As HP readers know, all bubbles end with a rush to liquidity, and cash. Unfortunately, in this mother-of-all-bubbles, even the safety of liquid cash will come into doubt as the dollar goes into freefall due to the over-extension and massive trade imbalance of the US government.
Here's a snippit from The Day After Tomorrow by Puplava and Barbera. You owe it to yourself to at least hedge against a housing-collapse-inspired fiscal meltdown. And damn, even if it doesn't happen as predicted below, that'd be one good movie, eh?
As stocks of all types collapse, bond traders recognize the tremendous deflationary affects inherent in a falling market, rationalizing that a negative wealth affect will completely dampen consumer spending and at the same time, import price inflation.
Commodity prices are collapsing with copper, nickel, zinc, crude oil and natural gas all down substantially from their 2005 highs and the CRB near 230, its early 2003 low. Adding to the bearish overall tone is the further collapse of Residential property markets where some area’s now report no bidders, and home values down over 60% from the 2005 all time highs.
In many areas, homeowners with no equity have simply walked away their properties handing back the keys and filing personal bankruptcy. As a result, while stocks crash and commodity prices tumble, bond prices rally sharply in a historic “flight to quality” move sending long term yields down to 7.80%. Nevertheless, great damage has been done, as losses from the surge in interest rates are now feared in the hundreds of billions of dollars, dwarfing the Savings and Loan Crisis of the early 1980s.
As the market collapses throughout the day, the financial crisis becomes the only news story seen on T.V. Around the world, nervous individuals head for their local banks and begin withdrawing funds. A massive bank run develops as ordinary individuals succumb to the fear of a building financial panic. At gas stations and supermarkets, supplies and shelves are almost empty, as individuals have rushed to spend money on food and gasoline.
As the smoke clears for the first great stock crash of the new millennium, the stock exchange is closed, and a national bank holiday is declared. Declining asset values have impaired banking system finances with a major derivative crisis now dominating the headlines. In many foreign countries, markets and banks are also closed as the derivatives crisis has caused the global financial system to seize up. Shortly, it is announced that Federal Reserve, the White House, and the entire G-10 committee will be meeting non-stop during the banking holiday in order to broker a global “bail out” arrangement. As the ministers arrive in Washington, there is a hostile atmosphere, rife with protectionism.
Amid growing threats of riots, after 3 days, limited ATM service is restored allowing individuals to withdraw up to $100 to meet short-term needs while banks remain otherwise closed. On Day 10, amid great anxiety, the President, Fed Chair and a panel of G-7 representatives announce that the Bank Holiday is over.
To stabilize the Dollar and stimulate domestic savings, U.S. short-term interest rates have been hiked by 5% full percentage points such that the Fed Funds Rate now stands at 7%. In addition, several new international bank mergers are announced, with a large Japanese bank acquiring a major U.S. Bank, and a large European Bank acquiring a second U.S. Bank. Insolvent hedge funds are unwound and merged by the Federal Reserve. It is announced that markets will soon be reopened and that the IMF Reserve Fund will be used if necessary to stabilize global financial markets by ensuring market liquidity.
Here's a snippit from The Day After Tomorrow by Puplava and Barbera. You owe it to yourself to at least hedge against a housing-collapse-inspired fiscal meltdown. And damn, even if it doesn't happen as predicted below, that'd be one good movie, eh?
As stocks of all types collapse, bond traders recognize the tremendous deflationary affects inherent in a falling market, rationalizing that a negative wealth affect will completely dampen consumer spending and at the same time, import price inflation.
Commodity prices are collapsing with copper, nickel, zinc, crude oil and natural gas all down substantially from their 2005 highs and the CRB near 230, its early 2003 low. Adding to the bearish overall tone is the further collapse of Residential property markets where some area’s now report no bidders, and home values down over 60% from the 2005 all time highs.
In many areas, homeowners with no equity have simply walked away their properties handing back the keys and filing personal bankruptcy. As a result, while stocks crash and commodity prices tumble, bond prices rally sharply in a historic “flight to quality” move sending long term yields down to 7.80%. Nevertheless, great damage has been done, as losses from the surge in interest rates are now feared in the hundreds of billions of dollars, dwarfing the Savings and Loan Crisis of the early 1980s.
As the market collapses throughout the day, the financial crisis becomes the only news story seen on T.V. Around the world, nervous individuals head for their local banks and begin withdrawing funds. A massive bank run develops as ordinary individuals succumb to the fear of a building financial panic. At gas stations and supermarkets, supplies and shelves are almost empty, as individuals have rushed to spend money on food and gasoline.
As the smoke clears for the first great stock crash of the new millennium, the stock exchange is closed, and a national bank holiday is declared. Declining asset values have impaired banking system finances with a major derivative crisis now dominating the headlines. In many foreign countries, markets and banks are also closed as the derivatives crisis has caused the global financial system to seize up. Shortly, it is announced that Federal Reserve, the White House, and the entire G-10 committee will be meeting non-stop during the banking holiday in order to broker a global “bail out” arrangement. As the ministers arrive in Washington, there is a hostile atmosphere, rife with protectionism.
Amid growing threats of riots, after 3 days, limited ATM service is restored allowing individuals to withdraw up to $100 to meet short-term needs while banks remain otherwise closed. On Day 10, amid great anxiety, the President, Fed Chair and a panel of G-7 representatives announce that the Bank Holiday is over.
To stabilize the Dollar and stimulate domestic savings, U.S. short-term interest rates have been hiked by 5% full percentage points such that the Fed Funds Rate now stands at 7%. In addition, several new international bank mergers are announced, with a large Japanese bank acquiring a major U.S. Bank, and a large European Bank acquiring a second U.S. Bank. Insolvent hedge funds are unwound and merged by the Federal Reserve. It is announced that markets will soon be reopened and that the IMF Reserve Fund will be used if necessary to stabilize global financial markets by ensuring market liquidity.
11 comments:
Scary story. I hope this doesnt happen.
No mention of how Gold would play out in the senario.
eceryone please read and study the book the secret it is and has the answer to all this doom and gloom raise your consciousness I'll work on improving my spelling God Bless
The Fed and Treasury have already run this war game by the policy makers and their plan was approved at a Camp David Meeting last Fall. They have $2 trillion in emergency cash already printed and waiting in warehouses to pay welfare types who might riot if their checks or food stamps are delayed. People with bank accounts and a few bucks to their name would get Uncle Sam ATM cards from FEMA in a system similar to the handouts after Katrina.
The new banking laws allow banks to limit cash withdrawals arbitrarily, and delay paying account holders up to 25 days. Even then, the settlement payment can be in the form of a check drawn on a Federal Reserve Bank. If you live in the boonies better be ready to travel if you want to cash it.
Subprime Lender Stocks Plummet: Easy Money Meltdown
Sunday February 11, 3:38 am ET
Tim Iacono submits: Just a small part of the overall mortgage market is being affected by recent developments in subprime lending, but, making up 20 percent of all new loans over the last two years, subprime borrowers have had an outsized impact on setting prices for real estate all across the country.
This will likely affect the rest of the housing market - to what extent is unknown.
People with bank accounts and a few bucks to their name would get Uncle Sam ATM cards from FEMA in a system similar to the handouts after Katrina.
+++++++
Gee, I feel so relieved. We have all seen how well the government handled the Katrina disaster....
There would not be anyone standing in line for a bank run; it will be done online. There is no mention of gold because there won't be much use for it; it would still not be a means of exchange. Anyone hoarding gold coins will just have to sell them for cash.
"There is no mention of gold because there won't be much use for it; it would still not be a means of exchange. Anyone hoarding gold coins will just have to sell them for cash."
Gold will be extremely useful. Don't forget that about 1/3 of all USD paper currency is held by foreigners. In a dollar crisis they will want to dump their paper for hard currency like gold and silver. That would create an automatic, worldwide market for Americans holding gold. The legality and logistics of such a market is another matter...
buy gold and silver its better to be safe than sorry
If Gold is not money, then why do central banks have so much of it, and issue monopoly money for us to play. Every American should be like a mini country, gold and guns. Looks like we have a bunch of indebtured slaves instead.
The key to the meltdown would be a run on banks. Same as in 1929 everyone running to get there money was the final straw.
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