America Will Go Bankrupt. It’s Just A Matter Of When

Yesterday we asked how low can the US Dollar go? In other words, how much of it can the Fed spend to support US Interventionist policies before the rest of the G-20 screams “No Mas!”? Today we may have an answer. I call it No POMO, no MOMO.

If you don’t know by now what POMO is, wiki does a good job of explaining it. It’s called Permanent Open Market Operations, the one that the FOMC has been running under the guiding hand of Goldman Sachs (GS) ever since ex-Fed of New York head Teflon Timmy Geithner moved into the White House into the role of Fed patron.

http://en.wikipedia.org/wiki/Open_market_operations

You may not know, but MOMO - or just plain MO - is trader talk for momentum. Yesterday, at shortly past 2:30pm ET, MOMO hit the “Wall” when the market realized the Fed would be receiving no more POMO from the US taxpayer. It seems that handing close to $2 trillion to the Fed is like getting close to bankruptcy. People are downright angry, and politicians are now afraid to venture into Town Hall meetings without full battle gear. In their own way, America has turned into a war zone.

So, what’s this President going to do? Is it more POMO and bankruptcy today or a healthcare reform bill and bankruptcy tomorrow?

Well, read his lips: “No bankruptcy on my watch!”, meaning he’ll have to decide later if he wants to run for re-election or join Goldman Sachs in a vice-chairman role, while he writes his memoirs and retires a near billionaire at under 55. That would put him up there second to Oprah as the wealthiest of all time African American.

Of course, if he also sidekicks his bud Letterman, we just might see his wealth soar into Oprah levels.

You see, in America, it’s all about the money. No POMO, no MOMO.

Figuring this was likely to happen I decided to take a market snapshot just at the point I saw MOMO hit the Wall, which happened to be 2:39pm ET.

Students of the market learned something following the Nixon years in the White House. In typical American fashion, it took a character by the name of Deep Throat to put investigative journalists onto the truth of the biggest story in decades. “Follow the money” said Deep Throat.

Well that was back in 1973, and I was a new chartered accountant and certified management accountant. After five years of auditing, trust me; I loved those words. I knew how important they would become in my life. “Follow the money”.

So at 2:39pm ET on Sept 23, 2009, just 24 minutes after the FOMC released their report, and just as MOMO was hitting the Wall, I took that snapshot:

S&P 500 then: 1,079.12 +7.46 +0.70%; S&P 500 at the close: 1,060.87 -10.79 -1.01%

NASDAQ then: 2,166.02 +19.72 +0.92%; NASDAQ at the close: 2,131.42 -14.88 -0.69%

Energy & Financials then: XLE -0.38% XLF 0.0%; Energy & Financials at the close: XLE -2.1% XLF -2.0%

Leading Semis and Computer Hardware then: $SOX +2.3% $HWI +2.0%; at the close: $SOX +0.5% $HWI +0.3%

Lagging Airlines, REITs and Goldminers then: $XAL -1.8% $DJR -0.8% $XAU -0.3%; at the close: $XAL -4.3% $DJR -3.9% $XAU -3.1%

30-year Treasury yields then: 4.185 -0.23 -0.55%; at the close: 4.195 -0.13 -0.31%

10-year Treasury yields then: 3.407 -0.49 -1.42%; at the close: 3.418 -0.38 -1.10%

5-year Treasury yields then: 2.368 -0.57 -2.35%; at the close: 2.375 -0.50 -2.06%

Euro then: 148.23 +0.31 +0.21%; at the close: 147.31 -0.61 -0.41%

Yen then: 109.96 +0.24 +0.22%; at the close: 109.55 -0.17 -0.15%

Pound then: 164.48 +0.94 +0.57%; at the close: 163.48 -0.06 -0.04%

Cdn Loonie then: 93.72 +0.16 +0.17%; at the close: 93.00 -0.56 -0.60%

The Gold index soared in very suspicious trading right before the USD soared and Treasury bonds lifted shortly before the FOMC announcement, and then Gold and Silver crashed: http://www.google.com/finance?q=NYSE:GLD

The Oil index bottomed by 10:40am and had zero to do with this: http://www.google.com/finance?q=NYSE:uso

Ask me if I believe that Goldman Sachs, JP Morgan (JPM) and UBS (UBS) were in on this play, and scored hundreds of millions, and I will say yes. They were the Humungous Bank & Broker (HB&B) units that floated this dubious story two days ago that Russia would be the hot market, so sell your US Dollars and buy Rubles (in the form of stocks like Vimpel Communications, Mobile TeleSystems, and so on. Buy your Suncor (SU) with Cdn Loonies and smash the US Dollar.

On the defensive team here people, I drew this on the chalkboard before the Interventionists ran the play.

Why did I think UBS was in on the offensive side (in more ways than one)? Other than issuing the ‘Buy Russia’ report, ignoring the facts as I pointed them out a few hours before they drove MO into the Wall, the US and UBS quickly cleaned up the tax evasion matter and then boom, right out of the blue, comes a new US-Swiss tax treaty.

In fact the backroom negotiating going on right before this G-20 meeting has, I surmise, been the biggest ever, leading me to believe that something big is coming down from the G-20 meetings today and tomorrow in Pittsburgh. I don’t think it’s the Super Bowl; but I think it’s Super sized. I think the $USD is going to rock on now. I can hear the crowd roaring from Europe, the UK, Canada and Japan. They needed the break, and it probably cost them something they wanted now, which is a new international reserve currency. I think Teflon Timmy asked them if they’d accept an 85 cent US Dollar in the meantime. I even think he can’t get the smirk off his face thinking about how lopping $100 off the gold price is going to look on the face of GATA’s Bill Murphy.

Aha, don’t cry if it happens. America will still go bankrupt; it’s just a matter of when. Gold will still go to $2500 and probably much higher; it’s just which year. Crude Oil will exceed $100 and maybe $150 long before the carbon trade is finished ripping off people for Goldman Sachs or electric cars or wind farms and solar energy fields make sense without taxpayer paid incentives.

Think of it this way: should Gold hit $900/oz; you can go buy the winning lottery ticket.

Geithner, like his predecessor Hank Paulson, is not a rocket scientist, and this stuff is not that hard to figure out.

Follow the money. Buy low; sell high.

Something to think about. Were all in this together.

Have a great day. I now have to get up in five hours. I’m done.

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Comment by Bindlepete

2009-09-24 16:46:09

As you say it on the horizon and moving this way . When it arrives is as yet uncertain but all of the market manipulation can neither deflect or defer it too long.

My question is will Canada survive with it’s multi year inventory of raw materials. Too closely tied to the sinking ship and can they cut the umbilical cord?

Time will tell.

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