As we awaken from another restful night of slumber (waking to the economic nightmare unfolding on this side of the dream boundary in real life) we see that China is now expressing concerns about being stiffed on their $1.3-trillion of US denominated assets. So what else is new?
The truth is, China may talk tough, but there’s little they can do. Oh sure, the US could have its debt rating fall as a result (and who knows how far) but that, paradoxically, would maybe be just the right medicine to force an incoming Fed boss (due to replace Ben Bernanke) into levering a rise in short-term interest rates here in the US.
I’ll outline the whole scenario in tomorrow’s Peoplenomics report (which may be posted early after markets close today). But the short version is that a return to the 2009 economics lows and a Dow of 5,000 could result in the short term, but the long-term outcome from raising rates might actually save the country. Remember: Nixon closed the gold window in 1971 and in cyclical economics, it’s time for a new world (monetary) order…and countries are likely to hammer gold prices in order to suck up enough yellow metal to buy into a new global SDR scheme.
Meantime, the 83% federal governmentwhich is about as disgusting as you can get. I was talking with my local freight delivery guy last night and he summed it up about as well as any comments I’ve heard so far: ”These old boys took the Pacific back from Japan…and now they can’t gather at their own monument? They ain’t gonna put up with that, for damn sure…” Amen.
Meantime, there seems to be enough money to buy a $47,174 mechanical bull, reports CNS.
We can reliably report that government now owns both types, huh?
And as if that’s not enough, here comes a report that the Treasury has just “made up” $8.3 trillion in debt to replace $7.5 trillion worth being retired for a net increase of $0.77-trillion. Don’t ask me how that works in light of the supposed budget ceiling because I can’t explain it (or the Easter bunny) either.
The BIG RESET is Coming…
This is ugly, but pay attention here. The phone range about 6 AM and it a my well-connected Wall St. Source (who must remain unnamed).
“You know what’s going on here, right? Everyone with two-cents worth of actuarial brains knows America needs a huge actuarial reset and there’s only going to be one way to get there. We need to default, have a crisis, wipe out 50-80% of the market value, force money out of dead pools in bonds and get things rolling again…”
Discussions with this source are at the core of tomorrow’s Peoplenomics report, but he continued on this morning’s point…
“Meredith Whitney was right…and about the only mistake she made was that in the “heat of the sound bite moment, she didn’t correct a couple of her numbers and her critics creamed her for it….”
“But you’re saying she’ll be right?”
“The numbers may be different, but the kinds of effects she was talking about? Sure,…different timeline of course…”
“What about all your fellow wealth managers who are screaming dollar collapse and touting gold?”
“Look, everyone needs the crash and reset. The German Constitutional Court is going to come back with their ruling that the OMTs (outright monetary transactions with German EU money)) are illegal, and that’s going to bury the Euro. Everyone in the world is going to have to get into a new partially gold-backed systems of SDR’s and it’s out there in IMF working papers from 2010.
the budget impasse isn’t going to be solved, and you know why? Obama is aligned with the tea party right now…the administration knows that not only the whole country but lots of state and local governments are on the actuarial skids and are about to blow up anyway…but the Four Horsemen (Pelosi, Reid, McConnell and Boehner) are all in denial mode and don’t see the actuarial reality.
But you go down this morning to your local Wal-Mart parking lot and ask people this morning “Is America’s economy in a sustainable position?” and I bet you 80-85% of people will admit it’s not. We can’t have all these people in retirement making more than working people today…it just doesn’t make economic sense and it needs to be sorted out and it’s going to hurt…
That’s the Big Reset… and the people who think we’re going to roll right into hyperinflation are going to get killed…what can I say? Every time a bunch of Americans get on one side of an economic issue they are almost inevitably wrong…why would that change now?”
In addition, my insider was pleased with the increase in volatility in yesterday’s trading action. And even more interesting? His outlook at the S&P could blow off more than 200 points between now and Christmas.
Whether he’ll be right, remains to be seen. But with what’s ahead, his call about Don Kohn as a great Fed choice to replace Ben Bernanke is looking pretty interesting, given Kohn’s experience managing in crisis. As to timing? Let the markets drop some more, let Wall St. whip up some worry, and then Obama can name a troubleshooter. Right now, it would be a tougher sell and Obama is playing the long game here.
TARP chief is leaving and may go to the CFTC…so many things in play here.
If you think the foreplay going on with the budget is something now, better tighten the seat belt because the fun is just beginning. The next couple of months should see the end of US dollar hegemony, the rise of a new international Special Drawing Rights market basket, which will also neuter international corporatists, who will be less able to wangle the wage labor spread between rich and poor countries as the global monetary system resets.
While the end may be promising, the pain of getting there will be extreme.
“It all comes down to this,” concluded my source, “You only have two ways out of this that have ever been invented. One is the Biblical Leviticus Jubilee where debts get forgiven and the other is Sharia law where interest is outlawed outright. The latter isn’t going to happen in the West and so that leaves what? Reset while its manageable or wait till it blows up on compound interest and hope it can all work out. That’s the choice and we’re there right now.”
The report this morning quoting former president Jimmy Carter that the Middle Class of Today resembles the poor of the 1970’s argues that not only is a reset necessary, but that its effects are already being felt over large portions of this once great nation.
The Senate is trying to figure a way to raise the debt ceiling so there’s no end to the nuttiness going on as the financial noose tightens…and the UK’s Financial Time’s calls it akin to America’s Gatsby Moment over here…
More After This…
What Happened to “Affordable” in the ACA?
The report in the DC Decoder site this morning about now it’s not just technical glitches, but something much deeper is being revealed about Obamacare: MUCH higher rates for comparable coverage are reported…
Looking at Friday
Some traction is being felt on the ‘net as there’s a report that Truckers may engage in a work stoppage on Friday. Read some of the FB posts over here for the latest…
It’s a small thing, really…
What are they Teaching?
As a teachers’ protest in Brazil turns violent, we wonder about the kind of role modeling going on in that part of the world.
Meantime, Brazil is demanding an explanation from Canada about reports that the maple leafies were snooping on web traffic. Nickel on the side says they were doing it at someone’s behest on this side of the border…
Word that the “Gulf state to introduce medical testing on travellers to ‘detect’ gay people and some them from entering the country” is bound to be controversial.
Meantime, under our “Everything is a business model” view, a recent Peoplenomics report looked at LGBT market segmentation as a niche growth model, although it’s hardly a large enough segmentation to actually build an economic recovery on…
Bats and Camels?
Either one (or maybe both) could be the transmissibility vector for MERS which has now killed 136 people worldwide and 58-so far in Saudi Arabia. For now, the odds of getting the disease in the US are fairly low, provided, that is, you have given up camels (so to speak) and don’t keep bats around. Of possible note to speleological types…
And Chickens, Too…
USDA has a warning out about salmonella which has apparently
At this point in the investigation, FSIS is unable to link the illnesses to a specific product and a specific production period. Raw products from the facilities in question bear one of the establishment numbers inside a USDA mark of inspection or elsewhere on the package:
The products were mainly distributed to retail outlets in California, Oregon and Washington State.
The Kid’s Newest Ploy
We get a kick out of seeing how creative Kid Korea can be in tweaking the West. This morning he’s restarting a reactor which was shut down in 2007…
Wonder if it will work as well as some of TEPCO’s?