Bailouts Will Push US into Depression
FYI - CNBC is reporting:
Bailouts Will Push US into Depression: Manager
"The end result of the global economic slowdown may be the U.S. announcing national bankruptcy as the government cannot afford the bailouts that it promised and the market will not bail out the government, Martin Hennecke, senior manager of private clients at Tyche, told CNBC on Thursday.
"We expect a depression in the United States. We expect a depression, very possibly, also in Europe," Hennecke said on "Worldwide Exchange." The estimated $300 billion cost of the Fannie/Freddie bailout will probably be considered as a loss that the government will have to take, therefore passing it on to taxpayers, he explained.
"We already have $3 trillion of debt, as far as the U.S. government is concerned. These debt figures across the U.S. economy are rising very sharply." When the government can no longer pass the United States' "immense debt" on to taxpayers, it will turn to the holders of U.S. dollars, leading to the eventual downfall of the currency, Hennecke said.
"Definitely, it (the dollar) is not a safe place to be invested in, as real inflation is closer to 10 or 11 percent than the actual inflation numbers given by the U.S. government," Hennecke said on "Worldwide Exchange". Investors should avoid exposure to debt and stay away from leveraging on any investment or asset, including property, Hennecke advised, adding that "banks have been too highly leveraged in the past, private households, everybody."
Hennecke's stock allocations are mainly Asian-based, especially in the Chinese market as the country's government has a large amount of cash and the macroeconomics are fundamentally strong.He also suggested investing in gold, despite the recent fall in price."
I think the stage is set for a Depression. Those familiar with the first US Depression will recognize the correlation between the corrupt FEDs' credit expansion in the 1920s and the extreme credit expansion by "easy al" Greenspan.
The differences are:
1. The amount of leverage currently employed by the US financial institutions. In the first Depression, leverage was typically 10 to 1. Bear Sterns leverage was 32 to one, Fannie Mae and Freddie Mac, I understand are leveraged 80 to 1.
2. Globalization. The world has become hypercompetitive. China, India, Vietnam and Russia are now under a capitalistic model. They want the factories production that was in the US.
3. The US manufacturing is not competitive, due to minimum wages, liability coverage, OSHA, EPA etc….
4. The US lack political leadership to lead the nation. The President will inherit an amazing mess.
5. The US is involved in a military Occupation, where the local population is being bribed to maintain peace. What happens if the US dollar collapses? What will be paid to maintain the peace?
6. Most Americans have very little real wealth. Paper, backed up with digits, in banks that hold more paper. Banks use to hold gold and silver, in order
7. Heavy reliance on foreign oil and gas for transportation, shipping and power. Oil and gas in exchange for what. Dollars? Debt? NO THANKS….
8. The US has evolved into the world’s largest debtor nation. So many Americans are on some sort of government pay out (40% is the number I read somewhere). What will these people do when/if the dollar loses it form of an exchange. Whether the US falls into a Depression or not, you should be able to address the issues above.I will write more later, I am out of time today.
UDN – Is the ultra short dollar.
I think you should own some gold and hold it. The US govenment can and has confiscated personel gold held in banks. Hold onto your job or develope job skills that can be useful in a slow down.
I do not think most Americans have a clue what is taking place. This will be a bigger problem.