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by Chris Martenson

In a podcast in February of 2009 before the “big plunge,” I related a concept that I call “from the outside in.”  Basically this theory holds that when trouble starts in financial markets, it begins in the periphery with the weaker markets, before spreading to the center.

At the time, I was deeply uncomfortable with what I saw in several European markets, as well as India’s.

This time?

China has had a particularly rough August, although September has seen a modest recovery, with the first three days of the month almost covering the territory lost on the final two.

From The Outside In – China’s Stock Slump
PREVIEW by Chris Martenson

In a podcast in February of 2009 before the “big plunge,” I related a concept that I call “from the outside in.”  Basically this theory holds that when trouble starts in financial markets, it begins in the periphery with the weaker markets, before spreading to the center.

At the time, I was deeply uncomfortable with what I saw in several European markets, as well as India’s.

This time?

China has had a particularly rough August, although September has seen a modest recovery, with the first three days of the month almost covering the territory lost on the final two.

by Chris Martenson

As part of our continuing series on “why things will proceed until the break,” we have this delightful article from the Washington Post, trumpeting the ‘findings’ of a study by a think tank representing the views of public employees that – surprise! – concluded that a “massive” hiring binge is required.

The think tank in question, the Partnership for Public Service, was founded in 2001 by a corporate raider, Samuel Heyman, who apparently has a passion for corporate governance as well as public government.

This is exactly the sort of article that the Washington Post loves to run – one that unabashedly calls for growth in the size and scope of government.  Nowhere in the article will you find a countervailing point of view that might dare to suggest it is large enough already, let alone a voice (like mine) that would claim it’s too large.

Federal Government Needs Massive Hiring Binge, Study Finds
PREVIEW by Chris Martenson

As part of our continuing series on “why things will proceed until the break,” we have this delightful article from the Washington Post, trumpeting the ‘findings’ of a study by a think tank representing the views of public employees that – surprise! – concluded that a “massive” hiring binge is required.

The think tank in question, the Partnership for Public Service, was founded in 2001 by a corporate raider, Samuel Heyman, who apparently has a passion for corporate governance as well as public government.

This is exactly the sort of article that the Washington Post loves to run – one that unabashedly calls for growth in the size and scope of government.  Nowhere in the article will you find a countervailing point of view that might dare to suggest it is large enough already, let alone a voice (like mine) that would claim it’s too large.

by Chris Martenson

In this post, I respond to the recent flurry of activity in print and in blogs about the dollar, US indebtedness, and the risks associated with both.

Mish recently posted a mixed grab-bag entitled Countdown To Dollar Implosion Madness, in which he (very rightly, in my view) took to task various bloggers and other Internet sources that have been peddling rumors of bank holidays and setting specific dates for a dollar implosion.

I don’t like trading in unsourced rumors, either by the mainstream media or by bloggers (as they are very nearly always proven wrong), and I am especially leery of setting dates for future market events.  So kudos to Mish for his efforts to hold bloggers to a higher standard.

However, I took exception to a snippet from a WSJ article by Andrew Batson, entitled Households Start to Rival the Chinese in Treasury Market (originally blogged about by Michael Pettis here), that offered the comforting impression that domestic savings are growing and are possibly sufficient to fund the US government deficit.

A Dollar Crisis in the Making
by Chris Martenson

In this post, I respond to the recent flurry of activity in print and in blogs about the dollar, US indebtedness, and the risks associated with both.

Mish recently posted a mixed grab-bag entitled Countdown To Dollar Implosion Madness, in which he (very rightly, in my view) took to task various bloggers and other Internet sources that have been peddling rumors of bank holidays and setting specific dates for a dollar implosion.

I don’t like trading in unsourced rumors, either by the mainstream media or by bloggers (as they are very nearly always proven wrong), and I am especially leery of setting dates for future market events.  So kudos to Mish for his efforts to hold bloggers to a higher standard.

However, I took exception to a snippet from a WSJ article by Andrew Batson, entitled Households Start to Rival the Chinese in Treasury Market (originally blogged about by Michael Pettis here), that offered the comforting impression that domestic savings are growing and are possibly sufficient to fund the US government deficit.

by Chris Martenson
Monday, August 31, 2009

Executive Summary

  • A funding crisis is in store for the US government and citizens.
  • The “Fourth Horseman,” represented by the dollar going down while interest rates go up, will signal the start of the funding crisis.
  • The Federal Reserve Custody Account has been growing faster than the Trade Deficit, a historical oddity.
  • The custody account represents a grotesque imbalance with risks of its own. 
  • The US will eventually face a funding crisis. For now, that crisis has been forestalled by willing foreign central banks.
  • This end begins with the widespread recognition that the US is insolvent and that propping it up is a lost cause.
  • It all ends with a vastly lowered standard of living.

In this report, I write about how the US debt machine will most likely meet its end and how we’ll know that this end is approaching.

In The Five Horsemen, I made the case that we have already seen the arrival of three out of the five signposts that will signal the end of US economic dominance and overconsumption. Those signposts are:

  • The First Horseman (arrived):  New credit growth falls below interest payments.
  • The Second Horseman (arrived):  The Fed monetizes debt.
  • The Third Horseman (arrived):  Government deficit spending exceeds 10% of GDP.
  • The Fourth Horseman (not yet):  The dollar goes down, while interest rates go up.
  • The Fifth Horseman (not yet):  US debt becomes denominated in foreign currencies.

I want to examine the Fourth Horseman more carefully, because I believe it will arrive next and will trigger the subsequent arrival of the Fifth Horseman.

How This All Ends
PREVIEW by Chris Martenson
Monday, August 31, 2009

Executive Summary

  • A funding crisis is in store for the US government and citizens.
  • The “Fourth Horseman,” represented by the dollar going down while interest rates go up, will signal the start of the funding crisis.
  • The Federal Reserve Custody Account has been growing faster than the Trade Deficit, a historical oddity.
  • The custody account represents a grotesque imbalance with risks of its own. 
  • The US will eventually face a funding crisis. For now, that crisis has been forestalled by willing foreign central banks.
  • This end begins with the widespread recognition that the US is insolvent and that propping it up is a lost cause.
  • It all ends with a vastly lowered standard of living.

In this report, I write about how the US debt machine will most likely meet its end and how we’ll know that this end is approaching.

In The Five Horsemen, I made the case that we have already seen the arrival of three out of the five signposts that will signal the end of US economic dominance and overconsumption. Those signposts are:

  • The First Horseman (arrived):  New credit growth falls below interest payments.
  • The Second Horseman (arrived):  The Fed monetizes debt.
  • The Third Horseman (arrived):  Government deficit spending exceeds 10% of GDP.
  • The Fourth Horseman (not yet):  The dollar goes down, while interest rates go up.
  • The Fifth Horseman (not yet):  US debt becomes denominated in foreign currencies.

I want to examine the Fourth Horseman more carefully, because I believe it will arrive next and will trigger the subsequent arrival of the Fifth Horseman.

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