Time Magazine, Are You Insane?

Time magazine has declared the “great banking crisis of 2008 is over.”

There are a number of critical reasons to be sceptical of Time’s logic in doing so, however.

First, let us consider the reasons Time gives for its bold declaration.

Number one among them is the reported $3 billion in profits made by Wells Fargo bank in the first quarter of this year.

In fact, so confident is Time that the most complex and far reaching banking crisis in memory is now a thing of the past, it claims that the Treasury’s stress tests of banks and its “legacy loans” program are now obsolete.

Apparently, the experts at the Treasury had been “thrown off the scent” by all the bad news that they forgot to take into an account that the banks don’t need any help.

The experts at the Treasury had been thrown off the scent and consequently had missed the fact that there was not need to test what is already working well. The same holds true for the Geithner plan to take toxic assets off bank balance sheets. It is academic now. What banks are earning from the difference between the cost of capital and the income from lending is now great enough for the banking system to be self-sustaining again.

Further evidence of the great recovery, we are told, are “comments from the CEOs of Citi and B of A” that everything is now rosy with banks and that any consideration of nationalization or insolvency is no longer necessary.

Give This Guy a Medal in Peddling B.S.

The author of these bold claims, Douglas A MacIntyre, does concede that despite the end of the crisis, the U.S. banking system is “still terribly weak” and “dilapidated.” But MacIntyre points to the rise in bank shares as evidence that these minor details are no longer of concern to investors.

There should be some sort of Congressional medal for hacks like MacIntyre who tow the government’s line of banks so faithfully.

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Which Camp Do You Belong To?

You should also consider which camp you belong to: that of the easily manipulated small-time investors who look no further than the platitudes of the mainstream media or the informed U.S. taxpayers who see the government’s Ponzi approach to recovery for what it is – a road to almost certain ruin for America’s middle class.

The easily manipulated cannot be helped. Wall Street needs its victims. And Washington – aided and abetted by once reputable media outlets like Time – are all too happy to feed a few more gullible and ill-informed investors to the wolves.

For those in the second camp, anger is the principal emotion right now. Probably closely followed by disbelief and a gut-wrenching disappointing in the new White House administration.

Fortunately for this second group, there’s also the possibility that they will survive the 21st century depression – and maybe even emerge from it wealthier and wiser.

Let me explain…

The Trend Is Your Friend

There is now a clear trend in place that informed investors can use to profit from the economic meltdown.

Simply put, it’s the unprecedented government’s commitment to spend its way out of this crisis and the unprecedented money creation (inflation) that goes with it.

You don’t have to be an expert in economics to figure this out.

To ‘fix’ the crisis, President Obama and Ben Bernanke have decided to try to spend their way out of trouble. But America is already deeply indebted. The country owed over $11 trillion – or over $36,000 for each American citizen.

So the government has two options to raise the kind of money it needs to try to bailout the economy. It can borrow or it can print money. (It cannot earn such vast amounts nor can it raise that kind of money through imposing new taxes.)

Right now, it’s doing both – borrowing via Treasury auctions and printing via the Fed’s “quantitative easing” program (under which it prints up new money and hands it over to the Treasury in return for government bonds).

The Problem with Borrowed or Printed Money…

The problem with borrowed or printed money, of course, is neither are real capital… and they cannot truly fix anything.

That’s not going to stop the Obama White House from trying.

According to the Congressional Budget office, the president’s budget alone will add more than $10 trillion to the total federal debt by 2019 – about as much total debt as was outstanding at the beginning of 2007.

That’s an extra $1 trillion in federal debt each year for the next ten years – and more borrowing than all the other presidents in history combined! It will bring the total federal debt to over $21 trillion by 2019.

Of course, these are the kind of numbers that used to be used only by astronomers measuring the vast distances in space. They are simply too vast to conceptualize. But to put it in perspective, the entire federal debt in 1980 was just $930 million. It’s now over ten thousand times that amount… and it’s growing at a faster rate than ever before.

Can you see where this is heading?

It is heading straight for a “great inflation” that will not only ruin those how have earned and saved dollars but also end America’s economic standing in the world.

As global trends specialist Justice Litle says, “The key thing is that paper currencies are backed by faith and little more – and in that regard, the mighty greenback has sprung a mighty leak. The cracks in the dam will soon widen… and then it’s only a matter of time before the U.S. government’s multitrillion-dollar spending spree, still ongoing, leads to the dollar’s outright collapse. Hence the subtle suggestion to position one’s self accordingly now, before things get really interesting.”

How can you diversify out of the dollar?

How to Get Away from the Doomed Dollar

There are a number of ways you can do this…

• Gold and silver are two great ways to hedge the dollar’s decline. That’s because these metals are an unbeatable store of value. And when investors realize that the dollar is destined to lose its value, guess where the smart money will go?
• Emerging markets are also a great way to get out of the way of the dollar’s coming slide. Emerging markets are certainly cheap and promising right now. Especially the so-called BRIC nations, Brazil, Russia, India and China. Plus, a rising middle-class in emerging markets means internal demand will for consumer good will grow. This will go a long way toward helping emerging markets “decouple” from the U.S.
• Oil, gas and metals also rise along with inflation. That’s because as dollars or other currencies lose value, the relative value of these hard assets rise in relation to cash.
• “Commodity currencies” such as the Australian dollar, the Canadian dollar and the New Zealand dollar will also rise versus to the dollar when inflation takes a grip in America. That’s because the value of these currencies is strong linked to natural resource profits. When the price of natural resources such as iron ore, uranium, oil and gas rise, so do these “hard asset” currencies.

It’s beyond the scope of this letter to tell you exactly how to use these assets to boost your portfolio or retirement account. Expert advice is needed to identify the most advantageous market timing, the right security, etc.

For Serious Investors Only…

For those of you really serious about protecting your wealth during the “Great Recession” and seizing the once-off money-making opportunities it is created every single day, you can test drive James Dale Davidson’s crisis investing service, Crisis Strategy Alert .

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A word of warning: this service isn’t for everyone. It requires an open mind. Many of the crisis plays it contains – what James calls “investment outliers” – are unconventional. They are not the kind of investments you’re probably used to. That’s because they take advantage of mispricing that extreme market conditions have on a range of different assets. In a nutshell: they allow you to buy dollar bills for 50 cents.

Unfortunately, it’s difficult to explain the methods of crisis investing to people used to bull markets and the illusion of every rising house and shares prices. But if you think you are open-minded enough to turn this crisis to your financial advantage, you can apply for a 60-day, no obligation trial membership of Crisis Strategy Alert here.

Until next week,

Chris Hunter, co-editor Abundance

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