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.
