is america really going broke?, page-14

johnaus & septa - you 2 R as brainwashed as some of these religios posters.

Wake up people!!! Just where are your heads?

The Point Of Super Saturation:
Since the paper market recovery began in March 2009, the Fed has been officially (or unofficially) monetising Treasury debt paper. As the countdown to the official end of QE2 progresses, this monetisation is now the ONLY mechanism which is propping up the entire global financial system with US Dollars and Treasury debt as its ultimate underpinnings. It is also the major prop under US and global paper asset markets, specifically stock markets. Unfortunately for the Fed, price rises are no longer being confined to the paper markets but are now spilling over into the real economy.

Many of the practices which led to the credit freeze of late 2008 are now back in play. On March 31, US stock markets finished their best first calendar quarter since 1999. Mortgage Backed Securities (MBS), the "toxic sludge" whose collapse ushered in the GFC, are back on the radar of even institutional investors. The debt appetite is not confined to US "Agency" paper (paper underpinned by Fannie Mae and Freddie Mac). US institutional investors are now buying "non-agency" paper which was yielding 20 percent plus at the height of the crisis in early 2009 but whose yield is now down to 5-7 percent. AIG, whose portfolio of MBS was bailed out by the US government in 2008, recently offered to buy back paper that the Fed had taken from it to add to its balance sheet back then. Don't forget, the Fed took the paper at 100 cents on the Dollar. AIG has offered to buy it back at just over 50 cents on the Dollar.

With the complacency on US financial markets now at breathtaking levels, the entire mechanism is facing the fact that a $US 2.19 TRILLION increase in the Treasury's debt limit has lasted the US government for a bit more than a year. Clearly, no financial entity besides the Fed could begin to "liquefy" this amount of new debt. If the super saturation point doesn't come on June 30, it will not be long delayed.

INSIDE THE UNITED STATESTHE UNBEARABLE PRESSURE ON THE REAL ECONOMY
Sometime back in the 1960s, the great US icon of mid/late 20th century irreverent humour, Mad Magazine published a satirical piece on the practice of packaging food in the US. Looking into the distant future, they saw a time when millions of disillusioned children would be opening Hershey bars in packages taller than they were only to find a tiny little piece of the stuff they had paid for hiding amid the acres of paper which wrapped it. As they were in many other areas, Mad was prophetic.

On March 28, the New York Times published an article under this headline: "Food Inflation Kept Hidden in Tinier Bags". Yep, you guessed it, the article was all about a speeding up in the trend of selling items at the same price by putting smaller amounts in the same size package. The huge surge in commodity and food prices in the wake of Mr Bernanke's QE2 has finally hit home. If it is possible, US companies are reducing the volume of what they sell while keeping the price the same, hoping that nobody will notice. Where that is not possible, companies are raising prices, no longer having any other choice. Long dreaded price-inflation is rearing its ugly head. And the even more dreaded (by the Fed) inflationary expectations are ramping up by the day.

Straining For "Consumption":
Consumer "sentiment" is plummeting in the US. The latest figures, for March, fell by 13 percent from the previous month as measured by the "final index" of consumer sentiment. Worse, the projection for six months into the future compiled by the University of Michigan dived from 71.6 to 57.9 between February and March. The March figure is the lowest in two years and the month to month fall amongst the largest ever recorded. Ironically enough, as this data was being released, the US government's Commerce Department also released its third and final revision for fourth quarter 2010 economic "growth". The figure was revised upward from 2.8 to 3.1 percent. The main catalyst was a bigger than previously estimated jump in - you guessed it - consumer spending.

Whether this jump in consumer spending was a result of increased "demand" or higher prices was not stated. Judging by the "downsizing" of what is available to the consumer, the latter is more likely.

The Crumbling Bastion Of Personal "Wealth":
In January 2011, US house prices fell for the seventh straight month, only just managing to hold above their housing bust lows set in April 2009. In Florida, one of the states worst hit by the housing bust, almost 20 percent of all established homes stand vacant. That's 1.6 million houses. The situation is nearly as bad elsewhere. "Vacancy rates" are 8 percent in California, 14 percent in Nevada and 16 percent in Arizona. These millions of vacant homes will obviously weigh on housing prices. Even worse, they will weigh even more heavily on new home building in the US.

Meanwhile - What About The "Peace Process"?:
Does anyone remember that? It has actually been a term in general use since the mid 1970s when the US began to try and broker a peace between Israel and its surrounding Arab neighbours after the wars of 1948, 1956, 1967 and 1973. It is nearing its 40th anniversary, with no "peace" anywhere to be seen.

Now, the "peace process" is taking place in Libya, under the "international" auspices of NATO and the UN. Once again we have a "no fly zone". Once again an American President is making speeches to his nation to "explain" why it is necessary to curb a dictator who has operated for decades in the region.

Mr Obama's "popularity" has sunk to a new low. Americans are getting tired of the "peace process".

?2011 - The Privateer
http://www.the-privateer.com
[email protected]
(reproduced with permission)