(Q) Are Things Getting Better?
(A) Yes and No
Greg Hunter
Oct 28, 2009
There is an old saying in the
markets,"nothing goes straight up or straight down."
If the economy has a lot more to fall, as I think it does, then
it will not fall straight down. I think we are on a proverbial
plateau in this downturn. Yesterday, Treasury Secretary Tim Geithner
said, "The financial sector story is in a much stronger
position than it was but it's a mixed picture," and "The
price of credit has come down dramatically." The economic
picture has improved because of massive amounts of money printing
for things such as "Cash for Clunkers" and the "$8,000
home buyers tax credit." There has also been hundreds of
billions spent buying toxic assets and our own treasuries to
suppress interest rates. Yes, pump hundreds of billions of dollars
into the credit markets and economy and things will look better...
for awhile. John Williams of shadowstats.com
says in his latest alert, "Fed Pushes Monetary Base to Record
High." That certainly makes sense because of what the Fed
has been doing. Williams is not alone in tracking high money
growth by the Fed. Terry Coxon of The
Casey Report said, "As of July, the M1 money supply
(currency held by the public plus checking deposits) had grown
17.5% in a year's time. That's not just unusually rapid, it's
extraordinarily rapid."
Yes, the economy is appearing to look better. However, even with
all the money creation, it is not great. Secretary Geithner said
as much with his "mixed picture" comment. Economist
John Williams concurs and takes it one step further by saying,
"Recession Not Over Despite a Positive GDP Quarter."
Williams thinks the government will continue to print money at
or near record amounts and thinks the downturn has farther to
go. Williams is expecting the economy will not look very good
in the 4th quarter. I think that means brace yourselves for another
leg down.
New York University Professor Nouriel Roubini is once again sending
up warning flares about a different problem, the Fed's zero interest
rate policy. We're talking free money, folks. You might remember
that he was one of the few that predicted the current financial
crisis. For that, he earned the nickname "Doctor Doom."
Now you can call him "Doctor Right on the Money." Roubini
sees the economy a little different than Williams. In some ways,
Roubini sees things more positive and in some ways not so much,
as told in the excerpt below.
Reuters reports: ... "Investors worldwide are borrowing
dollars to buy assets including equities and commodities, fueling
"huge" bubbles that may spark another financial crisis...."Roubini
said he sees a bubble in emerging-market equities and that gains
in some developing-nation currencies are becoming "excessive."
The rally in oil "is not justified by the fundamentals,"
he said. An asset "bust" may not occur for another
year or two as a "wall of liquidity" pushes prices
higher ... In a carry trade, investors borrow in countries with
low interest rates to invest in higher-yielding assets. Roubini
said the U.S. recession seems to be over, though the economic
recovery in advanced nations will be "anemic."...
(The
complete Reuters story)
Money printing will make things look better, but will it last?
What will happen if the Fed stops printing? What will happen
if the Fed keeps on printing? Don't be fooled by the crooked
path the economy is taking. Stay defensive. One thing is for
sure, when Professor Roubini gets nervous, you should too.
###
Greg Hunter
email:
greghunter1@att.net
website: http://usawatchdog.com
321gold Ltd
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