[ReverseEngineer]

FCBs sold Treasury and so did Primary Dealers in the most recent week. This is new, it is ominous, and it signals that market participants in the bond market have detected smoke in the room. Should they all rush the door at once the bond market dislocation that I have been warning of for months will gather steam and cut off federal funding, along with kneecapping the stock market. The Fed cannot possibly absorb this supply as it will not be limited to Treasuries; they would have to print up literally $20 trillion dollars to halt the collapse and should they attempt it the dollar would collapse instead as that would be a literal ten times over expansion of the monetary base. This would produce a monetary and market implosion twice as bad as what occurred in Iceland overnight.

Come on Karl, stop Whitewashing it. Tell us what you REALLY think! LOL. The Bond Market dislocation is the Storm on the Horizon. It is coming, to be sure. When this run starts, KATY BAR THE DOOR!!! Its all over. End Game.

There really is not any place left for Big Capital to send the paper, and those trading in it HAVE to fail. They will fail no matter what. These are however the SAME people who hold the real strings of power, and they do not want to be left hung out to dry, as they so well deserve. So they are trying to offload their debts on everyone else. The time has come to say NO MORE to this.

Unfortunately, this will not occur peacefully or without pain. Its going to be very ugly for sure, but then you canot make an Omellette without Breaking a few Eggs.
Reverse Engineer

[billg]

Reality has started to intrude into the market and it's not a pretty picture. FCBs sold Treasury and so did Primary Dealers in the most recent week. This is new, it is ominous, and it signals that market participants in the bond market have detected smoke in the room. Should they all rush the door at once the bond market dislocation that I have been warning of for months will gather steam and cut off federal funding, along with kneecapping the stock market. The Fed cannot possibly absorb this supply as it will not be limited to Treasuries; they would have to print up literally $20 trillion dollars to halt the collapse and should they attempt it the dollar would collapse instead as that would be a literal ten times over expansion of the monetary base. This would produce a monetary and market implosion twice as bad as what occurred in Iceland overnight.

Isn't Denninger the same guy that predicted that the deflation trend would continue thru 2009?

[PrestonSturges]

Things were so much better when Rove, Cheney, Falwell,and their little sidekick George what's his name were running the show.

[patience]

This is the part that scares me. Looks right to me, although it means a my future is pretty bed.

Quote:
"We stand on the edge of the failure of all of American's retirement assets. Literally all of them. Buried in some of the earnings reports of the last quarter are the fact that half of the market capitalization of some firms was wiped out in the last year due to pension fund shortfalls as a consequence of the stock and credit market swoon. CALPERS and other funds are rapidly going from being adequately capitalized to critically undercapitalized. If the Treasury and Stock market both sell off as I believe both can and is likely to happen if the current policies are continued essentially ALL American Retirement Assets will be destroyed - 401ks, IRAs and both private and public Pension systems. Total losses through these systems is likely to reach 80-90%, and the Boomers start retiring "en-masse" just a few years from now.

In short, if policies are not changed now there will be no retirement for Americans and the currently-retired who rely on these funds will find them gone and be forced back into the workplace. Unemployment in that scenario is likely to reach and may exceed 20%, and what's worse, Medicare funding will be severely curtailed at the same time due to the inability of the government to fund it."
end quote.

Quote, from billg:

"Isn't Denninger the same guy that predicted that the deflation trend would continue thru 2009?
_________________

Yeah, he did. And if you check his definition of deflation, (shrinking money supply), he's right, due to debt destruction of imaginary money in derivatives, etc. He does NOT mean falling prices; he is using the Austrian/Mises meaning of deflation.

In fact, this defines the current "Credit Crisis", in that credit is LESS available, hence spending by overindebted consumers is down. Don't believe that? Check out the states that are going broke from falling tax revenues.

[Fishman]

Things are so much better now that obama, Reid, Pelosi and their little sidekick Biden are completely lost as they try to figure out the crap brought on by two years of House and Senate Democratic control.
Correction there Preston

[InverseBetaDecay]

Things are so much better now that obama, Reid, Pelosi and their little sidekick Biden are completely lost as they try to figure out the crap brought on by two years of House and Senate Democratic control.
Correction there Preston

So Bush appoints Chris Cox to cripple the SEC, Cox eliminates all restraints on leverage, and you can't see any Republican fingerprints on this mess???????

(BTW, before anyone starts with the Obama crap, I was registered as a Repub for years, but I was becoming disgusted with the neocons, I voted for Ron Paul & then quit the party)

Relevant link

[Sixstrings]

essentially ALL American Retirement Assets will be destroyed - 401ks, IRAs and both private and public Pension systems

For as long as there is even a semblance of organized federal government, Social Security will not die.

The baby boomers' private 401ks, IRAs, and pensions may well go broke -- but I predict this will force a raise in Social Security bennies. Boomers vote, and they're not going to settle for just SS, not with what it currently pays anyway.

The irony in all this is that poor retirees will benefit from the collapse of the upper classes, as benefits for the poor will be increased.

[ReverseEngineer]

essentially ALL American Retirement Assets will be destroyed - 401ks, IRAs and both private and public Pension systems

For as long as there is even a semblance of organized federal government, Social Security will not die.

The baby boomers' private 401ks, IRAs, and pensions may well go broke -- but I predict this will force a raise in Social Security bennies. Boomers vote, and they're not going to settle for just SS, not with what it currently pays anyway.

The irony in all this is that poor retirees will benefit from the collapse of the upper classes, as benefits for the poor will be increased.

This is tantamount to saying, "Regardless of the fact there are insufficient numbers of employed people paying into the SS system, we will continue to keep Old People Welfare going while everybody else starves". LOL.

Just like Unemployment and the Highway Trust Fund, SS is an actuarial nightmare once you run into the problem of a long term recession or a depression. Like a tub of water with more running out than in, the SS trust fund will disappear in short order here paying bennies out while fewer all the time are paying in. The only way the Goobermint can afford to keep this running is by printing Funny Money.

So yea, while there is a semblance of Goobermint, they'll continue printing Funny Money and Retirees will continue getting checks. Just those checks won't actually buy anything, because there will be nothing to buy.

Retirement is essentially Welfare. Non-productive oldsters count on continued growth to fund their retirement, sitting atop a Ponzi Scheme and collecting from all those below them. When their life savings gets lost in that OTHER Ponzi scheme, then all they have left is the SS net, which itself is a Ponzi scheme.

The biggest drain overall here on all levels is the number of old people we support, both through retirement and through the medicaire system. When the workers no longer are productive, they cannot support the oldsters anymore. Time for the oldsters to walk into the Great Beyond.

Reverse Engineer

[billg]

Hyperinflation is a possibility says Morgan Stanley

[patience]

billg,

I agree with the inflation scenario. The key is the TIMING of it. As Alphaville says, there are preconditions: 1) more rapid and sustained expansion of the monetary base in the hands of the general public, 2) govt difficulties funding their bailouts and debt, and 3) loss of public confidence in the govt's ability to service debt without the printing press, and the govt would need to be in a "last resort" situation that overcomes their reluctance to print.

Some of these preconditions are sticking their heads up now.

1) More bailouts and huge deficit spending will bring a lot of funny munny to the general public's hands, as jobs programs hit, and the Fed starts "buying the long end of the curve", or long-term Treasury notes, to fund it all, when the point comes that no one else will fund it.

2)China is warning that they won't finance our debt forever, and the Saudi's have lost a LOT of money, impairing their ability to buy US debt. A couple of "failed auctions have occurred, where T's did not all sell at the offered interest rate. (This is the "tell", I think.) And, the 2009 deficit looks to be a whopper, as rescues of many kinds become "necessary".

3) When enough "printing" has been done, the word always gets out--the money devalues.

This process, or something very like it, occurred in Iceland in very short order, and looks to be threatening Ireland and UK. Some variant of collapse could, and probably will hit the US before long. Bernanke is still losing the re-flation battle, but that does not mean he will lose forever.

Most likely, I think, we will see a race between countries to devalue their currency (beggar thy neighbor), so the question becomes, who all does it, in what order, and to what degree? The answer to that (foreign exchange rates) will determine the prices of imported goods for any given country. The US is in a very ugly position with dependency on imported oil. If we get serious inflation in the US (relative to other currencies-the foreign exchange rate), look for oil products to skyrocket in price. A major Mideast war would be a certainty then, IMHO.

Nobody wants this to happen, so there is great pressure to keep financing the US foolishness. But I think it will eventually happen, and when it does, I want a long term supply of imported stuff to mitigate the effects on me. In the early 1950's, I could buy a cheap Chinese paint brush for 29 cents. After the Korean War, they weren't available, and an American made paint brush cost 3 to 10 bucks! This will happen again.

But whatever I do, I'm screwed anyway, being old, and on Social Security, with only a small home business income to help out.

Watch the US Treasury bond yields (10 year and 30 year), the effect that has on interest rates, and watch the dollar index. When the bond auctions fail, and yields go up despite the Fed's buying them, then interest rates will go high and the dollar index will fall ($US relative to other currencies). Then we we are on the slippery inflation slope.

Anyone who knows more than I do about this, PLEASE set me straight!

[patience]

The very difficult problem for us trying to hedge ourselves against these outcomes, is to find somewhere to park whatever assets we have while currency values whipsaw first one way then another, and back.

My first line of defense for this has been to get out of the way of crashing investments (probably early), by selling out of all stocks, bonds, MM funds, etc., and going to cash deposits. Some of that is in the Bank of Sealy/Posthole Bank of Mason Jar, and such. Some is scattered in 3 local banks, for now. Debts are paid.

Next is staying "in the economy" with a small business, to hopefully have an income that can vary with the dollar value, and be immune to layoff.

Then, we are trying to reduce our living expenses in every way possible, by either producing things ourselves (food, electricity, firewood, homemade stuff), or doing without stuff (gadgets, entertainment items, driving less).

If anyone knows more about being Ready For It, I want to hear about it.