Storm Clouds on the Horizon

Many attribute the current recession to the housing bubble bursting.  Home financing and equity loans were the most glaring examples of the larger credit bubble problems that had built up.  This problem is not unique to the United States and has afflicted Europe as well.  Remember Iceland failing as the first indication of impending financial disaster?

Supposedly, things have improved in Europe, but this commentary in the Telegraph makes me wonder.  The M3 money supply contracted despite the dumping of stimulus money by U.S. and European governments in an effort to free up credit liquidity.  Instead, loans to the private sector decreased for the first time since 1983.  Reading the analysis and quotes presented is not an exercise for the faint of heart, as it presents a very gloomy picture for 2010.  Any time the word “deflation” is used, be afraid.  So much for converting dollars to Euros to hedge your bets, at least in the long term.
So stocks are now looking unstable if things don’t improve in the credit picture.  Where do you invest if you are one of the fortunate who has extra money or want to get out of the stock market?  Well, the gold bugs have pushed gold to $1,000 an ounce and there have been run ups in oil, copper, and eve lead!  A lot of people have moved their money into commodities but there is peril there as well. The key quote from this:

"It seems to us that if output declines, then input of materials ought to be down by a similar order," said High Frequency Economics economist Carl Weinberg.

I’m afraid logic has nothing to do with economic behavior these days.  Where to put your money is becoming like shooting a moving target in an increasingly faster carnival game.  I’d thought maybe the Euro for very short term and silver (as a bargain compared to gold) for longer term, but nothing looks safe.

Do you trust the Federal Reserve?  I’m beginning to think we have nothing but incompetency at the top of our financial and political institutions.  Finding out the shell game involving AIG being forced to bail out big banks such as Goldman Sachs doesn’t add to confidence in the system.  The cover up following that action destroys it.

So we have major problems yet to fully come into play and an utterly incompetent response to what has already gone wrong – all on an international scale, not just domestic.  No sector is seeing concrete growth, except for bigger government of course. Now is not the time to relax thinking we are in safer waters, rather it is a time to batten down the hatches and ride the coming storms out.