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by Chris Martenson
Thursday, July 28, 2011

Executive Summary

  • How stocks, bonds, precious metals, commodities, the dollar and, real estate will most likely fare post-August 2nd
  • Why August-October will be a period of particularly high stress for the Treasury market
  • What the “big picture” endgame is beyond today’s debt ceiling histrionics and how it is now accelerating towards its inevitable conclusion
  • Why it’s now time to hedge your bets

Part I – Debt Ceiling Dilemma: The Foul Choice Facing Investors

If you have not yet read Part I, available free to all readers, please click here to read it first. 

Part II – What Should Happen and What Will Happen

As always, we can easily describe what should happen, but that’s not what will happen. Deflationists sometimes fall into the “what should happen” camp and find themselves mystified, if not disappointed, when those events fail to materialize. So do inflationists, just in the other direction.

My view is that what should happen almost always never does. There’s no such thing as a free market defined by willing, free-thinking participants. Instead, far too many market prices are managed, influenced, and/or manipulated, and this distorts both the timing and the severity of what actually happens.

For example, right now market participants should not be buying ten-year US Treasury bonds at 2.5%. Looking at the rates of inflation and the fiscal train wreck approaching the US government, a fair rate might be closer to 7.5% or higher. Where Treasury interest rates actually are and where they should be are very different propositions.

The thing that will most impact the world financial system will be if the US suffers a credit downgrade, which would be a near certainty if and/or when the US defaults on its obligations, even briefly.

What Should Happen and What Will Happen
PREVIEW by Chris Martenson
Thursday, July 28, 2011

Executive Summary

  • How stocks, bonds, precious metals, commodities, the dollar and, real estate will most likely fare post-August 2nd
  • Why August-October will be a period of particularly high stress for the Treasury market
  • What the “big picture” endgame is beyond today’s debt ceiling histrionics and how it is now accelerating towards its inevitable conclusion
  • Why it’s now time to hedge your bets

Part I – Debt Ceiling Dilemma: The Foul Choice Facing Investors

If you have not yet read Part I, available free to all readers, please click here to read it first. 

Part II – What Should Happen and What Will Happen

As always, we can easily describe what should happen, but that’s not what will happen. Deflationists sometimes fall into the “what should happen” camp and find themselves mystified, if not disappointed, when those events fail to materialize. So do inflationists, just in the other direction.

My view is that what should happen almost always never does. There’s no such thing as a free market defined by willing, free-thinking participants. Instead, far too many market prices are managed, influenced, and/or manipulated, and this distorts both the timing and the severity of what actually happens.

For example, right now market participants should not be buying ten-year US Treasury bonds at 2.5%. Looking at the rates of inflation and the fiscal train wreck approaching the US government, a fair rate might be closer to 7.5% or higher. Where Treasury interest rates actually are and where they should be are very different propositions.

The thing that will most impact the world financial system will be if the US suffers a credit downgrade, which would be a near certainty if and/or when the US defaults on its obligations, even briefly.

by Adam Taggart

"Straight Talk" features thinking from notable minds that the PeakProsperity.com audience has indicated it wants to learn more about. Readers submit the questions they want addressed and our guests take their best crack at answering. The comments and opinions expressed by our guests are their own.

This week's Straight Talk contributor is John Rubino, publisher of DollarCollapse.com, a popular hub for news impacting the economy. John is the author of several well-received books foretelling (years in advance) the collapse of the housing market and the decline of the US dollar. Before starting his website, John was a featured columnist with theStreet.com, Individual Investor, and a number of other influential financial publications. His perspective on Wall Street and the currency markets is shaped by his past roles as a Eurodollar trader, equity analyst and junk bond analyst in the 1980s.


1. Several times, you’ve published prescient forecasts when it mattered. For example, you and James Turk published The Coming Collapse of the Dollar and How to Profit From It in 2004 – about a year and half before the US Dollar Index dropped from 90 to nearly 70. Similarly, How to Profit From the Coming Real Estate Bust was released in 2003. What led you to accurately predict these major market moves so far in advance?

I’ve been involved, one way or another, with financial bubbles for most of my life.

Straight Talk with John Rubino: The Damage Is Already Done
by Adam Taggart

"Straight Talk" features thinking from notable minds that the PeakProsperity.com audience has indicated it wants to learn more about. Readers submit the questions they want addressed and our guests take their best crack at answering. The comments and opinions expressed by our guests are their own.

This week's Straight Talk contributor is John Rubino, publisher of DollarCollapse.com, a popular hub for news impacting the economy. John is the author of several well-received books foretelling (years in advance) the collapse of the housing market and the decline of the US dollar. Before starting his website, John was a featured columnist with theStreet.com, Individual Investor, and a number of other influential financial publications. His perspective on Wall Street and the currency markets is shaped by his past roles as a Eurodollar trader, equity analyst and junk bond analyst in the 1980s.


1. Several times, you’ve published prescient forecasts when it mattered. For example, you and James Turk published The Coming Collapse of the Dollar and How to Profit From It in 2004 – about a year and half before the US Dollar Index dropped from 90 to nearly 70. Similarly, How to Profit From the Coming Real Estate Bust was released in 2003. What led you to accurately predict these major market moves so far in advance?

I’ve been involved, one way or another, with financial bubbles for most of my life.

by Aaron M

Aaron submitted this post prior to the recent disaster in Japan. As we are now being educated in real-time as to the value of developing preparedness in advance of calamity, the guidance below becomes even more relevant. This article complements Aaron's earlier "Practical Survival Skills 101" posts on fire, water, and shelter.

Preface: What is an emergency? 

 height=There is an awful lot of academic banter in which we try to “identify” emergencies before they happen. Pedantic issues are categorized and specifics are assigned to them as potential resolutions. This is not a “flawed” approach, but it’s endemic in the American mindset, which is obsessed with micromanagement.

In order to distance ourselves from the details, which are too stochastic and specific, we can generally state that an emergency is a shortage of resources.

Resources can be defined as:

 

Practical Survival Skills 101 – Understanding Emergencies
by Aaron M

Aaron submitted this post prior to the recent disaster in Japan. As we are now being educated in real-time as to the value of developing preparedness in advance of calamity, the guidance below becomes even more relevant. This article complements Aaron's earlier "Practical Survival Skills 101" posts on fire, water, and shelter.

Preface: What is an emergency? 

 height=There is an awful lot of academic banter in which we try to “identify” emergencies before they happen. Pedantic issues are categorized and specifics are assigned to them as potential resolutions. This is not a “flawed” approach, but it’s endemic in the American mindset, which is obsessed with micromanagement.

In order to distance ourselves from the details, which are too stochastic and specific, we can generally state that an emergency is a shortage of resources.

Resources can be defined as:

 

by thc0655
Note: This post deals with personal security, one of the most asked-for topics by this community. However, we realize it is a sensitive if not scary topic for some. The intent here is have an open and mature exploration of an important subject. Please respect the author's efforts to do just that.
 
My wife and I live in Philadelphia on the “green line” between mostly-prosperous Center City and mostly-wasteland North Philadelphia. People are very aware of crime around here, as you might imagine, and many people have taken numerous steps to avoid becoming victims. That being said, I am still surprised on a nearly daily basis how unprepared and unaware some people are. (I’m a Police Sergeant, so I see many people who have been caught off guard by criminals. And that’s a very important first tip: If the criminal cannot catch you off guard and unprepared, he’s most likely going to pick a different victim. But that doesn’t account for intoxicated/drugged criminals, very inexperienced criminals, and professional criminals.)  

 

Protecting Yourself Against Crime and Violence
by thc0655
Note: This post deals with personal security, one of the most asked-for topics by this community. However, we realize it is a sensitive if not scary topic for some. The intent here is have an open and mature exploration of an important subject. Please respect the author's efforts to do just that.
 
My wife and I live in Philadelphia on the “green line” between mostly-prosperous Center City and mostly-wasteland North Philadelphia. People are very aware of crime around here, as you might imagine, and many people have taken numerous steps to avoid becoming victims. That being said, I am still surprised on a nearly daily basis how unprepared and unaware some people are. (I’m a Police Sergeant, so I see many people who have been caught off guard by criminals. And that’s a very important first tip: If the criminal cannot catch you off guard and unprepared, he’s most likely going to pick a different victim. But that doesn’t account for intoxicated/drugged criminals, very inexperienced criminals, and professional criminals.)  

 

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