pay bills” means a massive dilution in the currency through astronomical levels of money-creation (and debt-creation).

The rapid money-creation devalues the currency equally rapidly, creating VERY high inflation – and seriously eroding the standard of living. Simultaneously, soaring debt levels lead to massive resources being devoted to servicing the debt – wasted spending – and taking dollars away from a population more in need of government aid than ever.

This rapid decline in the real standard of living requires governments to increase social programs (or face social chaos) which accelerates the spiral of money-creation, debt, and inflation. Within months or, at most, a couple of years, hyperinflation begins.

Another significant down-leg for U.S. equity markets here could be the point of no return on the road to hyperinflation. The PPT cannot afford to fail.

For those who don't want to place their futures in the hands of market-manipulators, the window to protect yourselves through a significant commitment of cash reserves to precious metals is quickly closing. Goldman Sachs, at the heart of gold-manipulation, has closed out its HUGE “short” position on bullion in the Comex market.

When the Manipulators won't short gold, that would seem to be a sign that the train is about to leave the station. When it does, it won't be returning.

At present, the precious metals miners, especially the junior producers are at once-in-a-lifetime valuations. Great timing for a once in a lifetime crisis.

{rokintensedebate} 

TrackBack URI for this entry

Comments (0)

Subscribe to this comment's feed