Reply #8: DailyReckoning.com from April 24th [View All]

There is so much ‘noise’ in the financial system, it is hard to think. The papers are full of distractions and absurdities. You can find almost any point-of-view you want. Some argue that central banks are winning...that the stock market hasn’t gone down because it is getting ready to go up...and soon, the housing market will bottom out too.

“Fears of bank failures recede,” says a headline in the Financial Times today.

Others argue that the worst is still ahead...that the stock market will melt down...that housing prices will fall another 20%...and that the whole world will go into a monumental downturn.

“Housing slump may exceed Depression,” says a San Diego paper.

We take a middle view – that financial assets (including paper money), the financial industry, the credit cycle, the dollar-standard monetary system and the U.S.A. itself are in an historic decline...while emerging markets, gold and commodities are in a once-in-a-lifetime upswing.

We’ve heard about the panic that the doubling of wheat and rice prices is causing in China, India and other Asian countries. But now, reports the Washington Times , this panic is beginning to spill over to Americans. The article goes on to point out that bulk grocery stores, such as Costco, are having to put a limit on how much rice customers in certain states can buy. Americans have gotten a whiff of the high prices and fear that the shortages will spread from overseas, and have begun hoarding necessities such as oil, rice and flour.

“Commodity prices across the board are at levels not experienced in many of our lifetimes,” said CFTC Chairman Walter Lukken. “These price levels, along with record energy costs, have put a strain on consumers as well as many producers and commercial participants that utilize the futures markets to manage risks.”

Resource Trader Alert ’s Kevin Kerr assets that “this profit parade isn’t going to end anytime soon.” But let’s take a look at the headlines and then we’ll come back to our analysis.

Is the housing market getting worse?... in Nevada, the local press tells us that many erstwhile homeowners are not being very considerate to the new owners. They’re wrecking the houses before they leave, says the paper, even putting cement down the plumbing. Of course, they’re upset, continues the report, because they feel they’ve been roughly handled by the mortgage industry...Meanwhile, in Chicago, Jesse Jackson is in the news; he thinks borrowers have been roughly handled by the mortgage industry too. He’s called for a moratorium on foreclosures. And over the on East Coast, the Washington Post says lenders are “being swamped” by delinquent loans. Partly because of the risk of bad payers, mortgage approvals have fallen to a 10-year low. But not all the delinquents are homeowners. Many former students, who took out loans to get through college, are finding it hard to pay the money back. Lenders are tightening up on the scholars too. And the Bush Administration is so alarmed at the thought of all the college keg parties that might be canceled; it has proposed to buy student loans from the lenders.

Where will it get the money, you ask? From taxpayers, of course. Who are the taxpayers? The parents of the students, obviously. Then, why not let the parents keep their money and pay for their own children’s education? Oh, stop being a silly old fuddy duddy...