Economy Is in Depression, Not a Recession: Rosenberg

Economists Warn Of Runaway Inflation

Guest Post: We're All In A Race To The Bottom 

Submitted by Tyler Durden on 08/25/2010 13:05 -0500 

The political and economic environment is unfolding much as we discussed several months ago. Markets are being socialized and the government/central bank policies are meeting the problem of too much debt with more debt. But investors are beginning to see risk in a different light: The only "growth" is from stimulus, and how long can that last?... We're all racing to the bottom. There will be no winners, only non-losers as the government "spreads the pain." The non-losers will be those who have prepared: no or little debt and some savings for a rainy day (or decade). This was my only real advice for years.

Illinois Teachers' Retirement System Enters The Death Spiral: AIG Wannabe's Go-For-Broke Strategy Fails As Pension Fund Begins Liquidations

 

Calculated Risk blog: Unofficial Problem Bank List increases to 817 institutions.

This Economy is Ripping the Dignity of Millions of Americans to Shreds


World Stocks Slide on Economic Worries


Interest rates 'may reach 8% by 2012' adding £900 to the average mortgage as economists warn of need to curb 'runaway inflation'.


Jim Sinclair’s Commentary
Governments DO NOT default, they reschedule and declare that a solution. Problem solved.
Of course that is BS, but it takes awhile for the market to figure it out.

Morgan Stanley Says Government Defaults Inevitable By Matthew Brown – Aug 25, 2010 12:10 PM MT
Investors face defaults on government bonds given the burden of aging populations and the difficulty of increasing tax revenue, according to a Morgan Stanley executive director.
“Governments will impose a loss on some of their stakeholders,” Arnaud Mares in the firm’s London office wrote in a research report today. “The question is not whether they will renege on their promises, but rather upon which of their promises they will renege, and what form this default will take.” The sovereign-debt crisis is global “and it is not over,” he wrote.
Rather than miss principal and interest payments, governments may choose a “soft” default in which they pay back debts with devalued currencies resulting from faster inflation or force creditors to take lower returns, Mares said in an interview.
Borrowing costs for so-called peripheral euro-region nations from Greece to Ireland surged today, resuming their ascent on concern that governments won’t be able to cut their budget deficits. Standard & Poor’s lowered Ireland’s credit rating yesterday on the rising cost of supporting nationalized banks.
Population trends may be a better predictor of the ability to meet obligations rather than debt as a percentage of gross domestic product, which doesn’t reflect governments’ available revenue and is “backward-looking,” Mares wrote.
More…



Jim Sinclair’s Commentary
Intellectual giants and floor traders rarely go together. Floor traders and callused knuckles is a commonality.
There is one exception, maybe the only, and that is my dear friend and former partner Yra Harris.
Listen carefully, he knows what is coming.
Notes From Underground: CNBC-CME trader sounds off August 25, 2010 at 9:19 am

http://www.cnbc.com/id/15840232?video=1574259939&play=1


Dear CIGAs,
When reading Yra’s article, remember that he is not in the Bubble Camp, he is a floor trader who has profited and survived by never standing in front of a locomotive.
The day a bubble is a bubble is the day after it gets pricked. True bubbles are always identified in hindsight.
Regards,
Jim Sinclair

Treasuries – The New and Improved Toxic Asset? CIGA Eric
Treasuries are now the New and Improved Toxic Asset. Everyone knows that they are overvalued, everyone knows their yields are absurd—yet everyone tiptoes around that truth as delicately as if it were a bomb. Which is actually what it is.
Bob

Bob,
The only opinion that matters is the market. The secular trends in the bond market suggest two things: (1) While the nominal (U.S. dollar)trend in bonds remains intact, it serves as a poor "canary in the coal" mine because of the devaluation bias (see chart below):
Long-Term U.S. Government Bonds Total Return Index (LTGBTRI):
(2) When the devaluation bias is removed, the secular trend in the bond market changes from up to down. Clearly, the canary in the coal mine died in 2001 – a long time ago.
Long-Term U.S. Government Bonds Total Return Index (LTGBTRI) to Gold Ratio:
Do not let consensus opinion – "what should be" cloud your perception of reality. As I have said many times before, follow the money.
The flow of capital has already begun its transition from the public to private sector (see chart below). This transition will be manifested into market trends (capital flows) yet to be recognized by the collective vision of consensus opinion.
Long-Term U.S. Corporate Bonds Total Return Index (LTCBTRI) to Long-Term U.S. Government Bonds Total Return Index (LTGBTRI):
Regards,
Eric
More…




Silver Has Jumped The Creek CIGA Eric
Silver will lead another liquidity blast. This is illustrated by the gold to silver ratio (GSR).
In early August I suggested that,
While the ratio remains above June 2009 swing low, today’s technical suggest that another wave of currency debasement lurks just around the corner.
Today’s price and volume action suggest that silver has "jumped the creek" above near-term resistance. This has increased the pull of the May-June highs.
Silver ETF (SLV):
More…




‘Quantitative Easing’: What Does It Really Mean for Investors? CIGA Eric
Don’t make things more complex than they have to be. What does it mean?
Devaluation of paper money, particularly the senior currency in which the majority of debt was issued (U.S. dollar)

• Reduction in the general standard of living
• Ongoing default of debt through inflation
• Rising price of gold and silver relative to fiat.

Gold, London P.M. Fixed

Silver, London P.M. Fixed
Investors queasy over whether there’s anything that can be done to boost the flagging US economy could get a trillion-dollar answer this week from the Federal Reserve.
When officials from the central bank emerge from this week’s Jackson Hole, Wyo., retreat, they will likely disclose the latest in the arsenal of so-called "quantitative easing" measures.
Source: cnbc.com
More…

Extraordinary Action In Silver Helping Pull Gold Higher

Posted: Aug 25 2010     By: Dan Norcini      Post Edited: August 25, 2010 at 2:18 pm
Filed under: Trader Dan Norcini

Dear Friends,
Something extraordinary is obviously occurring in silver as it continues to shrug off any selling pressure that has normally been tied to the “risk aversion” trade. This is the second day in a row in which it has moved sharply higher blowing through chart resistance levels with ease and forcing a huge deal of pain for the shorts.
I cannot say with certainty what is occurring but it appears that one or more big players is challenging the perma shorts in this pit and is evidently doing so with great success thus far.
Silver is actually pulling gold higher in spite of the obvious capping that is occurring by the bullion banks above the $1,240 level.
Click chart to enlarge in PDF format