February 26, 2009
Our $10 trillion bailout exposure will lead to Hyperinflation.
Between the loans being backed by worthless assets, equity investments into companies with negative shareholder equity, guarantees on derivatives and other collateral, along with other bailouts and stimulus plans, the Federal Reserve and U.S. Treasury have so far taken on approximately $10 trillion in exposure during the current financial crisis.
We are absolutely outraged that Congress supported the $700 billion bailout along with Obama's $787 billion stimulus, especially considering that these were broad mandates with no checks and balances. It is our belief that almost all of the $10 trillion in exposure so far, will indeed be spent.
An equity infusion into a company with a terrible balance sheet like Citigroup or Bank of America, is nothing more than pouring the money down the drain. There is absolutely no chance of this money ever being recouped.
The only right decision the government has made so far during the financial crisis was allowing Lehman Brothers to fail. While many incompetent people in Washington point to the failure of Lehman Brothers as being the cause of the collapse in the equity markets, the decline in stock prices we have seen is simply the free market trying to correct the imbalances and excesses of the past decade.
By bailing out every single financial institution since the failure of Lehman Brothers, the U.S. government is insuring the collapse of the U.S. Dollar down the road, which will be the end of the whole entire financial system.
To understand just how big the $10 trillion in exposure is, it is larger than the money spent for World War II, NASA's all time budget, Vietnam War, Iraq War, New Deal, Korean War, World War I, S&L Crisis, Afghanistan War, Marshall Plan, Gulf War, Civil War, American Revolution, War of 1812, and the Louisiana Purchase combined.
In fact, the entire cost of World War II over five years was less than half of the pledges made by the Federal Reserve and U.S. Treasury over the past three months.
Up until now, the U.S. Treasury has been lucky enough to fund most of our spending by selling new Treasuries to foreigners seeking refuge and safety in the U.S. Dollar and government bonds.
However, we are approaching a point where the rest of the world is no longer going to want to fund our irresponsible spending. We already have an $11 trillion national debt with no way of paying it back. The world will soon figure out that it is time for them to cut their losses with the U.S. and the Federal Reserve's only choice will be printing the money out of thin air.
We believe there will soon be a huge rush out of the U.S. Dollar and Treasuries and into Gold and Silver. We are on a path towards hyperinflation and if we are going to avoid it, Obama needs to reverse course immediately by ignoring our current recession and doing everything possible to preserve any confidence that is still left in the Dollar.
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