Sunday, July 24, 2011

From the Privateer

I have read the Privateer in the past.   Good stuff.   No spin zone.  Kudos to Zerohedge for pointing this one out.


The Last Remission:

According to the official figures put out by the US government, the economic "recovery" in the US celebrated its second anniversary on June 30, 2011. The "fuel" burned in this "recovery" is immense. Mr Obama's presidency has ushered in the era of $US 1 TRILLION plus annual deficits riding on top of 0.00 percent controlling interest rates from the Fed. It has also ushered in the era in which almost nothing is traded on the paper markets which is not - explicitly or implicitly - guaranteed by the government.
The fuel to keep the global financial system functioning does not stop at the borders of the US. The "Dodd-Frank Wall Street Reform and Consumer Protection Act" has just produced the first ever "audit" of the US central bank.

It reveals that in the period between December 2007 and July 2010, the Fed parcelled out $US 16.1 TRILLION in emergency loans to financial entities all over the world. Almost half of this - a total of $US 7.75 TRILLION - was loaned to four US banks. They were Citigroup, Morgan Stanley, Merrill Lynch and the Bank of America.

In July 2010 (the cut off date for this "audit"), total US stock market capitalisation was $US 15 TRILLION.

The Fed provided about half of that (HT comment---in case not obvious, the ramp from 666 to 1332 - a double-- was 80% performed by jacking up futures in the off hours, using Fed funds handed to "bankers" who were really brokers that became banks for the sole purpose of allowing the Fed to hand money to them. ) 

This inflationary explosion is unprecedented in any era. It represents the biggest ever effort to rescue a debt-based system from the ravages caused by its own debt issuing excesses. It has, at best, provided a "remission" for global paper markets. The cost has been devastating for REAL economies everywhere.

A cancer patient who goes under the knife gets the malignant disease physically removed. If all traces of the malignancy are removed, the patient will recover. If all goes well, the recovery will be permanent with no "remissions". A life- threatening malignancy is NOT fought or cured by doing everything possible to increase its power and potency. Yet that is what financial authorities in the US and everywhere else have been doing in regard to the life blood of their economies. As this stark fact becomes ever clearer, Washington DC and Wall Street stand helpless before the fact that they can only cure the economy at the cost of killing the financial system which is feeding on it. It's that simple.
©2011 - The Privateer market letter

HT: It will be very painful to remove the vampire squid from our faces and jugulars.

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