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New Martenson Report ready

Saturday, December 27, 2008, 6:54 PM

In this report for subscribers, I explore a remarkable article by Mr. James Grant that appeared in the December 20th edition of the Wall Street Journal. I found it remarkable because Grant correctly identifies the Fed as the source of current economic troubles and makes the case that, under a gold standard, we might have a different set of troubles, but we wouldn't be facing an extinction-level event for finance. With the deft use of historical examples, he makes a strong case that our current ills stem from very common mistakes that have plagued central banking ever since it was first invented. I expand on several of his arguments to steer towards the conclusion that inflation lies in wait.

Link to the new Martenson Report


Daily Digest - Dec 27

Saturday, December 27, 2008, 11:56 AM
  • Gold Rises Most in a Week on Middle East, South Asia
  •  WSJ: Retailers Brace for Major Change
  • Refinance rates low; few qualify
  • New and Existing Home Sales (Chart)
  • Japan November industrial output falls 'off the cliff'
  • State Coincident Indicators (Chart/Map of states in recession, based on Fed indexes)
  • Total Net Borrowing and Lending in Credit Markets (Chart)
  • Retailers Want In on Stimulus Plan
  • GMAC Gets Bank Holding Company Status, and Potential Access to TARP 
  • Fed Papers GMAC LLC

Real economy shudders to a halt

Saturday, December 27, 2008, 9:06 AM

As we cast our gaze back on the year, it is clear that, even as the world’s monetary and fiscal authorities applied gigantic solutions directly to the banking industry, their efforts went largely unnoticed by the real economy.

The theme for the period from 2000 to 2008 was “globalization.” It turns out that this may have been a fad.


Introducing our new moderators

Friday, December 26, 2008, 4:38 PM

Let me begin by sharing a couple of recent anecdotes.

A woman, now retired, who ran breastfeeding and child nutrition programs out of the UN for years, was offended by a recent post here that strayed off the reservation and wandered into some pretty uncomfortable territory for her.

An 11-year-old got so taken with the Crash Course that he designed a module on “What is money?” for his class where he opened his pitch by holding up both a dollar bill and a candy bar, stating, “If, by the end of the class, you can tell me how these are identical, you can have them both.” He then proceeded with games using various money forms (cowrie shells, etc) to illustrate the ins and outs of the three characteristics of money. Wow! That’s incredible.

Together, these illustrate the range of people who are stopping by the site. Young and old, left and right, religious and non-religious, retired and working, along with a startling range of nationalities.


Daily Digest - Dec 26

Friday, December 26, 2008, 9:29 AM
  • 10 worst real-estate markets for 2009 
  • Real Personal Consumption Expenditure by Category (Chat)
  • Home prices may rise on mortgage refinancing boom 
  • In spite of stricter laws, metro-east bankruptcy filings rise
  • Wall St Santa rally small comfort after grim year
  • Worst predictions of 2008
  • Retail sales plummet (worst on record)   

Daily Digest - Dec 25

Wednesday, December 24, 2008, 7:10 PM
  • What happened to the American Dream?

Merry Christmas and Happy Hanukkah (and a very off topic post)

Wednesday, December 24, 2008, 4:54 PM

Seasons greetings.

It is Christmas Eve and I am not really in the mood to post anything about the Three Es.

Searching around, I thought I would share a family tradition of mine.  Long ago I chafed at the extremely dry family letters that we would receive during the holidays and decided to write ours in a very different style.

What started as a lampoon of others' letters became an important tradition in our own household, and I am told that many people look forward to receiving and reading our yearly missive. One family saves it for a read aloud at the dinner table.

In the spirit of the holidays, I offer you this fragment from last year's letter.  I would offer this year's, but not everybody has received it yet and nothing beats real mail.

Merry Christmas and happy holidays to all.


Chris Martenson

P.S. - The site will not be updated by me on Christmas Day.


Daily Digest - Dec 24

Wednesday, December 24, 2008, 7:08 AM
  • Japan Should Scrap U.S. Debt; Dollar May Plummet, Mikuni Says
  • Protectionist dominoes are beginning to tumble across the world 
  • MIT's Thesis Advisor to Bernanke Take
  • States set to impose bevy of new taxes 
  • Feinberg Despised in Wisconsin Where Cerberus Lives Up to Name
  • U.S. falls deeper into recession
  • Legitimacy Dwindles
  • "Mean Markets and Lizard Brains" FSN Newshour Book Interview
  • Laissez-Faire Capitalism Should Be as Dead as Soviet Communism 
  • U.S. Home Resales Fall; Prices Drop by Record 13.2% 

Daily Digest - Dec 23

Monday, December 22, 2008, 8:40 PM
  • Where'd the bailout money go? Shhhh, it's a secret
  • Bill Sharon ChrisMartenson Interview
  • Ron Paul & Peter Schiff Video
  • Financial Sense Newshour 3rd Hour
  • Banking Regulator Played Advocate Over Enforcer ensuring failure
  • Official says Calif. could be broke in 2 months
  • Recession Slows Migration in U.S.
  • Statement by the Press Secretary on Irresponsible Reporting by New York Times
  • A problem that almost no one saw as it was happening [Monday, April 04, 2005]
  • Federal Reserve is damned either way as it battles debt and deflation
  • OCC and OTS Mortgage Metrics Report, Disclosure of National Bank and Federal Thrift Mortgage Loan Data
  • Why the Auto Bailout's a Dead End
  • Developers Ask U.S. for Bailout as Massive Debt Looms
  • Increased shoplifting is another sign of bad times
  • Cramer Gets One Right - Social Security IS the Biggest Ponzi Scheme
  • Mortgage activity surges at US banks
  • Will the Financial Bailout Undermine the US Defined Benefit Pension System?
  • Department of the Treasury, 2008 Financial Report all 194 pages

Stall Speed

Monday, December 22, 2008, 3:58 PM

The problem with a deflationary collapse of a credit bubble is that everything that worked for you on the way up works against you on the way down. It's sort of like Judo gone wrong.

  • Where rising levels of credit masked poor business decisions and models, shrinking credit will expose them.
  • Where credit led to more credit, defaults will lead to more defaults.
  • Where optimism fueled the ride up, pessimism will drag it back down.

The difficulty for the Federal Reserve and the Treasury Department (and soon, Obama) is that all the big solutions with the big numbers being thrown at the big problems are insufficient. The stimulus is not reaching the right places – it’s getting stuck in the big institutions.

So even as prodigious amounts of money are being created and applied to “the problem,” the evidence suggests that their efforts are not working down on Main Street.

The reason for this is very simple – it is not possible to solve a crisis of solvency with liquidity. It is not possible to fix a crisis of malinvestment with the purchase of bad debts.

Here’s one example. Take retail store space. On the ride up, malls were developed at a furious pace. By every definition or comparison, the US overbuilt capacity in this sector by a very large amount. Given this, what’s going to happen next when this malinvestment is exposed? Well, we don’t have to wait to find out the opening notes of this symphony.