Liquidity??

Good Afternoon, one and all!

Today I'd like to start off with this short piece concerning global liquidity:

John Hussman: Global Liquidity or Domestic Stupidity
Posted on May 29th,
2007 with stocks: IVV, SPY

Excerpt from fund manager John Hussman's
weekly essay on the U.S. market:

Interest rate trends are pushing higher not only in the U.S., but globally. One might wonder -- if there is so much "global liquidity," why are interest rates rising everywhere? Credit spreads are perking up modestly too, but haven't yet exploded higher in a way that would reflect an oncoming recession or an easing of general inflation pressures.

What's really going on is not the creation of "global liquidity" -- central banks worldwide are generally tightening. What investors have misconstrued as "global liquidity" is nothing but a combination of a) risk blindness among investors, and b) the U.S. going deep into debt to finance current consumption (both private and government spending), while China and other developing nations run huge surpluses to sell us that consumption. They then take the proceeds and buy a) Treasury securities, and b) our means of production. Piece by piece, we are selling off productive assets and claims to our future income, in return for present spending. That's not liquidity -- it's reckless, voluntary subjugation of our future prosperity. Indeed, China recently agreed to buy a chunk of Blackstone Group, and its government is establishing additional means to invest its surpluses by purchasing U.S. assets.

Smartest comments of the week: Ray Dalio of Bridgewater Associates, who
manages about $160 billion in assets for clients including central banks and
foreign governments, quoted in Barron's:

"Our situation today is a modern-day version of the time before the Bretton Woods breakup. It is very much analogous to 1968, '69, and '70, a period in which we had large imbalances, a fixed exchange rate, and Japan and Germany bought our bonds, and then there was a rebalancing. China today is similar to Japan then, in transition from being an emerging economy, except it is about eight times as large. The imbalances are only going to increase, and there'll need to be an adjustment for that. This will lead to depreciation in the value of the dollar relative to emerging countries' currencies, particularly those in Asia . It is going to mean the Fed's tradeoff between inflation and growth is going to be more acute in the next couple of years..."

Check out the rest of the post.

In the long term, we the American people have a very large bill coming due... one that I fear we will not be able to meet, without a lot of suffering and gnashing of teeth.

However, in a small ray of hope, the mainstream media is starting to sound the alarm, albeit, a little too late.

According to USA Today:

The federal government recorded a $1.3 trillion loss last year — far
more than the official $248 billion deficit — when corporate-style accounting
standards are used, a USA TODAY analysis shows.

The loss reflects a continued deterioration in the finances of Social Security and government retirement programs for civil servants and military personnel. The loss — equal to $11,434 per household — is more than Americans paid in income taxes in 2006.

"We're on an unsustainable path and doing a great disservice to future generations," says Chris Chocola, a former Republican member of Congress from Indiana and corporate chief executive who is pushing for more accurate federal accounting.

Modern accounting requires that corporations, state governments and local governments count expenses immediately when a transaction occurs, even if the payment will be made later.

The federal government does not follow the rule, so promises for Social Security and Medicare don't show up when the government reports its financial condition.

Sorry, but that's not right.

From day one of Kumogakure School, I have linked to reports such as the Financial Report of the United States 2006, which gives government figures in Accrual (standard business) vs. Cash (what the government usually uses) Accounting.

Remember: Kumogakure always told you so, long before the Lamestream media got on the case. As a matter of fact, the government has been issuing these Financial Reports for years, and the media hasn't given them the time of day.

Ah well, at least it made the front page... so maybe we're NOT doomed.

The article continues:

Bottom line: Taxpayers are now on the hook for a record $59.1 trillion in
liabilities, a 2.3% increase from 2006. That amount is equal to $516,348 for
every U.S. household. By comparison, U.S. households owe an average of $112,043 for mortgages, car loans, credit cards and all other debt combined...

Now, dear reader, combine all of this bad news with the other posts on this subject I have done... and recognize that we have serious problems coming our way.

One good thing about all this... government subsidized feminism is coming to an end, and soon, as America will be too broke to fund the feminist agenda. Heck, maybe we will see compulsory marriage laws just like the Caesars tried in Rome as a last ditch effort to save this Republic...

But, once again, it will be too little, too late.

Revenge is a dish best served cold, and I for one can't wait to see the femmes get the comeuppance they so richly deserve.

Kumo out.