Shenandoah

The “Oh Hell” moment is upon us…..

March 13, 2008 on 8:50 am | In Old Posts |

A long time ago, in a galaxy far, far away…..

I warned that once the United States crossed the Rubicon, there would be major economic consequences. While those consequences may not happen in one moment of singularity, the consequences are there. There have been a number of technical analysts who project the next stop and support for the USD Index is at the 62 level followed by 56 then the low 40’s. It does not matter. There are larger geopolitical consequences once we close below the 72 level and set up a new base for the decline and none of them are good.

Don’t Cry for Me Argentina

That’s right. We are entering into the realistic probability of what I call destruction economics where the United States economy tears the heart and soul right out of it’s citizenship and almost every move by the Fed only makes matters worse. The fact that so many people have ignored the fact that the Federal Reserve Chairman has stated openly that he will inflate to avoid a deflationary depression has escaped the attention of many when discussing the dollar crisis. All you have to do to realize he’s not bluffing is to look at this chart:

I wish to thank John Williams and others who have continued the calculation of M3 and advise everyone to pay attention to www.shadowstats.com as the data series there no becomes crucial to where this economy is heading. The problem with the US Dollar being destroyed is much more important to other nations than our own at this moment. If you are a Chinese Communist Party leader who directed their central banks and investment houses to invest in American Treasuries and companies there is a realization that your returns are now quite negative versus domestic (Chinese) inflation and being deliberately diluted in the U.S. to monetize the massive Federal debt. There is now a real risk that the Arab and Chinese bloc elect to liquidate their holdings and convert them further into Euro denominated investments and double down on commodities to continue expanding their strategic investment base. This will trigger a massive inflationary spike at the grocery store for the American consumer and decide the election in a rapid manner. The Republicans will assume the role of Jimmy Carter and receive all the blame for the banking collapse, municipal bond market collapse and inflationary death spiral and their party will be obliterated at the polls. In that same token, the Argentine model is the only recent modern version of the inflationary death spiral being imposed by a central bank on its people that we have at the moment.

Depending on the events of the day, I will add to this thread tonight. But there is a whole world of hurt about to fall upon us….

Well that took less than an hour to update…watch the Swiss Franc today; it could easily trade at par which triggers another series of carry trade problems for the U.S.