Tectonic Monetary Shift

"The most pressing macro-observation I’d like to make – an observation that’s critical for investors to understand (though most don’t or won’t) – is that the tectonic monetary shift now underway is truly global in nature. And it’s not going to be over until a new and markedly different monetary regime has been implemented."
Casey Research

Not The "V" or the "W", But The "Y"

"The best we can hope for is to delay the inevitable, and/or to make a very severe recession or depression as quick and painless as possible. Recent actions by political leadership and monetary authorities in the US and the UK have delayed the most severe part of the recession. But the cost has been high, and the eventual downturn may be worse than if they had taken different actions or simply done nothing. My expectation is that the next economic downturn will come quickly starting about mid-year, and those who fail to prepare will be blindsided, and suffer a very large loss of wealth. The time to make preparations is when confidence is high, and the cost of preparations is low, because fear has receeded. After a strong nine months rally in global stocks (which by the way, I forecast back in March as the market was turning up), there is now widespread denial of problems, and huge complacency. Preparations can be made now, and hedges put in place, at a low and bearable cost. The basic problem that I see is two-fold: Too much debt, and widespread malinvestments. There is no longer a reasonable balance between the funds needed to service the debts and the cash flows generated by investments. The severity of the problem is masked, but only temporarily, by ultra-low interest rates. Even with the low rates, debts are continuing to default, and the number of troubled loans is increasing. When the inevitable rise in rates comes without a big rebound in earnings and cash flow, debt problems will multiply, and the financial sector will seize up with another severe credit crisis."
Michael Hampton, AKA Dr.Bubb - February 10, 2010

The entire article:
http://financialsense.com/fsu/editorials/hampton/2010/0210.html

The Seven Consequences

Martin Weiss at Weiss Research Inc. provides seven consequences of the rapidly accelerating debt and Federal Reserve's loose monetary policy:

"Consequence #1 is a recovery in the U.S. economy. When the government creates that much monetary and fiscal stimulus, it naturally has some impact, of course. That's why a recovery is now under way and why it is likely to continue for a few more quarters.
Consequence #2 is the rally in the U.S. stock market. Again, when so much liquidity is pumped into the economy, it's only natural that some of it would flow into equities.
Consequence #3 is a recovery in emerging markets. Here, unlike the U.S. and other Western economies, not only are the economies benefiting from government stimulus, but they are also benefiting from strong domestic fundamental growth factors.
Consequence #4 is the decline of the U.S. dollar. The greenback is falling against the euro and virtually every major currency on the planet, and it will probably continue to do so. The U.S. Dollar Index, which measures the dollar against a basket of six major currencies, is now nearing its lowest level in history. Once that level breaks, the pace of the dollar's decline could accelerate sharply.
Consequence #5 is the decline in the value of paper money as a whole, and the parallel rise in gold. Friday, gold pierced the $1,100 per-ounce level. Next, despite any intermediate setbacks, it could rise to $1,300.
Consequence #6 is rising interest rates. Yes, the Federal Reserve can hold its official short-term interest rates near zero, and this is precisely what it's doing. But the Fed does not exert the same control over long-term interest rates. Nor can it control foreign central banks, some of which are beginning to raise interest rates. And most important, the U.S. government cannot control foreign investors who now own over half of the publicly traded U.S. government securities.
Meanwhile, the forces driving long-term interest rates higher are powerful and enormous — the same forces we told you about earlier: massive monetary inflation and equally massive federal deficits.
Consequence #7 is an anemic U.S. economy overall, weighed down by high unemployment, low spending, and most important, the largest debts of all time. Don't expect this recovery to last very long. A second recession could come quickly on its heels.
I am often asked: Is the recession over? My answer is "yes." But to the more important question — is America's long-term depression over? — my answer is a firm "no." In the years ahead, we're likely to see a series of longer-than-usual recessions interrupted by shorter-than-normal recoveries, all adding up to a long depression.
Such is the inevitable consequence of the massive, revolutionary changes that have already taken place ... with more changes of similar magnitude still ahead."