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Analyst Joel Skousen
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From Joel Skousen’s
World Affairs Brief
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|3:00: Joel Skousen – World Affairs Brief|
|4:00: Melody Cedarstrom – Sound Financial Discussion|
|8:00: Suzanne DeKock – Weight Control|
|9:00: Lynn Marzulli – The Bible & Today’s Events|
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World Affairs Brief, September 30, 2011 Commentary and Insights on a Troubled World. Copyright Joel Skousen. Partial quotations with attribution permitted. Cite source as Joel Skousen’s World Affairs Brief (http://www.worldaffairsbrief.com)
SIGNS OF ECONOMIC COLLAPSE: IF, WHEN AND HOW BAD?
When big insider banks like Goldman Sachs start shorting the markets in a big way, and advise their high roller clients via private letter to do the same, you can bet the market s are going to take a beating in October. Puts shorting the S&P 500 are at a record high for October which indicates that a lot of big money is predicting a huge fall in global stocks soon. Certainly, the fundamentals concur that stocks are overpriced and that interest rates are artificially low compared to real inflation. Are we on the cusp of a major depression? Let’s see.
The deepest and least solvable crisis is, of course, the collapsing dominoes from sovereign debt. Every nation on earth, except for a few whose abundant oil income exceeds expenditures, is heavily overextended and none can or will pay back the huge sovereign debt they have accumulated. At least a half dozen countries require quarterly bailouts from other nations in order to pay back debt issues as they come due. Ukraine is the latest country to engage in funny accounting to fund their latest debt payment. Next time they too will need a bailout.
The Wall Street Journal reports on a copy they received of Goldman’s pessimistic letter to its biggest clients: “In a 54-page report sent to hundreds of Goldman’s institutional clients dated Aug. 16, Alan Brazil–a Goldman strategist who sits on the firm’s trading desk–argued that as much as $1 trillion in capital may be needed to shore up European banks; that small businesses in the U.S., a past driver of job production, are still languishing; and that China’s growth may not be sustainable.” Others are warning about a Chinese crash as well.
Michael Snyder reacts to that by saying that “Goldman Sachs is doing it again. Goldman is telling the public that everything is going to be just fine, but meanwhile they are advising their top clients to bet on a huge financial collapse [that’s a bit of an exaggeration. Goldman is preparing for a major financial crisis, not a collapse].
“Perhaps most startling of all is what the report has to say about the debt problems of the United States and Europe. ‘Solving a debt problem with more debt has not solved the underlying problem. In the US, Treasury debt growth financed the US consumer but has not had enough of an impact on job growth. Can the US continue to depreciate the world’s base currency? [Sounds like Goldman is listening to Ron Paul while repudiating him politically].’
“The report also goes into great detail about the financial crisis in Europe. Brazil writes about how the euro is headed for trouble and about how dozens of financial institutions in Europe could potentially be in danger of collapse [a threat which the PTB intend to use to pressure EU voters into giving more power to the ECB to issue Euro-wide Bonds].
“The following is how Business Insider summarized the advice that Brazil gave in the report regarding how to make money off of the impending collapse in Europe….
* Buy a six-month put option on the Euro versus the Swiss Franc, thus betting the Euro will drop against the Franc (the Franc being the currency that an official Goldman report recently referred to as the most overvalued in the world)
* Buy a five-year credit default swap on an index of European corporate debt.
“This is a bet that some of these companies will default, and your insurance policy, the CDS, will pay off [even though backed by nothing except promises to pay]. This is so typical of Goldman Sachs. They will say one thing publicly and then turn around and do the total opposite privately.”
Snyder concludes by saying what increasing numbers of commentators on the Right are saying: “There is a tremendous amount of fear in the global financial community right now [true]. As I wrote about the other day, the financial world is about to hit the panic button. Things could start falling apart at any time [depends on what he means by falling apart–a total collapse is not going to happen by economic means alone]. Most of these big banks will not admit how bad things are publicly, but privately there is a whole lot of freaking out going on [true only as to whether or not the FED is going to keep bailing them out. The banks are now totally dependent on external forces].”
For example a lot of hedge fund managers are set to lose their jobs. Some of the largest hedge funds are down 25% for the year. Today, according to the Wall Street Journal, “marks a deadline for investors in many hedge funds with monthly and quarterly liquidity to say they want their capital back.” Most of them are indicating they want to cash out rather than roll over into another hedge.
That’s the same reason Greece needs quarterly bailouts–because most investors don’t want to renew their investments in Greek bonds at any interest rate. Who would blame them? Greece simply doesn’t have the money to pay off these maturing bond issues and never will. In order to avoid establishing a precedent of default, the ECB is desperate to keep engineering short term bailouts until the European PTB can engineer a change in EU rules to allow the entire Union to create bonds guaranteed by all.
However, that plan suffered a major setback this week as the German constitutional court ruled this week that “no further fiscal powers may be surrendered to Europe without a new constitution and a popular referendum.”
But all this isn’t stopping the globalists in Europe from wringing as much money from their current powers to bail out other bankrupt nations. They will take it to the maximum. Thursday, the German lower house, the Bundestag, passed a bill to strengthen a bailout fund intended to help European countries deal with their debts. Stocks, looking for any justification for optimism, surged upward briefly.
As the Market Oracle of UK said, “It gives the EFSF [European Financial Stability Facility] carte blanche to carry out measures to save the euro, the insolvent countries and banks. The passage of legislation by Germany, which has already been passed by the Bundesrat (Senate) would leave Germany with no more say on the use or increase in funding just to save the euro, Greece and the other five countries, which is an impossible task at a cost of $4 to $6 trillion. All control passes to the EFSF and the ECB.” –another loss of sovereignty for Germans. More money for the EFSF solves the current liquidity crisis, but they won’t fix the solvency crisis.
This only settled the markets for a day. Today stocks dropped again with news that all these bailouts were adding to EU inflation. These short term fixes all have market consequences. European globalists realize that the semi-solvent nations in Europe are in no mood to go the next step–giving the ECB powers to issue EU-wide bonds–for which they will be liable, and so an even deeper crisis will be needed to drive them into giving the EU new powers.
This may well be the reason we are seeing the markets set up for short selling in October. Somebody obviously has given the word that a major market selloff is going to happen. That means it may be planned. If it goes deep enough, it may well be the crisis sufficient to drive European voters into accepting more EU powers to “fix” the problem with a new EU treaty.
Notice that US leaders (Obama and Treasury Sec. Geithner) are criticizing Europe for not taking dramatic steps and for moving too slowly. In reality, they know that Europe doesn’t have the same dramatic powers of the FED–so the criticism is offensive to European leaders. Its real purpose, of course, is to prepare the way for US-style solutions (more bailouts through bonding) when the crisis hits.
What does this mean for those in the United States? A big drop in the stock market does NOT mean that the economy will fully collapse. I think it will be a serious dip but not a permanent one. Obama has been sending out proposal after proposal to increase government stimulus in jobs and housing. Even go-along Republican leaders like John Boehner can’t go along because all conservative eyes are on the debt problem we face. This coming crisis may change that.
I can see a massive shakeout in the stock market (a big crisis) suddenly turning public opinion around and inducing them to believe government fear mongers that “we’ve got to inject more money into the economy” lest it collapse–the false solution. Why else would Ben Bernanke and Tim Geithner suddenly stop talking recovery and concentrate on dire warnings? I think they are setting us up for a crisis–not because they don’t have the power to inject more money and forestall it, but because they need something to stop the rising sentiment against the FED and deficit spending.
If they let the crisis go on long enough, it will doom Obama’s chances of reelection. But, if it is sufficiently sharp, Congress may relent early and agree to hand out more stimulus jobs and checks. Obama will then look like he “saved us” from collapse.
Investment guru Doug Casey is pessimistic: “With the exception of Ron Paul and Gary Johnson, the potential Republican candidates absolutely make my skin crawl. So, no, there is no help on the horizon. The U.S. government is spending about $1.5 trillion more this year than it takes in, and it is not going to cut that. In fact, foolish spending to bail things out will increase. And, worse than that, the Fed has artificially suppressed interest rates for three years. Interest accounts for roughly 2% of $15 trillion official national debt, or $300 billion per year. As interest rates inevitably rise, that interest amount will grow. At 12% – and I’m afraid they’ll have to go even higher than that – it would add another $1.5 trillion just in interest payments.
“I absolutely see no way out without a collapse of the U.S. currency and a total reordering of the U.S. economy.” Once again, the big question is when: now, later, or a lot later? All of those on the “collapse now” side of the debate don’t understand the powers of the conspiracy that controls our government.”
If they let the economy go down another notch and keep it there for the next couple of years, it means they intend to elect a controlled Republican to complete the manipulation of conservatives. We are at the point in this nation where everything Obama does will be met with conservative opposition, which is good. But if a false conservative leader gets in office and proposes something similar with a different name, most will be fooled and jump on board.
That is why the PTB seem determined to suppress Ron Paul’s candidacy and promote other controlled Republicans who are promoting some of Paul’s fiscal arguments against the FED but have no intention of following through. Only Ron Paul can be trusted to act with courage and not compromise.