Best of the Week
Most Popular
1. Investing in a Bubble Mania Stock Market Trending Towards Financial Crisis 2.0 CRASH! - 9th Sep 21
2.Tech Stocks Bubble Valuations 2000 vs 2021 - 25th Sep 21
3.Stock Market FOMO Going into Crash Season - 8th Oct 21
4.Stock Market FOMO Hits September Brick Wall - Evergrande China's Lehman's Moment - 22nd Sep 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.How to Protect Your Self From a Stock Market CRASH / Bear Market? - 14th Oct 21
7.AI Stocks Portfolio Buying and Selling Levels Going Into Market Correction - 11th Oct 21
8.Why Silver Price Could Crash by 20%! - 5th Oct 21
9.Powell: Inflation Might Not Be Transitory, After All - 3rd Oct 21
10.Global Stock Markets Topped 60 Days Before the US Stocks Peaked - 23rd Sep 21
Last 7 days
Stock Market Trend Forecast Early 2022 - Tech Growth Value Stocks Rotation - 18th Jan 22
Stock Market Sentiment Speaks: Are We Setting Up For A 'Mini-Crash'? - 18th Jan 22
Mobile Sports Betting is on a rise: Here’s why - 18th Jan 22
Exponential AI Stocks Mega-trend - 17th Jan 22
THE NEXT BITCOIN - 17th Jan 22
Gold Price Predictions for 2022 - 17th Jan 22
How Do Debt Relief Services Work To Reduce The Amount You Owe? - 17th Jan 22
RIVIAN IPO Illustrates We are in the Mother of all Stock Market Bubbles - 16th Jan 22
All Market Eyes on Copper - 16th Jan 22
The US Dollar Had a Slip-Up, but Gold Turned a Blind Eye to It - 16th Jan 22
A Stock Market Top for the Ages - 16th Jan 22
FREETRADE - Stock Investing Platform, the Good, Bad and Ugly Review, Free Shares, Cancelled Orders - 15th Jan 22
WD 14tb My Book External Drive Unboxing, Testing and Benchmark Performance Amazon Buy Review - 15th Jan 22
Toyland Ferris Wheel Birthday Fun at Gulliver's Rother Valley UK Theme Park 2022 - 15th Jan 22
What You Should Know About a TailoredPay High Risk Merchant Account - 15th Jan 22
Best Metaverse Tech Stocks Investing for 2022 and Beyond - 14th Jan 22
Gold Price Lagging Inflation - 14th Jan 22
Get Your Startup Idea Up And Running With These 7 Tips - 14th Jan 22
What Happens When Your Flight Gets Cancelled in the UK? - 14th Jan 22
How to Profit from 2022’s Biggest Trend Reversal - 11th Jan 22
Stock Market Sentiment Speaks: Are We Ready To Drop To 4400SPX? - 11th Jan 22
What's the Role of an Affiliate Marketer? - 11th Jan 22
Essential Things To Know Before You Set Up A Limited Liability Company - 11th Jan 22
NVIDIA THE KING OF THE METAVERSE! - 10th Jan 22
Fiscal and Monetary Cliffs Have Arrived - 10th Jan 22
The Meteoric Rise of Investing in Trading Cards - 10th Jan 22
IBM The REAL Quantum Metaverse STOCK! - 9th Jan 22
WARNING Failing NVME2 M2 SSD Drives Can Prevent Systems From Booting - Corsair MP600 - 9th Jan 22
The Fed’s inflated cake and a ‘quant’ of history - 9th Jan 22
NVME M2 SSD FAILURE WARNING Signs - Corsair MP600 1tb Drive - 9th Jan 22
Meadowhall Sheffield Christmas Lights 2021 Shopping - Before the Switch on - 9th Jan 22
How Does Insurance Work In Europe? Find Out Here - 9th Jan 22
MATTERPORT (MTTR) - DIGITIZING THE REAL WORLD - METAVERSE INVESTING 2022 - 7th Jan 22
Effect of Deflation On The Gold Price - 7th Jan 22
Stock Market 2022 Requires Different Strategies For Traders/Investors - 7th Jan 22
Old Man Winter Will Stimulate Natural Gas and Heating Oil Demand - 7th Jan 22
Is The Lazy Stock Market Bull Strategy Worth Considering? - 7th Jan 22
METAVERSE - NEW LIFE FOR SONY AGEING GAMING GIANT? - 6th Jan 2022
What Elliott Waves Show for Asia Pacific Stock and Financial Markets 2022 - 6th Jan 2022
Why You Should Register Your Company - 6th Jan 2022
4 Ways to Invest in Silver for 2022 - 6th Jan 2022
UNITY (U) - Metaverse Stock Analysis Investing for 2022 and Beyond - 5th Jan 2022
Stock Market Staving Off Risk-Off - 5th Jan 2022
Gold and Silver Still Hungover After New Year’s Eve - 5th Jan 2022
S&P 500 In an Uncharted Territory, But Is Sky the Limit? - 5th Jan 2022

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

The Greatest Money War of All Time

Stock-Markets / Financial Crash Feb 08, 2010 - 09:16 AM GMT

By: Martin_D_Weiss

Stock-Markets

Best Financial Markets Analysis ArticleWe are caught in the grips of a great war!

It is not a traditional land or sea war with tanks and battleships.

Nor is it an anti-terrorist, guerilla war for hearts and minds.


Rather, it is war of a third kind — pitting government bureaucrats against millions of investors … and causing massive collateral damage to innocent Americans.

Battle by battle, this great war has been escalated — each time with bigger guns deployed by Washington, each time with deadlier attacks striking Wall Street or Main Street …

Battle #1 began in Thailand in 1997 when global investors suddenly ran from its currency, dumped its stocks and abandoned its real estate.

Within weeks, the contagion spread to neighboring countries; within months, the fallout forced Russia to default on its sovereign debts.

Long Term Capital Management, a major player in the high-risk derivatives market, went under. Wall Street was on the verge of an unprecedented meltdown. The Dow plunged.

But the U.S. Federal Reserve responded swiftly, opening the money spigots full throttle and temporarily putting out the fires.

Soon, the pundits came out of hiding. They said the crisis was over. They swore up and down that the Fed had won the war.

However, any appearance of victory was deceptive in the extreme. All the Fed had really accomplished was to win a single battle, postpone the inevitable collapse, and in the process, help create another, far larger problem: the Tech Bubble of 1998-1999.

Investors, flush with cheap cash, rushed headlong into worthless IPOs. Harebrained business models prevailed. The Nasdaq DOUBLED in just one year.

Battle #2 began when the Tech Bubble turned into the Tech Wreck of 2000-2002.

Investors dumped their grossly overvalued dot-com stocks. Within weeks, the contagion of selling spread to other technology companies; within months, it spilled over into the entire economy.

Tech Wreck Losses: $6.5 Trillion

According to the above data compiled by the Fed, before it was over, U.S. households had suffered …

  • Losses of $3.6 trillion in stocks
  • Losses of $997 billion losses in mutual funds, plus
  • Losses of $1.9 trillion in life insurance and pension fund reserves

Total Tech Wreck losses: $6.6 trillion. (For the proof, click here.)

This time, the Fed responded with even bigger guns: To avert an all-out deflation, Chairman Alan Greenspan not only dropped interest rates to their lowest level since World War II, but he kept them at those extraordinary low levels for the longest period since the Great Depression.

He pumped cheap money into the economy like never before. He virtually banished the fear of risk. And, as a direct result, tens of trillions in borrowed dollars rushed into the U.S. housing market.

Again, the pundits swore the worst of the crisis had passed. Again, the government claimed it had scored a victory. Again, they were dead wrong.

Battle #3 was the monster born from the ashes of Battle #2: The Fed’s response to the Tech Wreck created the Housing Bubble, which, in turn, spawned the Housing Bust.

And alas, the losses resulting from the Housing Bust of 2007-2009 were 2.4 times greater than the losses from the Tech Wreck of 2000-2002.

Housing Bust Losses: $15.5 Trillion

According to recently released Fed data, even excluding the early real estate losses of 2007, the Housing Bust caused U.S. households …

  • Losses of $6.0 trillion in real estate
  • Losses of $4.4 trillion in stocks
  • Losses of $1.5 trillion in mutual funds, and
  • Losses of $3.6 trillion in life insurance and pension fund reserves

Total Housing Bust losses: $15.5 trillion. (For the proof, click here.)

Combined losses suffered during the Tech Wreck and the Housing Bust: $22.1 trillion.

Yet now, under a new administration, the bailout brigades are up to their old tricks.

For a third time, they’ve retaliated with easy-money fire hoses, this time driving short-term interest rates to practically ZERO.

For a third time, they’ve deployed bigger guns. This time, with bailouts and stimulus that add up to 30 percent of GDP — TEN times more than the average of all prior postwar recessions.

And again, they’ve had the audacity to declare “victory” … to say that the “crisis is over” … and proclaim that the “recovery is sustainable.”

Inevitable result: Another gigantic bubble, another bust, and another round of devastating losses — this time in sovereign government debt (e.g., Treasury bonds).

This is why the collapses of sovereign debt markets in Greece, Spain, and Portugal are so alarming. (See “The Next Contagion.”)

And this is why the Obama budget — including an astonishing $1.6 trillion deficit in the current fiscal year — is so dangerous.

My recommendations are unchanged:

Avoid all long-term bonds, whether issued by federal governments, private corporations, or municipalities.

Approach all stock investments with great CAUTION — tight stop losses, plenty of cash, and solid hedges.

Above all, do not fall for this new deception. Keep your money safe. Make sure you’re not engulfed in the next round of collateral damage.

Good luck and God bless!

Martin

This investment news is brought to you by Money and Markets. Money and Markets is a free daily investment newsletter from Martin D. Weiss and Weiss Research analysts offering the latest investing news and financial insights for the stock market, including tips and advice on investing in gold, energy and oil. Dr. Weiss is a leader in the fields of investing, interest rates, financial safety and economic forecasting. To view archives or subscribe, visit http://www.moneyandmarkets.com.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in