Banking Collapse Is Getting Worse, Not Better

Banking Collapse Is Getting Worse, Not Better

September 13, 2007

Elaine Meinel Supkis


Hurricane Ike is still pounding the remains of Galveston. Hurricane Banking Collapse 2007 is also still a howling 100 mph storm, too. Periodically, I visit Seeking Alpha to dispute the news with the economists there. There is a lot of wishful thinking out there! The dynamics of this meltdown are not like 1974 when the US was still basically solvent. It is very much like Britain in 1931. I use this as my own model which is why jerks upwards in stocks or commodities are not signs of a new bull market but rather, the death throes of a flooded city being pounded by a storm. The eye of the storm isn't a sign it is over. It is a sign of the second half coming ashore.


Powerful Strengths, Pathetic Weaknesses, and What Donald Coxe Recommends

1. The two most important forces in equity markets since July 13th have been powerful strength in financial stocks and pathetic weakness in commodity stocks. Since they have been inversely correlated for more than a year, investors should assume that the commodity stock bear market will continue until the financials roll over. The F&F bailout is merely the second act in a tragedy that has an unknowable number of acts to come.

2. When the financials do roll over, gold and gold mining stocks should move swiftly back into favor. Inflation remains above central bank target levels in the US – and in many other countries across the world. And any return to pronounced weakness among the bank stocks will be strongly bullish for gold.
*snip*
5. The pullback in oil prices and the dramatic bank rescues should have been enough to send the S&P back into bullish mode. It needs to break 1310 on the upside to take away its bearish condition.

6. The real yield on the Treasury 10-year is now a negative 145 bp. On a two-year hold, this means there could be more endogenous risk in nominal bonds than in most blue-chip non-financial stocks. The rush out of TIPs into Treasurys is doubtless driven by the unwinding of F&F exposures, but the long Treasurys are now seriously overvalued.



Alas, it is in the bond markets that we see echoes of the Great Depression the most clearly! The perception of wealth vanished with the crash of world stock markets. The bankruptcies of the individual debtors still wasn't all that great in 1929. Even in 1930, it seemed manageable. But the problem wasn't home owners unable to deal with credit problems! It was EMPIRES unable to do this! The entire system today is being rescued by the very same entity that is dying! The US empire is heading towards bankruptcy. The more it tries to save all the collapsing banks, the more swiftly the looming bankruptcy travels.


Just like a hurricane: we saw this week how the wild seas surged and crashed ashore long before the first clouds appeared on the horizon. We saw how reporters were amazed at the sun set which suddenly turned all the skies a brilliant pink color due to the high vapor levels from the storm. This beautiful light was not a sign of good times. All mariners know that this is the sign of doom and death and they feared this greatly.


This is exactly why it is so hard for many economists to be alarmed sufficiently by what is going on. They are not mariners. They are vacationers hanging about the broad boardwalks, looking at the seas and wondering what will happen next. People in Galveston should have known about its history and not built houses there. But they did! They did this by ignoring this grim history.


Du Plessis:

9. US election campaigns can be excuses for bold acts by foreign adventurers. Although President Bush was a non-person at the Republicans’ Convention after he gave his brief speech by satellite, he’s going to be President for four more months. The world should hope that rogue states think about that before deciding that Washington will be too distracted by the election to do anything about a surprise attack or invasion.


Our entire banking system is built on the shifting sands of international finance. International finance is all about trade rivals who suspend wars in order to see who can win the economic battle without killing millions of people. When this fails or one party that is heavily armed loses the economic battles, wars break out. Empires never simply go bankrupt. They go to war. War means creditors can't collect. They either support the wars or they become looting opportunities for the defunct empire.


The only hedge that prevents this is another empire being sufficiently strong, it can stop the bankrupt empire's plans of looting and enslaving other populations. In the case of today, the US has overwhelming military power. But it is not even remotely sufficient to enslave humanity due to restrictions on the use of force. We were allowed to disarm and invade Iraq but we were not allowed to nuke the population to death and thus, destroy them as humans so they couldn't resist occupation and looting of oil resources.


So here we are today: Palin and McCain openly talk about all-out war with RUSSIA! The Israelis want war with Iran. Europe wants the US to militarily dominate Russia so they can buy Russian energy but not give Russia any political or economic power over them. Japan wants the US to curb the Chinese. The US is losing the trade war with Europe and Japan. These contradictions are not lessening, they are worsening. And are at the root of the banking collapse. Since no one has changed either ideologies, goals, strategies or trade hostilities, the elements leading to more collapsing systems and the destruction of the post-Cold War alliances, continues.

Continued>>>
http://elainemeinelsupkis.typepad.com/ezmoneymatters/2008/09/banking-collaps.html

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