Radio Free Wall Street 4/18/2008

Lee Adler and Russ Winter talk about the stock market rally, the ominous potential of the pop in Treasury yields as a signal, and the worldwide hyperinflationary crackup booms in commodities.
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9 comments for “Radio Free Wall Street 4/18/2008

  1. don
    April 18, 2008 at 6:03 pm

    Perversely, it is in the interest of the US to keep hard commodity prices high, especially oil. That way the petrodollars keep recycling back to the US — to keep propping up our debt with foreign (more and more of it being public and not private, and more and more of it being M. East), buying of Ts and GSEs. For this reason, the Fed can’t raise interest rates, because doing so risk bursting the speculative commodity bubble.

    The risks here for the US are clear: rising price inflation in the US at the same time that consumption is in decline, tax revenues in decline, and state/federal expenses more pressing.

    But the global contradiction carry even bigger implications, for it places the rest of the world between Iraq and a hard place. In fact it resembles the situation in Iraq: we can’t leave, but we can’t stay. Can’t keep on buying those US Ts and GSEs, but can’t stop either.

    Continuation of CUB will result in a deepening of the US recession as consumer non-discretionary retail sales fast decline, threatening a global recession — with the sterialization/money printing further driving up global price inflation. But if the dollars aren’t recycled, then the US is in bad, bad shape.

    So, at risk of sounding simplistic, does it come down to this choice: does the world risk higher and higher food and energy inflation and the resulting social protest and growing instability, or does it risk a complete collapse of the US?

    My hunch: at some point the later will be the forced choice, because for any one nation, its national self-interest will trump that of the US — for it is clear for all to see that the US’ global hegemony is fast on the decline. Besides, and related to this, the US as a destination for exports isn’t what it was, so it isn’t as important anymore.

    p.s.
    It is extremely important that you are closely tracking and commenting on the fiscal crisis that may very well become the most pressing issue of the day by the end of this year and next, at just the time a new administration comes into office. Thanks.

  2. rapier
    April 18, 2008 at 7:55 pm

    It is a mistake to just think of all that loose oil money flowing into the financial system via the Gulf States.

    Russia has plenty of those dollars too and Russia might be described as a mafia controlled energy company with a state attached. It’s deeply corrupt and the worlds criminal underground is filling with people from the former USSR and it’s allied states. Moscow has the biggest number of millionaires and probably billionaires on the planet. Some of those dollars have to be coming into the US financial markets. There is no place better to launder money or just plain put it to work.

    Then there is Nigeria. A place that has become synonymous with con men, for good reason. That entire state, while in the middle of a civil war is absolutely corrupt. The elites take everything. There too some of those dollars must flow here.

    Huge resources are being devoted to sniffing out terrorist money flows but you never hear much about the busts. One wonders how much attention is being put on the global underworlds forays into the banking and financial system.

    Starved as it is for capital who doesn’t think that looking the other way isn’t common. The problem is that when you deal with these guys sometimes they make offers you can’t refuse.

    It’s all loose thinking but the corruption of the financial system can’t possibly decline under these circumstances.

  3. Lee Adler
    April 18, 2008 at 8:27 pm

    Thanks for these excellent, excellent comments. The complexity of this situation boggles the mind.

    Well… my mind, anyway. 😀

  4. April 18, 2008 at 9:16 pm

    Okay this corrupt process all continues until it cannot – then what?

    Assuming someone has the gumption to say no the world cannot go there to the very end – who can that person be? 2009 US President? Is there anyone else in the world with enough influence to stop this unfolding as it should not?

    If Obama or anyone else for that matter gets into the Whitehouse and cries “stop” does (s)he buy a bullet?

    This is all disturbing unless one accepts that pigman capitalism/industrial militarism is soooo dead and something new and more progressive arises soon.

    I suspect that new world order arising starts with you and me and the person next door. Not the pigmen and their cronies.

    Get ready to know and start helping your neighbour – I do not see any other way out.

    S

  5. don
    April 18, 2008 at 10:04 pm

    #2
    My intent was to indicate that an increasing share of foreign buying of US Ts and GSEs is coming from the M. East (by way of London). I am not suggesting that the M. East represents that totality of that buying. China remains by far the biggest kid on the block.

    Occasionally I drift over to sites like financialsense.com or safehaven.com or Peter Schiff to get a sense of the hyperinflationary argument, but I’m never convinced. The only analyst that provides a sound argument is that of Doug Noland of prudentbear.com. His piece today is exceptional in this regard. While I’m not yet convinced that the credit deflation scenario will ‘win’ out over the hyperinflation argument, Noland does present a challenge to my thinking. Summary of his argument: that “nationalization” of risk of the US credit system has forestalled its collapse and the above nationalization has allowed for renewed excess credit creation due largely to the growing current account deficit dynamic and the recycling of dollars, which “could incite a mini bout of liquidity, speculation, and Credit excess”, setting the stage for the next financial crisis.

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