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September 15th, 2009

Allen L Roland

America's illusionary economic recovery is being fueled by bailouts and wishful thinking while Wall Street insiders frantically sell. The reality is that Main Street is broke, jobless, deep in debt and will not spend and inflate the debt bubble that just burst ~ which leaves the stock market over priced and vulnerable for a major correction:

Last week, U.S. home foreclosures hit new all-time record highs and are still rising. Personal bankruptcies are skyrocketing ~ even among the rich. Unemployment is still soaring. Consumer borrowing is contracting dramatically and the commercial real estate market is rapidly deteriorating.

Graham Summers nails our present precarious economic condition in his September first article, Crooks, Computers, and the Coming Crash, and states the obvious by calling the present stock market rally " a liquidity rally driven by non-thinking computer programs, not a rally based on fundamentals."

Quite simply, it's a government manipulated Stock Market folks, since the government is now the nation's largest lender, insurer, automaker and guarantor against risk for both large and small investors ~ but it does not and will not trigger consumer confidence or spending. All this government control masks an important hidden truth ~ the Obama administration and the Fed do not want the American public to know the true extent of our economic chaos.

Summers spells out the effect on the stock market ~
" At this point, five stocks (yes only five) account for 40% of the trading volume on the market. Those five stocks: Citigroup, CIT Group, Fannie Mae, Freddie Mac, and AIG. Think about that, five stocks out of several thousand, are accounting for 40% of ALL trading.... This summates today’s market like nothing else: folks are ONLY trading the investments that they know are on life support from the government."

Summers goes on to write that Ben Bernanke, contrary to popular belief, most certainly did not save America's economic system ~ " Indeed, anyone looking to proclaim Bernanke as a savior should review the below video which shows that the guy DIDN’T HAVE A CLUE about the financial system/ economy from 2005-2007. Just watch the below video ~ and prepare to see an Ivy-league educated guy who’s in charge of our monetary system NOT see the biggest housing bubble in US history OR the worst financial crisis since the ‘30s (an era on which he is an alleged expert). " 5 minute Video of Bernanke’s mistakes:

Summers sums up his verdict on the man that Obama wants to reappoint for a second term as chairman of the Federal Reserve banking system ~ " In simple terms, Bailout Ben, in a mere year and a half, has overseen the destruction of 30% of US household wealth (from a housing and stock bubble he FAILED to see coming while working under Greenspan). He has yet to do a single thing to protect the average American or the dollar, but instead has opted to funnel trillions of taxpayer dollars over to Wall Street so that Goldman Sachs and friends could claim they’re not insolvent and pay themselves RECORD bonuses.... Indeed, Bernanke has re-created late 2007: the time when stocks went up day after day after day on lower volume and no fundamentals. Indeed, if I had to summate the entire market rally since July in one sentence it would be: insane euphoria and discounting of Fed pumping. The 2007 reference is not mere whimsy either. "

And what about the recent increase in insider selling ?

Summers says we have recreated the same unregulated fundamentally weak scenario that happened in 2007 ~ " Insider selling is at its highest ratio to insider buying since October 2007. The Relative Strength Index for the market recently hit levels we haven’t seen since October 2007. Corporate debt issuance is at October 2007 levels (companies issue as much debt as they can when stocks are up). 36% of investors are bullish and 24% bearish: a gap we haven’t seen since… October 2007"

So what's the bottom line ?

Summers does not pull his punches in his prediction which I completely agree with ~ " Folks, the US stock market is an enormous house of cards propped up by the biggest bubble-blower in history. Fundamentals have NOT improved, the economy continues to collapse (regardless of the GDP accounting gimmicks they use to claim we’re out of the recession), and stocks are at least 20-30% overvalued. This mess will come unraveled. And it won’t be long…" http://www.kitco.com/ind/Summers/sep012009.html

My guess it will be shortly after the end of the fiscal year on September 30th when the full extent of our dire financial circumstances becomes obvious. When all the figures are counted, the year will show a record national debt of close to $12.5 Trillion dollars. To give you an idea of that figure ~ it would take you 32 years to count ( in seconds ) to One billion. However, It would take you 32,000 years to count to a trillion and we're talking about 12.5 trillion and it's growing.

In other words, we're broke and can no longer run away from that reality which no amount of Fed money pumping can camouflage. It's time to face the music !

Allen L Roland http://blogs.salon.com/0002255/2009/09/14.html

Freelance Online columnist and psychotherapist Allen L Roland is available for comments, interviews, speaking engagements and private consultations www.allen@allenroland.com
Allen L Roland is a practicing psychotherapist, author and lecturer who also shares a daily political and social commentary on his weblog and website www.allenroland.com He also guest hosts a monthly national radio show TRUTHTALK on www.conscioustalk.net

Cartoon courtesy of Tom Toles / Washington Post


Allen Roland’s weblog: http://blogs.salon.com/0002255/
Website: www.allenroland.com

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