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Chris Martenson

It was recently announced that the Fed planned to re-open lines with other central banks, allowing them to swap for dollars.  We’ve been down this path before.  I want to review what happened last time, because if that pattern repeats, we are about to begin a brand-new stage of financial system stress and stock market losses.

To begin, you should review this article I wrote on September 25, 2009, which describes currency swaps and does a post-mortem on the relationship between dollar swap volumes and strength in the US dollar index.  The correlation was pretty tight.

Here’s the primary image from that article with some of the text that followed it:

Currency Swaps Spell Trouble?
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It was recently announced that the Fed planned to re-open lines with other central banks, allowing them to swap for dollars.  We’ve been down this path before.  I want to review what happened last time, because if that pattern repeats, we are about to begin a brand-new stage of financial system stress and stock market losses.

To begin, you should review this article I wrote on September 25, 2009, which describes currency swaps and does a post-mortem on the relationship between dollar swap volumes and strength in the US dollar index.  The correlation was pretty tight.

Here’s the primary image from that article with some of the text that followed it:

I’ve been struggling lately with balancing my role as a responsible information scout and commentator on the current economic situation with this sinking feeling that I’ve been carrying for awhile.  There have been a couple of times in the past where I’ve had a similar sense of apprehension.

One was in the Fall of 2008, when I sent out an Alert advising people to take cash out of the bank due to my fears of an imminent banking holiday.  A bank holiday never happened, but a year after my Alert, we learned from Hank Paulson and Mervyn King that we were literally hours away from a full blown banking melt-down at the exact time I sent out the Alert.

The mechanism by which my ‘spidey-senses’ get triggered is largely based on data and evidence, but there’s also a component to it that I cannot fully describe.  Mainly I am watching the news with incredible attention, trying to note both what is being said and what is being left out.  Looking for the ‘negative space’ takes a lot of attention, experience, and good old-fashioned thinking.  And I am glued to the markets, looking for changes in old patterns, trying to see the first signs of stress before they become common knowledge.

Based on widening credit spreads, a still-unexplained market glitch, a blow-out eco-disaster in the Gulf of Mexico, an already-failed trillion-dollar euro bailout that really wasn’t (vaporware, as Machinehead puts it), and the inexorable rise in gold, I come to the simple conclusion that these data points reveal a loss of faith in both our markets and our economic prospects.

Well, if you are running a Ponzi system, there is nothing more important than faith.  Which is why I spend so much time trying to gauge the winds of confidence as they swirl and eddy about.

I’m about as worried as I’ve ever been.

I’ve got that sinking feeling…
PREVIEW

I’ve been struggling lately with balancing my role as a responsible information scout and commentator on the current economic situation with this sinking feeling that I’ve been carrying for awhile.  There have been a couple of times in the past where I’ve had a similar sense of apprehension.

One was in the Fall of 2008, when I sent out an Alert advising people to take cash out of the bank due to my fears of an imminent banking holiday.  A bank holiday never happened, but a year after my Alert, we learned from Hank Paulson and Mervyn King that we were literally hours away from a full blown banking melt-down at the exact time I sent out the Alert.

The mechanism by which my ‘spidey-senses’ get triggered is largely based on data and evidence, but there’s also a component to it that I cannot fully describe.  Mainly I am watching the news with incredible attention, trying to note both what is being said and what is being left out.  Looking for the ‘negative space’ takes a lot of attention, experience, and good old-fashioned thinking.  And I am glued to the markets, looking for changes in old patterns, trying to see the first signs of stress before they become common knowledge.

Based on widening credit spreads, a still-unexplained market glitch, a blow-out eco-disaster in the Gulf of Mexico, an already-failed trillion-dollar euro bailout that really wasn’t (vaporware, as Machinehead puts it), and the inexorable rise in gold, I come to the simple conclusion that these data points reveal a loss of faith in both our markets and our economic prospects.

Well, if you are running a Ponzi system, there is nothing more important than faith.  Which is why I spend so much time trying to gauge the winds of confidence as they swirl and eddy about.

I’m about as worried as I’ve ever been.

Recently I’ve argued that Deflation is Not on the Menu by pointing out that the immediate and devastating political and economic pain associated with deflation will spur decision-makers to do anything and everything within their power to stoke inflation.

And then, when discussing the Greek situation, I noted that there are only three possible actions for EU leadership to take: 

  1. Let Greece fail
  2. Let French and German banks fail
  3. Fire up the QE particle accelerator, buy up all those dodgy Greek (and Spanish and Portuguese and…) bonds, and stuff them onto the ECB balance sheet like the Fed did with MBS paper

Providing no surprise to me at all, they chose option #3 this weekend and fired up the magic money machine to the tune of nearly a cool trillion:

A Cure Worse Than The Disease
PREVIEW

Recently I’ve argued that Deflation is Not on the Menu by pointing out that the immediate and devastating political and economic pain associated with deflation will spur decision-makers to do anything and everything within their power to stoke inflation.

And then, when discussing the Greek situation, I noted that there are only three possible actions for EU leadership to take: 

  1. Let Greece fail
  2. Let French and German banks fail
  3. Fire up the QE particle accelerator, buy up all those dodgy Greek (and Spanish and Portuguese and…) bonds, and stuff them onto the ECB balance sheet like the Fed did with MBS paper

Providing no surprise to me at all, they chose option #3 this weekend and fired up the magic money machine to the tune of nearly a cool trillion:

This guest post by Erik Townsend really elevates the discussion around the issue of investing in oil and energy given the realities involved in what Peak Oil truly implies politically and economically.  Few in the investing community have really fully internalized the magnitude of the predicament, but Erik has.

If we had a post rating system, this would receive the very highest mark.


By Erik Townsend ∙ May 3, 2010

Executive Summary

  • Although there’s more than 100 years’ supply of crude oil left in the ground, the resources that are “cheap and easy” to extract have for the most part already been discovered.
  • By 2012 the decline of production output from conventional sources coupled with much higher extraction cost of unconventional sources will lead to peak cheap oil, a phenomenon that will put extreme upward pressure on oil prices.
  • To a limited extent, a strong case exists for speculation on a moderate increase in petroleum prices.
  • Those who anticipate extraordinarily high prices (upwards of $300/bbl) have failed to consider what George Soros calls reflexivity. The global economy simply cannot afford such prices, and the rules will be changed before they are reached.
  • The future is likely to bring price controls, government intervention in the petroleum supply chain, and nationalization of oil resources.
  • The oil industry will face many unanticipated challenges during this period, capping the price appreciation potential of both commodity and equity plays in the oil industry.
  • Wise investors will focus on the initial price run-up expected to occur before large-scale government intervention ensues.

Why “Peak Oil” Will Never Lead To $500/bbl Crude Oil

This guest post by Erik Townsend really elevates the discussion around the issue of investing in oil and energy given the realities involved in what Peak Oil truly implies politically and economically.  Few in the investing community have really fully internalized the magnitude of the predicament, but Erik has.

If we had a post rating system, this would receive the very highest mark.


By Erik Townsend ∙ May 3, 2010

Executive Summary

  • Although there’s more than 100 years’ supply of crude oil left in the ground, the resources that are “cheap and easy” to extract have for the most part already been discovered.
  • By 2012 the decline of production output from conventional sources coupled with much higher extraction cost of unconventional sources will lead to peak cheap oil, a phenomenon that will put extreme upward pressure on oil prices.
  • To a limited extent, a strong case exists for speculation on a moderate increase in petroleum prices.
  • Those who anticipate extraordinarily high prices (upwards of $300/bbl) have failed to consider what George Soros calls reflexivity. The global economy simply cannot afford such prices, and the rules will be changed before they are reached.
  • The future is likely to bring price controls, government intervention in the petroleum supply chain, and nationalization of oil resources.
  • The oil industry will face many unanticipated challenges during this period, capping the price appreciation potential of both commodity and equity plays in the oil industry.
  • Wise investors will focus on the initial price run-up expected to occur before large-scale government intervention ensues.

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