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by Chris Martenson
Thursday, November 11, 2010

Executive Summary

  • The US is one failed auction away from economic meltdown.
  • OECD countries are not aligned on what battle they’re fighting.
  • ‘Emergency’ measures governments are now taking will become permanent.
  • Currency devaluation & higher prices are inevitable.
  • Time to prepare is running out. Use the time you have wisely.
  • Chris gives specifics of his personal preparations for use as a guide.

Part I

If you have not yet read Part I of this report, please click here to read it first.

Part II

To quickly review Part I, the US has embarked on a very dangerous strategy of trying to print its way to prosperity, and various countries have, in exceptionally strong terms, indicated severe displeasure with the move. Essentially, they’ve determined that the US is trying to export its difficulties to them, and this is not appreciated.

So what do we make of this, and what might happen next?

I’ll be honest with you here: I have been redoubling my efforts at personal preparation over the past few weeks (and they were already on set to “high” over the past six months). I now see a very high possibility that a fiscal and/or associated dollar crisis could happen in the next 12 months. How high? Right now it looks like 50/50 to me; it’s a coin flip (or Russian roulette with three in the cylinder, if you prefer).

All that would be required to set match to dry tinder would be a single failed Treasury auction. You may consider this unlikely due to the presence of the Fed backstopping all new government borrowing, and that’s certainly a valid consideration, but the wildcard here is that the Fed is merely backstopping all the new Treasury issuances. As I indicated in part one, above, while the US might be floating roughly $1.2 – $1.5 trillion in new Treasuries in 2011, there’s another $3 trillion or so of ‘rollovers’ that have to go off without a hitch as well.

Alert: QE II Has Lit The Fuse
PREVIEW by Chris Martenson
Thursday, November 11, 2010

Executive Summary

  • The US is one failed auction away from economic meltdown.
  • OECD countries are not aligned on what battle they’re fighting.
  • ‘Emergency’ measures governments are now taking will become permanent.
  • Currency devaluation & higher prices are inevitable.
  • Time to prepare is running out. Use the time you have wisely.
  • Chris gives specifics of his personal preparations for use as a guide.

Part I

If you have not yet read Part I of this report, please click here to read it first.

Part II

To quickly review Part I, the US has embarked on a very dangerous strategy of trying to print its way to prosperity, and various countries have, in exceptionally strong terms, indicated severe displeasure with the move. Essentially, they’ve determined that the US is trying to export its difficulties to them, and this is not appreciated.

So what do we make of this, and what might happen next?

I’ll be honest with you here: I have been redoubling my efforts at personal preparation over the past few weeks (and they were already on set to “high” over the past six months). I now see a very high possibility that a fiscal and/or associated dollar crisis could happen in the next 12 months. How high? Right now it looks like 50/50 to me; it’s a coin flip (or Russian roulette with three in the cylinder, if you prefer).

All that would be required to set match to dry tinder would be a single failed Treasury auction. You may consider this unlikely due to the presence of the Fed backstopping all new government borrowing, and that’s certainly a valid consideration, but the wildcard here is that the Fed is merely backstopping all the new Treasury issuances. As I indicated in part one, above, while the US might be floating roughly $1.2 – $1.5 trillion in new Treasuries in 2011, there’s another $3 trillion or so of ‘rollovers’ that have to go off without a hitch as well.

by Adam Taggart

"Straight Talk" features thinking from notable minds 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.

This week's Straight Talk contributor is Steve Keen, Associate Professor of Economics & Finance at the University of Western Sydney and author of the popular book Debunking Economics and the website Steve Keen's Debtwatch.  Steve's research focuses on the dynamics of debt and leads him to believe that debt-deflation is the key issue that will continue to dictate what happens in the global economy.


 1. Much of your research is complex. Can you summarize some of the more important conclusions of your work in ‘layman's’ terms for us?

 

 

Steve: Sure. My work is complex in part because I reject conventional economic analysis, which has infected how ordinary people think about the world—just as the Ptolemaic view of astronomy infected people’s minds prior to the Copernican revolution. So to explain my work I have to start with where I differ from conventional “neoclassical” economists, who now are rather like Ptolemaic astronomers—who tried to understand what they see in the sky by inventing more and more “spheres” on which heavenly bodies were supposed to rotate, rather than accepting Copernicus’ far simpler model of a solar system centered on the Sun.

The key ways are that I see the economy as being credit-driven, and out of equilibrium all the time. The economy needs an expanding supply of money to grow, and in our credit-driven economy, most of that expansion is driven by rising debt.

 

Straight Talk with Steve Keen: It’s All About the Debt
by Adam Taggart

"Straight Talk" features thinking from notable minds 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.

This week's Straight Talk contributor is Steve Keen, Associate Professor of Economics & Finance at the University of Western Sydney and author of the popular book Debunking Economics and the website Steve Keen's Debtwatch.  Steve's research focuses on the dynamics of debt and leads him to believe that debt-deflation is the key issue that will continue to dictate what happens in the global economy.


 1. Much of your research is complex. Can you summarize some of the more important conclusions of your work in ‘layman's’ terms for us?

 

 

Steve: Sure. My work is complex in part because I reject conventional economic analysis, which has infected how ordinary people think about the world—just as the Ptolemaic view of astronomy infected people’s minds prior to the Copernican revolution. So to explain my work I have to start with where I differ from conventional “neoclassical” economists, who now are rather like Ptolemaic astronomers—who tried to understand what they see in the sky by inventing more and more “spheres” on which heavenly bodies were supposed to rotate, rather than accepting Copernicus’ far simpler model of a solar system centered on the Sun.

The key ways are that I see the economy as being credit-driven, and out of equilibrium all the time. The economy needs an expanding supply of money to grow, and in our credit-driven economy, most of that expansion is driven by rising debt.

 

by Adam Taggart

Earlier this week, Chris was invited to appear on Talk Radio Europe, the largest English-speaking radio station in continental Europe. A podcast of the interview has just been made available, which you can listen to by clicking here or on the image below:

The discussion focused heavily on the looming Peak Oil crisis, with a particular slant on implications for the European countries. The subject matter resonated with the host, Richie Allen, particularly because he’s now beginning to hear related sentiment echoed by a small but growing number of concerned European economists.

Chris on Talk Radio Europe: “Gigantic Mismatch” Between World Oil Consumption and Future Supply
by Adam Taggart

Earlier this week, Chris was invited to appear on Talk Radio Europe, the largest English-speaking radio station in continental Europe. A podcast of the interview has just been made available, which you can listen to by clicking here or on the image below:

The discussion focused heavily on the looming Peak Oil crisis, with a particular slant on implications for the European countries. The subject matter resonated with the host, Richie Allen, particularly because he’s now beginning to hear related sentiment echoed by a small but growing number of concerned European economists.

by Adam Taggart

Chris’ latest interview on Financial Sense is now available. It’s a 23-minute podcast that can be listened to by clicking here or on the image below:

Chris and host Jim Puplava discuss the ramifications of Peak Oil on society – basically, essential systems we depend on will start malfunctioning – then dive deeper into specific steps individuals can take in preparation.

Chris on Financial Sense: Preparing for Peak Oil
by Adam Taggart

Chris’ latest interview on Financial Sense is now available. It’s a 23-minute podcast that can be listened to by clicking here or on the image below:

Chris and host Jim Puplava discuss the ramifications of Peak Oil on society – basically, essential systems we depend on will start malfunctioning – then dive deeper into specific steps individuals can take in preparation.

by Adam Taggart

Today marks the launch of our new and (hopefully) regularly recurring "Straight Talk" series, featuring thinking from notable minds 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. Our hopes are high you'll enjoy the expert insights and alternative perspectives this new series brings. 

Our inaugural Straight Talk contributor is Mike Shedlock, author of Mish's Global Economic Trend Analysis, one of the most visited and respected economic blogs on the Web. Mish is an outspoken deflationist and outlines his rationale for being so in his answers to our questions. He is also a registered investment advisor representative for SitkaPacific Capital Management. 


1. You’ve gone from mainframe computer programming analyst (in 2005) to being one of the most widely-read econobloggers in the world today. To what extent do you attribute your competitive advantage to holding a non-traditional background vs. the more ‘classically’ trained analysts and commentators?

Mish: It certainly helps not having a background in economics as taught by academia today. Nearly everyone in academia is a Keynesian or Monetarist.
 

Straight Talk with Mike Shedlock (aka “Mish”)
by Adam Taggart

Today marks the launch of our new and (hopefully) regularly recurring "Straight Talk" series, featuring thinking from notable minds 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. Our hopes are high you'll enjoy the expert insights and alternative perspectives this new series brings. 

Our inaugural Straight Talk contributor is Mike Shedlock, author of Mish's Global Economic Trend Analysis, one of the most visited and respected economic blogs on the Web. Mish is an outspoken deflationist and outlines his rationale for being so in his answers to our questions. He is also a registered investment advisor representative for SitkaPacific Capital Management. 


1. You’ve gone from mainframe computer programming analyst (in 2005) to being one of the most widely-read econobloggers in the world today. To what extent do you attribute your competitive advantage to holding a non-traditional background vs. the more ‘classically’ trained analysts and commentators?

Mish: It certainly helps not having a background in economics as taught by academia today. Nearly everyone in academia is a Keynesian or Monetarist.
 

by Chris Martenson

The most anticipated announcement of the year – perhaps too anticipated (sell the news?) – will answer the question, “How much new money will the Fed decide dump into the situation at their next meeting?”

Estimates range from a low of $500 billion to as high as $4 trillion. In the middle of the range is Bill Gross of PIMCO, who thinks the Fed needs to buy around $100 billion a month of US Treasuries (effectively monetizing the entire US deficit next year), while the high end is claimed by Jan Hatzius of Goldman Sachs, who makes the case that the Fed’s own “Taylor Rule” requires them to buy $4 trillion if they wish to close the apparent gap that exists between that rule and economic reality.

What began as a temporary rescue operation by the Fed and the feds to try and perform a normal Keynesian jump-start operation on the economy is now a permanent fixture without which the markets cannot operate.

More Liquidity on the Way
PREVIEW by Chris Martenson

The most anticipated announcement of the year – perhaps too anticipated (sell the news?) – will answer the question, “How much new money will the Fed decide dump into the situation at their next meeting?”

Estimates range from a low of $500 billion to as high as $4 trillion. In the middle of the range is Bill Gross of PIMCO, who thinks the Fed needs to buy around $100 billion a month of US Treasuries (effectively monetizing the entire US deficit next year), while the high end is claimed by Jan Hatzius of Goldman Sachs, who makes the case that the Fed’s own “Taylor Rule” requires them to buy $4 trillion if they wish to close the apparent gap that exists between that rule and economic reality.

What began as a temporary rescue operation by the Fed and the feds to try and perform a normal Keynesian jump-start operation on the economy is now a permanent fixture without which the markets cannot operate.

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