Socialization of the G7 Banking System

The G7 central banks in question would like to believe this is only going to last for a short while (1 month to a year), but I believe 5 years from now [the lending facilities] will still be around and bigger then ever.

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There is no corner of the lending industry which is not toughening up borrowing requirements. This is a picture of the credit crunch rolling into the real economy. Bernanke is urging Congress to bail out homeowners and Congress is begging Bernanke to start buying securitized student loans. More reflationary policies loom in the near future.

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There is a dirty little secret no one is talking about. Private direct investment into the United States has come to a standstill. The external current account and budget deficits are now being financed by foreign central banks almost exclusively. The US is living on the grace of foreign central bankers. They are rightly defending the value of their foreign reserves denominated in dollars and they have trillions and trillions of them to defend.

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The reflation of the banking system and economies has just begun. As G7 central bankers work to preserve their financial and banking systems, support the deficit spending and declining revenues through FIAT currency and credit creation you can expect inflation to run away to the upside. Bottom line: Any investment consisting of paper is extremely hazardous to your investing health….

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If you think the prices of wheat and rice were overdone you haven’t seen anything yet. Whenever public servants dream up some scheme to protect you the result is predictable: the problem is never solved and the cost is always multiples of what was projected. Vast new industries which are not economically justified become PERMANENT beneficiaries of government and taxpayer subsidies. There are permanent distortions of supply and demand, and that is where we are at in the US and EU.