JUST FOR THE RECORD: I found this on another site. Good Read IMO
Manipulating hope
By John Browne
Sunday, January 8, 2012
Read more: Manipulating hope - Pittsburgh Tribune-Review http://www.pittsburghlive.com/x/pitt...#ixzz1j3V9tAjN
Investors are fleeing to safety. Believing the United States is financially separate from Europe, euros are being sold for U.S. dollars.
Armed with the Fed's assurances that interest rates will be manipulated downward for the foreseeable future, U.S. Treasury yields continue falling.
With the price of precious metals trending down in response to talk of recession, U.S. Treasuries are perceived increasingly as a safe haven.
Politicians issue bullish statements about Europe -- even giving investors the impression that the problem has been contained and will not spread to the United States.
While world stocks fall, U.S. equities gyrate sideways, but mostly to the downside. Desperate to generate yield, investors appear persuaded still to accept increased risk. In doing so, they increasingly expose their savings, but based largely on the hope that things will turn out well.
Is this realistic or is this hope based upon an illusion created by manipulation?
Recession occurs when cash is scarce. Classically, savers should shed borrowings, accept only highly liquid, high-quality investments and accumulate cash. Ideally, cash will hold its value as asset prices plunge.
But when currency is being debased by central banks, savers should turn to precious metals to store value.
The Fed advertises openly its manipulation of the Treasury market by "Operation Twist." By eroding investors' return on cash and investments traditionally considered "safe," the Fed is forcing people to spend and take on more risk. Indeed, facing low yields, some investors have reached out to high-dividend stocks and so-called junk bonds.
The truth, however, is that the European problem is far from over. Indeed, it can be argued that the political decision to fund profligate governments through banks -- and to demand austerity and tax increases in return -- looks set to turn a recession into a full-blown depression.
Accounting for about 24 percent of the global economy, a European Union depression likely would cause severe worldwide recession. Even the United States economy, teetering on recession, likely will be drawn in.
In addition, estimates are that the U.S. banking system is entwined with EU banks for about $10 trillion. Therefore, the economic and financial future of the United States is linked closely to Europe's. That is why the Fed has been so supportive covertly of EU banks.
Furthermore, a EU breakup would kill the euro, the world's second currency. In reality, therefore, the world faces not only economic depression but also a currency crisis. Initially, a flood into U.S. dollars will drive dollar prices of commodities further downward. However, U.S. debt levels make the dollar itself increasingly suspect, threatening the very survival of paper money.
The government makes little effort to hide its manipulation of the unemployment figures to about half the true percentage. However, the Fed appears coy about distortions in the inflation figure. Reported low inflation justifies low interest rates and helps the government avoid trillions of extra dollars in borrowing and Social Security costs.
With worldwide depression and a currency crisis threatening, savers should accumulate cash, like precious metals that store value.
The great illusion that politicians are in control is misleading citizens and undermining the price of precious metals. Hidden from the truth, investors are acting on hope, not reality.
Government manipulation of hope for the U.S. economy engenders false hope, which, in turn, will make matters worse.
Read more: Manipulating hope - Pittsburgh Tribune-Review http://www.pittsburghlive.com/x/pitt...#ixzz1j3UxFeZA
Manipulating hope
By John Browne
Sunday, January 8, 2012
Read more: Manipulating hope - Pittsburgh Tribune-Review http://www.pittsburghlive.com/x/pitt...#ixzz1j3V9tAjN
Investors are fleeing to safety. Believing the United States is financially separate from Europe, euros are being sold for U.S. dollars.
Armed with the Fed's assurances that interest rates will be manipulated downward for the foreseeable future, U.S. Treasury yields continue falling.
With the price of precious metals trending down in response to talk of recession, U.S. Treasuries are perceived increasingly as a safe haven.
Politicians issue bullish statements about Europe -- even giving investors the impression that the problem has been contained and will not spread to the United States.
While world stocks fall, U.S. equities gyrate sideways, but mostly to the downside. Desperate to generate yield, investors appear persuaded still to accept increased risk. In doing so, they increasingly expose their savings, but based largely on the hope that things will turn out well.
Is this realistic or is this hope based upon an illusion created by manipulation?
Recession occurs when cash is scarce. Classically, savers should shed borrowings, accept only highly liquid, high-quality investments and accumulate cash. Ideally, cash will hold its value as asset prices plunge.
But when currency is being debased by central banks, savers should turn to precious metals to store value.
The Fed advertises openly its manipulation of the Treasury market by "Operation Twist." By eroding investors' return on cash and investments traditionally considered "safe," the Fed is forcing people to spend and take on more risk. Indeed, facing low yields, some investors have reached out to high-dividend stocks and so-called junk bonds.
The truth, however, is that the European problem is far from over. Indeed, it can be argued that the political decision to fund profligate governments through banks -- and to demand austerity and tax increases in return -- looks set to turn a recession into a full-blown depression.
Accounting for about 24 percent of the global economy, a European Union depression likely would cause severe worldwide recession. Even the United States economy, teetering on recession, likely will be drawn in.
In addition, estimates are that the U.S. banking system is entwined with EU banks for about $10 trillion. Therefore, the economic and financial future of the United States is linked closely to Europe's. That is why the Fed has been so supportive covertly of EU banks.
Furthermore, a EU breakup would kill the euro, the world's second currency. In reality, therefore, the world faces not only economic depression but also a currency crisis. Initially, a flood into U.S. dollars will drive dollar prices of commodities further downward. However, U.S. debt levels make the dollar itself increasingly suspect, threatening the very survival of paper money.
The government makes little effort to hide its manipulation of the unemployment figures to about half the true percentage. However, the Fed appears coy about distortions in the inflation figure. Reported low inflation justifies low interest rates and helps the government avoid trillions of extra dollars in borrowing and Social Security costs.
With worldwide depression and a currency crisis threatening, savers should accumulate cash, like precious metals that store value.
The great illusion that politicians are in control is misleading citizens and undermining the price of precious metals. Hidden from the truth, investors are acting on hope, not reality.
Government manipulation of hope for the U.S. economy engenders false hope, which, in turn, will make matters worse.
Read more: Manipulating hope - Pittsburgh Tribune-Review http://www.pittsburghlive.com/x/pitt...#ixzz1j3UxFeZA
