See this related chart from our links page: Chart - total borrowings through the roof
The sheople love to be led, even if they are led by a ravening pack of wolves that will systematically devour them over time. This pack of wolves, wearing poor, imitation sheep suits, love to feed the sheople their favorite food, which consists of the honey-dripping lies which are used to fatten them up for the slaughter. Chief among those lies, is a 1.9% GDP, which in reality is substantially negative when adjusted for bogus accounting practices, for a hyperinflationary stimulus package, and for real, as opposed to official, inflation, a 5.7% rate of unemployment, the highest in four years, which, in reality, is close to triple that rate and a non-farm job loss of 51,000, which is about one third of the true losses, due to hedonics and the fraudulent birth-death model. This is the Goldilocks matrix, where the sheople are placed in their little sheople pods and fattened with Illuminist lies so their money can be harvested from them later as they continue to take doltish financial actions based on a host of false assumptions provided by their wolfish leaders.
As these unbelievable economic lies are disseminated, the fleecing of the sheople continues unabated as the latest bailout package for Wall Street bankers and financial institutions gets pushed through Congress for the chief wolf's signature. Paulson's bazooka is now aimed at the sheople, to keep them from trampling down the wolf pack, thus providing the necessary cover for a continuance of the ongoing, blatant fraud being used to keep the real estate fleecing of taxpayers in full bloom. Moral hazard is now the market mantra. Anything that does not drip of moral hazard is unacceptable. The sheople will be fleeced, and the sooner the better. There is little chance the sheople will wake up until the wolves have them by the throat, and then it will be too late to do anything, which is what the wolves are banking on. By reading the IF, you are able to leave the herd, open up the Goldilocks matrix pod, and flee to the safety of gold and silver related assets. As you may recall from folklore, a silver bullet is needed to kill a werewolf. We wonder if this tale was not created by some ancient shaman who had visions of our future. Gold bullets will now take down werewolves also, but those bullets are substantially more expensive.
We are stunned and amazed as we read the financial statements of banks. It is like reading fairytales akin to Alice in Wonderland, where apparently anything but reality is possible. Hundreds of billions of dollars in unrealized, off-balance sheet, off-shored toxic waste losses continue to be hugely understated. That will soon change as the National Australia Bank takes a 90% haircut on its toxic waste. Wall Street will now have to mark to market, and the ravening wolves will be howling next week. We will see well over a trillion in losses eventually realized from the ongoing real estate sham, and perhaps even double that, which we will get to pay for as Paulson's bazooka blows us into hyperinflationary oblivion. Will these trillions in losses be made up by raising taxes? No, because raising taxes will do precious little more than keep tax revenues from dropping precipitously, as losses to income generated by unemployment and massive capital losses in stock, bond and derivative markets are unendingly amassed. Consumer spending will drop off a cliff as credit cards are exhausted and as real wages are destroyed by an inflation rate that totally eclipses any growth in wages. This will put most municipalities under, or at best they will teeter on bankruptcy, as they watch sales taxes deteriorate rapidly and as real estate tax revenues follow suit due to rampant foreclosures and increased abandonment of properties by disgusted, upside down borrowers, whose "jingle mail" will continue unabated. Municipalities will also be devastated by burgeoning budgetary expenses as inflation runs up even basic costs such as fuel and raw materials for infrastructure projects. Only the printing press will cover these massive losses, as trillions worth of new treasuries are created and immediately monetized to keep the hyperinflationary Ponzi scheme going. The Fed's general collateral will soon be exhausted by its exchanges for toxic waste from fraudsters, and the three quarters of a trillion budget deficit for 2009, which foreign nations will soon stop funding as the dollar continues to deteriorate, will both leave our government with no choice but the hyperinflationary printing of money at mach speed just to keep the economy from collapsing.
The trillions in real estate losses that now exist with Fannie and Freddie, or that will be heaped on them by the refinancing of toxic waste or by the origination of new fraudulent purchase money mortgages that will be made as the Fed winks and looks the other way despite its way-too-late tightening of credit standards, will look like a fart in a hurricane compared to the losses that will be suffered when the gargantuan, quadrillion- dollar, smoldering caldera of credit default and interest rates swaps erupts into a destructive conflagration, a holocaust of financial devastation that will dwarf anything we have seen thus far.
Even only a one percent loss on the notional value of these assets will produce ten trillion in losses, an amount equal to our current national debt. A ten percent loss would unleash a one hundred trillion dollar tsunami of losses that would be equal to our entire budget deficit when future expenditures and entitlements are factored in. As the old BTO song goes: "You ain't seen nothin' yet, da, da, ba-ba-ba baby, you just ain't seen nothin' yet!!!" The financial black hole that will be created by this mountain of derivatives will destroy everything in its path, except gold and silver which will pass through the event horizon and enter inter-dimensional space untouched by the economy-killing gravitational forces of this collapsed financial death-star. Massive, innumerable bank and corporate failures, coupled by double digit interest rates that will be imposed on the market by investors with or without the Fed's help, will assure the creation of this massive black hole that will suck in and crush everything but gold, silver and their related shares. The entire Milky Way might get sucked in as the in-spiraling and ring lock-down of two colliding massive black holes leaves blackboard theory and becomes reality.
This week was a typical puff-the-fluff extravaganza as the PPT pumped up the stock markets, fitting them with shock absorbers during the first half of the week to buffer the horrendous news that would arrive in the latter half of the week. So much for free markets. Let's hear it for Hitler, Mussolini and their corporatist, fascist dreams, which they used to power the holocaust, which will now be repeated in our time as the "useless eaters" are eliminated.
Gold futures concluded their rollover this week, mainly to the December contract, and will now consolidate during the summer vacation doldrums before exploding to new highs commencing in mid-to-late August. This bottom has produced some real bargains. Look at Agnico-Eagle below 55. This stock was over 90 a few months ago. It doesn't get any better than this. It's time to LOAD UP!!!
There is one thing certain about America’s bloated budget deficit and that is, that it will lead to higher real interest rates. Rates have been on the rise over the past few months and now with a record budget deficit of $482 billion upward pressure on rates will continue. If you add in the money looted by Social Security and Medicare surpluses the figure is really closer to $750 billion. The previous high in budget deficits was set in 2004 at $413 billion. Investors have to perceive government debt as riskier than it is currently and that means the government will have to pay more to borrow. Higher costs will ripple throughout the economy, raising borrowing costs, which will affect business and add to inflation. We have projected the US ten-year Treasury note currently trading to yield 4.10% to rise to 4.50% by the end of the year. If we are correct consumers can expect to pay more to borrow money. Another factor is when will foreign lenders finally get spooked and cut back on dollar denominated investments, such as US Treasuries? Will they continue to buy $2.5 billion a day worth of dollar denominated investments to cover America’s daily current account deficit? Instead of buying US Treasuries will they sell them?
The US is in a vicious never ending cycle. Interest on the public debt was $377.3 billion in the first nine months of this budget year, the fourth highest spending category. Another aspect of ever growing government borrowing is that it crowds out and makes it more difficult for business to obtain the financing they need, which cuts into expansion and the ability to make other capital investments. The effect is to smother the economy. In this third fiscal quarter the Treasury will borrow $171 billion, which was only exceeded by the $244 billion borrowed in the January-March quarter.
Government says the economy grew ½% in the second calendar quarter, when in fact it experienced a 2-1/2% drop. Now the Bush administration tells us expansion will be 1.6% this year, down from 2.7% growth they forecast in February. How can you be so wrong? They even expect 2.2% growth next year.
The last time the economy was in surplus was in 2001. We are headed for difficult times and the worse they get the bigger the government will be.