This is a clip from CNBC back in April 2010 of Robert Prechter telling the people on the show Fast Money that the market is due to turn down. The best part is near the end where Steve Grasso says “To call out a fall off the cliff in May is ridiculous.” Don’t these guys ever get tired of being wrong? What I respect so much about Prechter is that he has a definite strategy based on what the Elliot wave numbers tell him. These CNBC guys just blow in the wind; they are bipolar traders.
Prechter is a deflationist. Back in 2008, I was a much bigger believer in inflation than I am now. Ever since the credit meltdown, I’m more willing to suspect that the deflationary pressure of the debt burden is too big for inflation to get far out of hand. But I don’t know. I’m personally hedged in both directions these days: inflation and deflation. I personally would prefer deflation; it is a much more honest path of cleaning up the economy, and the investment strategy is simple: hold on to cash. I think if we see another big terrorist attack, which is realistically inevitable, the economy will be so negative that inflation won’t be able to overtake the downward pressure.
Prechter is calling for a choppy downtrend in the market into 2016, at which point we’ll see a new low. During much of that time people may still be thinking we are recovering, but the mood will eventually turn very gloomy.
Comprehensive Annual Financial Reports: Walter Burien on The Alex Jones Show May 2010
CAFR1 Trailer – The Only Game in Town – The Way Our Government Can Be
Not only does the government collect taxes, but it also makes money by investing. That investment money is basically the government’s reserve money, like bank reserves. That reserve money exists on all levels of government and is evident in Comprehensive Annual Financial Reports. Government budgets are not based on how much money is really available. The budgets are artificially low since laws restrict using that reserve money to meet the budget. Nonetheless, that reserve money is why the government hasn’t gone totally broke and totally collapsed. The government has enormous amounts of money invested in the so-called private economy. So, it is no wonder why things like car insurance are mandatory: government can get a big piece of that action by owning stock in those companies. The profitability of government investments is dependent on the health of the economy. So, bad economies are bad for government. But nonetheless, government has plenty of excess money sitting in investments whether they are appreciating or depreciating. What governments should do with that money is use it to create public banks, not invest in the private (corporatist) economy. With public banks, governments could create their own interest free credit for things like infrastructure construction without taxation and the burden of interest-bearing loans.
Goldman Sachs had a perfect first quarter of proprietary trading (trading with their own bank created money for their own profit). That means that all 63 trading days in the U.S. markets in the first quarter were winners for Goldman. Needless to say, in a fair game, that is a nearly impossible feat. But Goldman wasn’t the only perfect trader in the first quarter, so was JP Morgan. And although not perfect, Morgan Stanley managed to make money 93% of the time. It all just goes to show that when you have the resources to determine the direction of a market, you can’t lose. It becomes just like a casino, it is rigged in favor of the house. So, that just goes to show that the idea that the market is some kind of oracle of the health and future of the economy is a delusion. All the markets is is a barometer of whether the big banks are mostly buying or selling on any given day. It is a joke.
And it isn’t only the markets that the big banks rig, it is also the government. Just look at the recent giant European Union bailout orchestrated by the European Central Bank and the Federal Reserve. The only things that bailouts like that do is reward bad government behavior by delaying the day or reckoning and they assure no loses for the banks who finance bad government behavior. It is all a sick symbiotic relationship between governments and banks that turns them both into monsters. Plus, all that funny bailout money (debt) and risk manipulation messes up the real economy.
But no one in the mainstream ever comes out and says what the real problem is with all this stuff. The problem is that MONEY IN THE MODERN WORLD IS LITERALLY NOTHING BUT DEBT! The world doesn’t need bailouts, it doesn’t even need investigations into Goldman, it needs real debt-free money.
In light of the DOW’s 1000 point intraday plunge on May 6, 2010, here is a little clip of Max Keiser explaining the Plunge Protection Team (The Working Group on Financial Markets formed out of the October 1987 stock market crash). The May 6, 2010 crash looked like the Plunge Protection Team pressed sell and sell again instead of buy and then a few minutes later noticed their mistake. Procter & Gamble and 3M fell below what is called the Liquidity Replenishment Point and triggered a kind of market circuit breaker. Interestingly, Procter & Gamble and 3M are two stocks that the Plunge Protection Team purportedly targets to buy to prop up the market since they are heavily weighted on the indexes. Anyway, the whole thing was very bizarre. The rapid recovery was just as bizarre as the plunge itself. It all just goes to show how prone the market is to manipulation, both on the up side and down side.
This is a preview of an episode of NOVA on PBS titled Mind Over Money. You can watch the whole thing here. The episode looks at how emotion causes people to make irrational money decisions, and how those decisions make the economy irrational.
This is Australian (not Austrian) economist Steve Keen from September of 2009. He’s in the deflationist camp. And he talks about how it is private money creation through lending that first causes inflation; government money creation he claims is a kind of after effect.
That seems basically right to me; that is why in Dissolving Dollars I used the phrase “too much debt (not money) chasing too few debt free goods and services” to describe inflation. Just consider these words by William C. Dudley, President and Chief Executive Officer of the Federal Reserve Bank of New York from July of 2009.
“A related concern is the question of whether the Federal Reserve will be able to act quickly enough once it determines that it is time to raise rates. This concern reflects the view that the excess reserves sitting on banks’ balance sheets are essentially “dry tinder” that could quickly fuel excessive credit creation and put the Fed behind the curve in tightening monetary policy…In terms of imagery, this concern seems compelling—the banks sitting on piles of money that could be used to extend credit on a moment’s notice. However, this reasoning ignores a very important point. Based on how monetary policy has been conducted for several decades, banks have always had the ability to expand credit whenever they like. They don’t need a pile of “dry tinder” in the form of excess reserves to do so. That is because the Federal Reserve has committed itself to supply sufficient reserves to keep the fed funds rate at its target. If banks want to expand credit and that drives up the demand for reserves, the Fed automatically meets that demand in its conduct of monetary policy. In terms of the ability to expand credit rapidly, it makes no difference whether the banks have lots of excess reserves or not.” http://www.newyorkfed.org/newsevents/speeches/2009/dud090729.html
