Dollar and Stock Fantasies

Please have this guy read my dollar posts...clearly he does not understand that the Fed does not create the money - the banks do. If they don't lend money is not being created. If they call in loans then money is contracting...but this guy's a rocket scientist - he says "...its SDR's stupid?"



"Every day is christmas...don't worry everything will be fine over time if you buy quality..."
click to hear the audio

Clearly there is a tremendous misunderestimating of the misunderstanding of how the economy functions and how the money system works...and these guys are on TV? wow.

Ron Paul on the Jon Stewart Show in NYC

The Jon Stewart interview of Ron Paul was pulled from You Tube...I would suggest searching around for it...was a great interview...below is a transcript

Jon Stewart: … welcome Republican Congressman from the State of Texas who also ran for President in 2008. His new book is called End The Fed. Please welcome back to the program, Congressman Ron Paul.

Audience: (Applauds)

Jon Stewart: Nice to see you again, sir.

Ron Paul: It’s good to see you. Thank you.

Jon Stewart: I have read many… this call end the Fed. I have read many politician’s books. They typically are a couple of apocryphal [ph] campaign, anecdotes, cut and paste from one of Churchill’s books. A little end with the American exceptionalism, God and faith. You seemed to have put a lot of thought and effort into this book and you call yourself a congressman. It’s usually you’ve been calling, you’ve been rallying against this type of government intervention, the Federal Reserve, for 30-35 years. Suddenly, the tea parties arise calling for a very similar type of thing. Do you feel like you were like a cool Indie band and somebody came in and like kind of stole your sound and then, by golly, he’s super big. Like how do you feel when you’re watching that development for the last eight or nine months?

Ron Paul: It’s scares the daylights out of me.

Jon Stewart: (Laughter). There goes the daylight.

Ron Paul: Well now, what has happened is that the concerns of how it come about, it’s not because I knew about this. I think good economic policy will tell us that these problems are here and everybody knows we’re in the middle of a big problem. We’ve have…

Jon Stewart: But isn’t we this way with Republican administrations, with Democratic administrations. It is a consistency not often seen.

Ron Paul: Right, my biggest concern is personal liberty and I’ve noticed over the years that both Republicans and Democrats have very little respect for personal liberty and therefore I’ve been fighting this and I want the government to be small. If the government is big, you have less personal liberty and you have to find out how they finance big government and they tax us a lot, but it’s not enough to pay the bills. They borrow a lot and that’s not enough and then there’s another method and it has to do with the Fed.

They have this little thing called the counterfeit machine and they just print the money when they need it. You know, you and I we’d go to jail if we did that, but the Fed does it in secrecy and they get away with it and the government keeps growing and you have runaway welfare spending and then on top of that, they use this to finance these wars that I think are so ridiculous. You know, undeclared wars, endless wars, good wars, long wars, and all kinds of wars with no end in sight. So I’ve put a lot of blame on the Fed because they monetize these debts.

Jon Stewart: We would be taken to jail if we print the money. And do they ever, you know, first of all, I was struck by what you said me going to jail for printing money.

Audience: (Laughter)

Jon Stewart: We have to make a quick call after the show.

Audience: (Laughter)

Jon Stewart: But it is interesting. You know, reading about the history of the Fed that you layout. Their policy is always talking about controlling inflation or preventing deflation, but it is always inflationary. It always seems that over years, they just print more money and you believe that it then creates an illusion of an economy rather than an economy.

Ron Paul: Temporarily, it helps. You know, if you borrow a lot of money. If an individual borrows a million dollars a month, they can live beyond their means until they have to pay the bills. What the government does, if they pay their bills through financial crisis, inflation, unemployment and all these kinds of problem, but one of their job was to have a sound dollar and steady prices.

Well, in 1913, when they started, they have a dollar stock, but it’s worth 4 cents right now. Most of us have four employment. True statistics now in the free market, where we calculate our unemployment per five person, 20 percent, so they haven’t given us sound money. They don’t give us steady prices. They say, “Well, we want to steady the interest rates.” Well, the interest rates are, in my lifetime, they’ve been 21 percent and they’ve been less than 1 percent, so they have failed in everything they’ve done. They have given us big government and they have helped in a significant way to undermine our liberty.

Jon Stewart: What do you say if somebody says, “But what is the answer in the absence of any regulation or in the absence of any controlling entity? Isn’t it anarchy? Isn’t there chaos? Before the Fed, the 1800s, would anyone choose that century as a model for stability, you know, economically?

Ron Paul: It would help guide us because we had significant growth for 30 or 40 years at the end of 19th century and we have a gradually decreasing prices. Actually, your purchasing power went up, but it was not perfect because we have they call benevolism. They fixed the price ratio between gold and silver and there were shortcomings and frequently State’s abuse, so it was imperfect, but the Founders knew about inflation. The destruction …

Jon Stewart: Well, you’re more Jeffersonian on this. You would say he fought against the Central Bank and you would say that he would make the right call. But who would fill that gap? You know, is government the only infringement on personal liberty? You know, because it seems like government also can provide a bore against tyranny, the civil rights movement in such.

Ron Paul: No.

Jon Stewart: Are there other things that infringe personal liberty in government?

Ron Paul: Oh, yes, all the time. Well, with money, the government should protect the value of the money and not destroy it. But yes, the government has an important role in financial issues. They should protect against fraud. For instance, Enron went bankrupt. The market said their stock was worthless and under State Anti-Fraud laws, these individuals were prosecuted and put in jail. You didn’t need more regulations. You have to have anti-fraud laws. But it’s hard to enforce fraud laws when the government participates.

Jon Stewart: (Laughter)

Audience: (Laughter)

Jon Stewart: I’d really like this cast already. Extraordinary.

Ron Paul: Yeah, it’s hard to prosecute…

Jon Stewart: It’s hard to support fraud when the government is committing fraud.

Ron Paul: Well, what about Madoff. He deserves to go to jail, but you know, well, there’s a Ponzi scheme done in DC it’s a same situation down there.

Jon Stewart: Is that a failure though of a lack of oversight? I guess what I’m trying to wrap my head around is even a libertarian viewpoint would say that we need government to provide for the common defense.

Ron Paul: Yes, sure.

Jon Stewart: Who protects us from corporatism? Who protects us from… is it the corporate attack, maybe not as bloody as another country coming in, but isn’t it as necessary for the little guy to be protected from that by some kind of collective?

Ron Paul: Yes.

Jon Stewart: And some others.

Ron Paul: Yes. But to do this, it’s more about prevention than by regulating it. You caused all these harm and trouble and inflation.

Jon Stewart: Right.

Ron Paul: What you want to do is prevent it. The corporations have no right to come to government and get special benefits. The Halliburns [ph] wouldn’t exist in a libertarian society.

Jon Stewart: Right.

Ron Paul: And they get special benefits. It started early on, even with the railroads. I mean, they’ve got certain benefits. So corporations that makes money because you and I and everybody else buy their product. Business, good and bad and corporate profit reflects that they have given the consumer a good product at a good price, but if they’re big because they’re wheeling and dealing with the government. The bigger the government is, the more it encourages the lobbyists because then the incentive to go down there and control the government to get the benefits.

Jon Stewart: Has anyone try to, you know, in what you would call your ideal, has that been tried? Is there a country, is there a government that you believe approximated your ideal of a more sort of a liberty-oriented and economically and socially government?

Ron Paul: Well, we haven’t reached the ideal and we’re not likely to, but I think our country started off pretty well. You know, fairly well. They had the intention. They recognized property rights, sound money, and contracts and you didn’t have the right to destroy your neighbor’s property and so I think…

Jon Stewart: Oh, all right. I’ve got to make another call then. All right.

Audience: (Laughter)

Ron Paul: I don’t want to get you in any trouble.

Jon Stewart: Exactly. Thank you for writing this book. It is really thought-provoking and just really well written and clearly from the heart and it clearly comes from a foundation of belief that you know and awfully a lot about and how you’ve survived in government for eleven terms, I do not know, but thanks for being here. End the Fed is on the bookshelves now. You really should check it out. Thank you, sir.

Ron Paul: Thanks a lot.

Jon Stewart: Thank you, sir.

Why the Fed Loves Secrecy
by: Ron Paul

Last week I was very pleased that the Financial Services Committee held a hearing on the Federal Reserve Transparency Act, HR 1207. The bill has 295 cosponsors and there is also strong support for the companion bill in the Senate. This hearing was a major step forward in getting the bill passed.

I was pleased that the hearing was well-attended, especially considering that it was held on a Friday at nine o’clock in the morning! I have been talking about the immense, unchecked power of the Federal Reserve for many years, while the attention of Congress was always on other things. It was gratifying to see my colleagues asking probing questions and demonstrating genuine concern about this important issue as well.

The witness testifying in favor of HR 1207 made some very strong points, which was no surprise considering the bill is simply common sense. It was also no surprise that the witness testifying against the bill had no good arguments as to why a full audit should not be conducted promptly. He attempted to make the case that the fed is already sufficiently accountable to Congress and that the current auditing policy is adequate. The fact is that the Fed comes to Congress and talks about only what it wants to talk about, and the GAO audits only what the current laws allow to be audited. The really important things however, are off limits. There are no convincing arguments that it is in the best interests of the American people for anything the Fed does to be off limits.

It has been argued that full disclosure of details of funding facilities like TALF and PDCF that enabled massive bailouts of Wall Street would damage the financial position of those firms and destabilize the economy. In other words, if the American people knew how rotten the books were at those banks and how terribly they messed up, they would never willingly invest in them, and they would fail. Failure is not an option for friends of the Fed. Therefore, the funds must be stolen from the people in the dark of night. This is not how a free country works. This is not how free markets work. That is crony corporatism and instead of being a force for economic stabilization, it totally undermines it.

If the Fed gave its actual arguments against a full audit, they would not have mentioned anything about political independence or economic stability. Instead they would admit they don’t want to be audited because they enjoy their current situation too much. Under the guise of currency control, they are able to help out powerful allies on Wall Street, in exchange for lucrative jobs or who-knows-what favors later on. An audit would expose the Fed as a massive fraud perpetrated on this country, enriching a privileged few bankers at the top of our economic food chain, and leaving the rest of us with massively devalued dollars which we are forced to use by law. An audit would make people realize that, while Bernie Madoff defrauded a lot of investors for a lot of money, the Fed has defrauded every one of us by destroying the value of our money. An honest and full accounting of how the money system really works in this country would mean there is not much of a chance the American people would stand for it anymore.

Quotes of the Day

The hardest part of dealing with a bear market is selling weakness. At this point, we need to ensure a set of rules and a trading paradigm is in place that can allow one to contradict normal emotions and sell a market everyone else is looking to buy. For me today for example, I made money long...but made most of it short. But, from a day trading perspective...I needed to be much less impacted by the gap down and shallow bounce rather than focused on the expected counter-trend bounce back to yesterday's upper range that I would have preferred to see...It is quite possible that there will not be much of a bounce at all. However, I do believe that the dollar and the VIX will have a pullback for a few days next week before continuing their uptrends. We need to be ready to make the most of what ever the market serves - even if the bounce I think is reasonable to expect does not materialize.

"Psychologically, the steepness of the decline makes it harder for market participants to do the right thing and sell into the decline. The steepness of the decline also belies the underlying change of character seen at a change of Primary degree. If our analysis is correct, an important market juncture has been crossed...We suspect that people who are now waiting for a bounce or a pause to get on board this new trend will find that the train is leaving the station without them.

Again, the most important tactic now is not to miss this new long-term opportunity by using too much finesse and waiting for a bounce that never comes.  

We believe is strong evidence in support of the conclusion that an important high has been seen."  - Chris Carolan EWI

Non-Farm Payrolls

Today, the Labor Department reported that nonfarm payrolls decreased by 263,000 in September. As a result, today's chart provides some perspective on the US job market. Note how the number of jobs has steadily increased (top chart) over the long-term. During the last economic recovery, however, job growth was unable to get back up to trend (first time since 1960). More recently, nonfarm payrolls have pulled away from its 50-year trend by a record percentage (bottom chart). In fact, the number of US jobs is currently at level first seen in early 2000.

What's Next? - Followup

The dollar is indeed key to the market. We have 4 waves of 5 down for the equity indexes as I write this...It looks like the move down to fullfill wave 5 in markets will likely take the dollar up to the trend line I described in my previous Dollar post. A reaction correction from that point possibly starting on monday or sometime next week seems likely...this would be a bounce in the market for a short time to a few days (which would be a great short imo) and a pullback in the dollar which would be a possible buying opportunity. Its possible that wave 5 could complete by today's close or monday's open. We are directly over 50 day ma's and a reasonable position for a bounce. The question that remains is what kind of bounce...

Dollar - Not behaving well

I am watching the dollar for near-term cues on the market...time to be very careful with shorts...

a fool me moment could be setting up.

Treasuries...what divergence?

thanks to matt fraily, breakpointtrades.com

The chart below is from a post called: All we need now is a big hit to theoretical money - derivatives anyone? I think its worth another look at this point.

Observe the chart below. Each large move in the SP500 was preceded by  period of correlated behavior between treasuries and stocks. We are presently in a significantly correlated pattern.

 

What's Next?

Well that was interesting finally. The market has spoken decisively, by breaking major months long supports. So, what's next. Well, I am happy to tell you that the alternate scenario for the dollar has not played out. That does not mean it is entirely eliminated. It is possible that off the current market support levels, we get a forceful rally and possibly a retest for some kind. But let me preface by saying, that is NOT what I am looking for. The market was clearly overcome buy lack of uncommitted dollars being available to fund new equity purchases. Investors have no more money left, they are all in. The dollar chart says it all. Assets are being liquidated to pay credits.

Over the last six months, this rally has been funded first by short covering and bail out funds supplied to banks. (invested in call options they bought from scared pension funds and retirees). The problem is now the FDIC, deficit and pressure on the Fed is making fiat liquidity scarce. The Fed knows it can not take the risks it is used to being able to take. As the pressure on the fed, and against their 90 year campaign to short the dollar, increases...it will be visible as the shortage of available cash dollars as increasing prices in the chart below. The fact is, the system has come to a grinding halt. The Fed can't print the way they were used to, they can not lie about their balance sheet investments like that have done because Ron Paul, a large amount of americans and 280 congressmen are breathing down their throats.

I am looking for a dollar break over the red line on the chart below to signal the next round of deflation is in full throttle. It certainly is galloping along, but could hide for a little longer if the powers that be or markets wanted to look past it. Over that red line around 78.39...irrevocably declares a trend change in the dollar and likely the beginning of the end of Fed's campaign to destroy it.

All action in the market will be guided by the dollar in my opinion. The upper trendline is my immediate target and could be met tomorrow or monday if the market wants to do it. Given the action in the VIX and the dollar, I would look for a pullback consolidation in the two and then a resumption of the upward move. If the dollar can break cleanly through that upper trend line without pullback or consolidation...then the severity of the situation in the markets will likely intensify very quickly. I think that this is a significant possibility. But, more likely I would look for a good size rally for a larger corrective bounce after the dollar reaches resistance.

Market Observations

VIX, RUT, SPX and DJ have taken out key levels....

Wedges compromised.

Dollar - Hanging on the Edge

The dollar is hanging on to the declining wedge. It has not rallied impulsively. It needs to bounce hard tomorrow, otherwise, it looks potentially like it will attempt to match the 100% target for wave 5 down. This is around the 74 to 74.20 area and would coordinate well with a push in early October till the 7 to 9th. However, the reason that I suggested that the dollar configuration could be consolidative is there are multiple elements that are not pointing to a substantial rally in the markets here. The VIX is one of them. The VIX was up solidly as was the Put/Call. The positive VIX indicates a trend emerging to me, and the put/call may indicate a reaction in the market of a little more upside. I would not prefer to see the dollar fullfill the pattern below. But, the structure for Gold and Gold related stocks and Oil point to higher prices unless we get immediate or very quick reversals. The VIX supports the potential reversal scenario.

So, given the put/call and the $VIX setup, perhaps we are looking at a finishing move up in the am for the transports and indexes and then as sharp reversal. I will be buying into the reversal scenario if VIX takes out the recent highs.

Dollar - Oil - Market

The dollar strangely has sold off with he market...additionally, the market has sold off hard and bounced...

Oil has had the largest rally I have seen in a long time and it is looking more and more like we need to consider a capitulation may be coming in the form of a dollar exodus (which was very mild so far, overall dollar pattern looks consolidative sofar) and some sort of emotional equity market reaction if that were to occur...the problem is that at this time the dollar should not be pulling back hard and transports should hold below the breakdown attempt...currently they have bounced nicely off the 50 day MA...all very interesting and disorienting...just what you would expect at a change in direction.

This market is unbelievable to swing trade...day trading is the only option with the market like this.

Transports - Breakdown

Surfing a Tsunami

Do you occasionally feel like this guy...

Transports - Breakdown Around the Corner

Spiral Fib Time Projections

From Chris Carolan...If you are wondering, I think he is the best analyst at EWI hands down.

Martin Weiss, Phd? - "SIX DAYS LEFT to start profiting from the dollar disaster!"

"In just six short days, you will have missed your opportunity to register free for next week’s all-important online seminar.

The topic: Washington’s Secret War on the Dollar

The date: Next Tuesday, October 6 

The time: 2 PM Eastern (11 AM Pacific, 7 PM GMT)

Your cost: Zero!

But the ONLY way we can make sure you get your instructions for attending in time is for you to reserve your place well ahead of time!

At this event, my colleague Larry Edelson will reveal ...

Why the real national debt is more than EIGHT TIMES GREATER than Washington claims: Why the full weight of our debt addiction is beginning to hammer the dollar NOW ... and why our leaders have no choice but to slash the dollar's value in sheer self-defense.

Why the world’s governments, central banks, financial institutions and super-rich investors are fed up with Washington ... why increasing numbers don’t want to touch the dollar with a ten-foot pole ... and what they’re doing to protect themselves at YOUR expense.

What the news media isn’t telling you about Bernanke and the dollar: And how global plans to stop using the U.S. dollar as a safe haven or for international trade will impact your buying power and standard of living.

What’s the next shoe to drop in this great global war on the dollar? Could the G-20 be secretly scheming right now behind closed doors to accelerate the dollar’s plunge? (My answer is admittedly outrageous and has tremendous implications for your financial security!)

Critical steps you should be taking right now to protect yourself from this great dollar disaster: PLUS, the three investments that are most likely to preserve your wealth as the greenback continues to plunge in value worldwide.

SEVEN often-overlooked investments Larry believes are the most profitable ways to harness this massive, long-term dollar decline: What to buy ... where to buy it ... and when!

But again: The ONLY way we can make sure you receive your instructions for attending in time is for you to register soon! Simply click this link to grab your complimentary registration now.

Good luck and God bless!

Martin"

Since Weiss is putting the hard sell on this just like he did the Leveraged short ETF's - I think we should be considering the opposite side of this trade.

I despise high pressure tactics like Weiss uses. The best thing about this email...is that the cost is likely worth as much as the advice.

Ron Paul - Audit will expose Fed as a massive fraud

Paul The Real Reasons Behind Fed Secrecy (9/28/09)

Gaps on the ES contract

These make good target zones...to be aware of...

Market observations - Back Test Time

I would like to reiterate that there are gaps on the ES that need to fill in the 1074 area...In my opinion we have to test that area or exceed it. It is entirely possible that the market fails to make a new high and instead confirms wave 2 for our impulse wave down. This could be fulfilled with a move to the 1077 area on the SPX cash.

As you can see the VIX has made another attempt to break its down trendline. This is accompanied by a MACD cross and RSI over 50...something to keep a close eye on...VIX is currently only backtesting this trendline...it could drop below it again...or preferably consolidate and rally straight from here.

Transports had their huge sell day last week...the largest volume selling day in the $TRAN history. If the markets do continue up...into the Oct 2 to 7th area...any new high will not likely be confirmed by the $TRAN. This is a very good cue that these highs will be a top of consequence.

Oil is at an important support...and with the dollar showing strength today...it could easily break the down-trend line and take a quick trip to 57. The alternate view is that the dollar needs a consolidation and will allow for some upside for Oil - though that should not amount to much.

Agriculture commodities are struggling and remain below the emerging 2-4 line of the pattern...a break of that huge support line below will likely coincide with a strong move down. Upside looks like it would be quite limited...and this chart does not look healthy at all.

The dow could get its legs, in fact it has to tomorrow...otherwise this whole pattern, VIX, Trans and DJ look like simple backtests of resistance. Personally, I think there is some remaining upside...though nothing substantial.

Dollar Strong, Market Strong - which wins?

I am betting the dollar...

perhaps a little push is left for the market...but the dollar string the certainly a powerful divergence to that move.

Very Recent Dollar Related Headlines...

Gee, people are getting a little sure of themselves...

1. Sentiment suggests gold pullback a mere correction

2. Five ways to profit from the weaker dollar

3. A pledge from the Group of 20 leaders to bring the global economy back into balance is not seen as good for the dollar

4. Warning over US dollar as world reserve

World Bank President Robert Zoellick on Sunday warned that the United States should not "take for granted" the US dollar's role as preeminent global reserve currency.

"The United States would be mistaken to take for granted the dollar's place as the world's predominant reserve currency, Zoellick said, in excerpts of a speech to be delivered Monday.

6. The dollar is dead - long live the renminbi

Market observations

Below are some great charts that I was discussing with Matt Fraily at breakpointtrades.com. I highly recommend that you sign up for the newsletter using the form on the side of my blog. Matt, run's a very high quality service and has some really good automated/mechanical systems that are not available anywhere else. We work together on a lot of them. There will be some great products coming from the site related to mechanical systems and proprietary indicators that will be out soon...it's definitely worth a look.

Clearly the dollar pattern is maturing nicely and being confirmed by the inverse indexes. These inverse indexes are the 1x unleveraged versions. They reflect the market patterns much better plus they do not lose 50% of their value due to manipulation and slippage.

The charts are very well commented...I will be posting more prior to the open

A sign of things to come...Spain

In a release, the government [of Spain] said it now forecasts a total 2010 budget deficit equal to 8.1% of gross domestic product, compared to 8.4% previously, but still in excess of the 3%-of-GDP limit for users of the euro.

"The new budget maintains our commitment to social services, a productive economy and keeps our investment in research and development," Spain's finance minister Elena Salgado said in a meeting with journalists after Saturday's cabinet meeting.

Spending this year is shooting far over budget as the result of anti-crisis measures and spiraling unemployment benefit payments.

Following the collapse of the labor-intensive construction industry, nearly one in five Spanish workers is unemployed.

The European Commission, the EU's executive arm, has given Spain until 2012 to bring its deficit within 3% of GDP, the limit for users of the euro currency.

To help counter the shortfall, Spain's socialist government said it plans to raise a series of taxes to add nearly €11 billion to public coffers. In July of 2010 it will increase the general VAT tax to 18% from 16% and the special VAT tax, applied to services, food production and art objects to 8% from 7%.

The government will also scrap an annual income tax deduction of €400 per worker introduced last year and increase capital gains taxes.

The government's plans to raise taxes have been controversial, drawing criticism from opposition politicians, and some independent economists say it is too soon for Spain to start raising taxes with its economy still deep in recession.

While some European economies have already begun to show small positive growth rates, Spain isn't expected to do so until late next year.

18% VAT tax is insane in a depression. They should be reducing the tax not increasing it. (Or how about some off-balance-sheet transactions. Gee that would fix it in a giffy. Shazam - 3% of GDP. Call the JP Morgan guys or Bernake, they will show you how to do it.) The irony is that Spain will gain no revenue from any of these increases since already weak demand and buying power is simply being eroded further and that will just reduce consumption. So the net net is this action will reduce government revenue not increase it. This is why the EURO system will ultimately fail - it just does not makes sense.

Spain can not fix its deficit or account for the collapse in value of its domestic assets (which are not even discussed in their budget) with tax increases that will actually reduce revenue. Spain is only ONE of the problems on this one way street - Deflation Street. (Please read: The EURO - starting a trip to oblivion)

All it takes, is another shock...something like an inevitable systemic failure or a Bank of America, JP Morgan collapse...and the whole ponzi scheme will fall apart. Don't forget, the guys who designed the Euro reserve system are essentially the same guys who collapsed the dollar from 100 cents to 3.6 cents.

End The Fed