THE MARKETS ARE DELEVERAGING...AND THAT ESSENTIALLY MEANS GOING FROM PAPER ASSETS TO CASH...
BUT CASH IS A "PAPER ASSET" TOO... CASH IS THE INTERMEDIATE PHASE OF DELEVERAGING.
BASICALLY, AS THE WORLD SELLS OVER-VALUED STOCKS...IT BUYS PAPER MONEY...
TO GET THE BELOVED "PAPER ASSET INFLATION" BACK ....CENTRAL BANKS AND THE FED ARE FLOODING THE WORLD WITH NEW PAPER MONEY...A/K/A "LIQUIDITY."
BUT THEY SEEM TO BE PUSHING ON A STRING AT THIS POINT...
AFTER ALL, IF PAPER ASSETS WERE GROSSLY OVERVALUED...WHY WOULD INVESTORS WANT TO GO BACK TO PAPER ASSETS NOW...?
WORSE YET...
THOSE OVERVALUED PAPER ASSETS WERE "USED" AS COLLATERAL FOR MASSIVE DEBT AND BORROWING BY THE PUBLIC...SOME OF WHICH WAS VERY SUB-PRIME AT THE END OF THE BUBBLE DAZE.
IT IS THIS FALSE COLLATERAL ... AGAINST VERY REAL DEBT THAT IS CAUSING THE PROBLEM.
THE DEBTS ARE STILL WITH US...!!
BUT THE UNDERLYING VALUE OF THE PAPER ASSET "BUBBLE" COLLATERAL IS GONE...!!
SO WHAT TO DO... ?
IF YOU PRINT MONEY...THE DEBT SHOULD EVENTUALLY BE "EASIER" TO REPAY...BUT THIS IS CALLED INFLATION... OR EVEN HYPER-INFLATION IN ITS TOXIC FORM...
WHAT THE FED SEEMS TO WANT IS TO REFLATE THE PAPER ASSETS BEFORE THE INFLATION STARTS UP.... IN THE FORM OF A WEAKER DOLLAR...
BUT THE DOLLAR IS JOINED AT THE HIP WITH COMMODITIES EVEN NOW!
AS THE DOLLAR STRENGTHENS ON THIS "LIQUIDATION DEMAND" FOR CASH...COMMODITIES HAVE FALLEN...OIL AND GOLD ARE PLUNGING...
BUT NOW THE WORLD IS NOW AWASH IN CASH...!!
WHERE WILL THAT CASH GO NEXT...THAT IS THE REAL QUESTION?
WILL IT GO BACK INTO PAPER ASSETS AS THE FED HOPES...AND START A NEW BUBBLE?
OR WILL IT GO INTO COMMODITIES ...AS WOULD BE THE CASE IN A HYPER-INFLATION...
WILL THERE BE TIME TO "SOP UP" THE EXCESSES BEFORE INFLATION KICKS IN...?
MY HUNCH IS THAT THE EXCESS CASH FROM:
1. THE LIQUIDATION FRENZY, AND
2. THE CENTRAL BANKS PRINTING PRESS....WILL GO TO COMMODITIES AND OTHER HARD ASSETS...
AT THE END OF A PAPER BUBBLE PEOPLE WILL BE RELUCTANT TO GO "BACK TO PAPER" SO SOON...
WE ALREADY SEE GOLD AND OIL RISING PERIODICALLY INTERDAY... EVEN AS THE 4:45 CASH LIQUIDATIONS CONTINUE...
RIGHT NOW...$1000 GOLD AND $100 OIL WOULD BE A DISASTER FOR THE WORLD ECONOMY AND FOR THE CENTRAL BANKS...
IT WOULD ESSENTIALLY STOP THE GLOBAL ECONOMY IN IT'S TRACKS...
BUT THAT IS EXACTLY WHERE THE FED IS PUSHING THE ECONOMY WITH IT'S MASSIVE PRINTING OF MONEY...
ANY UP TICK IN GOLD OR OIL...PERHAPS MORPHING INTO A MOMO PLAY... WOULD SIGNAL THE ULTIMATE CENTRAL BANK CATCH-22...
THE NEED TO RISE RATES INSIDE OF A RECESSION...!
THUS CAUSING THE EXACT 1932 SITUATION THAT THEY WANT TO AVOID...
THERE IS A BIZARRE NOTION IN THE MEDIA THAN 1932 WAS "JUST A MISTAKE" BY THE FED AND THE WORLD CENTRAL BANKS... THEY WERE STUPID IN EFFECT!
THIS ASSUMES THAT WE "KNOW MORE" NOW ...THAN THEY DID THEN... THIS IS TOTALLY FALSE...
EVERYTHING WE "KNOW" TODAY WAS KNOWN IN 1932...
IN 1932, THEY DID WOULD THEY HAD TO DO...AND THE DEPRESSION WORSENED... MY HUNCH IS THAT WE ARE IN THE SAME POSITION TODAY...
EVENTUALLY, THE FED WILL "CAUSE A DEPRESSION"...SIMPLY BY TRYING TO AVOID ONE!
THAT IS THE GREAT PARADOX OF THE DISMAL SCIENCE...
THERE NEVER IS A "FREE LUNCH"...
NOT THEN, AND NOT NOW.
