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 Posted - 01/28/2009 : 21:36:15
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The End of Wall Street
The Wall Street Journal believes that Wall Street, as we know it, has come to an end, and hints that consumer credit may become severely restricted (i.e., no more credit cards for many people).
Please watch this Wall Street Journal video which explains why our current economic meltdown is so serious.
Phil Long M.D.
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Posted - 01/30/2009 : 19:05:43
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Why I Told My Family To "Get Into Gold" |
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Posted - 01/30/2009 : 23:58:46
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These Bailouts Won't Work
So Far, No Improvement
My prediction is that these bailouts aren't going to work.
These bailouts are directed at banks to relieve them of their "toxic debt" and to "inject liquidity" back into the credit markets.
Thus far, there is no sign that these trillion dollar bailouts are working:
- Global stock markets continue to fall.
- Global credit markets are still frozen.
- The global recession is worsening.
The Wrong Diagnosis
The mass media blames this economic meltdown on the "subprime mortgage crisis" triggering a banking crisis which, in turn, triggered a stock market crash.
I haven't heard one financial expert on television mention that this crisis is due to the collapse of the derivative market. I find this to be incredible.
- The subprime mortgage fiasco created $2 trillion in debt.
- Yet in 2008 the stock markets lost $7 trillion.
- Thus something much larger than the subprime mortgage fiasco is responsible for our current economic meltdown.
I believe the financial experts have totally misdiagnosed the cause for the economic meltdown. I believe our economic meltdown is due primarily to a massive collapse in the derivative market, and not just a collapse in the mortgage/credit/stock markets.
Wrong Treatment
Most of the US banks are now almost insolvent. They have lost trillions on betting in the derivative market, and on granting credit to people who can't repay their loans. These banks can be bailed out by the US government, but that won't remedy the basic problem.
Bailing out these banks will allow them to "carry on as usual".
They will continue to bet on the derivative market (where for every $1 they bet, they can get $10 to $40 if they win). They will continue to give credit to people who shouldn't qualify for credit.
Consider This Example
This month one of my patients bought a new car. This patient hasn't worked for a decade and is on welfare. However, this month he received a new credit card in the mail with a $5,000 credit limit. He immediately used this credit card to pay for the down payment on a new car. Incredibly, the car dealer didn't do a credit check, so my patient drove home with the new car. My patient is insolvent; nevertheless our financial system is showering him with credit.
I believe we are showering credit on our banking system exactly like we are showering credit on my patient.
Like my patient, most US banks are insolvent. Nevertheless, the US government is showering them with credit (bailing out US banks with money that they never will be able to repay). This does nothing to correct the bank's scandalous financial behavior.
Nationalize The Insolvent Banks
Currently you could buy up all the stocks of all the US banks for less than $700 billion.
Yet the Bush Administration committed $8.5 trillion to bailout the banks, and the Obama Administration just committed an additional $800 billion.
So why not just buy these banks (i.e., nationalize them) for a fraction of the cost of the current bailouts? At least, that way, the incompetent bankers who got us into this mess could be fired, and the government could better regulate these banks. The government could then get rid of the toxic bank "assets", guarantee the bank loans, and slowly bring these banks back into profitability. Then the government would have the option of selling these banks back to the private sector (and possibly making a profit).
Make Most of the Derivative Market Illegal (As It Was Before 2000)
Unless governments stop banks from betting on the derivative market and giving subprime loans; these bailouts will accomplish nothing.
The US government must repeal the deregulation laws of 2000, and make most of the derivative market illegal again. Since 2000, the derivate market grew from a few trillion US dollars to more than $600 trillion in 8 short years. This is the biggest speculative bubble in history. US banks have become addicted to gambling on the derivative market, and their addiction will soon bankrupt us all.
Phil Long M.D.
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Posted - 01/31/2009 : 16:34:39
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Warning About How The Federal Reserve Is Now A "Secret Government" That Bypasses Congress
Will The World Drop The US Dollar?
On September 18th, 2008, Congressman Ron Paul gave this warning about how the US Federal Reserve has become a "secret government" that has released trillions of dollars without asking for the approval of Congress.
Under the law, the US Federal Reserve has the power to release funds without the approval of Congress during "financial crisis". However, when the Federal Reserve was created in 1913, its founding fathers never thought that, one day, the Federal Reserve would use its emergency powers to release $5.5 trillion dollars to bailout banks (as it did in 2008).
Congressman Paul also warned that US over-consumption and mounting debt could cause investors to dump the US dollar.
We should all listen to this Congressman's warning.
Phil Long M.D.
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Posted - 01/31/2009 : 16:44:10
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Incredible Stupidity: Nobody Knows Where The Bailout Money Went
Congress Didn't Check Where The Bailout Money Went
This is another incredible story about financial stupidity.
In 2008, when the US Congress passed the law giving hundreds of billions to bailout the US banks, they didn't make the banks accountable for how these billions were spent.
Now no one in the US government knows where the bailout money actually went.
Stupidity on this scale usually bankrupts a nation.
Phil Long MD
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Posted - 01/31/2009 : 17:16:09
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They Are The First To Suffer
Eighty-six percent of my patients with schizophrenia are disabled and can't work. How will they survive if our financial stupidity bankrupts our governments?
Phil Long MD
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Posted - 01/31/2009 : 21:46:07
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Banks Are Using The Bailout Money To Buy Other Banks
How Could The US Banks Be So Incredibly Stupid?
Instead of the US banks using their bailout money to unfreeze the nation's frozen credit markets; these banks are using their bailout money to buy other banks.
Buying other banks simply compounds the debt problems that got the US banks into this terrible liquidity problem. The whole idea of these trillions of bailout dollars was to recapitalize the banks so that they could get out of debt and start lending money again to the "real economy".
Instead of that, these banking morons are going deeper into debt by buying other insolvent banks. The net result is that none of the bailout money is doing what the government intended:
- The bailout money hasn't gone into freeing up credit.
- The bailout money hasn't been an economic stimulus.
- The bailout money hasn't prevented a global economic meltdown.
What were these bankers smoking? Why does the US government let them get away with this fraud?
There Is No More Money To Throw At This Problem
The Bush Administration committed $8.5 trillion for this bank bailout. Last week, the Obama Administration committed another $800 billion for this bailout. Altogether, that means that the US has committed $9.3 trillion to bailout these banks.
The US Gross Domestic Product is $14 trillion. That means that the US government has committed 66% of the US Gross Domestic Product to bailout these banks. But there is nothing to show for this bailout: credit is frozen, the recession is much worse, and the US dollar continues to fall.
It is inconceivable that the US government has any money left to throw at bailing out these banks. So now what do we do?
By squandering $9.3 trillion on this failed banking bailout, the US government has converted a bad recession into the Second Great Depression.
Phil Long M.D.
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Posted - 02/01/2009 : 20:41:45
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Congressman Dennis Kucinich Questioned The First $700 Billion Bailout
Bailout Based On Fear, Not Fact
(Sept. 28, 2008)
Ohio Congressman Dennis Kucinich objected to the first $700 billion bailout package.
He raises a number of legitimate points.
Phil Long M.D.
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Posted - 02/01/2009 : 21:04:06
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These Are The Bankers The US Government Is Bailout Out
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Posted - 02/01/2009 : 21:26:19
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Reasons To Stop These Trillion Dollar Bailouts |
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Posted - 02/01/2009 : 22:15:22
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Congressman Claims Bailout Was For China
Was Much of Bush's $700 Billion Bailout For China?
In September 2008, Congressman Peter DeFazio stated that:
- Much of the $700 billion bailout package wasn't to bailout US banks.
- Instead, he claimed that this bailout package was to bailout Chinese investors who owned billions of dollars in toxic US subprime mortgage backed securities.
There Is Some Support For This Claim
- China is the largest holder of US Treasury securities. If China ever decided to "dump" this US debt; it could cause a run on the US dollar.
- Apparently China was also one of the largest holders of toxic US subprime mortgage backed securities. Obviously, China would want to get rid of these toxic mortgage backed securities.
- Congressman DeFazio suggests that China demanded that USA buy back its toxic subprime mortgage backed securities (or else China would punish USA by "dumping" its Treasury securities).
- The ambiguous wording in the first $700 billion bailout law allowed the US Treasury to buy back toxic "assets" from anywhere in the world (including China).
- This could explain why journalists can't find out where the bailout money has gone. Bloomberg News actually sued the Federal Reserve, under the Freedom of Information Act, to force the government to tell where the billions in bailouts had gone. The Federal Reserve refused to answer this question, stating it was "a state secret".
If this allegation is true; it would mean that (once again) President Bush lied to America. It would mean that the $700 billion bailout had little to do with "stimulating the American economy". Congressman DeFazio thus alleges that President Bush's first $700 bailout package was all about buying back toxic subprime mortgage backed securities from China.
Of course, President Bush could never sell American taxpayers on the need to bailout Chinese investors. Thus it would make sense for President Bush to repackage the truth, and say that this $700 billion bailout was to "stimulate the American economy" and "save jobs in America".
If Congressman DeFazio's allegation is true, it would mean that China now holds so much American debt (i.e., Treasury securities, etc.) that China is able to dictate US fiscal policy (e.g., bailouts and interest rates).
This whole bailout story is getting so bizarre.
Phil Long M.D.
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Posted - 02/01/2009 : 23:00:35
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For Your Information
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Posted - 02/05/2009 : 23:24:49
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Gold Prices Are Largely Controlled By The Central Banks
Things You Should Know About Gold
Before anyone invests in gold, there are a few things you should know:
- The price of gold is tightly controlled:
The previous post on gold reported that certain world banks control thousands of tons of gold. That means these banks can manipulate the gold market for their own advantage.
- Throughout the year there are multiple "buy" and "sell" points for gold:
Those controlling the market let the price of gold increase by about $200/oz. Then they sell tons of gold at this high price. Their dumping tons of gold into the market quickly decreases the price of gold by about $200/oz, and at this lower price those controlling the market buy back their gold. This buying increases the price of gold, which attracts new investors to buy more gold. Once this new wave of buying pushes the price of gold above $900, those controlling the market again sell more tons of gold. Then the price drops again by $200/oz, and the cycle repeats itself. This cycle has happened 3 times in the past year, and indications are that the 4th cycle (i.e. price drop) is about to happen.
- Wait a month before you buy any gold:
If the prediction is that those controlling the market are about to sell off more tons of gold at the current high price; my suggestion would be to postpone your purchase of gold. Once gold drops to about $750/oz, it would be a good time to buy gold. Most experts predict that gold will finish this year above $850/oz (so you will make a small profit).
- The price of gold might dramatically increase:
If China decides to dump much of its US debt (e.g., Treasury securities etc.); there could be a collapse of the US dollar. If the US Federal Reserve prints too many dollars to pay for the recent US bank bailouts; there could be hyperinflation. These economic disasters are unlikely, but either would dramatically increase the price of gold.
What is more likely is that there will be worldwide currency devaluation (which would increase the price of gold).
Phil Long MD
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Posted - 02/21/2009 : 12:01:43
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Billions For Wall Street Bailouts vs. Minimum Wage For Main Street
Dear Members,
By now you have deduced that:
- I am furious that the US government has given a $8.5 trillion bailout to the Wall Street bankers and speculators that have caused this economic meltdown.
- Sadly, I predict that this $8.5 trillion banking bailout will be ineffective (since it does nothing to change the corrupt banking and derivative market betting practices that caused this meltdown).
- I predict that most of the suffering caused by this economic meltdown will be inflicted on the poor.
Please watch this video which illustrates what is wrong in today's capitalism. One bank, Goldman Sachs, received a $10 billion government bailout. This bank then gave $6.8 billion in bonuses to its executives (for an average bonus of $210,300 per executive).
Perhaps the worst part of this story is that Treasury Secretary Henry Paulson, the man who gave Goldman Sachs the $10 billion, was the former Chief Executive Officer of Goldman Sachs.
I really believe in capitalism, but bailouts for the rich and exploitation of the poor isn't capitalism.
Phil Long M.D.
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Posted - 02/27/2009 : 10:50:08
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I WON'T BUY GOLD UNTIL APRIL 2009
Dear Members,
I predict the gold market will drop for the next month or so until the price of London spot gold hits US $750/oz. Then the central banks that control the price of gold will let the price of gold rise again.
As I mentioned before, the International Monetary Fund announced last year that it was forced to sell more than 400 tons of gold (in divided lots). Normally only 500 tons of gold are traded in one year, so the additional sale of 400 tons would significantly distort the price of gold.
That is why, in 2008, there was so much volatility in the price of gold. Each time the price of gold increased to be near $1000/oz, the IMF or some other distressed central bank would sell a hundred tons of gold (forcing the price of gold down for the next month).
I believe the IMF (and other central banks) are starting to sell another hundred tons of gold right now. Thus this month would be a very bad time to buy gold.
In April, when the price of gold is around $750/oz, I am planning to buy gold (as bullion certificates within my tax-sheltered retirement savings plan). When I buy in April, I am expecting that gold will go from $750/oz to $1000/oz by year's end.
Why am I getting out of cash (i.e., money funds or guaranteed certificates of savings)?
I believe that most countries will experience major currency devaluations this year.
I lost 20% of my life savings (when valued in US dollars) in 2008 when the Canadian dollar dropped 20% relative to the US dollar. I don't want to be in cash this year when our currency is devalued again.
Remember, I am not an economist. I am just a psychiatrist who is watching his life saving's disappear due to the corruption within our financial system. I am not qualified to tell you what you should do with your savings.
Phil Long MD
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The Great Recession of 2009-2011 [closed]
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