Can Bernanke Fix the Economy?

GDP is up, but debt is up even more. It is a borrowed recovery. The idea that the government can fix the economy is a myth. Social mood directs the markets, economy, politics. Government intervention only makes things worse. FDIC, FED, Fannie, Freddie are the cause of our problems. Free markets, small government, less tax is the way to go. The government does not have the vision for economic progress. They only make impossible promisses and when things go south, they demand bailout at tax payer expense.

The government should have stopped messing with the economy long time ago. Their so called good intentions cause the crash. FED has been inflating the money supply (bank credit) for the last 50 years. It exploded exponentially, much faster than the GDP. In other words, as every day passes by, it takes more and more borrowed money to create $1 increase in GDP. This is because the real economy is shrinking and wall street, finance, and other non-productive sectors are expanding.

We need financial instutions just like an engine needs oil. But look what happened: At the top of the housing boom, the number of realtors was more than the number of factory workers in the US. This is the financial mania mentality where people think they will all get rich without creating something. Not only that, this shows the sad state of the population where they don't have the capacity to create something and sell.

Where does that leave us? It leaves us at the top of the rally that was right before the real crash in Great Depression:

http://www.tradingstocks.net/html/2010_stock_market_forecast.html

We cannot borrow and recover. Borrowing is the cause of the problem. More borrowing will not solve it. I wish the Keynesians would understand common sense economics. Consumer economy is a myth. It is a way to put the American public to sleep while the multinational corporations pillage and plunder their wealth until there is nothing left.

Why is government not doing anything? Well, government works for the capitalist elite. Nobody else. Don't believe it when government says they want to help the home owners. Homeowners are the banks. When government talks about Affordable Housing, it really means they want higher home prices so that people can take bigger mortgages and be the slaves of the banks for their entire life.

Why does the government do this?? Because when we borrow, banks create money. This new money makes it easy to earn and makes the government look good. Banks don't lend existing money. This is why Obama is telling the banks to lend. Almost all of our money supply is created this way. It is bank credit. When we borrowed we created the principal. Now the banks want us to pay back principal + interest. The interest is not even created yet. So if the borrowing stops, the economy stops:

http://www.tradingstocks.net/html/jaguar_inflation.html

To delay the inevitable, the government allowed the banks to give sub-prime mortgages so that a new portion of the population could borrow and money would be created. No 20% down. Liar loans... Constant increase in money supply would make the government look good, and it would give the impression that they managed the economy well. This is how banks create money out of thin air:

http://www.tradingstocks.net/html/banks_create_money.html

This tendency has accelerated since Reagan. Thus the stock market bubble of 1980s and 1990s. Now they ran out of people to lend money to. Thus the music stops. The bubbles pop one after the other. The debt is all time high and the real economy is not able to carry the weight anymore:

http://www.tradingstocks.net/html/inflation_deflation_credit_bub.html

We have borrowed from the future. When the future arrives, it will be paid back one way or another. There is no free lunch. People say we will print money and pay. Printing money only changes who pays for it. In a global economy, it does not matter who pays, it will cause the crash.

The cause is in place. The effect will follow. FED already made the mistake of inflating the credit bubble. When it deflates, economy will crash. It cannot be avoided.

Stay Away From Bond Market!

I keep hearing how high the bond market is flying. This is typical of a top. It makes the news now. But the time to buy the bonds was long ago when they were crushed and nobody wanted to hear about them.

Bonds are a bubble! US dollar is the place to be for the next 1-2 years. Not stocks. Not bonds. US dollar rally is real. 2008 was just the warm up in this deflationary crash. FED printed a trillion and inflation is nowhere to be seen! Do you know why? Let me explain.
Our money supply is NOT printed dollars. It is bank credit. We printed 2 trillion dollars. But we borrowed 50 to 300 trillion over many decades. This debt becomes our money supply. And it needs to be paid back with interest! Banks create money when we borrow:

http://www.tradingstocks.net/html/banks_create_money.html

At a given time principal+ interest does not exist. It will only exist with more borrowing, so that people can earn and pay it back. When the borrowing slows down, it becomes hard to find US dollars to pay back the debt. That is why when the economy goes down, US dollar rallies and everything else falls, including Gold.

We are at the early stages of a deflationary crash. The debt levels in the society are too high. This is why starting with 2006 housing top, economy started to come down. We ran out of borrowers! Thus we were not able to inflate the money supply as needed!

http://www.tradingstocks.net/html/inflation_deflation_credit_bub.html

Sub-prime was intentional. No 20% down. Uncle sam wants you to borrow the full amount! Liar loans were OK, as long as you borrowed, all was fair! And then the music stopped. Now they pay you 8K home buyer credit so that you may borrow!

http://www.tradingstocks.net/html/housing_market_bubble_bust_cyc.html

The crash will go into history books. We are in Kondratieff Winter. The debt is the problem. Debt is denominated in US dollars, not Gold! To pay debt, people must find US dollars. Gold is not in a bull market either:

http://www.tradingstocks.net/html/gold_bull_or_bubble.html

US state and local governments are going bust. They are cutting jobs. Banks are kept alive at tax payer expense. Fannie, Freddie loosing billions, may reach a trillion, just so that cheap mortgage is available so that banks can sell their over prices homes to the home buyers. Stay away from bonds. Bonds are a bubble.

http://www.tradingstocks.net/html/investors_jump_into_fire.html

This is going to be a single dip depression. Stock market has head and shoulders pattern. 2000 is left shoulder, 2007 is head, 2010 is right shoulder. Stocks can go down lower than you can imagine. Get out while you can. Nothing has been fixed. We have borrowed and spent on consumer debt. We are not increasing our productive capacity or competitive edge. Borrowing from China to consume more Chinese products is not going to be a recovery. This is a dead end.

http://www.tradingstocks.net/html/latest_opinion.html

Cash is the place to be for a while. Soon your USD will buy more stocks, more homes, more oil, more gold. Deflationary crash is coming.