Where is the US economy headed?

We're Now Engaging in the Same Disastrous Policies... Only On a National Level


By Graham Summers
Apr 8 2011 10:5

The financial world is entering a massive process of transition though most folks have failed to see it. That process is that of Ben Bernanke being forced to resign and the US Federal Reserve being broken up.

I know many people believe the Fed is always going to be in power, but they are wrong. The US Federal Reserve is in fact the third central bank the US has had. And it, like the other two, will be dismantled in the next five years.

The reason for this is quite simple. The REAL Crisis (of which 2008 was the warm-up) is fast approaching. When I say REAL Crisis I mean full-scale systemic meltdown, a situation in which the market accomplishes what the Fed, regulators, and US Government at large have failed to do: clean house.

The plain facts are right in front of us. The US is broke on every level: Federal, State, Local, and individual/ consumer. We all know this, but we don’t want to admit it because doing so would likely mean wiping out at minimum 30% of what we have today.

Nobody wants this. Consumers don’t want to lose their retirement accounts or their savings. The Government doesn’t want to lose its unending virtual checkbook. Politicians don’t want to lose their financial backers (the oligarchs). And the Fed certainly doesn’t want to lose its massive Free Lunch.

However, it is clear to everyone that the system is broken. Consider that the very policies that Wall Street developed resulting in the 2008 meltdown (excessive debt, fraud, too much leverage, etc) are now being applied to the Federal balance sheet.

Indeed, the Fed’s response to the Financial Crisis was to do the exact same things Wall Street did.

The only reason it worked for a time was because investors continue to believe that the Fed is some kind of omnipotent financial authority that can take on all debts and back up all monetary transactions. The reason they’re willing to believe this is because not doing so would result in the collapse I referred to before.

To use a metaphor, if your house has a broken foundation (the financial system), you can prop it up using various structures (the Fed). However, eventually the foundation gives way regardless of the support.

We are already seeing this happen in Europe. The Euro is up but the entire European system is broken. No one wants to be a part of it any more. Only the politicians and bankers are trying to keep it together (largely because they don’t want to lose their influence).

However, elections in Germany are making it clear voters will obliterate anyone who is pro bailouts. As a result of this, the tide is turning. Large-scale reform and changes can take a while which is why the process seems to be occurring in slow motion.

But the process is occurring. And nothing can stop it. You can fight the tide tooth and nail, but it will turn regardless of your efforts.

The same situation will hit in the US in the future. I’ve already detailed why the US Dollar is holding up (it’s priced against other paper currencies) despite the fact an exodus from the greenback is occurring.

Meanwhile money continues to funnel into the king of currencies: GOLD.


Indeed we just a hit a new all time high for the precious metal. I mentioned before that the pullback in January was a buying opportunity. If you followed my suggestion you should be doing quite well.

Best Regards,

Good Investing!

Graham Summers

Listening to the majority doesn't mean someone's listening to the best.

Hey H2OMAN, I notice you have the fairtax web address below your signature.

Listening to the majority doesn't mean someone's listening to the best.

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I'd definitely be impressed to see any real growth from the U.S. economy in 2011.

Gold is a fool's investment; guess what'll happen to gold prices once everybody decides to sell? The nose-dive will be so quick, those who are late will see their paper investment worth less then the paper they're holding

Gold has no real practical value except to make jewelry and computers - and speculation.

Food and fuel are more important commodities.

They were the Hunt brothers in Texas.

... 2% growth is quite realistic since the US economy is starting from a low basis.