Fitzwilson - The Entire Planet’s Financial System is at Stake

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/2/15_Fitzwilson_-_The_Entire_Planets_Financial_System_is_at_Stake.html

Alan Greenspan: The Financial System Is Broke

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http://www.msnbc.msn.com/id/21134540/vp/38510073#38510073

MR. GREENSPAN: Yeah, yeah. I, I would say that there's nothing out there that I can see which will alter the, the, the trend or the level of unemployment in this context.

MR. GREENSPAN: Well, the problem there implies that the government has control over those rates, meaning the Federal Reserve and the Treasury Department, in a sense. There is no doubt that the federal funds rate, that is the rate produced by the Federal Reserve, can be fixed at whatever the Fed wants it to be, but which the government has no control over is long-term interest rates, and long-term interest rates are what make the economy move. And if this budget problem eventually merges to the point where it begins to become very toxic, it will be reflected in rising long-term interest rates, rising mortgage rates, lower housing. At the moment, there is no sign of that, basically because the financial system is broke and you cannot have inflation if financial system is not working.

There's nothing like the truth coming from a former Fed Chairman. Greenspan is correct in this case: bond vigilantes will punish the US Treasury bond markets in demanding higher yields on long-dated Treasury bonds, forcing up long-term interest rates. They will also drive down the value of the USDollar, as the US government's ability to pay its obligations will come under question. It's not a matter of if, but when the steepening of the yield curve will occur.

Here is an article addressing the steepening of the yield curve from 2009.

http://www.reuters.com/article/idUSTRE54U1NZ20090531

Gold reclaims currency status as global financial systems unravel

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/7841961/Gold-reclaims-its-currency-status-as-the-global-system-unravels.html

Rant

I've been immersed in these games the government and banks play, so I incorrectly assumed everyone believes what I believe about Wall Street, our government, central banks, fiscal and sovereign debt problems, Iceland, Dubai, Greece, etc.

The problem is this: most people don't have a clue about basic economics and financial models, even people much smarter than me, including the experts. Have they been that influenced by the media and teachings? Why do they cling to a Keynesian school of thought which clearly has failed? Why do they believe the only way to fix a huge debt problem is to add more debt, induced by a few privileged men? Why do they continue to believe the economic equivalent of a flat earth?

I've managed to piss off Ivy Leaguers, industry experts, financial insiders--you name it--for being the messenger. I've talked to economists, historians, and academicians from top schools and they believe the system is sound--that outlying events spoiled it for all of us, they reckon. They don't see the systemic breakdown in our fiat, fractional reserve financial systems--or how leverage has created huge pools of toxic derivatives, vulnerable to manipulation. Our financial system is a gigantic, rigged casino. Our profligacy has turned unfunded entitlements like pension funds, social security and healthcare programs into giant Ponzi schemes.

My friends in the real estate and equities markets have shunned me. What are they running away from--me? I'm one data point, unable to move my old dishwasher, much less markets. I haven't been a popular member of the cocktail circuit or at family dinners. And I thought to myself: why are these very bright people so unaware of what has been so coherent to me? I've ranted endlessly the basic economic laws of supply and demand for a certain asset class. Why are educated, bright, authoritative, and influential people missing out on something so luminous? I leave these questions to ponder, unsure of the correct answers. And I exit hoping I am completely wrong in my conclusions.