RE: Wow...fed pumps in more...Pay particular attention #5....www.jsmineset.com
Sinclair= 1 smart dude!
On Thursday and Friday of this past week you have witnessed the largest injection of liquidity in the history of man in only two days.
This is as close as you will get in an alarm-less financial world (no crisis is a crisis because you cannot see it) to absolute proof that the financial system has a major challenge. That challenge may have been sparked by sub prime madness, but is now firing all across the interest sensitive credit derivative market that is absolutely ENORMOUS in terms of replacement value. Should this paper giant implode as a weapon of financial mass destruction, then replacement value is a true value. This brand of un-financed, unregulated, paper garbage special performance contracts dependent on the balance sheet of the loser for viability, without standards and therefore without markets, valued as cartoons by mark to model is larger that the entire National Debt of the US (Source: IMF monthly report on derivative numbers).
Injection of massive liquidity on an unprecedented level may calm emotions, however it also may not. One thing is for sure: the problems are not going away and it is the Big Kahuna that the Fed and the ECB are trying to stave off.
There are conclusions evident from the events and reactions to events of Thursday and Friday:
Anything and everything at an unlimited amount will be done in terms of creating more paper money in order to keep the financial system liquid to hopefully prevent a meltdown in Over the Counter Derivatives on debt.
That puts the last nail in the dollar coffin, most certainly when you know earnings are not going to keep up and less taxes will be paid. The Federal budget will balloon and we will have a negative TIC report.
Since it is axiomatic that the dollar rules gold and logical that the Formula rules the dollar, gold will go to and through all the Angels.
The US dollar, for starters, is headed to .7200.
The equity markets are anyone’s guess as liquidity historically is the grease of the wheels of stocks. Give the perma-bulls liquidity and guess where it goes. In the Weimar Republic as there currency went to zero their stock market went to infinity.
History is being made yesterday and today. It may well not be over even in this time span. The actions of Thursday and Friday are greater even than the Bernanke Helicopter Drop in the two day time period. This event will reverberate through the world financial market for years to come. This is only an indication of what will happen as all this economic sin, instant gratification, profit at any cost economy begins to unwind in the form of the Over The Counter Derivative implosion. Be careful here.