Wednesday, January 22, 2014

Economic Trends

Several things going on economically:

1. Implementation of Basil 1 Accords caused Japanese "Lost Decade"
2. Implementation of Basil 2 Accords in 2007 crashed the housing market (mortgage-backed securities)
3. China real estate over-investment (ghost cities)
4. FED QE money printing
5. Sterilization keeping QE money in speculative markets
6. Mega-Banks buying bonds and credit default swaps (bond insurance) with QE (not inflationary) instead of lending (inflationary).
7. Mega-Banks use REPO market to exchange bonds and swaps with each other for cash to invest in DOW (inflates DOW).
8. CEO's cashing out stock options while DOW inflates with QE.
9. Waiting for implementation of Basil 3 Accords which will do away with the REPO market.
10. China is buying up real estate in US.
11. US has 17 Trillion in debt (700% revenue), 5 Trillion is owned by US government agencies itself (Social Security, Disability, Military, etc). 12 Trillion is private owned.  (5.7 T Foreign owned = 1.3 T China, 1.2 T Japan; FED; Pub and Priv Pensions; Mutual Funds )
12. Increasing FED interest rates will increase how much interest the US will need to pay in interest to float the national debt.

.... with REPO gone, banks may no longer be able to prop up the DOW with QE.

.... If Bond Market collapses, banks holding credit default swaps (insurance) will be liable to pay, which they will pass onto the depositor. We may see a Cypress-style bail-in.

.... So what is safe to invest in: real estate, cash, stock, bonds, gold? I have chosen one of these to invest in.

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