Don’t say you weren’t warned…

The bad news…

The Bank for International Settlements, the world’s most prestigious financial body, has warned that years of loose monetary policy has fuelled a dangerous credit bubble, leaving the global economy more vulnerable to another 1930s-style slump than generally understood.

The BIS, the ultimate bank of central bankers, pointed to a confluence a worrying signs, citing mass issuance of new-fangled credit instruments, soaring levels of household debt, extreme appetite for risk shown by investors, and entrenched imbalances in the world currency system.

See the full article here.

But wait, there’s more….

It is not a matter of “if” the dollar will collapse, but “when” it will collapse. At Gold Stock Bull, we think the dollar could fall below 80 cents before year end. Once that support gives, it is anyone’s guess how low it could drop. The U.S. dollar is facing imminent collapse in the face of an unsustainable debt.

At a UN Headquarters press conference, launching the 2007 World Economic Situation and Prospects Report, mid-year update, Rob Vos, the Director of the Development Policy and Analysis Division of the Department of Economic and Social Affairs (DESA), told reporters that, “The United States debt, which has now deepened to well over $3 trillion, might turn out to be unsustainable in the rest of 2007 or next, putting further downward pressure on the United States dollar.” He also pointed out that since its peak in 2002, the dollar had depreciated vis-a -vis the major currencies by some 35 percent and by 25 percent against a broader range of other currencies.

See here for the whole story.

And finally:

The M3 data that shows how much money the Fed prints as well as how much is in circulation, etc, just last year, they announced, ‘No one is really interested in these numbers and they are too hard to compile.’ Like a drunken, gambling spouse declaring there is no need to balance the check books or look into the bank accounts, so it is here. Many people yelled about the M3 numbers being suppressed but to no avail, of course.

See here for more.

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Chris

I like to explore, learn, teach, and laugh!

2 thoughts on “Don’t say you weren’t warned…”

  1. With the sub-prime mess and collapse of housing prices in many U.S. markets, the Fed is under pressure to lower interest rates. But lowering interest rates will make international holders of U.S. T-Bills (mostly China and Japan) more inclined to further reduce their buying, or (gasp!) stop buying altogether. My guess is that the Fed will try to save the dollar rather than housing, and raise rather than lower interest rates. They could always introduce 100 year mortgages like they had in Japan…