The International Forecaster, Bob Chapman, exposes The Rotten Underpinnings Of Our Financial System:
“We have to chuckle when the world is concerned with financial events in Dubai, Iceland, Latvia, Lithuania, Estonia, Romania, Hungary, Austria, Spain, Ireland, Portugal and Italy, when all of Europe’s and America’s banks are insolvent. Who is kidding whom? We cannot leave out the brokerage houses and insurance companies. We must admit that the Fed and other central banks have done a good job covering up the mess they deliberately created by deceiving the public, as they prepare for stage 2 of the credit crisis. The only way these companies can continue to “survive†is to continue to keep two sets of books. Decisions by the FASB and the BIS have guaranteed that the charade will continue unbeknownst to the public and professionals alike. We are long past moral hazard and into criminal enterprise. They will operate in a one-world of in reality until they all simply collapse. Each and every day their underlying assets deteriorate. Next to fall over the years 2010 and 2011 will be the stock market and bond market. That should expose the rotten underpinnings and bring about the demise of our financial system. The only question is will we look like Weimar, Zimbabwe or Argentina?”
[emphasis added]
Mr. Chapman is right, in that we regularly hear stories about the problems with government debt in Eastern Europe and certain mid east countries. All the while, American and Western European banks are completely bankrupt, to the tune of trillions of dollas – if they weren’t, then there would have been no need for the TARP bailout. The illusionists at the banks are keeping our focus tuned to the left hand where we see green shoots and recovery, while the right hand continues to play the paper shuffle game, hiding toxic assets and keeping foreclosures from hitting the open market.
As Chapman has suggested, it is only a matter of time. The mathematics here are very clear, and the losses world-wide far outweigh the money central banks have been able to print. Eventually, there will need to be so much money printed just to bail out losses, that the whole system will either collapse because the CB’s realize they can’t save them, or the currencies involved hyperinflate to such a level that they completely collapse as viable monetary instruments.
On top of the risk to the global financial sector, consider the many geo-political scenarios that can play out in the world, including a strike on Iran, terror attacks on oil pipelines around Saudi Arabia or Yemen, or a breakdown of social order in Pakistan, and the probability of a negative impact event on the US Economy rises even higher.
Comments….. what a let down – I actually thought there would be some indication of thether it would be more like Zimbabwe or argentina!!!
Sorry Andrew — the answer wasn’t in Mr. Chapman’s post. Let’s hope for Argentina, if we’ve got to choose one or the other.
well, everyone knows that Argentinians are the prettiest, so i hope we wind up looking like them. wait, what?
I don’t understand those who think we are headed for a DEFLATIONARY DEPRESSION. Does anyone think in their right minds that the current USA Government would want deflation of any sort? Just look at what they have done to the Housing Market after the collapse with tax credits, interest rates and such. We will absolutely have Hyper Inflation unless absolute dramatic reform happens in our Federal Government in 2010. Personally, I do not even think 15 Peter Schiffs and Rand Pauls can prevent that scenario at this point. It is only a matter of how long (magnititue) of the inveitbale SHTF can be cUrVed.
Does anyone else agree with this?
This may have been posted elsewhere on the site but its worth reading again. It gave me a better understanding about hyperinflation.
http://en.wikipedia.org/wiki/Hyperinflation
Brian, totally agreed. IMOH the wheels come of the cart bigtime this year and into 2011. The powers that be WANT hyperinflation and currency disintegration. They do not want the USD to survive. Does anyone think for a minute that the politicians in DC don’t know what they are doing? Does anyone think that printing 14 trillion will be OK for us all and that we can continue business as usual. No not at all, they have systematically passed legislation after legislation that has the sole purpose of bankrupting, disintegrating, and collapsing our country as we know it. They want a 1 world currency and 1 world govt. I am not sure even gold or silver will survive as a form of money. (maybe for a time, but ultimately PM’s will be outlawed)
Hyperinflation? Eventually…maybe…not for some time though.
FOR THE TIME BEING, I’m sticking with deflation…if anything.
There are more losses to come…and A LOT more bad debt to be cleansed out of the system before inflation is a problem, IMO.
I’m sticking with Mish on this one – The excess reserves sitting in banks are not being lent out because few qualified borrowers want to borrow money right now…and most of those who do want to borrow are not qualified in banks’ minds – and they are probably right in thinking so. The “excess reserves” are only going to help the banks cover their losses.
Consumer credit, a crucial element to the drug-induced fantasy of an economy that we’ve had for the last 20 years, has fallen off a cliff. Wages are dropping. Those two items alone suggest that consumer spending will not rebound to previous levels…for some time.
Without consumer spending, there is nothing to “push” prices up…which is important, depending on which definition of inflation you use (e.g., expansion of “money” vs. increases in prices due to expansion of money).
Until more of the losses/bad debt is written off, and consumer spending cranks back up (somehow), inflation is not a concern.
…that being said, a couple of years from now MAY be a completely different story.
Just my 2 cents…
How about Iceland? This just happened less than two years ago. If you believe that the elite show us or tell us what they’re going to do before they do it, then perhaps Iceland is a sign of things to come.
Deflationary depression followed by currency collapse followed by hyperinflation, it would seem.