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FOMC Fomenters of Outrageous Money Collapse

By Roger Wiegand      Printer Friendly Version
Dec 11 2007 3:33PM

www.webeatthestreet.com

“Multiple government band aids on the broken bones economy in the United States merely papers over a catastrophe. These boys in Washington, D.C and New York City with their hands on the reins are about to get thrown from the horse.” - Traderrog

Global Investment Banks Lose Big and So Do Taxpayers

“The problem with America’s housing collapse along with that of other nations has been skidding valuations not interest rates. Consumers are tapped out and can no longer pay their bills. When mortgages fail from lack of payment, house valuations sink collectively. The enormity and ferocity of this crash invariably sucks in politicians and congress to abate the cries for help from constituents. Backlash from authorities has the potential to increase this disaster exponentially. By engaging in a loan modification process they are abridging basic contract law by minimizing legal liability and shielding mortgage servicing companies from lawsuits. The end buyers of real estate derivatives were largely underwritten by foreign entities holding roughly 30% of the entire mess. They will not only lose interest income promised to them by contract but are in danger of losing a portion or, their entire invested principal.

Our government, by stepping in to protect the issuers of badly rated paper will drive away further foreign investment in a variety of USA markets. Tom Donlan in Barron’s this past weekend had the proper solution. Let them all foreclose and fail; with properties quickly falling into hands of banks. Then home prices will be rapidly reduced to proper sales levels and markets will heal themselves. Meddling produces more problems of greater magnitude and that is where this problem is headed. Greenspan started it by giving bankers, mortgage companies and consumers a free lunch. Now Congress plans to give another free lunch to derivative issuers “for the greater good of our economy.” There is no free lunch and when it is eventually taken away, the end game is massive dissension, liquidation or, degeneration into violence.”-Traderrog

The Panic of 1907 Gave Strength to Big Banker’s Ideas

To Control the Money Supply of the United States

“There is no kind of dishonesty into which otherwise good people more easily and frequently fall than that of defrauding the  government.” - Benjamin Franklin 1706 -1790

“Markets in New York were nearly permanently destroyed in 1907 by a major panic. J.P. Morgan took control and forced fellow bankers along with use of his personal funds to prop-up and liquefy markets. While origination of the Federal Reserve in 1913 seemed a noble remedial idea at that time, it has promulgated nearly complete destruction of the U.S. Dollar inflating away 98% of it.”- Traderrog

We are conservative in thinking and politics but must face the fact global corporations of the largest magnitude have seized control of Congress and most government operations by fiat. American voters are avoiding the polls in droves as they view all political parties to be the same; instigating the status quo and not only not solving pressing problems but creating more of them. Congress is the lapdog of big business. They will either behave or be replaced. It matters not who we elect as our next President of the United States. Who ever that person is, they will be told what to do, how to do it, and when to do it. This is not the government our forefathers and founders of this country envisioned.

Socially and Psychologically Big Business and Government

Have Become One with Corporations Determining the Outcome

In her book, The Silent Takeover, Noreena Hertz tells us “Propelled by government policies of privatization, deregulation, and trade liberalization, and the technological developments of the past 20 years, a power shift has taken place. The hundred largest multinational corporations now control 20% of the global foreign assets, and 51 of the 100 biggest economies in the world are now corporations (29 out of the top 100; if measured in value added terms). The sales of Ford and General Motors are greater than the GDP of the whole of sub-Saharan Africa; the assets of IBM, BP, and General Electric outstrip the economic capabilities of small nations; Wal-Mart, the super market retailer, has higher revenues than most Central and European states; and Exxon is comparable in economic size to the economies of Chile and Pakistan.”

“With this kind of revenue and power it seems logical, control of the international monetary system must be managed by this gang using big government, stock and currency markets, nation’s treasuries and armies.” - Traderrog

Several years ago someone said, the top twenty CEO’s running the largest insurance companies, if gathered in unison for one purpose could bring the stock and currency markets to their knees. The cash and capitalization of these companies is nothing short of astounding. Now in our current era, a newer and perhaps larger gang, the hedge fund boys and derivative bankers funded with billions in U.S. Treasury cash and Yen-carry-trade funds, have taken the game to a new level; one impossible to even dream of just 20 years ago.

Having violated basic principles of finance in creation of exponential growing debt; (derivatives) the extent of these liabilities has grown beyond our capability to measure it. Nobody really knows or understands how large and deep this problem has become. If the problem cannot be identified it cannot be resolved.

Currently, the answer to this dilemma has been to acknowledge a tiny portion of the damages and sweep the other 90% under the rug slipping monster liability wreckage into “off balance sheet” locations; relegated to debt purgatory. This fraudulent solution is regularly practiced with issuance of new treasury bonds and notes. The un-sold ones are not designated “un-sold” but rather are shelved, marked “sold” and held for further sale. Monetization or, the production of this junk legal tender by designated command establishes false worth and further expands our now unreported M-3, the measurement of new money.

Obviously, the true worth of our dollar is painfully exposed as individuals, companies, and governments run away from it seeking something else and shunning deteriorating dollars.

U.S. Dollar Index Signals Collapse from 2002 Peak to Falling Present.

The Dollar is attempting a mini-rally after being oversold. It has hard resistance blocking it at 80 with milder resistance nearby at 76.50 and 76.91. The primary trend is down with this currency having much further to fall.

Stronger Currencies

“Today’s stronger currencies are the Swiss Franc, Canadian Dollar, Euro and Australian Dollar. The Aussie and the Loonie are mining and material connected within their nation states. Precious metals and base metal mining along with other materials provide the underpinning for support and growth along with energy products. The Euro is an amalgamation of currencies; a jackpot containing most of the money in Europe. Since the Euro is regularly utilized by 850,000,000 people domestically as well as by foreign traders and investors shunning dollars, the Euro has gone from being a poor sister to a powerhouse. The true test for the Euro will be after economies on the continent go soft into the forthcoming recession. The Swiss Franc is a safety-security currency having never defaulted in 256 years. While some rules and regulations have changed in recent years, some saying not for the better, the Swiss Franc remains the ‘go-to” currency in times of trouble and strife in money markets. After its first huge rally from 55 to nearly 90, which we recommended trading, the Swiss should find a new support next month and prepare for the next rally move.” - Traderrog

Euro Rallied in Massive Run Beginning in 2002 When It’s Inverse Trade, the United States Dollar Fell Off the Monetary Cliff.

Technically, the Euro has more room on the momentum chart (bottom box) with hard overhead resistance at 150. Analysts from Europe say if the Euro breaks through 150, that’s the line in the sand and central bankers must strongly respond. For now, the old high from 1992 has been broken and the Euro stays in a buying trend.

What Happens At the FOMC Today?

“As we write this essay on Tuesday morning of 12-11-07 at 730:AM we would forecast a 50 basis point cut with a corresponding reduction of 50 basis points at the Federal Home Loan Bank’s Discount Window. This would show concern and responsibility. Should they cut rate 25 basis instead, the stock markets might show obvious disappointment by trading flat or down. In our view, they are losing control and are out of control. A fast run to a -2.5% rate reduction is needed. But, by spooning it out in dribbles, it’s too late. We say the recession began last April, 2007. Probably, it might be officially acknowledged, very reluctantly, by the second quarter of 2008. By 2009, this country and most of the world face something infinitely worse.

Federal Reserve Fails Again

“Well we were half right. We were wrong on the 50/50 rate cuts but correct on the markets direction as they cut 25/25 instead. It is now 15 minutes after the news was announced and the Dow Jones Industrial Average is 161 points lower and falling like a stone. Oil was $2.00 higher and still climbing while currencies were mostly unchanged. Gold and silver were selling a little along with the Dow. However, we missed the gold and silver rally early Monday as we had it right expecting to go long but it ran away before our recommendations could be communicated. What happens next? We think the lack of realism by the FOMC will add further selling to the market this week and then it should level off for the pre-holidays. Gold and silver were in a C corrective wave lower today, anyway. For our precious metals, the teeth are gone from an earlier out of cycle rally so we should sell down to perhaps $750-$775 gold and a potential low of $13.85 for silver. We are not expecting to install any new positions for this month but rather will be doing our homework for the metals rallies that should kick-off after the first week of January, 2008. - Traderrog

Roger Wiegand
Editor Trader Tracks Newsletter
& The Rog Blog at webeatthestreet.com

 

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Roger Wiegand is Editor of Trader Tracks Newsletter for gold, silver and energy traders. Roger provides recommendations for short and longer term traditional futures and commodities trading with specifics for individual trades.  See webeatthestreet.com for more information.

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