Fast and Furious Rhyme Time ~ The Risk Averse Alert

Thursday, June 21, 2012

Fast and Furious Rhyme Time

Wha-wha-what happened? Are we freeing up capital to pick up some yummy Greek debt? Or, more likely, is time come to prepare for the EMU's burial? And what is criminal ratings agency Moody's up to? The timing of its credit downgrade of major trans-Atlantic banks today following on yesterday's "no hyperinflationary soup for you!" from the Fed Fuehrer hardly seems coincidental. Yet more transparency in a desperate bid to provoke crisis necessary to keep a ridiculous game of make believe going?

Whatever the cause of today's thumping, the developing attack on Team Fraud's cover at the top should not be overlooked. The U.S. House Committee on Oversight and Government Reform, through its "Fast and Furious" investigation, has found cause to hold U.S. Attorney General Eric Holder in contempt of Congress, creating a constitutional crisis now poised to become the Obama administration's Watergate moment.

They say history never repeats itself, but often rhymes. Well, the formal start of the American hyperinflationary experience dates back to August 15, 1971. On that date President Nixon cancelled the Bretton Woods international monetary system and the dismantling of the U.S. physical economy — the greatest industrial powerhouse the world had ever seen — subsequently moved into high gear.

Mmmm. Yummy sophistry sandwich, Dick. Great job, too, putting down those "international money speculators." Lord knows these folks had nothing to do with the astronomical increase in U.S. Treasury debt issuance since...

A destructive policy pushed by a seditious (fascist) political element inevitably brought pushback from elements within the U.S. political establishment awakened to a threat that, today is right at our doorstep. In due course, then, circumstance conducive to Nixon's removal was played up and the President was forced to either resign or face impeachment.

Enter today's rhyme. At the very moment the American hyperinflationary experience is set to go Wiemar the President apparently has walked right into a trap that, even members of his own party appear prepared to spring shut. Therein lies a potentially distinguishing circumstance determining how soon March '09 lows are taken out (in "Beware the Approaching Terror" are weekly S&P 500 charts depicting two possibilities). Should Team Fraud's cover be blown with Obama's removal, then quite possibly "No more hyperinflationary soup for you!" could become a legislative imperative sinking today's mountain of garbage to the bottom of the sea in a panic dwarfing the most recent instance reinstatement of Glass-Steagall had traction in Congress.

One thing extraordinarily pertinent about that mountain of Treasury debt the lovers of s#!^ had better get through their thick skulls here at the dawn of collapse of the game of make believe its existence was made to support. The vast majority of Treasury debt was not created on account of runaway spending in Washington. (Good lord, you couldn't spend that much if you tried! Yet if you could, then how the heck did 9/11 happen?) Instead it exists at the behest of the Ponzi scheme that collapsed in 2008. It was created on its own account, this because in an environment where rates are falling it is considered a "no brainer" to issue debt like it were candy. In effect Adam Smith's Leveraged Ponzi Scheme (a.k.a. "structured finance") largely capitalized this debt. Thus is the greater portion of it best regarded illegitimate in the current environment, as no Ponzi scheme can continue forever (not to mention that, a Ponzi scheme is less than a zero-sum game and will by no means facilitate creation of wealth out of thin air, the likes of which would otherwise generate ample cash flows to service debt incurred while physically building "something out of nothing," such as American capitalism — not today's British imperial brand — has been demonstrated amply capable of achieving at defining moments over the past 2+ centuries). The bulk of U.S. Treasury debt either will be written off outright, or become intimately tied to a Third National Bank of the United States capitalized by massive, dedicated, long-term-oriented investment in productivity enhancing projects radically altering today's physical economy in a manner that similarly distinguishes it at present from the era when horses and buggies roamed the landscape. This might be a tough idea for today's glorified gamblers to wrap their Ivy League destroyed brains around, but you know what they say: necessity is the mother of invention. There is no getting around the fact that, if mankind is to prove itself sane, then reassertion of the American System of Political Economy — protectionism and all — is the inescapable direction we will be moving once today's game of make believe ends tragically, and that quite likely imminently.

Fast Money
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