Sunday, December 16, 2007



That the U.S. economy is headed in the direction of stagflation is pretty clear from the November, 2007 statistics. According to, Real Consumer Price Inflation is running in excess of 11% a year and, as we commented above, the money supply figure (M3) is increasing at 15% per year, or a doubling time of about 5 years. Moreover, GDP growth is a negative number. It would appear that The Cartel-charted-course (which we describe in our June Letter) toward a hyperinflationary Recession/Depression as a catalyst for a painful transition into the apparent “End Game”, is on track.

To be sure, this course involving an explosion of the money supply (“money from helicopters” to use the phrase associated with Chairman Bernanke) and the massive and increasing use of derivatives to intervene in a wide variety of markets is fraught with danger. Deepcaster, Warren Buffet and Jim Sinclair have all pointed out the dangers. Indeed, Sinclair has aptly described the financial system as sitting on a “$20 trillion trembling mountain of derivatives…think Weimar Republic.” Unfortunately Jim Sinclair and Warren Buffett are correct.

In sum, with The Cartel’s increasing use of derivatives comes an increasing risk of a financial meltdown. We had such a harbinger of one in August with the credit market freeze up of August, 2007 but The Cartel was able to rescue its major International Bank and Wall Street clients from this one.

So far The Cartel has staved off a systemic meltdown. But, alas, it may well not always be so.

Steve, your common sense commentator.

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