Another challenging week for the American economy...because despite the continuing rally, the past five days were marked at least in part by inflationary concerns. The unfortunate side effect of quantitative easing is taking its toll across the economic landscape...most visibly with increasing gas prices, but perhaps most destructively in Treasuries.
In this week's highlight of the week, Bill Bonner takes a thoughtful moment to enumerate the economics disasters we've already watched quickly unfold, and also examines the cost inflation extracts on your personal wealth...it's not pretty.
We continue to travel down a very dark road...and it's difficult to make out exactly what's at the end of it. The details just aren't clear, but sadly enough the rough outline in the approaching distance is...and it's nothing less than both depression and hyperinflation.
Enough... Let us delay no longer, nor distract anymore, from the original work's majesty. Read on for an excerpt from Bill's highlighted essay...
In this week's highlight of the week, Bill Bonner takes a thoughtful moment to enumerate the economics disasters we've already watched quickly unfold, and also examines the cost inflation extracts on your personal wealth...it's not pretty.
We continue to travel down a very dark road...and it's difficult to make out exactly what's at the end of it. The details just aren't clear, but sadly enough the rough outline in the approaching distance is...and it's nothing less than both depression and hyperinflation.
Enough... Let us delay no longer, nor distract anymore, from the original work's majesty. Read on for an excerpt from Bill's highlighted essay...
"Yesterday, for the third day in a row...not much happened in the markets. The Dow fell 24 points - hardly worth mentioning. Gold held steady at $955. Oil rose a dollar - to $71. And the dollar itself remained about where it was - at $1.39 per euro.
"It is as if everyone were waiting to see what happens next. Let's see...
"We've seen the biggest stock crash in history...
"..the biggest property crash in history...
"..the biggest deficits in history (four times the previous record!)...
"..the biggest bailouts in history (we can't even count that high)...
"..the biggest bankruptcies in history...
"..the auto industry and the finance industry have been largely nationalized...
"..the president of the United States of America is now making financial decisions for formerly private industries...
"What's left to see?
"Oh yes...the depression...and hyperinflation.
"And...now's the time to protect your investments from these dreadful consequences...
"'Get ready for inflation and higher interest rates,' warns Art Laffer in the Wall Street Journal. Remember him? Creator of the 'Laffer Curve.'
"But don't worry about inflation, adds Harvard professor Gregory Mankiw, also in the Wall Street Journal: Inflation is just what we need. 'In the current environment, the goal could be to produce enough inflation to ensure that the real interest rate is sufficiently negative...' to force people to get rid of their money as fast as possible.
"Over in the bond market, investors are finding out what a little bit of inflation - or even hints of inflation - can do. People bought US Treasuries during the panic of '08 for safety purposes. Now, they're getting what we predicted. Alas, yes, they are getting what they deserve, not what they expected. Our friend Chuck Butler points out that prices of 10-year Treasuries have come down from $110 as recently as 5 months ago to just $94 this week. How's that for safety - a 15% loss!"
The above is but a smidgen of Bill's deep reflection in this highlight of the week essay. You'd be doing yourself a personal disservice to stop reading here. If you're seeking a better understanding of what's in store for the US economy you should continue on..."It is as if everyone were waiting to see what happens next. Let's see...
"We've seen the biggest stock crash in history...
"..the biggest property crash in history...
"..the biggest deficits in history (four times the previous record!)...
"..the biggest bailouts in history (we can't even count that high)...
"..the biggest bankruptcies in history...
"..the auto industry and the finance industry have been largely nationalized...
"..the president of the United States of America is now making financial decisions for formerly private industries...
"What's left to see?
"Oh yes...the depression...and hyperinflation.
"And...now's the time to protect your investments from these dreadful consequences...
"'Get ready for inflation and higher interest rates,' warns Art Laffer in the Wall Street Journal. Remember him? Creator of the 'Laffer Curve.'
"But don't worry about inflation, adds Harvard professor Gregory Mankiw, also in the Wall Street Journal: Inflation is just what we need. 'In the current environment, the goal could be to produce enough inflation to ensure that the real interest rate is sufficiently negative...' to force people to get rid of their money as fast as possible.
"Over in the bond market, investors are finding out what a little bit of inflation - or even hints of inflation - can do. People bought US Treasuries during the panic of '08 for safety purposes. Now, they're getting what we predicted. Alas, yes, they are getting what they deserve, not what they expected. Our friend Chuck Butler points out that prices of 10-year Treasuries have come down from $110 as recently as 5 months ago to just $94 this week. How's that for safety - a 15% loss!"
Below you'll find a wide range of analysis from some of the brightest minds in finance and economics. We present ideas from Gloom Boom & Doom Report author & publisher Dr. Marc Faber, Quantum Advisors founder Ajit Dayal, and 5 Min. Forecast managing editor Ian Mathias...as well as two carefully selected standouts from the many fine essays Bill Bonner and The Mogambo Guru wrote for The Daily Reckoning this week...see some of the best below!
The Frame of Mind of American Economic Policymakers, Part I & Part II
By Dr. Marc Faber
Hong Kong, China
"I seldom become depressed, but when I consider that prosperity is created by "peace, easy taxes and a tolerable administration of justice" I really think that the U.S. and other Western governments are doing their very best to impoverish their countries."
Why Investors Fled India
By Ajit Dayal
Mumbai, India
"...the P-Note pool of money - hot, short-term money - that gets India exposure via Participatory Notes does not even have to fill in that health examination form...Imagine an airline crew in Shanghai airport vouching that the passengers are not affected by swine flu - and signing the form on their behalf. The Chinese would take the crew out of the plane and shoot them or send them off to the hinterland. In India, we worship these unknown pools of capital - and shoot ourselves in the foot."
Bond Bubble Burps Again
By Ian Mathias
Baltimore, Maryland
"...the very day of this highly anticipated bond auction, Russia and Brazil both announced they'd soon be selling $20 billion in U.S. Treasuries in exchange for IMF bonds. It's a smart move...each nation gets to diversify out of the dollar (the IMF will pay these bonds back with a basket of global monies) and send a clear signal to the U.S. government."
Standing at the Gates of Economic Hell
By The Mogambo Guru
Tampa Bay, Florida
"I already told him that the economy is crappy; nobody has any money with which to buy things because all of their money is being used to service a backbreaking load of debt that was accumulated to fuel the booming bubbles in the stock market, the bond market, the housing market and the growth in the size of government that are all bursting, all thanks to Alan Greenspan and the Federal Reserve creating so, so, so much money and credit, leading us to here, a place I lovingly call, 'The gates of economic hell!'"
The Deflationary Downturn
By Bill Bonner
London, England
"The markets are clearly in a deflationary downturn. No doubt about it. After a long period of credit expansion credit is finally contracting. The smart money is probably betting on lower asset prices...We're also looking at $2.4 trillion worth of Alt-A mortgages that will need to be refinanced or reset. The peak in those resets won't happen until January 2013. So stay tuned...this housing bear market isn't going away any time soon."
By Dr. Marc Faber
Hong Kong, China
"I seldom become depressed, but when I consider that prosperity is created by "peace, easy taxes and a tolerable administration of justice" I really think that the U.S. and other Western governments are doing their very best to impoverish their countries."
Why Investors Fled India
By Ajit Dayal
Mumbai, India
"...the P-Note pool of money - hot, short-term money - that gets India exposure via Participatory Notes does not even have to fill in that health examination form...Imagine an airline crew in Shanghai airport vouching that the passengers are not affected by swine flu - and signing the form on their behalf. The Chinese would take the crew out of the plane and shoot them or send them off to the hinterland. In India, we worship these unknown pools of capital - and shoot ourselves in the foot."
Bond Bubble Burps Again
By Ian Mathias
Baltimore, Maryland
"...the very day of this highly anticipated bond auction, Russia and Brazil both announced they'd soon be selling $20 billion in U.S. Treasuries in exchange for IMF bonds. It's a smart move...each nation gets to diversify out of the dollar (the IMF will pay these bonds back with a basket of global monies) and send a clear signal to the U.S. government."
Standing at the Gates of Economic Hell
By The Mogambo Guru
Tampa Bay, Florida
"I already told him that the economy is crappy; nobody has any money with which to buy things because all of their money is being used to service a backbreaking load of debt that was accumulated to fuel the booming bubbles in the stock market, the bond market, the housing market and the growth in the size of government that are all bursting, all thanks to Alan Greenspan and the Federal Reserve creating so, so, so much money and credit, leading us to here, a place I lovingly call, 'The gates of economic hell!'"
The Deflationary Downturn
By Bill Bonner
London, England
"The markets are clearly in a deflationary downturn. No doubt about it. After a long period of credit expansion credit is finally contracting. The smart money is probably betting on lower asset prices...We're also looking at $2.4 trillion worth of Alt-A mortgages that will need to be refinanced or reset. The peak in those resets won't happen until January 2013. So stay tuned...this housing bear market isn't going away any time soon."
Thank goodness for the weekend...a respite from work and a great opportunity to catch up on all your favorite DR reading you couldn't squeeze into a busy week. However, unlike missed reading, there are some opportunities that come up only once in a lifetime...and then the chance is gone forever.
An upcoming example is the Agora Financial Investment Symposium...the one fleeting moment you'll have in 2009 to celebrate the 10th anniversary of the DR, and to see each and every one of your favorite Agora Financial personalities live and in person.
From just today's issue, you'll be able to see Bill Bonner, Dr. Marc Faber, Ajit Dayal, and Ian Mathias at the event...along with so many others!
This year we're celebrating a Decade of Reckoning in Vancouver, Canada, from July 21st through the 24th. Please join us as we honor ten historic years of The Daily Reckoning, and spend four intense days discussing the most profitable investments we'll tackle in the next ten years.
An upcoming example is the Agora Financial Investment Symposium...the one fleeting moment you'll have in 2009 to celebrate the 10th anniversary of the DR, and to see each and every one of your favorite Agora Financial personalities live and in person.
From just today's issue, you'll be able to see Bill Bonner, Dr. Marc Faber, Ajit Dayal, and Ian Mathias at the event...along with so many others!
This year we're celebrating a Decade of Reckoning in Vancouver, Canada, from July 21st through the 24th. Please join us as we honor ten historic years of The Daily Reckoning, and spend four intense days discussing the most profitable investments we'll tackle in the next ten years.
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