Back in 2006, with my help of friend John, realized that the US economic structure was based on financial fraud through mortgage securitization.
Bill Clinton signed into law the routing of the glass-stegall act, put into place to separate 'gambling' from bank deposits. George W routed the FBI department staffing down to a couple of people to investigate the trillion dollar mortgage industry. In the late years of George W administration the final bubble was being blown, resulting in 2008-2009 financial crash.
In August 2008 I started this blog as an outlet on my rantings to everyone I could meet on the pending economic impact. Little did I know how close it was.
In the turmoil of then, the natural outcome would have been a deflationary collapse that was stopped by a couple of drastic measures. First, the government went on a no-holds barred deficit spending campaign to soften the blow to the economy. Second, mark to market accounting in place since the Great Depression to valuate companies was suspended, as it is to this day.
Some purists would say both of these acts where not appropriate and that capitalist forces should have played out naturally. I am not one of those people. Yes, that is an option, and maybe it was the best one that should have been followed. But I can see why dramatic steps was taken to prevent a global economic collapse, as it was perceived at the time.
What I am against is all of the drastic steps WITHOUT meaningful reform. That is, 'fixing' of what was broke. We have chosen to take the worst path, appeasement without follow through on reform.
The market has hit an all time high today. Did you hear the bell? My friend John has said there is no bell that goes off warning everyone that the market has hit a multi-year high followed by a market collapse. Basically, there is no warning.
I am NOT predicting a market collapse per-say. I am predicting that we are into phase 4 of this mutli-year global economic refactoring.
Phase 1 was the incredible loose regulation and promotion of securitization of trillions of dollars providing the market collapse in 2008-2009. There are many other factors at work, such as derivatives in the 100's of trillions, but safe to say all the games in phase 1, lead to phase 2, 2008-2009 collapse.
This lead to phase 3, appeasement into 2013. I realized that appeasement was the route and not cleaning house in 2010, and changed my stance that the market may not collapse per-say, simply be dwarfed by lack of law and raw financial meddling.
We are soon to enter phase 4, appeasement failing. There is no amount of appeasement that can fix the system, without taking strong steps to fix the heart of the problems.
We have India's Rupee under duress, with India taking draconian steps to curb gold imports. Mish is calling for a possible Rupee collapse as food inflation hits 18% per year!
We have various countries in Europe, such as Italy, Spain, Greece simply upping the ante on financial gains, buying weeks, months, maybe years, but not decades as they exhaust every 'new legal' option.
We have countries like France, promoting job creation without even bothering to talk to the companies involved in so-called creation plans. And for what? a few double digit jobs? That is worth lying about?
Japan is leading the world on the demographic catastrophe that awaits us all in an economic system that at its core foundation is based on ever increasing demand.
We have China continuing to try to transform it's economy into a consumer-global based powerhouse to replace the USA. In the process, the information about the Chinese economy is safely in the unreliable fantasy zone. China has HUGE potential, but who can understand their true standings? At best, it is a hail mary hope that may come to save the world?
Back in march 2011, once I realized the world would NOT fix any core issues, but simply appease, the timeline for 'disaster' shifted from short term (2010-2012) to longer term (2013-2017).
Well, we are here, sad to say. I don't expect fireworks until 2014, but it could happen next week.
The world dances around the US dollar, and that dance is starting to show it's age. All is needed is enough people to lose faith in the dance to start the next phase of the crisis, global currency shakedown.
Best I can say is diversify, with a chunk in cash ready to move. The USD I CANNOT envision any sudden moves down in value for YEARS to come, so it is once again the safest play....until its not! :)