What’s The Next Big Thing For 2009?

Fri, 11/21/2008 - 13:26 - rich2010

Prediction is very difficult, especially about the future - Niels Bohr

The Grin Reaper has spent the last week puzzling about the future and remains puzzled about what is coming next. The Federal Reserve created $1 Trillion USD from 1913 until Sept 18, 2008 since then they have created another 1 Trillion in two months and are on track to create another 1 Trillion before the end of 2008. All of this debt has to be sold into the bond market in 2009 which frankly I doubt can happen.

About five years back I began scrutinizing US T-bill holdings. Three years ago to my great surprise it appeared that both China and Japan had stopped accumulating US debt. Out of nowhere came a new category of buyers referred to as ’Carribean Banks’. My understanding is that this is a nice euphemism for FED-owned hedge funds who serve as a shill buyer to keep up the appearance of demand for US debt. This practice represents monetarization of US debt. Simply put, the money gets printed in the absence of a real live bond buyer.

In the years since Richard Nixon closed the FED’s gold window in 1971 the US government has convinced foreigners to accept more bonds to roll over the debt, and more bonds in ’payment’ of the interest owed. The question is what happens when the foreigners want to be paid in something other than more US debt. This tipping point should usher in the Great Bond Market Collapse of 2009. Most writers worth reading identify this as a signal of the coming hyperinflation.

Meanwhile everywhere assets appear to be deflating, house, automobiles, commodities, gold, silver. Meanwhile the US Treasury 30 year bond rose to 127.19 and the 10 year finished at 120.71. The USD closed above 88 and the spot price for crude oil fell over 10% settling at $48.63/bbl.

Yesterday the Dow hit a six year low, closing below 8000 at 7997: Citigroup Inc shares fall as much as 25.5 percent to $4.77; Bank of America Corp shares fell a 10.6 percent to $11.68. JPMorgan Chase & Co share fell 18.5 percent to $23.21; the S&P financials index .GSPF falls as much as 8.5 percent; and Goldman Sachs Group Inc shares fall as much as 11.1 percent to $49.00. Today the DOW dropped another 4 percent to 7552. So much for the vaunted effect of buying bankster stock shares with TARP (Troubled Asset Relief Program) funds promoted by Benny and Hanky.

Citibank will probably be the first ’too big to fail’ bank to fail given the increasing cost of the credit default swaps on it’s debt. This failure will come with a twist. The majority of Citibank’s deposits are contained overseas and thus not covered under the FDIC’s revised insured limit of $250,000 USD. This will probably come as a surprise to Citibank’s depositors, who overnight will morph into Citibank’s creditors.

How far the stock market will fall is anyone’s guess, the next support on the charts is roughly around today’s close. So we may expect an engineered Xmas rally by the Plunge Protection Team. But I’m on the lookout for the coming day when both the stock and bond markets head down together. That’s when we know that the Great Bond Collapse of 2009 will be underway. After that I suspect that the 2009 bond collapse will eventually transmogrify into a global fiat currency collapse, given that the only thing backing the world’s currencies is hot air issuing from the collective mouths of the world’s central bankers. From every indication they are going to need to blow a lot more smoke up bondholders skirts to give them a warm feeling about the pile of fiat paper.

The most positive effect for gold and silver investors is that the PPT is providing us with historical bargains in preparation for the biggest event in the history of fiat money...it’s own demise.

Happy New Year.

Grinz!

Comments

Sun, 11/30/2008 - 11:48 - Ray

Great post! It should be on the front of every newspaper but it won’t be. I am getting ready to sell my temporary long position to take advantage of this Santa Claus rally, but then I am going short for what I see as the first collapse in January 2009.

I don’t think any one has a clue what we are in for. Including the new Citi Bank owners.....the American taxpayer!

If the Fiat Currency goes pear shaped

Thu, 11/27/2008 - 16:49 - Just dropping by

Grinzy, If what you are saying is true, where do you think the value of Gold will be conservatively if the bond market collapses? It would appear that gold is presently at the highest price it has ever been - any advice?

Sun, 11/30/2008 - 13:48 - Just dropping by

Your question is what led me to lead off the article with the quote from Niels Bohr.

I expect gold to challenge this year’s high, and then take it out to $1650.

At that point we will have to determine whether the FEDsury (or is that Treasural?) does any to modify the derivative structure. If not look for continued momentum above 2000 in 2009.

Timing is impossible in this Failout driven environment. But with real interest rates below zero and the creation of 2 trillion dollars in the last quarter to the year, expect hyperinflation with a 2010 target of 3000, matching the Dow.

Grin and Reap it!

Wed, 11/26/2008 - 21:22 - Penny K

I came from a family that was particularly industrious and creative in handling the daily challenges of the Great Depression; even after Grandpa lost his farm, he shared 5 acres with a friend in North Portland and grew vegetables to sell and to feed the family. Grandma was a whiz with a sewing machine and could lay a tile floor and make her own noodles.

In 1950, when I was six, I dreamed among other things, that we were in a very bad Depression in 2009, later dreaming it was called the Greater Depression, a thought with no comfort in it. I knew my numbers and letters, but asked my mother how old everyone would be in 2009, and I realized of all the relatives who took after Grandma and Grandpa, only one would be likely to be alive, and she would be 95--not going to happen. I decided I would have to be that one for my time and learn the kind of things a person might need to help families survive; much as I was told to do in my first guidance dream at age 3: ’if I would learn the things that people might need if they could no longer get what they needed and no longer knew how to do those things for themselves, the family which came from me would survive’. I have lived and learned accordingly. Here it is, right around the corner: the thought that it is almost 2009 resonates daily and I find myself asking: how much bread does a person need daily, how much protein, sources of vitamin A that can be put in food to fend off illness, how long does it take to grow a tomato? How would one make a baby formula that was reasonably healthy and digestible.As you can see, I do not expect the social network to hold.

I know these answers, but what about the poor souls who don’t.

And still people are trying to figure out how to hold onto their money; I can’t blame them, but if the bottom cannot hold, what do you know that is fundamental?

Mon, 11/24/2008 - 18:32 - ehswan

What!? You write that the treasury has been buying up it’s own debt offerings since 2005? This, if true, is a fiscal disaster. How can you be the only one I’ve read who has noticed this! With that question in mind, given that I have obsessively read economy stuff for months and not a word about it, I am compelled to be skeptical.

Mon, 11/24/2008 - 19:40 - Grin Reaper

Ehswan.

Here is the summary. What first got me interested was that as the months progressed, the past data got ’adjusted’ over time.

http://www.ustreas.gov/tic/mfh.txt

Of course this is the US treasury, so who knows what the real truth is?

Peace,

Grin Reaper

Sat, 11/22/2008 - 17:42 - Old Ari

I thought that quote was from Yogi Berra!

Sat, 11/22/2008 - 09:19 - darkcloud

subject: generational inexperience and memory loss? (a.k.a. history repeats itself)

question: what is an exclusive common denominator to america’s last crisis (stock market crash, depression, world war II) and

america’s current crisis (markets crashing, recession/depression [tbd], world war III [tbd])?

answer: in the years preceding these crises something rare occurred on an extended-long-term basis (14 years: 1917-1931 and 12 years: 1995-2006, respectively). it was this:

america’s legislative watchdog and protector - congress (both the house and senate) - was majority (controlled by)...

...the republican party. (note: and it never occurred - but for much shorter terms of 2 to 4 years - at any time in between the 2 crises. hence - the subject title i have chosen.)

They can choose order over chaos

Fri, 11/21/2008 - 14:21 - Mike Cane

Everything getting wiped out is going to happen anyway.

They can choose to let it happen in a bloody and chaotic manner or they can all get together and proceed with an orderly erasure of all three levels of debt that will keep nations and societies still intact and ready to start fresh: http://mikecane2008.wordpress.com/2008/11/20/chronicles-of-depression-20...

It will probably take much pain for them to realize the way out.