Monday, December 28, 2009

2010 - Brace For Impact

I've received a half dozen credit card offers in the mail this week for 0% APR credit cards (teaser rate loans) - so it looks like the banks are trying to unload their dollars - yet again - to consumers in the hopes of stimulating the economy.

It's all part of the scheme of Quantitative Easing.
(Here's a good video with an explanation)

Of real concern though is where the Fed's monetary policy is leading us, and ZeroHedge has a brilliant, yet sobering, piece about it. is precisely what the Fed, the Treasury, and all bank CEOs are doing all their best to keep hidden until they are safely on their private jets heading toward warmer climes: in 2010, the total estimated net issuance across all US$ denominated fixed income classes is expected to increase by 27%, from $1.75 trillion to $2.22 trillion. The culprit: Treasury issuance to keep funding an impossible budget. And, yes, we use the term impossible in its most technical sense. As everyone who has taken First Grade math knows, there is no way that the ludicrous deficit spending the US has embarked on makes any sense at all... none. But the administration can sure pretend it does, until everything falls apart and blaming everyone else for its fiscal imprudence is no longer an option.

Out of the $2.22 trillion in expected 2010 issuance, $200 billion will be absorbed by the Fed while QE continues through March. Then the US is on its own: $2.06 trillion will have to find non-Fed originating demand. To sum up: $200 billion in 2009; $2.1 trillion in 2010. Good luck.
With all the money being pumped into the market our dollar is losing buying power ... Inflation's on the way (actually we've already seen it in shrinking packages in the supermarket). Just wait to see what will happen when we can no longer sell our debt to China or anyone else. I guess we'll all be asked to do our "patriotic duty" and buy American bonds ... backed by the full faith and credit of the US.
Quantitative Easing... is the Fed's equivalent of band-aiding a zombied and ponzied corpse, better known as the US economy. It worked for a while, but now the zombie is about to go back into critical, followed by comatose, and lastly, undead (and 401(k)-depleting) condition.

This is why it's a good idea to buy gold or silver.

“First of all the main problem the past number of years is we spent a lot of money we didn’t have to buy foreign products we can’t afford. We have run up an enormous debt to the rest of the world and have nothing to show for it. It’s analogous to an individual loses his job and instead of getting another job he buys everything on his credit card, and he shows his wife his credit card bills and says “Look honey, look how great we are doing”. - Peter Schiff