Short Term Pleasure

Stocks could touch crazy levels. Commodity prices are rebounding, but sovereign default is showing sign of stress with widening fiscal deficit.

Something has to give way and it has to snap with possibility of a currency crisis. Think about this – central banks around the world are pressing on with huge amounts of money, but the real economy is not strong enough for all this money to be absorbed. U.S. businesses filed 40% more bankruptcies in May than a year ago as companies including RH Donnelley Corp, auto parts maker Visteon Corp and apparel retailer Anchor Blue Retail Group Inc. were pushed into the red by a struggling U.S. economy. According to Automated Access to Court Electronic Records (AACER), a database of U.S. bankruptcy statistics used by attorneys and lenders, 7,514 commercial entities filed for bankruptcy last month, compared to just 5,354 a year ago. The May figure was twice as high as the number of filings two years ago

Naturally, it is going to stocks, real estate, commodities and it is again a mistake what they are doing by sharing short-term pleasure, but long term pains. This will result in a much higher and serious inflationary pressure, much higher interest rates in response in later part of our lifetime, hence the associated impact of on higher unemployment and possibly a worse-off growth prospects down the road have yet to fully feed through.

Credibility of US dollar and couple of major currencies is already in doubt. It may be something that none of us have at the moment, but the truth is not too far and possibly could be too spicy to handle, if not without a good care.

World is becoming more protectionist and leaders made solvent banks to take over insolvent banks with support of huge print machine and then both banks failed in the end. This is pretty similar to experience of the 1930s but the key difference is that we do not actively engage the printing machine then, now we will have to face the serious consequence of recalcitrant inflation.

I doubt anyone, especially the politically elected government, to see and afford pains of unemployment and greater amount of hardships. Bernanke said the threat of deflation has eased, but surging debt is causing interest rates to rise, "Maintaining the confidence of the financial markets requires that we, as a nation, begin planning now for the restoration of fiscal balance," he said, according to Reuters.

Thanks to the U.S. Treasury, investors can now switch some of their savings over to what could be a superior "legal tender." Called "Gold Dollars," this govt.-approved money spends like regular dollars - but it's backed by physical bars of 24-karat gold.