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XMFSinchiruna (26.59)

The Genie is Out of the Bottle



May 18, 2009 – Comments (13)

It's been quite a weekend for Ambrose Evans-Pritchard, International Business Editor for Britain's highest-circulating newspaper the Daily Telegraph. His coverage of the entire fiancial crisis has been absolutely first-rate, with a tireless supply of perspective and investigative reporting that has contributed enormously to the greater public's understanding of these unprecedented events. As a student of Anthropology among other disciplines, I always admired the groundbreaking work by his father E.E. Evans-Pritchard, who helped pioneer major theoretical reforms for modern anthropological practice. Some of his writings sit above my head as I sit here and blog for you.

Just as we are whipped up into a rally-fed frenzy of fantasy green shoots, along he came with an article last week which included a lengthy series of shocking quotations attributed to a certain private-sector participant in the TARP program. Evans-Pritchard quoted the individual as calling the program a "sham", forecasting a "catastrophic increase in the number of LBO’s (leveraged buyouts) going into default". and suggesting that "the only way out is to debase the currency, but that is going to lead to some very high inflation three years down the road". I read the story on the Telegraph website, but by the time I went to write about it, the link no longer produced the article ...  it had been pulled.

I have seen no explanation forthcoming from the Daily Telegraph for why the article was pulled from the website. Given the potential public-relations implications of such a scalding critique potentially emanating from a participant in the program, I am not entirely surprised to see the article disappear, but I am surprised at the lack of public inquiry into the matter from either the mainstream press or the broader public. I, for one, would like an explanation. One blogger who posted text of the original article that matches what I read before the piece disappeared, claims to have received a communication on behalf of the quoted individual, claiming that the article in question "fabricated, misquoted, and misstated" his position.

Disclosure: By reporting to you what I have seen on the web, and providing links, I make no claims about the material contained in those links, and leave it to Fools to conduct their own research into the matter and form their own conclusions about what may or may not have transpired. Furthermore, by reporting that quotes as summarized above were thus attributed in the original article as I read it before it ceased to appear, I make no claims whatsoever as to the veracity of said attribution. Since I have encountered no public notice of retraction nor any other such explanation for the article's failure to load, I have no verifiable reason to suspect that the article has been removed for any reason other than the possible reasons listed on the Telegraph's "Error 404" page.

Well, one might think that potentially fueling an international uproar of speculation about what might or might not have been said at the Qatar Global Investment Forum would have some business editors laying low for a couple of days... but not Ambrose Evans-Pritchard. He came out today with another article blasting the U.S. fiscal response to the present crisis, building off of a BBC report that cited the chief finance spokesman for Japan's opposition party saying that it would invest only in yen-denominated U.S. bonds rather than accepting the risk of dollar devaluation. The article also boldly claims that China "suspects that Washington is engineering a stealth default on America's debt by the trickery of quantitative easing". 

Are you intrigued? I am! Where's the press? Where is the critical thinking? Where are we on our government's list of priorities? What is the real future of the American economy and the incurably impaired U.S. dollar? I believe the answers are clear, and I believe that much was revealed in recent days to the less-than-casual observer.

This is the most important time in any of our lives to walk with our eyes open, no mater how unpleasant the resulting conclusions may be. It's much more fun to believe in green shoots, until they turn out to be lies.

Be careful, Fools!

P.S. - Have you listened to the Bloomberg radio interview with Jim Sinclair that I posted last week?




13 Comments – Post Your Own

#1) On May 18, 2009 at 9:29 PM, russiangambit (28.81) wrote:

The current government's plan for fixing the economy seems to be lying to us until we start believing that things are good, and then hoping that the economy will actually fall in step with that. It is a confidence game. And we can't allow stary bad news to come out without proper authorizations, can we? But the economy is no poker and the government is going to loose big .

Somebody earlier compared our government to the Enron's situation (the smartest guys in the room),  and it does ring true.


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#2) On May 18, 2009 at 9:38 PM, alstry (< 20) wrote:

We are not too far before every dime of GDP will be going to tax and that point there will be nothing left for goods and services.....

The question now is whether gold and silver will be confiscated?

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#3) On May 18, 2009 at 9:49 PM, angusthermopylae (37.59) wrote:


I hope you and others will keep on top of this--I will try to keep up, but I find that I have the attention span of a squirrel lately...

Seriously, though, I think that we will find more of these "inadvertant" statements in the months to come.  That's why I'm not a big believer in Area-51 conspiracy-type stuff:  Some bozo always talks when he shouldn't, says what he shouldn't, and then everyone can finally acknowledge what they knew all along...

Humanity is so fun to be around, huh?


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#4) On May 19, 2009 at 4:01 AM, kristm (99.78) wrote:

I am amazed anytime someone expresses disappointment in the American media and its failure to report on things of a serious nature. This is news to you? Serious journalism exhaled its last weak breath and passed away sometime last spring.

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#5) On May 19, 2009 at 9:18 AM, ralphmachio (< 20) wrote:

Oh, that's rich. Last spring huh? Television makes me leave the room. I have 0 tolerance for it. Has been that way since I was around 18. It astonishes me that people pay 45-55$ a month to be indoctrinated with lies. 

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#6) On May 19, 2009 at 9:19 AM, XMFSinchiruna (26.59) wrote:


That is not what is news to me. :) But that doesn't prevent me from issuing a public challenge to the media to stay on top of this important story. I'm not holding my breath, but at least I'm helping to make them look bad for not doing so. :)

Serious journalism has largely been dead a lot longer than that... but you're right... it has gotten much worse.

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#7) On May 19, 2009 at 10:00 AM, TMFDeej (97.84) wrote:

Great post, Sinch.  Fascinating stuff.  I am not familiar with Mr. Evans-Pritchard.  I'll have to add him to my reading list.

I have been tossing this whole inflation versus deflation thing around in my head endlessly lately.  The velocity of money has dropped so much that I just don't see all of the printing, easing, and spending that the government as inflationary...unless the value of the U.S. dollar collapses.

The value of the dollar is the BIG variable here.  So far it's held up extremely well.  I wonder how long it is before the markets, particilarly foreign investors, begin to choke on all of the Treasuries that we are issuing to finance this massive debt.  Any guesses?  I think that it could potentially be several years off, but I really don't know.


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#8) On May 19, 2009 at 10:35 AM, outoffocus (24.11) wrote:

I think serious journalism died around the same time Common sense died.

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#9) On May 19, 2009 at 11:10 AM, XMFSinchiruna (26.59) wrote:


I'm sorry to hear that you've missed out on Evans-Pritchard's coverage of these events over the past couple of years... within the mainstream media I really don't think anyone has put the puzzle pieces from this crisis together the way he has. Please do keep an eye out for his articles.

The USDX will soon break through support at 82, then eventually 72, and even 62. The timing for this process can not be known, since there are far too many players involved whose actions could significantly impact the timing. China, of course, is principle among those players. Evans-Pritchard's claim that Beijing sees our interventions and quantitative easing as a backhanded aproach towards some type of default on our insurmountable debt-load is both a fascinating development within the public record, but also an entirely plausible hidden strategem of the fat cats in Washington.

The value of the dollar will erode significantly, and will lead to stagflation regardless of the velocity of money by virtue of lost confidence in the currency itself and the U.S.'s ability to make good on its debt. This is a currency event first and foremost.

If velocity of money were to reverse, then watch out, because we would have drastic hyperinflation within the span of a year or two. I don't see it playing out that way... I see continued credit tightness as even the trillions committed so far fail to plug up the black hole of toxic derivatives and the leverage upon which they are built. I see a broadly deepening U.S. depression met with similar weakness in Europe and elsewhere, and I see the inception of wholsale bankruptcies eventually making everything that has transpired to date look like child's play. I see states and municipalities facing insolvency, which can only be addressed through further quantitative easing. Tragically, I see unemployment rising to astronomical levels just as the normal safety nets are exhausted. Therefore, I believe we will have many more trillions thrown at this crisis in a staged attempt to placate the masses until some form of sovereign debt renegotiation or default is announced.

I believe that this stagflationary scenario can play out in multiple ways, some leading to a slower dollar devaluation, others bordering on cataclysmic if China or other economic powers should play their cards boldly. The timing can not be known, only the direction, which is why I have been invested in precious metals since 2004.

Foreign central banks are already choking on Tresuries, and are rightfully concerned about the long-term stability of those assets. If the lead-up to the G20 summit didn't make that obvious, then I don't know what would.

Now, when rallies like the ridiculous one we're in reverse course, we get investors fleeing into Treasuries to sit on the sidelines. Imagine how it will look when Treasuries are no longer considered a safe haven... what do you suppose will happen to the value of precious metals then?

Gold's going to $2,000, and once Fools have found that gold is the only true safe haven when paper currencies are shredded by out-of-control, bank-puppet helicopters, then they can stop worrying about the timing of inflationary forces and relax with an asset that literally can't lose under these circumstances. I don't expect everyone to match my very heavy allocation in precious metals, but I would advise everyone to at least have some exposure.

Again, I don't enjoy posting warnings of this sort, and I wish with every bone in my body that I could say more positive things about the state of the dollar and the U.S. economy, but after all these years spent pouring over the evidence, this is the warning that I feel duty-bound to issue. 



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#10) On May 19, 2009 at 1:33 PM, kristm (99.78) wrote:

Well it was pretty sick before last spring, but the few places left that stuck to their "journalistic standards" gave up the ghost just as the presidential election started heating up. RIP American Journalism, 1690-2008.

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#11) On May 19, 2009 at 5:16 PM, bostoncelitcs (57.53) wrote:

Thanks for the "disclosure".....I feel a lot better now.....

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#12) On May 19, 2009 at 5:37 PM, XMFSinchiruna (26.59) wrote:


I'm not entirely sure how to take that. Great song, though, and I'm sure I share you're disappointment about game 7. :(

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#13) On May 21, 2009 at 8:28 PM, bostoncelitcs (57.53) wrote:

Take it however you want to.

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