The sky is certainly not falling, but my predictions are different. I think that the rules will change. We will not have free market economy anymore, and perhaps even do away with dollar and swap it for something else in attempt to remove hyper inflated currency. Stocks are likewise... paper inflated by speculation that everything will be ok. With 50 trillion debt everything can not be ok.

Once people begin to retire they will see that their funds were simply stolen. The worst kind of theft there is that is still going on. There's no way to resolve Social Security right now without raising taxes or Privatizing and selling off US assets.

The system is fundomentaly broken. It was broken from the beginning. The PROBLEM right now is that almost all of the Businesses are depended on short term borrowing to get the economy flowing. Debt is a norm, but with debt comes interest on the debt... and interest money does not exist. It has to be borrowed.

Thus someone has to constantly borrow to pay the interest, and that's why these bailouts are needed. If banks stop lending out extra cash, people can not pay the interest and the system halts.

Mark my words, the rules will change... after the panic and martial law that is (the troops are already deployed domestically).

The US Dollar is skyrocketing against all major currencies, that is one of the reasons why oil is dropping so much..

For example not too long ago the Australian $ was almost equal to the US $, now it is close to $1.50... watch www.xe.com for changes..

The major reason why oil is dropping is the perceived demand. The reason we are in this mess is the idea that the economy will constantly grow. For any sane person it's obviously impossible. There are not enough resources to maintain the current growth rate, and the debt amounts just hit the fan.

So, oil market is similar to the house market. It hiked because there seemed to be high speculated future demand, as world economies were growing. Now that this speculated growth was erased, the real oil and housing prices will surface, and these are substantially lower.

The reason that dollar has strengthened is common sense. People still believe that it's worth something, and when their local economies contract, they seek the foreign currency as a safe haven. The demand for currency rises, and thus currency is valued more.

NOW. The big surprise will come when the actual inflation results will take place. As you may know, the fed pumped in enormous amounts of extra cash to rescue the economy.... around 3 trillion this year alone.




The graph above shows the increase of aggregate dollar supply over years. Issuing new dollars is like issuing split stocks. ... the only difference is that the people who currently hold dollars don't get the additional amount to cover their losses.

The Fed stopped publishing M3 in 2005, and the reason is that they knew they would have to pump in ENORMOUS amount of money into the system. The graph above states that supply was 11 and some trillion (how odd, because it's the amount of government debt outstanding ... HINT HINT...).

So, they've just injected extra 3 trillion to add to the above graph. Did the economy grow by 30% to compensate for the new money injection???? NO! Did someone say 30% inflation? No!!!! Nobody did, and nobody will, because disclosing this info is a financial suicide for any nation. The only reason that dollar stays afloat is foreigners still believe it will hold as the Middle East still trading oil in dollars. Another reason is that all of that extra money supply is locked away in securities that are waiting to be paid. THE REASON for this crisis is precisely that... these securities are insolvent. Somebody has to either suffer substantial losses and declare bankruptcies, or borrow more money to cover for the insolvency... thus prolonging the agony. And that's what the Government and Fed are doing right now.

Now we have Brazil and Bolivia dropping dollar. In South America people would not be caught dead holding dollars. Once the Asia will follow the same trend, you will see the real effects of inflation.

That's why you will see analysts forecast gold to double in price within next 6 months (if gold doubles, then you can bet that basic needs costs will too). That's why you see the silent bank runs by the investors who transfer their money to Asia... where manufacturing sector still exists.

I think the phenomenon of Christmas shopping can best describe US economy. People buy enormous amounts of presents now, and pay later. That's what we call a trade deficit.

Now imagine if Christmas shopping was every day. Imagine how many new jobs would it create while it lasted.

Now, see what happens after the Christmas shopping takes place. It's a big sale and there are less products ordered by retailers. The factories don't make as much... and the Christmas production halts. The economy contracts, and people are out of jobs because there's no need for trucks to truck as much products to the Wall Marts.

And the worst thing... people are broke, but there's no more extra credit to take out to cover the interest payments on debt.

Believe me, the above is a very high probability right now. And what amazes me is that people are oblivious about what's going on because of their lack of understanding.



The real economies are only grow as much as real production grows. I think it's about time to learn that debt-based production is not real.

And when I say that rules will be rewritten... I mean... rewritten :)

http://www.bloomberg.com/apps/news?pid=20601087&sid=aP5mpMUORBWM

The stock market during the past year was up in the 14,000s. Today it dipped into the 7,000s. That is a 50% drop during the past year. They say that usually when the market has a 40% differential ... it starts to change course. Of course these are different times. So we will see.