Category: Economics & Investing

Good Morning Jim, As I read today’s blog, I thought again about the safety of credit unions. As far as I have been able to discover, they have not jumped in to the derivatives like banks and mortgage companies did, and seem much safer than banks. Credit unions are mostly local and (though the requirements are often much less restrictive than they used to be) usually only have local residents as customers. Does anyone know any more on credit unions? I’ve long recommended credit unions to my friends and family in place of banks, since they usually offer lower loan, …

Jim, We are clearly experiencing deflation, as bad debt and derivatives unwind. At the same time there appears to be massive inflation by the Fed, or else where did the three Trillion for Iraq come from? The only “X factor” now is the money multiplier. Reserve requirements are now [effectively] zero. A good video (Flash required). But now eliminate the reserve component, [and its] Zimbabwe dollars ahoy. Here is some scary stuff, directly from the Fed. And here is an explanation similar to what I had wanted to write about the “Its the Economy Stupid” with Clinton and Greenspan – …

I often have friends and clients ask me how I can talk about inflation and deflation in the same breath. They’ve asked: “But I thought that inflation and deflation were contradictory. How do you think that we could experience both inflation and deflation at the same time?” Let me explain, starting with a bit of background: The fractional reserve banking system, based on usury, creates money. Here is a simplified example: Each time you deposit a $1,000 at your local bank, the bank then lends nearly all of that money out to someone else, charging interest. The bank holds just …

Jim, Scroll down this article to the link to the Quarterly Derivatives Fact Sheet. It shows Citi[Bank] exposed to $3 trillion and J.P. Morgan at $7.8 trillion [in OTC derivatives.] Continue to the bottom of the piece for “Intelligence Czar Can Waive SEC Rules.” It looks like the Plunge Protection Team is operating in overdrive. Eisenhower warned of “The military-industrial complex”. What about the corporate-government complex? This looks like something Il Duce would have been proud of. Best wishes for our free enterprise system, – William JWR Replies: I’m glad to see that some readers took the time to look …

A recent news article titled Dresdner Rescues $19 Billion SIV, Follows Citigroup illustrates the severity of the global liquidity collapse. Note that the article mentions that the K2 SIV had no “direct exposure” to securities backed by subprime or midprime debt. But yet the fund failed dramatically. This adds credence to my assertion that the world’s entire credit market is essentially broken, and that despite frantic attempts by the central banks to inject liquidity (BTW, another $25 billion was just injected the Fed on Thursday), most of the major financial institutions are starting to crumble. In the very near future, …