It Is Failing: ALL OF IT

[SlowDownFast]

From: http://market-ticker.org/archives/1066-It-Is-Failing-ALL-OF-IT.html

I have tried to warn people since the summer of 2007 that you cannot "print" your way out of a credit over-expansion, nor can you deny the ultimate contraction in the economy and assets.

Bernanke and other policymakers, including both the Bush and Obama Administrations, have tried to deny reality.

You can't.

The Bond Market has had it with the games, and despite a "good" auction today signaled its disgust with the lies, the unending deficits and both bonds and stocks sold off at the same time:



I know I keep pointing out this chart, and what it means, but you can't ignore it. It is, in fact, everything.

This chart is not signaling economic recovery when on the same day the TNX jumps by 5% the market declines by 100 DOW points.

Guys, this is the start of the bond market dislocation that I have written about for the last two years. It may stop or it may accelerate, but this much is certain - even if it stops here the dream of a 4% mortgage that Bernanke has hawked as the "key" to housing stabilization is not going to happen.

When we got down into the mid 4s I told people close to me to either lock or refinance and do it now. Some did, some were holding out for that 4% number.

How's that look now?

Let me show you what happened on eRATE's real-time mortgage rate quoter this afternoon:



This was precipitated by a near-collapse in MBS paper about the same time the /ZN (10 year Treasury futures) took a huge dump.

You saw that right - the 30/fixed is now being quoted at 6.5%, up nearly 30% in one day.

I'm sure this will "settle down" a bit, but that sort of dislocation is what happens when you transfer the risk of insolvency to the Federal Balance Sheet and start playing games at The Federal Reserve.

By the way, this makes the payment for a $200,000 note at 5% worth only $170,000 at 6.5%.

Bluntly: Bernanke's screwing around just cost you 15% of the value of your house IN ONE DAY.

When the Treasury Market dislocates risk premiums go to the moon and EVERY sort of duration credit gets more expensive all at once.

The market calls all bets, Bernanke went all-in with 2-7 off suit, the flop came up A-A-K and the bond market is grinning.

Anyone care to bet what the bond market has for hole cards?

This will translate into corporate funding costs and when it does you're going to see a staggering impact on Corporate America, triggering another monstrous wave of bankruptcies.

THE GOVERNMENT MUST STOP THE STUPIDITY NOW; WE ARE HEADED FOR A NEAR-EXACT REPEAT OF THE 1930s WHEN FUNDING ESSENTIALLY DISAPPEARS.

BERNANKE'S TAMPERING HAS DONE NOTHING BUT MAKE THE PROBLEM WORSE!

Disclosure: Getting short everything and soon will be shorter than a mosquito if the government keeps this crap up.

[underpants]

1. Farmer's don't deplete their resources like this

Jefferson had it right
Hamilton sucked :evilgrin:

[IrateCitizen]

2. Antebellum southern farmers depleted their resources much worse than this

Part of the reason that the South insisted upon the expansion of slavery to the territories was to accommodate planters -- specifically, cotton planters -- moving further and further west.

Why did they need to keep moving further west? Because their agricultural practices basically depleted the soil within a generation or two.

Of course, this can be contrasted with the agricultural practices of the Amish and Mennonites in the North, where diversification -- not staple crop agriculture -- was the goal. In that instance, farming practices proved much more sustainable. However, these groups were troubled by their own expansionist tendencies resulting from population growth (similar to the southern yeomanry).

Furthermore, can you honestly look at modern industrialized agricultural practices and claim that those farmers aren't depleting their resources? My only point is that this situation is far from as simple as you portray, and as much as I take issue with many of Hamilton's ideological stances, Jefferson can hardly be held up as a paragon of virtue in light of disagreement with Hamilton.

[Adsos Letter]

23. Totally OT, but...

Edmund Ruffin, of Civil War infamy, is less well known for his attempts to improve soil depletion in the antebellum South.

Other than that, he held execrable beliefs...

http://en.wikipedia.org/wiki/Edmund_Ruffin

[nichomachus]

4. We are eating our seed corn n/t

[glitch]

5. Hugely. nt

[SlowDownFast]

3. China warns Federal Reserve over 'printing money'

China warns Federal Reserve over 'printing money'

China has warned a top member of the US Federal Reserve that it is increasingly disturbed by the Fed's direct purchase of US Treasury bonds.

By Ambrose Evans-Pritchard
Last Updated: 1:52PM BST 27 May 2009

Richard Fisher, president of the Dallas Federal Reserve Bank, said: "Senior officials of the Chinese government grilled me about whether or not we are going to monetise the actions of our legislature."

"I must have been asked about that a hundred times in China. I was asked at every single meeting about our purchases of Treasuries. That seemed to be the principal preoccupation of those that were invested with their surpluses mostly in the United States," he told the Wall Street Journal.

His recent trip to the Far East appears to have been a stark reminder that Asia's "Confucian" culture of right action does not look kindly on the insouciant policy of printing money by Anglo-Saxons.

Mr Fisher, the Fed's leading hawk, was a fierce opponent of the original decision to buy Treasury debt, fearing that it would lead to a blurring of the line between fiscal and monetary policy – and could all too easily degenerate into Argentine-style financing of uncontrolled spending.

more:
http://www.telegraph.co.uk/finance/financetopics/financialcrisis/5379285/China-warns-Federal-Reserve-over-printing-money.html

[mbperrin]

18. If I held as many USD as the Chinese, I'd worry about them being worth

anything, too.

Actually, their best solution in the face of uncertainty is to buy dollar-denominated hard assets right here in the US - factories, hotels, commercial, farmland, anything at all that is tangible and located here, the home of the currency. Gets you out of the dollar and into something you can hold in your hand regardless of what happens next.

[Wednesdays]

6. K&R

:kick:

[spotbird]

7. But what can an individual investor do about it?

You're right, but it's worse knowing how bad things are going to get because there is no way to protect oneself

[Joanne98]

8. Declare a year of Jubilee!

[SlowDownFast]

9. You'll see WW3 (or 4, depending on your POV) before that happens.

Think about it.

It won't happen.

Not without major war(s) first.

Just being realistic.

Buckle up.

[Joanne98]

10. I'll keep my fingers crossed anyway!

:bounce:

Wait me up when the war starts!

[SlowDownFast]

12. You mean you're still sleeping?

You'll miss your daily rations at your local gov't soup kitchen if you don't wake up soon.

Better hurry, there's about to be millions in line in front of you - hopefully there will still be food.

On your way there, be sure to avoid those parts of town where the roving gangs and armed militias are.

You get the picture.

Oh, yeah, Obama and all that...

Never mind.

[CoffeeCat]

11. Festivus for the rest of us!

Oh boy, I can't WAIT for the airing of grievances!

[westerebus]

13. May Day 2010. Works for me.

:hi:

[HamdenRice]

24. Yeah! Let's stiff 800 million Asian savers, including a few hundred million peasant farmers!!!

That'll teach em to save and lend to us!!!

[westerebus]

14. Short.

I'm so short, I need a ladder to get to a mosquito's belly.

[pa28]

15. Wish I could rec this twice.

We took a fork in the road and there's no going back now. Just because the last two years have been painful perhaps Americans think there is a natural limit to the losses.

Certainly, watching the equity in your house evaporate is painful or watching the value of your stock portfolio disappear. Too bad for us nobody up there is setting a limit to the pain (fate is a sadist people).

No, there won't be any public announcement in advance that the dollar is dead but when the fed is buying TIPS with newly created money you know it's not going to end well. Individuals need to be responsible for protecting their own assets and coming out on the other side in one piece because waiting, hoping and trusting at this point will probably put you first in line to be sheared.

[CoffeeCat]

19. Don't you agree that TIPS are a good investment vehicle...

...for the individual investor?

I heard Bob Brinker talking about these last weekend, and I thought that TIPS sounded like
a nice place to park some money for a while.

Any thoughts?

[pa28]

20. Yes I do think it's good vehicle.

I believe they are totally safe but the fed buying them with newly created dollars just gave me an irony attack there for a minute.

[lib2DaBone]

16. $12.8 Trillion we GAVE to the Bankster/Gangsters......And got nothing in return

.. that works out to $100,000 for every man, woman and child in he United States.

We spent $12.8 Trillion.... and everyone knows, our government is doing nothing to bring our jobs back from China and Mexico. The jobs our elected leaders sent away! They are not even trying.

I look for the NAU (North American Union) and the Amero to be in place within the next 8 months.

The American people are groaning... crying...suffering under taxes and regulation. The politicians are out of control. This is not a left/right issue.

Basically.. we are SCREWED!

The answer? Close the Federal Reserve and return the power over money to the American people.

[Old Hob]

17. I think I know how Germans felt about the Treaty of Versailles now.

[ixion]

21. kick

[ozymandius]

22. too late to recommend

But there's plenty of time left to kick this thread. I am posting a link to this thread at the Stock Market Watch thread for 6/4/09. Great work!

Words cannot adequately express the disgust I have with those wise old men who make our problems worse and get patted on the back by their beltway peers for their efforts.