The Risk Averse Alert

Imminent dislocation of key Asian physical economies portended by Japanese announcement of its intention to devalue the yen—an act of "beggar my neighbor" ringing back to the period of the early 1930s when competitive currency devaluations were ventured in a short-sighted, panic-stricken bid to defend national economies— astronomically raises the prospect of consequent banking crises simultaneously breaking out, just like happened in the 1931-1933 period. Destabilize—deflate—global capital flows necessary to prop up a still highly leveraged banking system stuffed to the gills with derivatives exposure the likes of which require capital in such quantities as, indeed, demand extraordinary central bank actions (quantitative easing)—these infinitely pumping liquidity into the banking system—and but one thing is certain to result: insolvency.

Now, do you think the idiot leading the Fed might soon finally surrender to this inevitable outcome, let alone ever recognize the approaching train wreck a currency war is certain to promote? Hell no! Capo Confetti is pre-programed to hyperinflate. Being an incompetent Ivy League academic living in a textbook vacuum detached from intrigue-filled dynamics defining physical reality, the jerk is virtually certain to effect the exact opposite outcome he claims to be pursuing. Good luck, Confetti, flooding the world with your largess while every physical and financial asset that can fetch a price is being put on the market in a desperate bid to stave off insolvency certain to afflict the banking system in a global environment of competitive currency devaluations now knocking at the door! Employment prospects Confetti supposedly ventures to better through endless QE are grim, indeed. Every ill-housed, ill-clad, ill-fed person in America, and the millions more about to join them, can thank the hapless Fed chairman at the appointed hour whose moment is at hand.

Today's Japanese yen devaluation inevitably will become a global phenomenon, too. The game of make believe supposing profound leverage, still building, can be sustained in a cut-throat, competitive climate driving cash flows through the floor is doomed. Once the U.S. dollar joins the party, complete disintegration of the post-Bretton Woods world will ensue.

Even now, the financial economy, strictly technically speaking, is well-poised for its panic-stricken dismantling, which, most immediately, likely portends its chaotic consolidation. So, the first order of business is an imminent, 2008 redux whose devastation is likely to be of an even greater magnitude in its negative effect. This outlook, of course, assumes the current Japanese move to devalue the yen will proceed and, as is likely, spread throughout Asia. This tendency should become fairly obvious over the next few months.

Following the next leg of financial consolidation in today's rapidly failing global economy, the likes of which is tragically precipitating competitive currency devaluations, then will be (all things remaining fairly equal) hyperinflationary blowout hitting the dollar in inexorable collapse making its decline over the past forty years appear merely a blip.

It's all very clear now. As long as primacy continues being given to supporting the derivatives casino called the trans-Atlantic banking system, chaotic convulsion profoundly threatening the world as we know it is a foregone conclusion. This certainty today is being exposed in movement toward competitive currency devaluation initiated by the world's third largest economy, Japan (which only a few years ago was the world's second largest economy, having now been surpassed by China). Cut-throat economics might have seemed attractive in a bygone day when leverage could be easily expanded and absorbed into dubious financial products made in the London-New York Axis of Fraud. However, with confidence in that game now having irreversibly collapsed, the impossibility of sustaining the system of globalization now stands thoroughly exposed.

Hang onto your hats, kids. Here we goooooooo...



© The Risk Averse Alert — Advocating a patient, disciplined approach to stock market investing. Overriding objective is limiting financial risk. Minimizing investment capital loss is a priority.

Analysis centers on the stock market's path of least resistance. Long-term, this drives a simple strategy for safely investing a 401(k) for maximum profit. Intermediate-term, investing with stock index tracking-ETFs (both their long and short varieties) is advanced. Short-term, stock index options occasionally offer extraordinary profit opportunities when the stock market is moving along its projected path.

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