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International instability

Monday, October 27, 2008, 9:06 PM

As bad as the US is, there are worse problems elsewhere.  This is why I think this credit crisis will not play out like any previously and why I think there's a better than even chance of a systemic banking crisis.

In times past when a country experienced a bubble or a banking crisis, there was always a country next door that hadn't where the savvy could hide out.  Where does one hide out today?

Europe on the brink of currency crisis meltdown

The financial crisis spreading like wildfire across the former Soviet bloc threatens to set off a second and more dangerous banking crisis in Western Europe, tipping the whole Continent into a fully-fledged economic slump.

Currency pegs are being tested to destruction on the fringes of Europe’s monetary union in a traumatic upheaval that recalls the collapse of the Exchange Rate Mechanism in 1992.

“This is the biggest currency crisis the world has ever seen,” said Neil Mellor, a strategist at Bank of New York Mellon.

Stephen Jen, currency chief at Morgan Stanley, says the emerging market crash is a vastly underestimated risk. It threatens to become “the second epicentre of the global financial crisis,” this time unfolding in Europe rather than America.

Austria’s bank exposure to emerging markets is equal to 85pc of GDP – with a heavy concentration in Hungary, Ukraine, and Serbia – all now queuing up (with Belarus) for rescue packages from the International Monetary Fund.

Exposure is 50pc of GDP for Switzerland, 25pc for Sweden, 24pc for the UK, and 23pc for Spain. The US figure is just 4pc. America is the staid old lady in this drama.

Those figures in the bottom two paragraphs are quite the eye-openers. Somehow Austria's bank system loaned out 85% of Austria's GDP to emerging markets that are even now resorting to emergency measures to stem the erosion of the their currencies against the dollar.  The problem, apparently, is that these countries were loaned vast amounts of money denominated in dollars.  The faster their currencies fall, the more it costs them to pay back their loans.  
Some of these currencies have fallen by 40% in a matter of weeks. » Read more

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Coming soon! The Crash Course on DVD!

Sunday, October 26, 2008, 10:25 PM


Chris Martenson fans,

Okay, okay! We got the message loud and clear that you want the Crash Course on DVD. In fact, in the few days since the Crash Course was completed, we’ve been inundated with requests for a DVD version. I’m writing today to describe our plans to release the Crash Course on DVD and to distribute that DVD through a grassroots community effort. Here's the deal: » Read more

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Trouble In The Real Economy

Saturday, October 25, 2008, 4:38 PM

While I was driving home today, the airwaves were filled with happy news of credit markets unfrozen and signs of renewed liquidity in the paper markets.  Specifically, NPR had a 10-minute piece that was nothing but one high level money manager after another saying things were better.

Lost in this "news" was any sense that our economy is something more than the flow of billions between and among various debt markets.  The implication was clear: Now that our ability to lend more freely has been fixed, we've turned the corner.  Whew!  

Glad that's behind us!

Unfortunately, it's not so easy.  In a debt-based market economy, there are two parties involved - a willing lender and a willing borrower.  It would seem that the willing lender part is being fixed, but what about the willing borrower?

Here, the signs are decidedly less favorable. » Read more

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Now Chris Martenson needs YOUR help!

Friday, October 24, 2008, 2:36 PM


Chris Martenson fans,

By now all of you know that the Crash Course is finally complete. Hats off to Chris, who has put over four years of his life into this herculean effort. Chris has not only amassed this data and created the Crash Course; he’s also committed himself to giving the Crash Course away for free to everyone.

We hope you’ve enjoyed the Crash Course. Now Chris needs your help spreading the word. Chris is passionate about getting the message of the Crash Course out to everyone. So much so that he’s decided to forego the obvious opportunity to sell this fine work for a fair price. Instead he plans to continue giving it away for the sake of public service.

We have no advertising or marketing budget whatsoever. To get the word out, we need to “go viral” with our message, so we desperately need your help to get the word out about the free Crash Course. Specifically, I’m asking everyone to help in the following ways: » Read more

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Alert - Global markets melt down.

Friday, October 24, 2008, 7:59 AM

Hang on, it's going to be a bumpy ride.

Last night global markets sold off more than 10% in a few spots in Asia (Korea & India) and are down between 7% and 8% in Europe.

Here in the US, our stock futures are "Lock Limit Down," meaning that automatic circuit breakers have tripped, preventing any further trading. » Read more

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Thank you everyone!

Thursday, October 23, 2008, 6:16 PM

I want to thank everybody who donated or signed up today. Thank you!

I want to thank everyone who left a comment, and those who just dropped by.

The Crash Course was 4 years in the
making.  To be done with the main body feels like an accomplishment
greater than my PhD dissertation.  It was certainly harder for me. So I
slept late and (mostly) took the day off to recharge.

I will be back fully in the saddle tomorrow.  I am full of energy and ready to begin the next phase of this project.

So thanks again, and see you all here tomorrow.

All the best,
Chris


In the meantime, I think there is a very important truth wrapped within this article by Chris Hedges.   It exposes my central discomfort with the legions of Goldman Sachs people who are now seemingly running every aspect of the bailout.  In a nutshell, if everybody is thinking the same thing, then nobody is thinking.   » Read more

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Chapter 20 is done....

Wednesday, October 22, 2008, 6:22 PM

Finally(!!) 

...and now the work begins. 

Link to:  Chapter 20 - What Should I Do?

This is the last of the Crash Course series...I plan to put out an obligatory "here are my thoughts on national and global solutions" piece as an addendum, but I suspect  that material would be rapidly dated by events.

So I kept the Crash Course as timeless as possible. » Read more

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Why the blog is getting fewer updates...

Monday, October 20, 2008, 3:02 PM

Things will continue to be a little slower than normal on this blog as I enter the home stretch on Chapter 20. I am very close to completion, perhaps another day or two.

As always, this chapter has proven to be harder and more complicated than I thought.  Suffice it to say, it could be an entire course all by itself, but I feel compelled to keep it to no more than ~15 minutes. 

After this part is done, I will breath a huge sigh of relief, drink some champagne, and immediately begin wondering about where I take my efforts next.

I am considering the thought of producing more such chapters but on much narrower topics - say inflation vs. deflation, or my thoughts on gold, or going into greater detail on the key points of preparation raised by Chapter 20.

One thing is certain, I am committed to spending more time delivering value to the subscribers to this site, so more frequent Martenson Reports are a certainty.

I'd love to hear your thoughts on the matter.

Best,
Chris

» Read more

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The "must read" article of the day - The Confidence Game

Monday, October 20, 2008, 9:07 AM

James Grant writes a keeper. I highly recommend you read the whole thing.

The Confidence Game

Quote:
In disclosing plans to buy a quarter-trillion dollars of bank stock in the name of the American taxpayer, Treasury Secretary Hank Paulson harped on confidence. "Today, there is a lack of confidence in our financial system, a lack of confidence that must be conquered," he said on Tuesday.

What Mr. Paulson did not get around to mentioning was the excess of confidence that preceded the shortfall. Under the spell of soaring house prices (and before that, of stock prices), Americans trusted the things they ought to have doubted. But markets are cyclical, and there is always a new day. In compensating fashion, people will eventually doubt the things they ought to have trusted. Investment opportunity follows disillusionment. It's complacency that precedes bear markets.

» Read more

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Money stampeding out of the market

Saturday, October 18, 2008, 12:56 PM

While the myth is that the stock market is a discounting machine, the reality is that it is mostly a liquidity measuring device.

What I mean by this is that the gigantic machinery of Wall Street, which includes all the people working at brokerages, as well as all of the buildings and infrastructure involved in operating a market, are not cheap, and the money to operate all of that has to come from somewhere.

It is safe to say that just keeping the machinery well-oiled requires several billions of new money each month to keep it fed at a subsistence level (for the pin-stripe crowd, I mean).

Yes, we could look at stock's p/e ratios and scrutinize annual reports, but the sad truth is that if more money is leaving the market than entering it, prices will fall.

It's very simple: » Read more