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Chris Martenson

Image | Central banks cut interest rates
Central banks cut interest rates

World stock markets were in meltdown mode last night.  Japan was off more than 10% at one point.

So the world’s Central Banks got together and performed an emergency coordinated rate cut of 0.50% (50 basis points).

[quote]The US Federal Reserve has cut rates from 2% to 1.5% and the European Central Bank trimmed its rate from 4.25% to 3.75%.

The central banks of Canada, China, Sweden and Switzerland [and the UK] all took similar action in the coordinated move.

The unprecedented step is aimed at steadying a faltering global economy and slumping stock markets. [/quote]

Fed Funds were already at 1.25% after a stealth rate cut. This 50 basis point cut just gets us officially closer to what was already in effect. So it will not actually change the cost of money in the US at all. Not one tiny bit. Rather, this was symbolic for the US. For the EU it does represent an actual decline in the cost of money, which brings me to my next point.

Second, I cannot figure out how a rate cut does anything at this point. Yes, so money is cheaper to borrow from the Central Banks. Okay. So what?

In order for that to be effective, somebody has to want to borrow it.

Again the Central Banks are fighting the wrong fight. Where they battled liquidity, solvency was the issue.

Now, where they are battling the cost of borrowed money, they have done nothing about the desire to borrow money.

I am quite intrigued to see China on the list of involved Central Banks. This is the first time I can recall their coordinated involvement in the actions of the world banking cartel.  Welcome to the club.

Japan was not involved, because they don’t have 50 basis points to cut – their monetary policy has been riding the rails right down near the zero line for years.  So Japan is now saying to the rest of the world "welcome to the club!"

Despite the fact that the move was merely symbolic, the impact on the US futures was immediate and pronounced.  I’ve never seen a 60 point pop in a 5 minute window before.

Bottom line:  The world’s Central Banks are desperately pulling on their main lever, with fingers crossed, hoping that it will work one more time.  Unfortunately, the interest rate lever cannot fix our current ills…this was merely a psychological shot in the arm, meant to let the world know that the Central Banks are taking all this seriously.  A measure meant to add confidence to an economic system that operates on confidence.

Central banks cut interest rates

World stock markets were in meltdown mode last night.  Japan was off more than 10% at one point.

So the world’s Central Banks got together and performed an emergency coordinated rate cut of 0.50% (50 basis points).

[quote]The US Federal Reserve has cut rates from 2% to 1.5% and the European Central Bank trimmed its rate from 4.25% to 3.75%.

The central banks of Canada, China, Sweden and Switzerland [and the UK] all took similar action in the coordinated move.

The unprecedented step is aimed at steadying a faltering global economy and slumping stock markets. [/quote]

Fed Funds were already at 1.25% after a stealth rate cut. This 50 basis point cut just gets us officially closer to what was already in effect. So it will not actually change the cost of money in the US at all. Not one tiny bit. Rather, this was symbolic for the US. For the EU it does represent an actual decline in the cost of money, which brings me to my next point.

Second, I cannot figure out how a rate cut does anything at this point. Yes, so money is cheaper to borrow from the Central Banks. Okay. So what?

In order for that to be effective, somebody has to want to borrow it.

Again the Central Banks are fighting the wrong fight. Where they battled liquidity, solvency was the issue.

Now, where they are battling the cost of borrowed money, they have done nothing about the desire to borrow money.

I am quite intrigued to see China on the list of involved Central Banks. This is the first time I can recall their coordinated involvement in the actions of the world banking cartel.  Welcome to the club.

Japan was not involved, because they don’t have 50 basis points to cut – their monetary policy has been riding the rails right down near the zero line for years.  So Japan is now saying to the rest of the world "welcome to the club!"

Despite the fact that the move was merely symbolic, the impact on the US futures was immediate and pronounced.  I’ve never seen a 60 point pop in a 5 minute window before.

Bottom line:  The world’s Central Banks are desperately pulling on their main lever, with fingers crossed, hoping that it will work one more time.  Unfortunately, the interest rate lever cannot fix our current ills…this was merely a psychological shot in the arm, meant to let the world know that the Central Banks are taking all this seriously.  A measure meant to add confidence to an economic system that operates on confidence.

Image | The Fed – Picture of the Day
The Fed – Picture of the Day

In 1998, the Long Term Capital Management (LTCM) blow-up (aka "the worst financial crisis of all time,") happened.  To fight the pernicious effects of this crisis, the Fed expanded its asset base, which is a fancy way of saying that they pushed a bunch of cash out into the banking system

Well, that crisis passed, and the Fed slowly re-absorbed that excess cash and returned to a more normal rate of exponential money expansion.

Then the Y2K ‘crisis’ came along and the Fed shoved tons of money into the banking system in anticipation of a crisis that never was.  (Hey, they didn’t know that.)  Unfortunately, all this hot money poured onto an already-raging stock market mania and served to fuel the final blow-off that finally burst in the spring of 2000.

Then 9/11 came along, and this was by far a larger shock to the system than either of the prior crises.  Again, money was shoved into the system and then reeled back in later.

Well, then, this picture will help you put this current crisis into context.

 

Yikes.

The opportunity for this level of monetary monkeying to end up in the hyperinflationary ditch is very, very high.

The Fed – Picture of the Day

In 1998, the Long Term Capital Management (LTCM) blow-up (aka "the worst financial crisis of all time,") happened.  To fight the pernicious effects of this crisis, the Fed expanded its asset base, which is a fancy way of saying that they pushed a bunch of cash out into the banking system

Well, that crisis passed, and the Fed slowly re-absorbed that excess cash and returned to a more normal rate of exponential money expansion.

Then the Y2K ‘crisis’ came along and the Fed shoved tons of money into the banking system in anticipation of a crisis that never was.  (Hey, they didn’t know that.)  Unfortunately, all this hot money poured onto an already-raging stock market mania and served to fuel the final blow-off that finally burst in the spring of 2000.

Then 9/11 came along, and this was by far a larger shock to the system than either of the prior crises.  Again, money was shoved into the system and then reeled back in later.

Well, then, this picture will help you put this current crisis into context.

 

Yikes.

The opportunity for this level of monetary monkeying to end up in the hyperinflationary ditch is very, very high.

Image | Physical gold market “on fire”
Physical gold market “on fire”

I have long advocated that owning physical gold is the cornerstone of a prudent portfolio.  How much is up to you, but in my estimation it should be somewhere north of 10% of your total holdings.

I have recently had difficulty trying to help a few individuals obtain the gold and/or silver they desired.  In my 6 years of being a very active gold/silver investor, I have never seen anything like this.   Product is hard to find, and getting harder. 

The "official price," as set by the paper traders in the NY Comex pits, is miles away from the actual price you’d have to pay to actually get real physical gold, and growing wider by the week.

This "spread" between the "official" spot price and the real price you’d have to pay has doubled for gold in the past month and is now a whopping 40% for quality silver product.

And that’s if you can find any.

Today the US mint announced that "due to high demand" they are ceasing production of a wide range of gold products.

[quote]US Mint halts some American Eagle coin production
NEW YORK, Oct 7 (Reuters) – Unprecedented demand for precious metals and volatile markets forced the U.S. Mint to cease production for the half-ounce and quarter-ounce popular American Eagle gold coins for the rest of this year and to supply other bullion coins on an allocation basis.[/quote]

The ‘explanation’ given is that with demand so high the mint has decided to cease production so that it can "catch up".   I am no production expert, but halting production seems like an odd way to go about "catching up". 

What makes more sense to me is that the US Mint is running out of stock material with which to work.  That fits the decision like a t-shirt that’s three sizes too small.

At Colorado Gold, a very reliable gold dealing website, these messages now grace the front page:

[quote]Gold:  No Credit Suisse, Buffalos, Maple Leafs, or tenth ounce or half ounce Gold Eagles till you see it here

Silver:  SORRY. NO SILVER ORDERS ACCEPTED TILL ALL EXISTING ORDERS ARE FILLED. THE MINTS WILL NEVER CATCH UP, IF ORDERS KEEP PILING UP. IT COULD BE SEVERAL WEEKS BEFORE SILVER ORDERS ARE ONCE AGAIN TAKEN.[/quote]

Physical gold market “on fire”

I have long advocated that owning physical gold is the cornerstone of a prudent portfolio.  How much is up to you, but in my estimation it should be somewhere north of 10% of your total holdings.

I have recently had difficulty trying to help a few individuals obtain the gold and/or silver they desired.  In my 6 years of being a very active gold/silver investor, I have never seen anything like this.   Product is hard to find, and getting harder. 

The "official price," as set by the paper traders in the NY Comex pits, is miles away from the actual price you’d have to pay to actually get real physical gold, and growing wider by the week.

This "spread" between the "official" spot price and the real price you’d have to pay has doubled for gold in the past month and is now a whopping 40% for quality silver product.

And that’s if you can find any.

Today the US mint announced that "due to high demand" they are ceasing production of a wide range of gold products.

[quote]US Mint halts some American Eagle coin production
NEW YORK, Oct 7 (Reuters) – Unprecedented demand for precious metals and volatile markets forced the U.S. Mint to cease production for the half-ounce and quarter-ounce popular American Eagle gold coins for the rest of this year and to supply other bullion coins on an allocation basis.[/quote]

The ‘explanation’ given is that with demand so high the mint has decided to cease production so that it can "catch up".   I am no production expert, but halting production seems like an odd way to go about "catching up". 

What makes more sense to me is that the US Mint is running out of stock material with which to work.  That fits the decision like a t-shirt that’s three sizes too small.

At Colorado Gold, a very reliable gold dealing website, these messages now grace the front page:

[quote]Gold:  No Credit Suisse, Buffalos, Maple Leafs, or tenth ounce or half ounce Gold Eagles till you see it here

Silver:  SORRY. NO SILVER ORDERS ACCEPTED TILL ALL EXISTING ORDERS ARE FILLED. THE MINTS WILL NEVER CATCH UP, IF ORDERS KEEP PILING UP. IT COULD BE SEVERAL WEEKS BEFORE SILVER ORDERS ARE ONCE AGAIN TAKEN.[/quote]

Image | A Preview to Chapter 20 (or, Navigating a Martenson Report)
A Preview to Chapter 20 (or, Navigating a Martenson Report)
 PREVIEW
Monday, October 6, 2008

My belief is that massive, unprecedented change is coming.

No, I believe that it is already underway. When the dust settles in one, five, or twenty years, the economic landscape will be utterly changed.

Another belief I hold is that by taking steps now, both small and large, you can significantly minimize disruptions in your life that so many others will experience. While we will all end up in the same place in twenty years, I want your path to be as gentle as possible. By undergoing voluntary change, you will have more opportunities to shape your path than those who find change involuntarily forced on them. Where others will someday reach a cliff face that needs to be scaled all at once, my goal is to walk with you up the side trail. Each Martenson Report is designed to reinforce the lessons of the Crash Course, with my goal being to help you navigate the changes ahead.

Beliefs

It all begins with beliefs. I created the Crash Course to provide all the intellectual evidence anyone could possibly need, laid out like an air-tight prosecution with the following conclusion: The next twenty years will be unlike the last twenty years. But if your underlying beliefs are in opposition to this message, you may find yourself taking no actions at all. Examples of such beliefs might be:

  1. “Technology will arise that will blunt or maybe even reverse the impact of Peak Oil”. If this is one of your core beliefs, then it won’t really matter how well I lay out the case that Peak Oil is not only real, but frighteningly near. So you won’t take any actions. You’ll continue to live at drivable distances from where you work and play, and you won’t bother to bolster your food security or maneuver your portfolio holdings away from exposed industries and companies or do anything else.
  2. “This is just a normal recession – we’ve faced them before, and they don’t last that long.” If you hold this belief, then you are open to the typical broker’s suggestion that the best strategy is to “buy and hold for the long-term.” You might also be tempted to tune out all the current market information as “noise” that provides no value to your understanding and is probably harmful in its potential to alter your outlook.

So, it can be said that beliefs drive our actions. Somebody else said it even better:

Your beliefs become your thoughts
Your thoughts become your words
Your words become your actions
Your actions become your habits
Your habits become your values
Your values become your destiny


~ Mahatma Gandhi

So I structured the Crash Course specifically to enable you to open up your beliefs to examination. Not because I have any particular assessment or judgment about whether you hold the “right ones” or the “wrong ones,” because I don’t. I did this because at key turning points, such as the one we are at right now, it is vitally important that you know what your beliefs are, so that you can be aware of the ways in which they are guiding, enhancing, or inhibiting your actions. It is a dead certainty that at a major point of change, most people will be holding limiting beliefs rooted in the status quo, while a smaller number of people will hold enhancing beliefs providing them with greater opportunities to take advantage of the changes when they arrive.

The Martenson Report

My weekly, and often daily, writings are designed to continue to expose the fact that the very change we are talking about is right here, it’s right now, and it’s massive. I seek to continually reinforce the notion that the past is gone and it’s not coming back, and that a new future is upon us. The breadth and depth of these changes literally touch every single support system and every political and corporate institution in existence. The possible range of ways to prepare is nearly infinite, requiring that we carefully and strategically sort them into smaller groupings that we can actually do something about. Because we can’t possibly prepare in every possible way, we need to have a brutally efficient means of prioritizing our actions into the ones that provide the most potential protection or return for the least investment of time and/or money.

Because of this, I write The Martenson Report with three specific “Horizons” in mind as crudely depicted below.

width=

I break my own thinking into three specific horizons spanning just a few years each and I “bucket” all the possible risks and events that I care to focus on into those three segments of time.

While it’s never too soon to begin to modify one’s actions in response to any major change, even if it’s 10 years out, it pays to begin with those elements that are closest and will have the most impact.

For example, I have mainly kept the Martenson Reports geared towards the first Horizon because that’s where I think most people have the most work to do, because it has the most immediate challenges, and because, as challenging as they are, we can get our minds around these changes. The Horizon II & III changes are big, hairy, and scary. Adapting to them will require lots of lead time and you should have them on your radar screen. However, I would council that you attend to Horizon I stuff before you put too much aggressive action towards the Horizon II and III stuff. Naturally, if you were going to make a big move anyway, perhaps sell a house and move somewhere, or buy a car, you should definitely put on your long-term thinking cap on and let those Horizon II and III possibilities inform your decision-making processes.

What do I do first?

Even within any given Horizon, we need to further prioritize our actions. Let’s break them into three tiers. Tier I actions should always be initiated (and preferably completed) before starting on any Tier II actions, which should themselves precede any Tier III actions.

 

Tier I >> Tier II >> Tier III

 

Here’s an example. Let’s assume for the purposes of this discussion that you hold the personal view that there’s a risk, a chance, a possibility, that the US banking system could be forced to go “on holiday” at some point over the next year. Let’s give it some really outrageously high chance, like 33%. That is, a one-in-three chance that US banks could get shut down for a period of time, perhaps for a week or more at some point over the next year. What should you do?

My advice would be to consider all of the most likely things that could happen that you could easily remedy at low or no cost before moving on to harder stuff. Here is a simplified example, with only one item in each “tier”, of actions that you might take:

Tier I: Have some cash out of the bank, so that you can continue to buy things and operate even if your personal bank is not open, your ATM card does not work, and your credit card is inoperative. Cost? Whatever the lost interest would be, plus having to worry about how to safely store this money. Potential benefit? The ability to conduct your life relatively unhindered if the banks close down.

Tier II: Move money from distant, possibly unsafe banking/brokerage accounts to safer banks. This is important to do, but not as critical as getting a supply of cash on hand for emergencies. So you should get your Tier I cash needs taken care of before spending any time on moving your money around. Fortunately the Tier I action can be accomplished on your lunch break tomorrow so it’s not a big deal.

Tier III: Build your local community. Find out who can do what, who will need your help, and what you can do to help. Only do this after taking care of your personal issues, so that you can have a clear head and can really be helpful to others. If you’ve ever actually listened to those airplane cabin attendants, you are already familiar with this advice: “Please secure the oxygen mask over your own mouth and nose before helping your neighbor or child…” The same principle applies here. All of my advice follows this basic outline. The simple, low-cost, high potential return solutions are the ones I press first.

Why I follow the markets (and report on them) so closely

Often I will report on what some people consider to be “market noise.” I focus my attention on the markets because I believe they give me a valuable head start on what’s really happening. I have little faith that “we the people” are entrusted with the real situation by our leaders in the media and/or in politics. Therefore, my best source of timely and accurate information is the markets.

When I see certain things happen in the markets that will finally tell me which way this whole mess is going to break, I will personally be taking some very aggressive last-minute actions. For example, if/when the US dollar begins to head down in earnest at the same time that interest rates rise, that will be my cue to immediately swap out all of my remaining dollars for “things.” I have “buy lists” in place for items ranging from hard assets to basic staples.

It is only by closely monitoring the markets that I feel comfortable knowing what’s going on, even if this amounts to “reading tea leaves” and being subject to lots of truly random noise in addition to the small amounts of real signal.

What I do is monitor the stock, gold, dollar, interest rate, and credit markets, all day, every day that they are open. And then I report at PeakProsperity.com on what I am seeing and thinking in response to the day’s events. For those who cannot (or will not) monitor the markets this closely, I can be an important source of information.

But I do not monitor the markets to pick stocks or find bargains or make a killing. I think the markets are designed in such a way as to seriously discriminate against the small investor, and I also happen to believe that they are all going to sink a LOT lower over time to reflect the fact that too many claims have been made against the future. What are the chances for a small time investor to record gains in a broadly declining market? In my judgment, somewhere between zero and slim.

So, my aim is not to monitor the markets for gain, but for their informational content. If you want to play the markets, there are a lot of high quality newsletters and free sources of information out there to help you do this. I personally analyze the markets for what they can tell me about where we are along the Crash Curve. I want clues as to how long this will take to unfold and what it might look like when it gets there. So I monitor the markets and then report on them to you.

Summary

I write my reports with the clear intent of reinforcing your awareness that the future will be very different from the present, and I measure my success by whether you actually took actions or not – and, (if you did) by whether your actions were structured in such a way that you took care of the easy, low-cost stuff first before moving on to the harder items.

I want you to be safe and secure.

I have faith that, with reliable information, good advice, and a little bit of common sense for good measure, you and I will be able to navigate what lies ahead.

A Preview to Chapter 20 (or, Navigating a Martenson Report)
 PREVIEW
Monday, October 6, 2008

My belief is that massive, unprecedented change is coming.

No, I believe that it is already underway. When the dust settles in one, five, or twenty years, the economic landscape will be utterly changed.

Another belief I hold is that by taking steps now, both small and large, you can significantly minimize disruptions in your life that so many others will experience. While we will all end up in the same place in twenty years, I want your path to be as gentle as possible. By undergoing voluntary change, you will have more opportunities to shape your path than those who find change involuntarily forced on them. Where others will someday reach a cliff face that needs to be scaled all at once, my goal is to walk with you up the side trail. Each Martenson Report is designed to reinforce the lessons of the Crash Course, with my goal being to help you navigate the changes ahead.

Beliefs

It all begins with beliefs. I created the Crash Course to provide all the intellectual evidence anyone could possibly need, laid out like an air-tight prosecution with the following conclusion: The next twenty years will be unlike the last twenty years. But if your underlying beliefs are in opposition to this message, you may find yourself taking no actions at all. Examples of such beliefs might be:

  1. “Technology will arise that will blunt or maybe even reverse the impact of Peak Oil”. If this is one of your core beliefs, then it won’t really matter how well I lay out the case that Peak Oil is not only real, but frighteningly near. So you won’t take any actions. You’ll continue to live at drivable distances from where you work and play, and you won’t bother to bolster your food security or maneuver your portfolio holdings away from exposed industries and companies or do anything else.
  2. “This is just a normal recession – we’ve faced them before, and they don’t last that long.” If you hold this belief, then you are open to the typical broker’s suggestion that the best strategy is to “buy and hold for the long-term.” You might also be tempted to tune out all the current market information as “noise” that provides no value to your understanding and is probably harmful in its potential to alter your outlook.

So, it can be said that beliefs drive our actions. Somebody else said it even better:

Your beliefs become your thoughts
Your thoughts become your words
Your words become your actions
Your actions become your habits
Your habits become your values
Your values become your destiny


~ Mahatma Gandhi

So I structured the Crash Course specifically to enable you to open up your beliefs to examination. Not because I have any particular assessment or judgment about whether you hold the “right ones” or the “wrong ones,” because I don’t. I did this because at key turning points, such as the one we are at right now, it is vitally important that you know what your beliefs are, so that you can be aware of the ways in which they are guiding, enhancing, or inhibiting your actions. It is a dead certainty that at a major point of change, most people will be holding limiting beliefs rooted in the status quo, while a smaller number of people will hold enhancing beliefs providing them with greater opportunities to take advantage of the changes when they arrive.

The Martenson Report

My weekly, and often daily, writings are designed to continue to expose the fact that the very change we are talking about is right here, it’s right now, and it’s massive. I seek to continually reinforce the notion that the past is gone and it’s not coming back, and that a new future is upon us. The breadth and depth of these changes literally touch every single support system and every political and corporate institution in existence. The possible range of ways to prepare is nearly infinite, requiring that we carefully and strategically sort them into smaller groupings that we can actually do something about. Because we can’t possibly prepare in every possible way, we need to have a brutally efficient means of prioritizing our actions into the ones that provide the most potential protection or return for the least investment of time and/or money.

Because of this, I write The Martenson Report with three specific “Horizons” in mind as crudely depicted below.

width=

I break my own thinking into three specific horizons spanning just a few years each and I “bucket” all the possible risks and events that I care to focus on into those three segments of time.

While it’s never too soon to begin to modify one’s actions in response to any major change, even if it’s 10 years out, it pays to begin with those elements that are closest and will have the most impact.

For example, I have mainly kept the Martenson Reports geared towards the first Horizon because that’s where I think most people have the most work to do, because it has the most immediate challenges, and because, as challenging as they are, we can get our minds around these changes. The Horizon II & III changes are big, hairy, and scary. Adapting to them will require lots of lead time and you should have them on your radar screen. However, I would council that you attend to Horizon I stuff before you put too much aggressive action towards the Horizon II and III stuff. Naturally, if you were going to make a big move anyway, perhaps sell a house and move somewhere, or buy a car, you should definitely put on your long-term thinking cap on and let those Horizon II and III possibilities inform your decision-making processes.

What do I do first?

Even within any given Horizon, we need to further prioritize our actions. Let’s break them into three tiers. Tier I actions should always be initiated (and preferably completed) before starting on any Tier II actions, which should themselves precede any Tier III actions.

 

Tier I >> Tier II >> Tier III

 

Here’s an example. Let’s assume for the purposes of this discussion that you hold the personal view that there’s a risk, a chance, a possibility, that the US banking system could be forced to go “on holiday” at some point over the next year. Let’s give it some really outrageously high chance, like 33%. That is, a one-in-three chance that US banks could get shut down for a period of time, perhaps for a week or more at some point over the next year. What should you do?

My advice would be to consider all of the most likely things that could happen that you could easily remedy at low or no cost before moving on to harder stuff. Here is a simplified example, with only one item in each “tier”, of actions that you might take:

Tier I: Have some cash out of the bank, so that you can continue to buy things and operate even if your personal bank is not open, your ATM card does not work, and your credit card is inoperative. Cost? Whatever the lost interest would be, plus having to worry about how to safely store this money. Potential benefit? The ability to conduct your life relatively unhindered if the banks close down.

Tier II: Move money from distant, possibly unsafe banking/brokerage accounts to safer banks. This is important to do, but not as critical as getting a supply of cash on hand for emergencies. So you should get your Tier I cash needs taken care of before spending any time on moving your money around. Fortunately the Tier I action can be accomplished on your lunch break tomorrow so it’s not a big deal.

Tier III: Build your local community. Find out who can do what, who will need your help, and what you can do to help. Only do this after taking care of your personal issues, so that you can have a clear head and can really be helpful to others. If you’ve ever actually listened to those airplane cabin attendants, you are already familiar with this advice: “Please secure the oxygen mask over your own mouth and nose before helping your neighbor or child…” The same principle applies here. All of my advice follows this basic outline. The simple, low-cost, high potential return solutions are the ones I press first.

Why I follow the markets (and report on them) so closely

Often I will report on what some people consider to be “market noise.” I focus my attention on the markets because I believe they give me a valuable head start on what’s really happening. I have little faith that “we the people” are entrusted with the real situation by our leaders in the media and/or in politics. Therefore, my best source of timely and accurate information is the markets.

When I see certain things happen in the markets that will finally tell me which way this whole mess is going to break, I will personally be taking some very aggressive last-minute actions. For example, if/when the US dollar begins to head down in earnest at the same time that interest rates rise, that will be my cue to immediately swap out all of my remaining dollars for “things.” I have “buy lists” in place for items ranging from hard assets to basic staples.

It is only by closely monitoring the markets that I feel comfortable knowing what’s going on, even if this amounts to “reading tea leaves” and being subject to lots of truly random noise in addition to the small amounts of real signal.

What I do is monitor the stock, gold, dollar, interest rate, and credit markets, all day, every day that they are open. And then I report at PeakProsperity.com on what I am seeing and thinking in response to the day’s events. For those who cannot (or will not) monitor the markets this closely, I can be an important source of information.

But I do not monitor the markets to pick stocks or find bargains or make a killing. I think the markets are designed in such a way as to seriously discriminate against the small investor, and I also happen to believe that they are all going to sink a LOT lower over time to reflect the fact that too many claims have been made against the future. What are the chances for a small time investor to record gains in a broadly declining market? In my judgment, somewhere between zero and slim.

So, my aim is not to monitor the markets for gain, but for their informational content. If you want to play the markets, there are a lot of high quality newsletters and free sources of information out there to help you do this. I personally analyze the markets for what they can tell me about where we are along the Crash Curve. I want clues as to how long this will take to unfold and what it might look like when it gets there. So I monitor the markets and then report on them to you.

Summary

I write my reports with the clear intent of reinforcing your awareness that the future will be very different from the present, and I measure my success by whether you actually took actions or not – and, (if you did) by whether your actions were structured in such a way that you took care of the easy, low-cost stuff first before moving on to the harder items.

I want you to be safe and secure.

I have faith that, with reliable information, good advice, and a little bit of common sense for good measure, you and I will be able to navigate what lies ahead.

Image | Fed Boosts Cash Auctions to $900 Billion, May Do More
Fed Boosts Cash Auctions to $900 Billion, May Do More

Wow.

This is big news.  This means that the Fed is either prepared to destroy the remaining portion of its decimated balance sheet, or (and this is more likely) it is going to be directly printing money out of thin air to pass out in exchange for bad debts.

[quote]Oct. 6 (Bloomberg) — The Federal Reserve will double its auctions of cash to banks to as much as $900 billion and is considering further steps to unfreeze short-term lending markets as the credit crunch deepens.

"The Federal Reserve stands ready to take additional measures as necessary to foster liquid money-market conditions,” the central bank said in a statement released in Washington today. Fed and Treasury officials are "consulting with market participants on ways to provide additional support for term unsecured funding markets,” the statement said.

Today’s steps follow a hoarding of cash by banks that sent the premium on the three-month London interbank offered rate over the Fed’s benchmark interest rate to a record. Industrial companies are also finding it harder to raise cash after the market for commercial paper shrank to a three-year low as investors flee even borrowers with few links to mortgages.

"It is pretty much all out war,” said Christopher Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd., New York. “They are pulling out all the stops to try and get borrowers and lenders to meet and do transactions once again.”[/quote]

Link (Bloomberg)

The speed and depth of this crisis are without parallel.  We are very, very close to an all out-banking holiday and all that means.

Fed Boosts Cash Auctions to $900 Billion, May Do More

Wow.

This is big news.  This means that the Fed is either prepared to destroy the remaining portion of its decimated balance sheet, or (and this is more likely) it is going to be directly printing money out of thin air to pass out in exchange for bad debts.

[quote]Oct. 6 (Bloomberg) — The Federal Reserve will double its auctions of cash to banks to as much as $900 billion and is considering further steps to unfreeze short-term lending markets as the credit crunch deepens.

"The Federal Reserve stands ready to take additional measures as necessary to foster liquid money-market conditions,” the central bank said in a statement released in Washington today. Fed and Treasury officials are "consulting with market participants on ways to provide additional support for term unsecured funding markets,” the statement said.

Today’s steps follow a hoarding of cash by banks that sent the premium on the three-month London interbank offered rate over the Fed’s benchmark interest rate to a record. Industrial companies are also finding it harder to raise cash after the market for commercial paper shrank to a three-year low as investors flee even borrowers with few links to mortgages.

"It is pretty much all out war,” said Christopher Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd., New York. “They are pulling out all the stops to try and get borrowers and lenders to meet and do transactions once again.”[/quote]

Link (Bloomberg)

The speed and depth of this crisis are without parallel.  We are very, very close to an all out-banking holiday and all that means.

Image | Europe is a real mess
Europe is a real mess

The surprising finding to me in all of this credit crisis mess has been that Europe was, if anything, slightly more relaxed in their regulatory approach than the US, and their financial institutions even more leveraged.

[quote]Carsten Brzenski, chief economist at ING in Brussels, said the global crisis was now engulfing Europe with devastating speed.

"We are at imminent risk of a credit crunch. Key markets are not functioning properly. The Europeans thought the sub-prime crisis was just American rubbish that the US should clean up itself, but now they are finding out that it is their rubbish too," he said.

Data from the IMF shows that European banks hold 75pc as much exposure to toxic US housing debt as US banks themselves. Moreover they have mounting bad debts from the British, Spanish, French, Dutch, Scandinavian, and East European housing markets, where property bubbles reached even more extreme levels that in the US.[/quote]

Link (Telegraph) 

The big news tonight is that Germany had to effect an emergency bailout of one of its larger institutions this weekend AND announce that they were going to guarantee all individual German bank deposits.

Europe is a real mess

The surprising finding to me in all of this credit crisis mess has been that Europe was, if anything, slightly more relaxed in their regulatory approach than the US, and their financial institutions even more leveraged.

[quote]Carsten Brzenski, chief economist at ING in Brussels, said the global crisis was now engulfing Europe with devastating speed.

"We are at imminent risk of a credit crunch. Key markets are not functioning properly. The Europeans thought the sub-prime crisis was just American rubbish that the US should clean up itself, but now they are finding out that it is their rubbish too," he said.

Data from the IMF shows that European banks hold 75pc as much exposure to toxic US housing debt as US banks themselves. Moreover they have mounting bad debts from the British, Spanish, French, Dutch, Scandinavian, and East European housing markets, where property bubbles reached even more extreme levels that in the US.[/quote]

Link (Telegraph) 

The big news tonight is that Germany had to effect an emergency bailout of one of its larger institutions this weekend AND announce that they were going to guarantee all individual German bank deposits.

Image | It’s Here And It’s Now
It’s Here And It’s Now
 PREVIEW
Friday, October 3, 2008

Introduction

Everything that I have been writing about, everything that I have been lecturing about, and everything that I made the Crash Course about is now in motion.

It is here, and it is happening right now.

The purpose of this Martenson Report is to nudge you further and further toward taking any remaining actions that can help shield you from what is coming. I want you to understand that my advice and my voice are just one of many, and that your job is to listen to everything and make up your own mind.
It’s Here And It’s Now
 PREVIEW
Friday, October 3, 2008

Introduction

Everything that I have been writing about, everything that I have been lecturing about, and everything that I made the Crash Course about is now in motion.

It is here, and it is happening right now.

The purpose of this Martenson Report is to nudge you further and further toward taking any remaining actions that can help shield you from what is coming. I want you to understand that my advice and my voice are just one of many, and that your job is to listen to everything and make up your own mind.
Image | Bailout Bill Passes – Markets Plunge
Bailout Bill Passes – Markets Plunge

Well, once again, an overwhelming majority of the American populace was overridden by the DC politicians.

The last time that happened didn’t turn out so well, as I recall.  In fact, it is still not working out so well.  It’s called Iraq.

At any rate, the full-court press to pass this thing was phenomenal to witness.

[quote]WASHINGTON — The House of Representatives gave final approval on Friday to the $700 billion bailout for the financial system, reversing course to authorize what may be the most expensive government intervention in history.

At 1:21 p.m., applause and cheers echoed through the House chamber as the number of “aye” votes crossed the threshold needed for passage with just seconds remaining in the official 15-minute voting period. The vote was 263 to 171.

And in a sign of the urgency surrounding the package, Congressional staff rushed the newly printed legislation into a news conference where Democratic leaders gathered after the vote and Speaker Nancy Pelosi, Democrat of California, signed it, at exactly 2 p.m.

Earlier, Ms. Pelosi said the measure was essential to “begin to shape the financial stability of our country and the economic security of our people.”
[/quote]

Link (NYT)

Throughout the process, there was never any doubt in my mind that it would be passed.  I was a little bit surprised at the three-pager that Paulson tried to ram through, both for its brevity and for its blunt attempt to seize unlimited power.

Bailout Bill Passes – Markets Plunge

Well, once again, an overwhelming majority of the American populace was overridden by the DC politicians.

The last time that happened didn’t turn out so well, as I recall.  In fact, it is still not working out so well.  It’s called Iraq.

At any rate, the full-court press to pass this thing was phenomenal to witness.

[quote]WASHINGTON — The House of Representatives gave final approval on Friday to the $700 billion bailout for the financial system, reversing course to authorize what may be the most expensive government intervention in history.

At 1:21 p.m., applause and cheers echoed through the House chamber as the number of “aye” votes crossed the threshold needed for passage with just seconds remaining in the official 15-minute voting period. The vote was 263 to 171.

And in a sign of the urgency surrounding the package, Congressional staff rushed the newly printed legislation into a news conference where Democratic leaders gathered after the vote and Speaker Nancy Pelosi, Democrat of California, signed it, at exactly 2 p.m.

Earlier, Ms. Pelosi said the measure was essential to “begin to shape the financial stability of our country and the economic security of our people.”
[/quote]

Link (NYT)

Throughout the process, there was never any doubt in my mind that it would be passed.  I was a little bit surprised at the three-pager that Paulson tried to ram through, both for its brevity and for its blunt attempt to seize unlimited power.

Image | Payrolls fall by 159,000 in September
Payrolls fall by 159,000 in September

While I consider the employment report to be among the Fuzziest of Numbers, I still look at it when it comes out (like it did this morning at 8:30 a.m.) because there is some value in the trend, even if the number itself is not worth much.

Plus, seeing the amount of fudging in the Birth-Death model is one of my favorite activities, because I think it provides insight into just how unreliable government statistical models really are.

[quote]WASHINGTON (MarketWatch) – U.S. employment fell by 159,000 in September, the worst job losses since March 2003, the Labor Department reported Friday.[/quote]

This would have, of course and as always, been even worse had the infamous Birth-Death model not inexplicably added 42,000 jobs to the count.

Payrolls fall by 159,000 in September

While I consider the employment report to be among the Fuzziest of Numbers, I still look at it when it comes out (like it did this morning at 8:30 a.m.) because there is some value in the trend, even if the number itself is not worth much.

Plus, seeing the amount of fudging in the Birth-Death model is one of my favorite activities, because I think it provides insight into just how unreliable government statistical models really are.

[quote]WASHINGTON (MarketWatch) – U.S. employment fell by 159,000 in September, the worst job losses since March 2003, the Labor Department reported Friday.[/quote]

This would have, of course and as always, been even worse had the infamous Birth-Death model not inexplicably added 42,000 jobs to the count.

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Just got my result that I’m C19 positive.
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