tin1

Noteworthy Pundit: Marc Faber's 2009 Predictions

let me rebut your long post with just one sentence. They want to implode the U.S economy and dollar to usher in a North American Union, Canada, U.S and Mexico


On Dec 30 01:45 PM derryl wrote:

> SW,
> I'm not so sure the currency debasement is in the future. Between
> the commercial banks' subprime trillions and investment banks' derivatives
> trillions the dollar was already debased to the tune of these 10s
> or hundreds of trillions of created money over the past decade or
> so. With these trillions unwinding and evaporating the Fed's creation
> of new trillions may do nothing more than stop the decline or partially
> restore the general money supply and price levels that were in effect
> before the deleveraging began.
>
> Faber made a good point about Japan that I think applies to the US.
> Japanese price deflation mostly affected real estate and stocks,
> the 2 asset classes that had enjoyed the bulk of the previous inflation
> of money creation. Deleveraging deflates the same assets that it
> inflated. If you take out oil and transportation US CPI has hardly
> moved while real estate (only in the regions like California and
> Florida that were most inflated) and stock prices have plummeted.
> And the price of Wall St derivative assets is unwinding completely
> along with the fantasy money that was used to purchase them in the
> first place.
>
> So I think the currency debasement has already happened and most
> of that money went into these 3 specific asset classes which are
> now deflating. Treasury prevented the mortgage industry from collapsing
> by taking Fannie and Freddie public. Bernanke's $350 billion went
> to preventing insolvency of Wall St commercial banks who created
> money for derivatives purchases, assets that are now either worth
> less or worthless. Everybody had to dump their still valuable assets--stocks--to
> try to cover their losses in the inflated categories, which deflated
> stocks. In the panic "real" money dumped stocks too so there's still
> a lot of money waiting to see what to do next.
>
> Bernanke will not replace the evaporating derivatives trillions so
> that market will simply deflate, maybe (hopefully) permanently. Tim
> has explained that rapid real estate inflation is unsustainable for
> reasons of fundamental affordability so the deflating regions will
> not reflate to 2006 levels. More Treasury or Fed billions will just
> move the bad debt from private to public hands and move the good
> money from public to private hands--the banks, to encourage new lending
> to stop the decline and prevent broader deflation.
>
> I share Faber's bullishness on long oil and other essential commodities,
> but unless somebody has a big international money system surprise
> up their sleeve gold is only a fear investment and as soon as fear
> subsides gold will decline. If things stay bad and fear lasts for
> over a year there could be some good gains in gold, but I have a
> suspicion a recovery will begin in mid-2009 because I think Obama
> will bail out underwater mortgages. I think some deal will be made
> for the Fed or Treasury to buy the underwater portions in order to
> stabilize both the real estate markets and people's mood.
>
> So the upshot: There's still lots of money to evaporate as derivatives
> continue their terminal decline, but I think that problem has been
> or is being isolated from the rest of the economy. The investment
> bank money and the derivatives assets it purchased will decline in
> tandem. A portion of that money was leaking into the economy by way
> of salaries and bonuses paid to staff and by people cashing out before
> the scheme began unwinding. That flow should stop, so a replacement
> flow of new Fed money shouldn't be any more debasing than what was
> already happening.
>