The Rule of Liars – Wall Street Underground

By Nick Guarino | March 2, 2010

We are living under the rule of professional liars. They are our politicians, Wall Street brokers, bankers, leaders of our our major companies.

Banks don’t record their losses in derivatives, in the past that would be called fraud. They don’t book their vast losses in housing, commercial real estate and business loans. But those losses keep growing, even if they don’t show them. And in today’s twisted world that is called managing risk, its a sad time we live in.

It’s real important to set your clock to the right time. To set your compass on north. It’s the only way to know where you are, and where you are going. And to be able to sort out the truth from the lies.

This is the most dangerous time of all. Many people who survived the last year have bought into the recovery spin. They believe the crisis is over. They will do the exact wrong thing. They will get creamed in the next phase of this wipeout.

The insane logic tells you to buy gold, “because inflation is right around the corner, and the dollar will collapse.” That is the worst mistake you could make. Just the opposite is true. Another bold face lie.

The dollar is trading in a well-worn range. It is not collapsing and will not collapse. The whole world is running to dollars en masse. The U.S. isn’t printing money to cover massive deficits. It does not have to. It is able to borrow all the money it wants. At ever lower interest rates. This talk about monetizing debt by printing money is another lie.

Put on your thinking cap. Say you are going to buy government debt, or AAA-rated debt, as is required of many banks and retirement funds. Which government’s debt would you select? Japan? Spain? Greece? Italy? England? Portugal? Ireland? How about Dubai?

The answer is you can’t buy any of the above. None of them are rated AAA any more. Just Uncle Sam. These other nations put new meaning to the phrase “debt crisis.” As a percentage of debt to GDP they owe far more the the US. I fully expect most, if not all of them, to default soon on their massive sovereign debts.

Their defaults will trigger something much worse. Those nations will be forced to cut benefits and government services. The spoiled masses there will be enraged. They will riot in the streets.

These nations are semi-socialist states. Since World War II, the people in them have only known massive largesse from government. Government has looked after them, from cradle to grave.

Now, like a hungry baby whose bottle of milk is taken away, the masses will cry and throw a tantrum. Unlike a baby, unemployed twenty-somethings, whose benefits have been cut off, can do a hell of a lot of damage, as they riot in major cities across the globe. Instead of throwing toys, they will throw Molotov cocktails.

The smart money knows this. So where do they put their money? They buy U.S. government securities in unprecedented amounts and at record low interest rates. To do that, they must use (buy and keep) U.S. dollars.

You see, the world is stuck in the Dollar Trap. The dollar may be a shadow of its former self. But it’s still the best of a bad lot. Of all the debt instruments, U.S. government debt is the only secure, guaranteed place to park your money.

As much debt as the US government is issuing, other governments are issuing a hell of a lot more debt, as a percentage of their GDP. And the US is prepared to and will bankrupt its citizens to pay all this debt.

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