Cover of Pigs at the TroughWill the U.S. dollar make a giant crash landing this year, or just a rough and tumble touch down on the slippery slope of Keynesian Economic Theory? Will the frantic search for stores of value, which started this summer rally, on the back of the decline of the U.S. dollar, keep the bulls charging straight up the hill?
Today's sale of U.S. Treasury Bills is the culmination of a record breaking week, in the sale of these financial instruments to both domestic and foreign buyers. The government is essentially "re-mortgaging the future of every U.S. citizen and family just to maintain and increase the massive debt load that threatens the financial well being of future generations of Americans.
And this, after the largest financial bailout of private companies in the history of finance anywhere. No wonder Ariana Huffington is reprinting her 2004 book "Pigs at the Trough" to include the companies and people in charge who helped cause the financial meltdown and then were rescued by, you guessed it, us!
Corporate greed has been a headline at various times over the past 30 years from the arrest of Michael Milken in the greed fueled 80's junk bond debacle, to the lies and false books of Enron which prompted the first printing of the book. Now previously revered companies such as Bear Stearn, AIG, Citigroup, Bank of America, Lehman Brothers and even General Motors have joined the lexicon, as their leaders were either too greedy, too blind, or too inept to keep their troubled charges out of catastrophe's way, while they paid themselves ever larger graft in the form of corporate "compensation". Andrew Hall of Citi Group is a prime example of the cult of entitlement funded by both taxpayers and shareholders taking in $100 Million per year, for the past 3 years, while each and every U.S. taxpayer just bought 54 shares of Citi without having any say in the matter.
As a former policeman, I am still astounded that "only" Bernie Madoff has been arrested. It's as if, every time the movers and shakers get into trouble over their massive greed, someone is shaken out of the rats nest to take the fall and keep the limelight away from the rest. In organized Crime circles, it is usually a small fry that takes the fall...hmmmm
The truly landmark names like J.P. Morgan and the venerable Goldman Sachs have usually dodged such issues, or at least explained them away as business necessity. Let's face it. These guys are smart. The smartest of the smart in point of fact. That is why, after all of the blood letting over the past 18 months, these two have emerged as the only two investment banks left standing. In the midst of the worst financial crisis since World War 2, in just this past quarter alone, a space of 3 months, these two Giants made over $5.5 Billion between them in pure profit. (How much have you made since March?) Now GS is poised to pay out to it's executives a total of $11.4 Billion in bonuses this year (yes, that's $11,400,000,000) How could they possibly do that?
Well one way is to speculate on the price of oil and other commodities. You can bet that, if oil is at say, $68 per barrel, that at least $25 of that price is due to the market manipulation of this one giant speculator. What does this company make? Why, it makes money, lots and lots of money, and it makes no apologies.
While many average Americans have lost their homes, their jobs and their futures, GS was betting on the futures market in oil, and making a killing while their alumni have been the driving force behind the most massive bailout of Wall Street in history. No wonder the term "Government Sachs" is whispered with winks and nods in the halls of power. Yes, they returned the Tarp money, with a 23% gain for taxpayers, but that is the sugar which they can point to to soften the blow of their gaming the system to drive up prices and profits. (Note to Government - use the 23% to hire more market policemen)
As a consequence of all of this, in June, Timothy Geithner went to China to sell the wary Chinese on the benefits of buying even more U.S. Government debt. Hopefully he is the best salesman in the history of salesmen, because he has a boatload of dollars to sell. This weeks high level talks with the Chinese may or may not bode well for treasury sales. Only time will tell, but rest assured, the U.S. dollar has seen it's best days, at least for the foreseeable future.
If you are Canadian, like me, hold on to your loonies! We are headed back to the 1950's and 60's when the Canada buck was worth more than the U.S. buck, on a consistent basis. We have the second largest deposits of oil on the planet. Our banks have stayed conservative, avoiding the toxic Derivatives debacle and have entered this summer rally strong. We have the second largest deposits of oil and natural gas in the world, the largest deposits of potash, lumber, seafood, nickel, uranium and arguably, diamonds. We own 20% of the worlds entire supply of fresh water, with only .03% of it's population. We own the largest claim to the arctic, which is suspected to harbor 25% of the total world's oil supply, and finally, the largest consumer on the planet, is right next door.
But Sadly, as GS and JP go, so goes Wall Street and thus we have this summer rally in the North American markets. As I have said before, the market has been the driver of wealth for over 100 years, and will be the driver of wealth for the next 100 years. Goldman Sachs is the proof positive, of this theory. that is why you cannot sit on the sidelines and watch as the dollar goes down, and the market goes up. You've lost way too much already!
It's time to get back on the never ending roller coaster created by the gluttons of Wall Street. However, a note of caution: be prepared to get off when everyone around you is laughing hysterically and pointing upward.
The crash of 2010 could be even worse than last year!