This is just a quick note on the state of the market and the economy right now. I am very bothered by the false spin that has been coming out of almost every media outlet and the government ever since this spring. The absence of reasonable economic analysis is almost complete.
The government and the media are currently putting ordinary people at risk by not telling them that certain guarantee programs are ending. As of last week, September 18, the Treasury Department’s ” Temporary Guarantee Program for Money Market Funds” HAS ENDED.
Click to view: http://www.treas.gov/press/releases/tg76.htm (note that this only says that the program will end on September 18, there is no announcement that it has actually ended, which it has)
They obviously don’t want anyone to know this, because they don’t want anyone to withdraw money from these funds. If you remember, this program was started last autumn, because the withdrawals that were seen during the most chaotic days could have absolutely destroyed the stock market. The program was initiated not out of concern for ordinary people who had money in these funds, but as a way to support stock prices. The consideration is the same today.
I have not seen a single media entry, except one mention on the CNBC website, telling this story. The problem with these funds is that people see them as savings accounts. In fact, a lot of the money is invested in stocks, and although the fund will not swing like stocks, there is a much higher risk of losing all your money. There is no FDIC protection. A lot of people in Britain and The Netherlands lost money in this way last year.
There are a few people who seem to be keeping an eye on things though. The government is about to hit its debt ceiling of 12 Trillion Dollars soon, and the word is that Geithner is about to ask for it to be raised. In other words, the government has spent so much money bailing out anything and everything, that the $700 Billion last year is now like a spit in the bucket. The question will soon become: who will bail out the government? The situation is really serious now. Please take a look at CNBC's Heidi Moore's article on that:
The absolute surge in stocks over the summer was not something that I foresaw. I am flabbergasted at it. Then it came to me; this is the same pattern as during the depression. Here’s what happened back then:
- 1929: crash
- Early 1930: stock market up by 50%
- Late 1930: stock market down 50%
A lot of things are different now, but I wouldn’t be surprised if the same thing happens within 4-5 months. By this I mean, of course, that the crash and the 50% surge has already happened, and we're just waiting for the 50% drop. After that, all the terrible mistakes that the Treasury, the Fed and Congress have made will become very apparent. They have essentially done everything wrong in the handling of this crisis.
This is my basis for this accusation: this crisis has been dealt with as if it were a smaller, cyclical crisis, but the medicine has been administered on a massive scale. I believe that this is a structural crisis, and that none of the cyclical theories apply. Now we will only get debasement of currency, more unemployment, and a downward-spiraling trend.
Moreover, I advise that the winner-takes-all voting system should be destroyed.