Stephen Roach says, U.S. Consumer Deleveraging is Just Beginning

Stephen Roach

Stephen Roach

Stephen Roach: “The market is in for a rude awakening,” said the chairman of Morgan Stanley Asia, whose grim outlook seems to remain constant wherever he’s domiciled. “This will be an usually weak recovery,” Roach said. “The damage done to the system [will be] lasting – we are not even close to healing. It’s ‘game over’ for the U.S. consumer. Deleveraging is just beginning.”

Buffett Says, We Are Doomed – We’re Going to Be Crushed Under A Mountain of Debt

A highly influential American has finally hit the panic button about the tremendous mountain of debt the country is piling up.Last year, Warren Buffett says, we were justified in using any means necessary to stave off another Great Depression. Now that the economy is beginning to recover, however, we need to curtail our out-of-control spending, or we’ll destroy the value of the dollar and many Americans’ life savings.Some not-so-fun facts from Buffett’s editorial today in the New York Times: * Congress is now spending 185% of what it takes in * Our deficit is a post WWII record of 13% of GDP * Our debt is growing by 1% a month * We are borrowing $1.8 trillion a year$1.8 trillion is a lot of money. Even if the Chinese lend us $400 billion a year and Americans save a remarkable $500 billion and lend it to the government, we’ll still need another $900 billion.So, where’s it going to come from? Most likely the printing press. And, ultimately, Buffett says, that will destroy the value of the dollar.

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Bob Prechter “Quite Sure” Next Wave Down Will Be Bigger and March Lows Will Break

Yes, the late 2007-early 2009 market debacle was just a warm-up to what Prechter believes will be the bear market’s main attraction. In this regard, he says the current cycle will echo past post-bubble periods such as America in the 1930s and England in the 1720s, after the bursting of the South Sea bubble.The 2000 market peak market a “major trend change” for the market from a very long-term cycle perspective, and the downside is going to continue to be painful well into the next decade, Prechter says. “The extreme overvaluation, the manic buying and bubbles in the late 1990s [and] mid-2000s are for the history books – they’re very large,” he says. “The bear market is going to have balance that out with some sort of significant retrenchment.”

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Robert Prechter Says Dollar’s Hit a “Major Bottom”

Forget all the talk about the dollar being in terminal decline. The recent rally in the greenback is for real, says Robert Prechter, president of Elliott Wave International. The man who correctly predicted the 1987 crash and last year’s peak in oil prices now says we’re “going to be up for a year or two in the dollar.”Reuters and other mainstream news outlets attribute the recent uptick in the dollar versus other major currencies to an improving economy signaled by Friday’s “stronger-than-expected U.S. jobs numbers.” Prechter, ever the contrarian, says the U.S. dollar has put in a major bottom but not for the reasons everyone else is pointing to.

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Inflation Not a Problem “Deflationary Depression” in Our Future

Elliott Wave International founder, Bob Prechter thinks Krugman and Bernanke are premature in declaring victory over the credit crunch. Prechter, who famously predicted the 1987 stock market crash, tells Tech Ticker “the march towards depression, which is being fueled by deflationary trend, is pretty well intact.”So forget all you’ve heard about recovery and inflation, “we’ve only seen the first phase,” of the downturn according to Prechter. Next to come, is “a credit implosion” that will once again destroy the value of stocks, commodities and especially real estate. “The biggest area of overvaluation because of credit extension is the real estate area,” he says. “And if you’ll notice that’s the area that’s had the weakest of any kind of attempt at a recovery.”When this next phase of “deflationary depression” happens the only investment advice he can give is: safety first. “Make sure as an individual you’re in the safest possible investments so you can ride this out.” And as discussed in a previous segment, that means investing in dollars or dollar equivalent assets.

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How a Very Pessimistic Ron Paul Would Fix the Economy: Tech Ticker, Yahoo! Finance

Congressman Ron Paul is “very pessimistic” about the state of the economy, largely because – from his view – the Obama Administration “continues to do the things that created the problem in the first place.”Long a proponent of small government and a staunch opponent of the Federal Reserve system, Paul’s main point is that increased spending and higher deficits are not the solution to our problems, but their cause.”You can take care of people, but never with a deficit, never by expanding the spending,” the Texas Republican says in this exclusive video interview, taped in the Capitol Hill Rotunda in Washington D.C. “The more we do to interfere with the correction – the longer it lasts.”Had he been elected, Paul said he would be doing “a lot less” than President Obama and blames Keynesian economics – which advocates increased government borrowing and spending during times of duress — for our nation’s current ills.While admitting a transition to what he views an “ideal society” won’t be quick or simple, Paul’s economic prescription includes: * Allowing bankruptcies to occur vs. rewarding failure with bailouts. * Stop inflation by dismantling the Fed and returning to the gold standard. * Encourage savings and liquidate debt. * Deregulate. * Give tax credits to those who take care of themselves, or the doctors who provide their care. * Cut government spending, especially on international endeavors. “We spend hundreds of billions of maintaining our empire around the world. Let’s bring that money home,” he says.These recommendations will be familiar to anyone who followed (or supported) Paul’s run for the Presidency in 2008. Given all that’s transpired in the past year, one suspects he’d be getting a lot more votes if the campaign were happening today.

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Can The US Federal Reserve Go Broke?

RGE Monitor

RGE Monitor

Can Central Banks Go Broke? Fed Refuses To Disclose Collateral Composition And Recipients Of $2.8 Trillion Loans

  • The U.S. government is prepared to lend more than $7.4 trillion on behalf of American taxpayers, or half the U.S. GDP, to rescue the financial system since the credit markets seized up 15 months ago. Bernanke’s Fed is responsible for $4.4 trillion of pledges, or 60% of the total commitment of $7.4 trillion. The unprecedented pledge of funds includes $2.8 trillion already tapped by financial institutions

  • The commitment dwarfs the only plan approved by lawmakers, the Treasury Department’s $700 bn Troubled Asset Relief Program (TARP)–> Regulators refuse to disclose who is receiving how much while Congress starts pushing for transparency and give authority over taxpayer money back to elected officials.


  • see Cumberland Advisor’s real-time graph of Fed’s balance sheet and the contributions of different lending programs.
  • The bailout includes a Fed program to buy as much as $2.4 trillion in short-term notes, called commercial paper, that companies use to pay bills, begun Oct. 27, and $1.4 trillion from the FDIC to guarantee bank-to-bank loans, started Oct. 14.
  • Buiter: Can the central bank become insolvent? How and by whom or by what institution should the central bank be recapitalized, if its capital were deemed insufficient? These are relevant questions today wherever central banks have taken on large exposures to private credit risk as in the U.S., the Eurozone, and the UK.
  • Nov 5, RGE: Fed Balance Sheet Expansion: Change in Formula for Interest Paid on Reserves –> banks are providing the reserves for the Fed’s balance sheet expansion themselves.
  • Sep 17: Treasury Announces Supplementary Financing Program to fund the Federal Reserve’s Liquidity Facilities and to manage the balance sheet impact of these efforts.

Go to:  http://www.rgemonitor.com for all the details. (Excellent Financial Site – You will recognize the writer, because he has been all over the TV recently.