Examples: Confidence Destroyed
""We're near the cliff's edge, very close to capitulation, the mood is very gloomy," said Jean-Claude Petit, head of equities at Barclays Wealth Managers France.
"I not sure that governments and central banks are realising what's really going on," he said.
What's "really going on" is that our entire financial system has turned into a gigantic clown car. There hasn't been any recognition that the fundamental problem over the last two decades has been fraudulent lending - giving money to people on loan that the lender knows full well has no real chance of being able to pay it back.
The FX dislocations that we've seen over the last few days have perplexed me and in addition been cause for great alarm. This is not without foundation. After much study I think I've figured out what's going on - we are witnessing the capital flight that I feared might happen in some of my Tickers from last year.
These moves are hedge funds and others that are leaving The United States with their money. It is flowing out of the United States.
Nor is this limited to hedge funds - it has become essentially impossible to sell Fannie and Freddie paper overseas now too:
"Feb. 20 (Bloomberg) -- Asian investors won’t buy debt and mortgage-backed securities from Fannie Mae and Freddie Mac until they carry explicit U.S. guarantees, similar to those given on bonds issued by Bank of America Corp. or Citigroup Inc.
The risks are too great without a pledge that the U.S. will repay the debt no matter what, according to Hideo Shimomura, chief fund investor in Tokyo for Mitsubishi UFJ Asset Management Co., and other bondholders and analysts in Japan, China and South Korea interviewed by Bloomberg. Overseas resistance may hamper U.S. efforts to hold down home-loan rates and rebuild the nation’s largest mortgage-finance companies.
The problem is that we can't guarantee these securities. If we attempt it we will literally double the outstanding debt of the United States overnight. This will in turn destroy the bond market, spiking yields higher, which in turn will crush what's left of the credit markets (including and especially housing.)
Policy-makers must understand: This is a confidence problem and they are responsible for it. The people pulling the levers of power, including Bernanke, the OTS, OCC, President Obama and Geithner (and their predecessors, have intentionally and systematically obscured the facts and looked the other way while various people within Wall Street repeatedly misrepresented the quality of the securities they were peddling and, in many cases, the health of their firms. Do I really need to go back and cite "The economy is fundamentally sound" or "I'm going to burn the shorts" again? None of these people have been held to account for their falsehoods by our government and as a consequence the market is doing the job that government refuses to do, with the result being a market collapse.
We as Americans and in fact investors all over the world have suffered trillions of dollars in harm, a consequence that accrued to us as a direct and proximate consequence of the intentional and willful acts of these government officials and "captains of Wall Street."
Now the people with the money are quite literally leaving. They're finished with the liars and games and are taking their ball and going home, voting with their wallets. The damage being done to our capital markets is reaching critical levels and threatens to stoke a positive feedback loop that is nearly impossible to stop.
Should our policymakers not step up and put a stop to the lies and fraud in the immediate future the other actions they are taking will mean exactly nothing. A "mini-crash" of another 20-30% down in the S&P 500 (which would take us into the 600s) will destroy another 2-3 million American jobs and bankrupt hundreds of midsize and large companies, along with tens of thousands of small firms. An all-on market panic, which is looking increasingly likely and may initiate as soon as today, will result in the bankruptcy of 30% or more of the S&P 500 and an unemployment rate that will exceed 15% within the next twelve months on "official statistics", and U-6 numbers above 25% - rivaling The Great Depression.
There is no more time for game-playing. Our policy-makers were not elected to protect the malefactors and fraudsters; they were elected to protect the people.
Confidence has been lost across the board. If our government does not act decisively and quickly to restore confidence, forcing the fraud into the open and prosecuting those involved, along with setting forth a concrete path of action specifically addressing the issue of "nationalization" (in any of its various forms of dress) for financial institutions capital flight will accelerate, our financial institutions stock prices will continue on their trip to zero and our markets will crash.
My personal confidence is shaken and on the verge of being destroyed, at which point I may as well take my wealth and depart the system entirely with it, buying a piece of arable land, some chickens and goats, a passel of firearms with many cases of ammo and, just in case, some horses so I can still get around if we suffer a catastrophic economic collapse.
Yes folks, I do think it could get that bad, and it could happen very quickly if our government does not step up - now - to address the above.
Full link here: http://market-ticker.denninger.net/archives/813-Examples-Confidence-Destroyed.html
