Must See Video

Another one of those days! Crazy busy at work and then all the drama of our economic soap opera. You cannot say that things are boring!

The Bailout to be Named Later
Last night I watched President Obama hold one of the worst press conferences I can remember a president having. Long answers that were short on any substance and several clear contradictions. In one sentence he said "The days of spending more than we make, and living beyond our means are over". He then went on to detail how the US government is the sole entity that can solve the crisis because it will borrow more than it collects in taxes to live beyond its means. Classic. The President had no details on the rescue package, as he wanted to give Tim Geithner "his day in the Sun" to explain the plan. So I waited for today.

I am still waiting.

The big ball of nothing that was announced today was both a waste of time and a dangerous sign that the headliners in charge are still lost. I am not going to cover any of the plan's details that were announced, as those items as well as 80% of the plan are still in flux. Remember that we are told something has to be done ASAP or the world will collapse, but Giethner says the plan will not be put forward "until they get it right". How does he know when the plan is "right"?

I had warned my more liberal friends that when George Bush was gone, things were not really going to change. Without a convenient target to complain about, people might have to come to terms with the fact that George Bush by himself was not responsible for the economic mess. That blame falls squarely on the FED, the Treasury, the SEC, and the US Congress. All the same players are still there. Today's total bemusing display of incompetence means that the old fool Bush may be gone, but the supporting fools are still in charge.

The markets tanked, as should have been expected. Without a clear plan to give away all the money that the banks want, they all hit the "SELL" button. While a rough day, there was no real damage done. The market players were trying to scare the FED and Treasury into quicker action, and I think they will succeed. The "BUY" buttons will be firmly depressed going into weeks end. Silly hissy fit. Great chart from Jesse's Cafe Americain sums up my position on today's action:


Must See Video
More and more details are being uncovered concerning the big scare Hank Paulson gave Congress back in September. Remember the old "tanks in the streets" line? Well it seems things were even worse than we may have known. Any system built on confidence and pure belief is by definition built on nothing at all. Almost all modern banking systems thus fit the "built on nothing at all" description.

This Motley Fool blogger has a great take on the whole thing:

Now, we have another video (actually available since late January), and one which I encourage every Fool not only to watch but to circulate as they see fit, in which Congressman Paul E. Kanjorski of Pennsylvania reveals some shocking information regarding a bank run which occured right here and indeed brought this country and the entire world economy to within three hours of complete and systemic financial collapse. In this video, Congressman Kanjorski reveals (at about the 2:15 mark) that the move to raise the move to guarantee money market funds up to $250,000 was an emergency measure to stave off a massive run on the banks that removed $550 billion from the system in a matter of just a couple of hours. Treasury then injected $105 billion to no avail, and shut the system down to prevent a panic continuation of this electronic bank run. By "their" [read Treasury's] estimation, had they not shut it down and issued the guarantee, money market withdrawls would have reached $5.5 trillion by two 'o'clock that afternoon!! He then indicates Treasury's assessment that the run not only would have destroyed the U.S. economy immediately, but would have collapsed the world economy within 24 hours.

So there you have it, Fools. Britain we know came within 3 hours of utter collapse, and now we see that the U.S. came just as close a month prior! Indeed, the entire world economy came within a day of systemic failure. It makes you wonder... how many hours do we stand from such a scenario at the moment? Further, what warnings can officials from the new administration utilize to influence Congressional votes that could possibly trump those warnings of Paulson and Bernanke on that Thursday evening back in September? These are fascinating and perilous times, and I urge all Fools to keep watching intently. Our modern financial system is gravely ill, and may never recover... we have to be asking ourselves what comes in its place if only as an exercise of due diligence.

Video Here:


It is my firm belief that an event such as the two narrowly avoided in the Fall of 2008 not only WILL occur, but MUST occur. While the Treasury may have stopped a bank run, one must think that plenty of panicked money holders have since resumed their removal of funds but at a much slower pace as to stave off another shut down. I do wonder how the 5.5 Trillion estimate would end the financial world as we know it but 3 trillion dollars in various bailouts can only make things stronger? Anyone want to take that one? Kevin perhaps?

The money you make and have saved up only exists in a notional sense. The only thing backing it up is a collective agreement that it exists. You and I do not matter, but rest assured that the deep pockets will take their money out first, convert it to something with real value (like GOLD) and then exit the collective agreement. Anyone that sees this video must know this to be true.

Have a good night.

Too Much Going On

The full moon was very bright last night. With all the snow cover it was bright enough to read by moonlight around 10pm last night. Pretty wild.

Too Much Going On
Got home a touch late and I have really been swamped trying to get caught up on my reading. Add to this that developments are coming fast and furious as I write, and I simply cannot put together anything coherent this evening. Some quick hits of some things I am looking at:

-from CNBC: 'Bad Bank' Is Dropped From Financial-Rescue Package
Headline is misleading; it seems that the "Bad Bank" idea will not extend to thrifts and insurance companies, but bad asset disposal onto the taxpayer is still in place.

-Old News for Gold Bugs
Latest article by "The Mogambo Guru". As he says, this investing thing is easy!

-I was thinking today that within the next 5 years you will bank at Bank of America, shop at Wall Mart, buy electronics at Best Buy, and get books at Barnes and Noble. All other stores will no longer exist. No choice and no competition.

-When IS Nationalization going to occur?
Jesse's Cafe Americain has some thoughts on this that include a rumor of a bank holiday coming soon.

-Reading some mainstream media and listening to some CNBC I get the feeling that even though the mess we are in has been going strong for around 6 months now, most seem of the opinion that in two quarters things will turn around. Hope is not a plan.

-I caught Obama at the town hall he held in Indiana today. I could sum up with the following line: "The only thing we have to fear is that you all are not fearful enough!" He did not sell the stimulus plan very well at all.

-What happens in California over the next 4 months will show exactly how the United States is going to end up. Call it a free preview.

-One question nobody asks is :"If 1 trillion is going to save us from the economic abyss, why not spend 2 Trillion? Why not 3 trillion? What about 10 trillion?" The answer is both revealing and scary.

-The possible dropping of some aspects of the "Bad Bank" plan should show you once and for all why trading this market with overnight positions is a sure loser. If you were long the banks thinking this plan was in, maybe the banks get clobbered tomorrow on this news. If you were short, maybe this will be seen as positive for the banks in the sense that they do not need the help. Either way, any position is subject to the whim of government intervention. Stay nimble!

-Kevin Depew's 5 Things to Know is a must read today. Number 3 bears careful reading. Remember, the government right now is using authority never before seen. Not good.

Have a good night.

You have No Idea What You are Doing, Do You? So What!

The temperature will reach 50 degrees both Saturday and Sunday. I will try to contain my excitement.

Blogroll Additions and Subtractions
Some changes to the "Must Read" blogroll to the left. I really do not stop by the site "Soot and Ashes" anymore. It has been removed. Two new every day stops have been added. The first is the truly wonderful site, "The Automatic Earth". The writers there are about as insightful on a macro level as you could possibly hope for. Highly recommended. Also added is the site that directed me to the Automatic Earth, Some Assembly Required which is also a must read every day, though tends to be a little political at times. I figure the readers here can handle it!

You have No Idea What You are Doing, Do You? So What!
Sometime you can get brutal honesty. It is rare, but it does happen. Came across this piece that was pure magic and a window into the very essence of what is wrong with the government. Read and enjoy this Briefing Room gem:

Obey on Stimulus Waste: "So What?"
How money is spent should be far from the biggest concern about the stimulus package, its chief author, House Appropriations Committee Chairman David Obey (D-Wisc.) said Friday.

"So what?" Obey asked in response to a question on NPR's "Morning Edition" about the perceived lack of direction from Congress as to how money in the stimulus should be spent. "This is an emergency. We've got to simply find a way to get this done as fast as possible and as well as possible, and that's what we're doing."

Obey said that Congress is not responsible if money is misspent, but rather, whoever spends the money poorly.

"We simply made a decision, which took about three seconds, not to have earmarks in the bill," Obey told NPR. "And with all due respect, that's the least important question facing us on putting together this package."

As Chairman of the Appropriations Committee, Obey had chief oversight in crafting the $825 billion package as passed by the House. The provisions in the bill have been criticized by Republicans and some centrist Democrats for not being as directly related to stimulating the economy as it should be.

""We have more oversight built into this package than any package in the history of man. If money is spent badly, we want to know about it so we can hold accountable the people who made that choice," the chairman said. "And guess what? Regardless of what we do, there will be some stupid decisions made."

At least this guy lays it on the line. I love the name as well, David "you subjects will" Obey.

I do not think I need to add much commentary. If you thought these massive spending plans were being put together on the fly with little to no thinking involved, you were right. If you thought our elected officials were panicked fools, you were right.

What probably galls me the most is that Mr. Obey thinks that he has zero responsibility if things go wrong. The blame will be put on somebody else, but surely not on the very folks that voted for the bill. If the money is wasted (it will be) the Congress will just say "that FED and Treasury did it, not us!" Just like the Iraq war vote. Almost 80% of the Senate and House voted "yes" then sat back and said "I never thought things would go this way". Guess what, that's why you have to THINK before you vote. Once you authorize an action, be it military or economic, you should be held accountable for your actions. It is cowardly and weak to blame others for execution of the very action you authorized.

I could go on, but I do not want to get all riled up on a Friday night. By now you know the score. Come Monday you will know a vague price tag. In the next elections you will know what to do. Let us hope plenty of others wake up from "The Matrix" and give Mr. Obey and all his like their walking papers.

Friday Night Entertainment
A little fun is called for after another wild week. Thanks to all that have been coming by. In the last economic blog rating release Economic Disconnect was finally able to claim the number 100 spot! I am very happy about that. Maybe I could crack into the top 90's in the next update. Miracles do happen.

Fishing Dreams
I am already getting the fishing urge. I even went into the basement and looked through my tackle getting an idea on what I will have to buy for the spring season, you know, to stimulate the economy and all. My favorite place to fish here in Massachusetts is "The Gray Lady" herself, Quabbin Reservoir. The reservoir is immense in size and is home to some rare animals. I have seen otters there, hummingbirds abound, and Moose are seen on the shores. There are even several breeding pairs of Bald Eagles. Here is a picture of one (very center of photo)


Here is a photo of yours truly fishing the Quabbin. Note the reflection of the clouds on the glass-like water:


Friday Night Rock Blogging
Some music for a Friday night. Music is good, cheap, and fun. What else can you say that about? (Get your minds out of the gutter!)

Loyal reader Kevin submitted a song request. It was a bit hard to track down, but I was struck by the great sound and underlying message of the tune. Consider "Gone, Gonna Rise Again" by Michael Johnathon:


I have always loved this song, even though I am not a big Rolling Stones fan. take a listen to "Paint it Black":


Who can forget the metal band Danzig? Well, probably a few people, but not me! I love this song called "Mother":


I know I have had this song on before, but I heard it on the radio today in the lab and now it is STUCK in my head! the raw emotion in the songs' vocals is really something. Here is Concrete Blonde and "Joey":


Last one for the evening, and we need a real ripper. An outstanding Ozzy song is "Over the Mountain". Cryptic lyrics ("I heard them tell me that this land of dreams was now; I told them I had ridden shooting stars and said I'd show them how"), amazing gutair work by the immortal Randy Rhoades, and a wicked tempo combine to make a real treat:


Have a good night.

Honali or Bust!

I had to resolve a total network connection loss tonight so I am a bit short on time. Luckily, as you will see in this post, my material tends to write itself!

Honali or Bust!
"Puff, the magic dragon lived by the sea
And frolicked in the autumn mist in a land called Honali"
-from the song "Puff the Magic Dragon" by Peter, Paul and Mary

Things were looking bad as the day started. Bank of America alone was down over 20% in the early going. We have seen this show before with Bear Stearns, AIG, and Lehman Brothers. The end seemed near and as a Bank of America account holder, I was interested to see just how my money would be handled.

But then things changed. A ripper of a financial stocks rally began and ran all day long turning huge losses into gains by days end. Now understand that huge percentage moves are not too hard with stocks that are single digit midgets (as coined by Todd Harrison at Minyanville), but still this was some action.

So what was the big turnaround catalyst? A "rumor" was being reported by all the major news sites that the draconian measure of "mark to market" was going to get the boot, possibly as soon as next week. You read that right. The banks may soon have full license to play "mark to what I want to" and vastly improve their balance sheets. My speculation is that during the whole "bad bank" talks it became obvious that the black hole of any asset buys was going to expose just how bad off the banks were, even after the government paid huge premiums for junk assets. That would have happened in a mark to market scenario. Hence it is make believe time!

The financial sector may be able to access that storied fantasy land "Honali" where Puff the Magic Dragon lives and waits for impressionable young bankers in need of balance sheet repair. The government is nothing if not kind I guess, though that depends mightily on just who you are.

So playing pretend would not really have an effect when all the players know the truth, right? Wrongo! As I said in the intro, my stuff writes itself and here is my masterpiece of the evening (from Reuters):

Wall Street jumps on bank rescue hope
By Rodrigo Campos Rodrigo Campos – Thu Feb 5, 2:11 pm ET
NEW YORK (Reuters) – Stocks rose on Thursday on investor hopes that the Obama administration's plan to shore up the financial system would include a measure that would help banks stem losses and revive lending.
Traders said investor sentiment was buoyed by talk that Washington would suspend an accounting requirement on the recognition of losses that has resulted in billions of write-downs for banks.
"The notion that you can suspend this mark-to-market provision, which was established after Enron, as way of halting the slide in the value of financials is at the fundamental core of putting on the brakes," said Peter Kenny, managing director at Knight Equity Markets in Jersey City, New Jersey.
"The market reaction is a barometer how well (the suspension) could impact market psychology and market value."

The leading early candidate for total moron of the year is a strong one. Peter Kenny writes my blog this evening, so I guess I am grateful.

This whole nasty "mark to market" madness was set up to keep dishonest businesses, like ENRON, from playing too many balance sheet tricks. People went to jail over Enron. There was public outrage. This time around the book making game of Jenga is deemed both good and necessary! This stuff writes itself! Mr. Kenny comes right out swinging saying that playing make believe is the only way to save the banks! Honali or bust indeed!

Not content with just that whopper, Mr. Kenny then goes on to show his total lack of fundamental understanding by asserting that marking to myth a bunch of bank assets will "halt the slide in the VALUE" of the financials. That's rich! If we hold hands, take a Michael Phelps hit of the bong, and fly away to Honali the banks will actually be solvent and have some value! Whoopee! Other than the value of whatever money the taxpayers pour into the banks, they are all ZEROES.

By now any sane player will know you cannot be in many stocks because of crazy intervention wizardry that can manifest at any moment. When the best policy action is to play make believe, you know you have a problem. I really have nothing to add to this thing, I think it stands on it's own merits.

Have a good night. Dream of Unicorns!

Just Say What You Mean

Home a bit late and had to shovel the driveway once again. Just a few quick hits for the evening. Winter rules! NOT!

Caps on Executive Pay, Kinda Sorta
When I saw the headline that under new rules firms getting taxpayer money through the TARP would have to have limits set on executive pay I was pretty excited. I should not get excited when money, the Banks and Congress get together as there is no meat to these stupid restrictions at all. NONE. I am not going to waste your time and mine recounting the retarded structure of the pay caps, there are many places you can read the hilarity.

The caps are set under vague notions that make no sense and have no verifiable qualifications. As a shareholder in a company that gets TARP funds, you get to vote on a NON-BINDING resolution regarding top exec pay! Whoopee! What a deal!

As if to placate the scared masses on Wall Street, check this passage out from the Yahoo article chronicling the baloney rules:

The limit would apply to top-paid executives at the most distressed financial institutions that are negotiating bailout agreements with the federal government. It also would apply to other banks that receive aid, but they could get around the limits by publicizing to shareholders plans to exceed the salary cap.
The limits would not apply retroactively to any bank that received money from the first half of the $700 bailout allocated by Congress. For example, the restriction would not apply to such firms as American International Group Inc., Bank of America Corp., and Citigroup Inc., that already have received such help.
But Obama touted the broad symbolism of his action.

Sorry Mr. Obama, just because you think some crappy symbolic gesture gets the job done does not make it so. There are now too many sharp bloggers that will fully expose the crazy pay the bankers are still going to collect. Try again.

Just Say What You Mean
I get a bit frustrated reading all kinds of quotes where people say something that just makes no sense, or say something that is pure bullsh#t. I think there should be a moratorium on veiled words and falsehoods. Consider the following takes on various quotes over the past few months or so, that I will attribute to nobody specific as many people say the same thing.

"We need home prices to recover."
Just what does this mean? Do we need home prices to recover their "values" at the height of the housing bubble? If so, say so. Say something like "We need home prices to recover to the values when people where buying a condo in Miami that had not even been built and selling it 4 hours later for a 30% gain." Or say something like "We need housing to permanently eat up 60-70% of an average family's income again." Just be honest.

"For the economy to recover, we need the banks to start lending again"
OK. The banks are lending now. I got a great loan on my new Infiniti G35X just last July. With my 829 credit score, a trade in that was worth something, and a down payment of 20% they were falling all over themselves to give me a loan. If you have a credit score over 720 and 10% down you too can get a home loan right now at all time low rates. So what does this really mean? Why not say something like "the banks need to lend more money than they have to people that can never pay it back so we can have another debt illusion economic boom." Try that one out.

"The Government needs to stop asset price declines"
This line is favored by the worst of the Keynesian clowns, the banks, and the corrupt fools at PIMCO. Why not phrase it this way "The taxpayer has to buy all the assets that we all were so wrong about to prevent us from our own ruin." Or even "Inflated prices that rob you of economic freedom is really in your best interest, I have graphs that bear this out." That will work.

"We have to act immediately"
I love this one. just like the used car salesman or the plasma TV pusher they make you feel like you need to make the decision ASAP. This pressuring technique is common to any enterprise where any clear thought on the event will make you see that it is not a good idea. Why not just say "We did all the thinking, so just trust us." Or "We must do this immediately or you may figure out a more sensible solution that does not put the money where we need it to go." That is much closer to the heart of it.

There are many others. I encourage all readers to put in your selection with translations and I will post a compilation in the next blog or so. Be original and most of all sarcastic! It is just one more free service we offer.

Days like today when all the fake talk and real monster money sums are at play one wants to make one of those "Snuggie" robes I see on TV out of gold or silver and wrap yourself in it and relax.

Have a good night.

Massive Inflation is Assumed by Government

Some more light snow all day here in Massachusetts. It just keeps coming! I cannot complain if reader Watchtower has to endure days without end of ice and no electricity. Keep warm my friend!

Reader Input
Loyal reader Lisa was kind enough to supply an address for her own blog titled Capitalist Preservation. The site looks very sharp and professional. Lisa has daily posts that track breaking news and trade able information. Who knew we had a rogue trader in our midst?

The Mother Load (or Lode?)
All the gold ever mined would just fill up two Olympic sized swimming pools. In man's quest for the yellow metal, he has to look in new places to find more supply. In Japan the search extended to the end result of "daily operations" if you will, and found that sewerage can be your friend in times of need:

Reuters
Japan sewage yields more gold than top mines
TOKYO (Reuters) – Resource-poor Japan just discovered a new source of mineral wealth -- sewage.
A sewage treatment facility in central Japan has recorded a higher gold yield from sludge than can be found at some of the world's best mines.
An official in Nagano prefecture, northwest of Tokyo, said the high percentage of gold found at the Suwa facility was probably due to the large number of precision equipment manufacturers in the vicinity that use the yellow metal.
The facility recently recorded finding 1,890 grams of gold per tonne of ash from incinerated sludge.
That is a far higher gold content than Japan's Hishikari Mine, one of the world's top gold mines, owned by Sumitomo Metal Mining, which contains 20-40 grams of the precious metal per tonne of ore.
The prefecture is so far due to receive 5 million yen (39,075 pounds) for the gold, minus expenses.

As they say, if life gives you lemons, make lemonade. Here, if life gives you sludge deposits, make gold ingots! Sewerage may be the new mother load!

An Excellent Use for TARP 2.0
I am opposed to any new federal spending to support failed banks. I may be convinced otherwise if one little, itty, bitty provision was attached to the TARP 2.0 legislation. Here are my conditions:

-All 100 US Senators are to be audited by the IRS in 2009
-200 House of Representatives members are to be audited by the IRS in 2009

It seems only fitting that as the US Congress is putting the TAXPAYER on the hook for any and all banking losses, we should first find out if in fact the members of Congress are even taxpayers to begin with. There is something vile in the way that our government seems to have no qualms about saddling the population with mountains of bad debt while they themselves do not even pay their share. Maybe that is why they do not care, they are not paying anyway! Perhaps we could set up a "Good Senator, Bad Senator" scheme where the tax dodgers have their IRS bill payed for by the taxpayers as well. Why not indeed.

Massive Inflation is Assumed by Government
There were at least 3 stories out today that chronicle all the problems the new Administration is having with the "Bad Bank" idea. You can read a CNBC piece here. Everything boils down to the simple fact that the Banks refuse to sell the worst of their mortgage backed and other credit assets unless they receive almost full value for them. While the government would LOVE to do just that, they are afraid that the political fallout from such a handout may be large. Additionally, the vast sums needed to fund such handouts are actually scaring high level officials! Now that will keep me awake at night. A number that scares even those in Washington? That has to be in the 5-6 Trillion dollar range if true.

The total disconnect between the banks and reality got me to thinking about how in the world the US government thinks they can get out of this without crushing losses. The only thing I can come up with is that the advisers to the decision makers are pretty sure that a hefty dose of inflation is on the way. Let me explain.

There are perhaps no two economic terms that have more perceived meaning than "Inflation" and "Deflation". You can read about money supply views, Austrian views, and asset price views which will all define these two terms in slightly different ways. For me the easiest way to picture Deflation is thus:

-I will not buy that 200,000 home TODAY because TOMORROW the home will cost 100,000 and I can buy two then with my money that is WORTH MORE.

The opposite view sums up my take on Inflation:

-I must buy that 200,000 home TODAY because TOMORROW the home will cost 400,000 and my money will be WORTH LESS.

Now I do not want to get into deep debate about what exactly deflation/inflation may or not mean by various measures. This is how I think about those two phenomena.

With that in mind, the government seems to think that if they buy bad assets at say 75 cents on the dollar (versus the market price of 25 cents on the dollar) that one of two things must occur to break even:
1.)The market price is wrong
2.)The future price of the assets will at some point make them whole due to massive inflation

Assumption number 1 is out. The market is correct on the pricing, and the pricing is only going to get worse going forward. There will be no magical resurrection of credit instrument values. Not any time in the near to medium future (10-15 years).

So that leaves us with assumption number 2. How would this work? Consider the purchase of Toxic asset A:
-Bank valued at 1 Million dollars
-Market valued at 300,000 dollars
-Government buy price is 800,000 dollars

So right now the government is sitting on a loss of 500,000 for Toxic asset A. That's not very good. But now consider that the government has an inside man at the monetary controls. Someone with access to a printing press and a warmed up helicopter (This could be anyone, so please do not assume I am referring to Ben Bernanke!). US dollars are created and sent out in droves. If all goes well, inflation returns and through the magic of dollars that are worth less, Toxic asset A has a new value in 5-10 years of 900,000 dollars! The government actually made money on the deal! What's not to like?

If successful, the kind of rampant inflation needed to get the toxic asset prices up will be dangerously high. While it works out in a strictly numerical sense, the diminished dollar will have serious consequences.

And it may be wrong to assume it will even work. Credit is being destroyed faster than even the FED can print it up. Credit appetite has also cratered. Wages are in no way, shape or form going to rise anytime soon. It is hard to see how the government is going to create the kind of inflation it needs.

I am sure the boys at the FED and the Treasury have a bunch of fancy charts and graphs that sketch out how this will occur, just like in their textbooks back at school. I am sure they will try. They might even succeed. Sadly there seems to be only two end results here, neither can be thought well of. On the one hand if the government is successful in creating inflation to the degree that covers their stake in toxic assets, you are going to be poorer. A whole bunch poorer. Like really bad off. If they fail, the USA may be looking at a default moment. Again, you are really not going to like that one bit. Not at all. Nope.

The "Bad Bank" plan is due out in the next couple of weeks, as is the TARP 2.0. Also the new stimulus plan is up on deck. The FED today extended their term lending facilities out to October, and will later extend them forever. If this all seems like jamming the system with cash consider the way I have outlined the options available to policy makers. The frenetic money creation has to run hot and heavy. They are already way behind.

Have a good night.

What Protections Do We Have From the Government?

Very busy weekend hacking apart the ice sheet that was my driveway. 4 hours of pick-axe work later, and again the driveway is all hardtop. Now my back is mad at me.

Reader Input
As I have said many times, the real payoff of writing this blog is the readers that stop by again and again. The feedback and discussion in the comments section is my first click when I get on the computer. Loyal reader Kevin often posts well thought out macro comments that always get me thinking. In response to Friday's post Kevin dropped a line in the comments section that had plenty of depth and insight. reproduced here with permission:

The dollar is strong because gold is not a medium exchange for most purposes, and every frigging county is trying to do the same damn thing at the same time which is devalue their currency and run massive fiscal stimulus programs and running up budget deficit in the west, or in the east so they can export to us or to try and create inflation and inflate away the debt. The Yen is about the only exception and that has thrown Japan straight into a depression as the carry trades unwind due to deleveraging. Gold is also benefiting as this happens due to people in other countries buying it because their currencies are collapsing at a faster rate then the dollar which is used to settle international trade or at least what's left of it.
The real danger is a major policy blunder by these asshats in DC if they blow up the bond market it's over lights out end of story and the likely hood of that happening can not be understated. Argentina death dance.
One of the item on Obama's list was to back the unions while this would have been ok in boom time it is not good when the economy is in the toilet headed into a deflationary spiral. Labor is a commodity just like anything else and if there is a sh#t pot full of supply and zero demand prices or in this case wages must fall.
The problem with BARF is that the debt is still there, it doesn't matter if the banks hold it or the taxpayer until this stuff is flushed there will be no recovery and things will only get worse.
I starting to think the only requirement that there must be to be in Congress is to have flunked basic math.
Kevin

Well thought out analysis that puts what you read in the mainstream media to shame.

Loyal reader Lisa writes her own blog, and I encourage her to leave a URL that we can use to check it out. Same goes for any reader that writes. I am always looking for sites to read, and will happily post your URL's for the readers here to take a look. Debate and the trading of ideas is the best way to learn and grow.

What Protections Do We Have From the Government?
Iceland collapses. The UK was near collapse. Russia is looking weak in the currency department. China is seeing unrest as workers are losing jobs. Japan looks to be as bad as any time during her "Lost 20 years and counting". The US had major structural issues well covered here and other places.

There are some worrying items that keep popping up that have made me think about just what kind of protections we as private citizens may or may not have against the government. Consider these two items:

-California Suspends State Tax Rebates
Faced with a busted budget and no free cash flow, California has stated they will issue I.O.U's instead of state tax refunds this spring. What if the Federal government went the same way? What would you do? What could you do?

-401k Seizures
I understand that this item had a ton of circulation among the more right wing type of publications. Let me say for the record I have never heard or read credible evidence that the US Congress have even considered this move. Be that as it may, the country of Argentina went right ahead and took private wealth in 401k's and made it the government's money to hand out, invest, and lose as they please. There are plenty of folks at the DAVOS economic summit floating similar ideas. What if your retirement money was taken in by the US government? What could you do?

The two examples show clearly that when money is involved the average joe is powerless. The FED continues to expand their powers under amorphous language. Terms like "the FED can expand its role in the interest of economic stability" are very troublesome. Who is to say "NO" to outright grabs of private property and money?

Now you may think I am wearing a tin foil hat right now. But what is so different between the government using trillions of taxpayer money to bailout the banks (when such action is running about 70% opposed by the public) and taking over 401k's for cash flow help? Why not suspend all tax rebates in the interest of "economic stability"? Why not limit how much cash you can withdraw from your own account to keep money at the banks? Is any of this out in left field?

I am at a loss to think of a clear course of action. Obviously elections allow for removal of government members, but when do people really vote the same bums out? It seems we will have to assume things will not go too far. You know what happens when you assume though!

Tidbits
The web site "The Big Picture" has a quote of the day posting. Today's was pretty good so i am including it here:

"There are 10^11 stars in the galaxy. That used to be a huge number. But it's only a hundred billion. It's less than the national deficit! We used to call them astronomical numbers. Now we should call them economical numbers". —Richard Feynman (1918 - 1988)

Scary!

I came across a picture of what 1 Billion dollars looks like all in physical form. No confirmation that this bundle was located in Ben Bernanke's basement waiting to be loaded into helicopters:


Have a good night.