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Markets break down - Dow plummets below 9,000

Thursday, October 9, 2008, 3:30 PM

Okay, folks, we are in the midst of a pretty serious stock market breakdown.

Yes, we've had bigger down days, but this is on the heels of some of the most concerted behind-the-scenes and out-in-the-open official intervention that we've ever seen.

This means the market has lost confidence, not just in the US authorities' ability to manage the crisis, but more generally in central banking. 

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New Martenson Report Ready

Thursday, October 9, 2008, 2:56 PM

October 9, 2008

In this Martenson Report I cover the importance of the credit markets
to the smooth functioning of our just-in-time economy.  If the credit
markets fully seize up it is not a stretch to state that most
businesses and the flow of many goods will also seize up.

In fact this has already happened to a limited extent.  Should this
extend further there are a few basic precautions that you should
consider as a means of mitigating the impact of a potential
banking/credit lock-up.

Follow this link to the report:  How the Credit Markets Affect Us All 

Note:  This report is for subscribers only.

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The Six Stages of Awareness

Wednesday, October 8, 2008, 5:21 PM

A new Martenson Report, available to all registered users, is posted.  This one is about how we might internally process the changes that are before us.

Link to:  
The Six Stages of Awareness


The text below is from a past seminar.  It is a very loose adaptation of the Kubler-Ross "Five Stages of Grief" framework.

Often a broad new awareness results in a series of emotional responses
that mimic the grief associated with loss.  I have termed these as The
Six Stages of Awareness.

Each of us here is somewhere along this progression.  Most of us will
inevitably pass through all six stages, each at a different speed.

While we read each others comments at this site (and elsewhere) my hope
is that we can find acceptance and understanding of the fact that each
person is at a slightly different stage of acceptance and awareness. 

Each person needs to process the stage they are currently in and that
is perfectly OK with me (within normal bounds of civility and
appropriateness, of course).

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Central banks cut interest rates

Wednesday, October 8, 2008, 7:32 AM

World stock markets were in meltdown mode last night.  Japan was off more than 10% at one point.

So the world's Central Banks got together and performed an emergency coordinated rate cut of 0.50% (50 basis points).

The US Federal Reserve has cut rates from 2% to 1.5% and the European Central Bank trimmed its rate from 4.25% to 3.75%.

The central banks of Canada, China, Sweden and Switzerland [and the UK] all took similar action in the coordinated move.

The unprecedented step is aimed at steadying a faltering global economy and slumping stock markets.

Fed Funds were already at 1.25% after a stealth rate cut. This 50 basis point cut just gets us officially closer to what was already in effect. So it will not actually change the cost of money in the US at all. Not one tiny bit. Rather, this was symbolic for the US. For the EU it does represent an actual decline in the cost of money, which brings me to my next point.

Second, I cannot figure out how a rate cut does anything at this point. Yes, so money is cheaper to borrow from the Central Banks. Okay. So what?

In order for that to be effective, somebody has to want to borrow it.

Again the Central Banks are fighting the wrong fight. Where they battled liquidity, solvency was the issue.

Now, where they are battling the cost of borrowed money, they have done nothing about the desire to borrow money.

I am quite intrigued to see China on the list of involved Central Banks. This is the first time I can recall their coordinated involvement in the actions of the world banking cartel.  Welcome to the club.

Japan was not involved, because they don't have 50 basis points to cut - their monetary policy has been riding the rails right down near the zero line for years.  So Japan is now saying to the rest of the world "welcome to the club!"

Despite the fact that the move was merely symbolic, the impact on the US futures was immediate and pronounced.  I've never seen a 60 point pop in a 5 minute window before.

Bottom line:  The world's Central Banks are desperately pulling on their main lever, with fingers crossed, hoping that it will work one more time.  Unfortunately, the interest rate lever cannot fix our current ills...this was merely a psychological shot in the arm, meant to let the world know that the Central Banks are taking all this seriously.  A measure meant to add confidence to an economic system that operates on confidence.

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The Fed - Picture of the Day

Tuesday, October 7, 2008, 3:56 PM

In 1998, the Long Term Capital Management (LTCM) blow-up (aka "the worst financial crisis of all time,") happened.  To fight the pernicious effects of this crisis, the Fed expanded its asset base, which is a fancy way of saying that they pushed a bunch of cash out into the banking system

Well, that crisis passed, and the Fed slowly re-absorbed that excess cash and returned to a more normal rate of exponential money expansion.

Then the Y2K 'crisis' came along and the Fed shoved tons of money into the banking system in anticipation of a crisis that never was.  (Hey, they didn't know that.)  Unfortunately, all this hot money poured onto an already-raging stock market mania and served to fuel the final blow-off that finally burst in the spring of 2000.

Then 9/11 came along, and this was by far a larger shock to the system than either of the prior crises.  Again, money was shoved into the system and then reeled back in later.

Well, then, this picture will help you put this current crisis into context.


The opportunity for this level of monetary monkeying to end up in the hyperinflationary ditch is very, very high.

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Physical gold market "on fire"

Tuesday, October 7, 2008, 2:46 PM

I have long advocated that owning physical gold is the cornerstone of a prudent portfolio.  How much is up to you, but in my estimation it should be somewhere north of 10% of your total holdings.

I have recently had difficulty trying to help a few individuals obtain the gold and/or silver they desired.  In my 6 years of being a very active gold/silver investor, I have never seen anything like this.   Product is hard to find, and getting harder. 

The "official price," as set by the paper traders in the NY Comex pits, is miles away from the actual price you'd have to pay to actually get real physical gold, and growing wider by the week.

This "spread" between the "official" spot price and the real price you'd have to pay has doubled for gold in the past month and is now a whopping 40% for quality silver product.

And that's if you can find any.

Today the US mint announced that "due to high demand" they are ceasing production of a wide range of gold products.

US Mint halts some American Eagle coin production
NEW YORK, Oct 7 (Reuters) - Unprecedented demand for precious metals and volatile markets forced the U.S. Mint to cease production for the half-ounce and quarter-ounce popular American Eagle gold coins for the rest of this year and to supply other bullion coins on an allocation basis.

The 'explanation' given is that with demand so high the mint has decided to cease production so that it can "catch up".   I am no production expert, but halting production seems like an odd way to go about "catching up". 

What makes more sense to me is that the US Mint is running out of stock material with which to work.  That fits the decision like a t-shirt that's three sizes too small.

At Colorado Gold, a very reliable gold dealing website, these messages now grace the front page:

Gold:  No Credit Suisse, Buffalos, Maple Leafs, or tenth ounce or half ounce Gold Eagles till you see it here


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New Martenson Report Ready

Monday, October 6, 2008, 10:02 PM

This one is available to all registered users as it outlines my basic approach and gives a sneak peak into Chapter 20...

The opening: 

My belief is that massive, unprecedented change is coming. No, I
believe that it is already underway. When the dust settles in one,
five, or twenty years, the economic landscape will be utterly changed.
Another belief is that by taking steps now, both small and large, you
can significantly minimize disruptions in your life that so many others
will experience. While we will all end up in the same place in twenty
years, I want your path to be as gentle as possible. By undergoing
voluntary change, you will have more opportunities to shape your path
than those who find change involuntarily forced on them. Where others
will someday reach a cliff face that needs to be scaled all at once, my
goal is to walk with you up the side trail. The Crash Course is my main
offering and each Martenson Report is designed to reinforce those
lessons with my goal being to help you navigate the changes ahead. 

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Recent Radio Spot with Jason Bradford of KZYX (CA)

Monday, October 6, 2008, 6:10 PM

Here's the feed for the recording.

Link to Radio Interview

(no more to this message)


Fed Boosts Cash Auctions to $900 Billion, May Do More

Monday, October 6, 2008, 12:00 PM


This is big news.  This means that the Fed is either prepared to destroy the remaining portion of its decimated balance sheet, or (and this is more likely) it is going to be directly printing money out of thin air to pass out in exchange for bad debts.

Oct. 6 (Bloomberg) -- The Federal Reserve will double its auctions of cash to banks to as much as $900 billion and is considering further steps to unfreeze short-term lending markets as the credit crunch deepens.

"The Federal Reserve stands ready to take additional measures as necessary to foster liquid money-market conditions,'' the central bank said in a statement released in Washington today. Fed and Treasury officials are "consulting with market participants on ways to provide additional support for term unsecured funding markets,'' the statement said.

Today's steps follow a hoarding of cash by banks that sent the premium on the three-month London interbank offered rate over the Fed's benchmark interest rate to a record. Industrial companies are also finding it harder to raise cash after the market for commercial paper shrank to a three-year low as investors flee even borrowers with few links to mortgages.

"It is pretty much all out war,'' said Christopher Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd., New York. ``They are pulling out all the stops to try and get borrowers and lenders to meet and do transactions once again.''

Link (Bloomberg)

The speed and depth of this crisis are without parallel.  We are very, very close to an all out-banking holiday and all that means.

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Reminder - I'll be on the radio at 12:10 EST today

Monday, October 6, 2008, 11:30 AM

I'll be interviewed by Jason Bradford on California Public Radio
station KZYX from 12:00 (EST) to 1:00 on Monday, October 6th.  I think
I will come on about 12:10 pm, if I understand the format correctly.

Jason was/is one of the prime architects of the Willits, CA
"relocalizaton effort", of which I am a big fan.  Somehow he got an
entire town to see what was coming and take actions - years ago.

There are limited 'spots' available to listen in by Streaming Media at the link below. » Read more