WHERE IS THE EXCESSIVE RISK RIGHT NOW?

by Cullen Roche

My mother tells my I predicted the housing bust. My father tells me I predicted the market crash in 2008. Readers believe I predicted the flash crash last year. None of this is true. I don’t predict anything. I can’t predict anything. No one can. But that doesn’t mean you can’t take highly calculated risks. The intelligent investor does not need to be able to predict the future. He/she merely needs to know when to fold ‘em and know when to hold ‘em. In the investment world, nothing is more important than knowing when to fold ‘em.

When I review the housing bubble I was far from predicting what ensued. I didn’t ever imagine the crisis that would unfold. All I knew was that there was a trend in US housing prices that was unprecedented, inconsistent with underlying fundamentals and unsustainable. I recognized a disequilibrium in the market. But my conclusion was not of the magnitude of “genius” like John Paulson, Kyle Bass or Michael Burry. No, my conclusion was far simpler. I just stayed away.

You see, playing with bubbles is a dangerous game. The difference between being John Paulson (who shorted sub-prime) and Julian Robertson (who shorted the Nasdaq bubble too soon) is a matter of months in the life of a bubble. Without a doubt both men are market geniuses. The difference, however, is that one had lucky timing and the other didn’t. I would argue that the truly intelligent investor simply pulls his chips back and steps away from the table for awhile in the midst of such irrationality. Warren Buffett is probably the best case of “don’t mess with what you don’t understand”. And in the case of bubbles, I would argue that no one understands the market’s behavior.

As I have previously discussed, market bubbles are the most severe cases of disequilibrium. It is the point in the market cycle where the system becomes highly unstable to the point of losing all linearity and entering an entirely chaotic orbit. This makes for a market environment that can be highly rewarding, but astronomically risky. But market don’t have to be in bubbles to be extraordinarily risky. What appears like a perfectly stable system can very quickly devolve into a nightmare.

With that said, are there examples of this in today’s markets? Are there markets that warrant a “do not enter” sign? I believe so. And if I were an investor in the following markets I would merely pull my chips off the table, take a long deep breath and walk away from the table.

1) China
China remains one of the great “if it’s too good to be true it probably is”. This economy is growing at a rate that is incomprehensible to most westerners. But the cracks have started to show in the facade. Between their reverse mergers, supposed GDP fraud, accounting scandals, highly flawed monetary policy and insanely inflationary fiscal policy (where they just build empty cities in the middle of nowhere) I have to wonder what breaks the back of this economy at some point? My guess is that inflation will rage in China to the point of public discontent and ultimately harsh economic repercussions. The bottom line: the risks of investing in China are enormous. For the majority of us, it’s simply not worth taking the risk.

2) Municipal bonds.
I don’t think there’s a major municipal bond crisis on the horizon. I’ve been fairly vocal about that. On the other hand, I have to accept the reality that the risk of a funding crisis is very real. This would most likely arise in the form of austerity due to politics, but the odds are that it could happen. With so many other options in the bond world one has to ask him/herself why they would bother taking the risk of buying municipal bonds? The mere potential for collapse in what is supposed to be a fairly low risk asset class is too much for me to bear.

3) Silver
This is not a popular call, but investing isn’t a popularity contest. The bottom line is that silver prices are on an unsustainable course. If I had to pick one bubble in the world today it would be the silver market. As is always the case, the fundamentals are always superb in a bubble, however, the market action never quite correlates appropriately. As I’ve said before, silver prices could double from here. On the other hand, they could also crater. I am going to invest in precious metals there are lower risk ways to obtain exposure.

4) European equities (particularly periphery nations)
Few things are more confusing in the world of macroeconomics today than the crisis in Europe. There is simply no telling if the region will collapse or unite. And while I think we are likely moving closer to some form of unity I have to also acknowledge that collapse is a very real potential. In the broad world of equities there is simply no reason to bother investing in European equities. This is particularly true for the periphery nations which are now serving as high beta form of their core brethren.

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Stay Ahead of The Market This Earnings Season

by Bespoke Investment Group

At Bespoke, we offer numerous services to help investors stay on top of the market during earnings season. As just one example, last Thursday afternoon we published a report for clients regarding Google's (GOOG) upcoming earnings report and advised that, "based on Google’s past trading history on earnings, we would not be a buyer of the stock tomorrow morning regardless of how good (or bad) it might look."

As we all know now, GOOG's report didn't exactly impress Wall Street. After missing consensus forecasts by two cents, the stock opened Friday morning down over $33, but the decline was not finished there. By the end of the day Friday, GOOG traded down an additional $14.59 from from Friday's opening price for a total decline of $47.81 on the day. With such a large drop at the open, some bottom fishers may have been tempted to buy the stock for an intraday rebound, and for those that did, they quickly came to regret that decision. Bespoke Premium and Premium Plus clients, however, would have seen GOOG's prior trading history and avoided the trap altogether.

Thursday's report regarding GOOG is just one of the many types of exclusive reports related to earnings season that Bespoke Premium and Bespoke Premium Plus clients have come to expect during earnings season, and with hundred of companies on to report earnings season in the weeks ahead, traders and investors need all the help they can get to stay on top of the market during what is often a volatile period. If you are not yet a subscriber and would like additional information, click here. If you would like to subscribe to either of these services, sign up today to receive access.

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Fake Unemployment and Inflation Figures Sustain the Illusion of an Economic Recovery

By: Joel_S_Hirschhorn

How do the powerful keep the US population dumb and distracted? A key tactic has been using methodologies that produce totally misleading underestimates of key economic factors. First we learned that official unemployment figures are too low by a factor of two. Now, understand that the official rate of inflation hitting consumers is even more inaccurate. You will hear about a low inflation rate of less than 3 percent. In reality, it is closer to 10 percent, according to the highly regarded analysis by John Williams.

It is difficult for any one of us to have first hand evidence that unemployment nationally is really much higher than what the government says, even though most of us know people who are out of work or taking part time work out of sheer necessity. But when it comes to rising prices hitting our pockets, credit cards and checkbooks we have a much clearer sense of what is really happening. Gasoline prices have jumped more than 10 percent in recent weeks and for most of us is about a dollar more a gallon than a year ago or so. Some experts are predicting that $4 gas will soon hit most of the nation and, even worse, that $5 gas may hit us this summer.

Food prices are also jumping like a frog on crack cocaine. Many of them are masked by smaller weight packaging. Health care costs, especially insurance premiums and drugs, have also hit many Americans substantially and painfully. High inflation especially hits hard those people who have seen their incomes decline. Those on Social Security receiving no cost-of-living increase have every right to be angry.

The federal government is manipulating statistics to intentionally get a low number for inflation as well as unemployment in order to mask just how awful and unfair the economy really is. Political leaders in both major parties use this propaganda strategy, as if there are simply too few intelligent Americans to see through the lies. Sadly, they seem to be correct. And the mass media push the propaganda strategy by continually hyping and spreading the intentionally false data.

“We have inflation now. If you go to the shop, whether it’s groceries, or education or insurance or health care, prices are going up for everything. The government lies about it in the US ,” said Jim Rogers back in June, 2010. It has only gotten worse. 

At this time John Williams has correctly described economic reality: “Near-term circumstances generally have continued to deteriorate. Though not yet commonly recognized, there is both an intensifying double-dip recession and a rapidly escalating inflation problem.” Wow! How does that compare to all the glib recovery talk by President Obama and just about everyone else in government?

In addition to banks and financial companies too big to fail that benefit the rich, when it comes to the economy plutocrats think it is too bad to tell the truth.

Who is falling for the economic propaganda? Gallup measures optimism about the economy as a function of age, income and political party affiliation. Worst of all are Democrats and the young.

Meanwhile the Federal Reserve keeps printing money to cope with the budget deficit and national debt problems, which is a major reason for the sharp increases in gasoline prices.

None of any of this, of course, matters much to the rich and powerful Upper Class that is doing just fine and buying more luxury things. And the fat cats on Wall Street and in the financial sector are giving themselves huge bonuses and salaries. Dr. Phil of television fame is selling his $15 million mansion estate so he can buy an even bigger one for $30 million.

Over at Ford, the chief exec recently received $56.5 million in stock and last year pulled down an additional $26.5 million in annual compensation. The latter amounts to 910 times the annual pay of entry-level Ford workers.

In 2011, Americans who make over $1 million will pay just 23.1 percent of their incomes in federal income tax. In 1961, the Institute for Policy Studies notes in its newly released annual Tax Day report, Americans who made over $1 million — in our current dollars — paid 43.1 percent of their incomes to the IRS. That was when the middle class was prospering.

If congressional Republicans get their way, the middle class will feel considerable pain from program-cutting tactics to curb the national debt, while the rich Upper Class gets more tax breaks and keeps sapping the wealth of the nation as Democrats lack the courage to fight hard for increasing their taxes. With rising economic inequality the US is rapidly becoming a two-class society: 20 percent rich and 80 percent poor.

Meanwhile, whenever I listen to Obama and congressional leaders it is like watching a skit on Saturday Night Live or the Daily Show. They are that absurd.

How many more millions of Americans must experience more pain and suffering, go hungry, lose their homes, lose their jobs, postpone retirement, and go without decent health care before the public snaps out of their stupor? Not that there is very much optimism among Americans. In a University of Michigan March survey just 11 percent expect inflation-adjusted income gains during the year ahead, barely above the all-time low of 8 percent in 1980, and only 21 percent expect the economy to improve over the coming year. But where is the loud political outrage? Loud enough to scare the hell out of politicians and the rich.

When will Americans rise up as those in Tunisia and Egypt did and before that in former Soviet-bloc nations and tear down their corrupt and dysfunctional government?

Unemployment at 20 percent, inflation at 10 percent, a multi-trillion dollar national debt, and nothing but lies from politicians. Have you had enough? Do you still believe that voting in different Republicans or Democrats will fix things?

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Spiralling Public Debt and Economic Stagnation in the European Union

By: Bob_Chapman

Europe continues to struggle from one problem to another. The euro has been strong only because the dollar has been weak. The governments of Greece, Ireland, Portugal and Spain continue their balancing acts on the edge of a financial precipice. All have Socialist governments, which have done terrible jobs, but the opposition is not much better. Each economy is in serious trouble and if Italy and Belgium follow it will take $4 trillion to bail them out. If the solvent EU members bail them out they’ll fail as well. Americans and Brits can look down their noses, but their problems are just as bad if not worse. They all have practiced different versions of Keynesian economics that has been disastrous. Their fiscal and monetary policies have been and continue to be out of control, as corruption abounds. The solutions are unpalatable, especially for politicians, because they all spell austerity. We have just seen the European Central Bank raise interest rates as euro zone economies slow, as they hope to arrest 2.8% official inflation. Real inflation is double that number.

We predicted $4 trillion would be needed to bail out Europe some time ago and Germany and the other solvent nations have come to the same conclusion. Even if it were possible, those six nations would live in poverty for the next 50 years. That is hardly a solution. The underlying problem lies with the central banks and the lending banks. Loans to these nations for whatever reason should have never been made in the first place. The bankers who lend money that they create out of thin air knew what they were doing and they knew full well the risks they were taking; 80% of the blame lies at their feet, thus, 80% of the bill is their responsibility, not that of the taxpayers of these countries. Months ago Germany was offered 50 cents on the dollar to settle its debt owed by Greece. The offer was rejected. In time that rejection will be viewed as a major mistake. As a result Greece’s Illuminist president is in the process of laying plans to collateralize new debt repayment commitments with Greek assets such as islands, ports, the rail system, the electric and gas companies and any asset not nailed down. That is why George Soros had top people from JPMorgan Chase and Goldman Sachs with him two weeks ago when be attended secret meetings in Athens. The underlying theme is let’s steal everything. Greek GDP will probably fall 4% this year, as wages and salaries have been slashed. Banks like JPM and GS that create money out of thin air do not care about the money, they want the assets.

Central bank bond buyers last year cut their exposure to Greece, Ireland and Portugal. These actions were prompted by concerns over sovereign default and were replaced by purchases of gold. The euro zone, England and the US have large deficits and only modest growth generated by QE and stimulus. Conditions now question debt sustainability. Debt rollover in Europe is acute, especially for Irish and German banks, with as much as half of their outstanding debt coming due over the next two years. As you know the IMF and EU have bailed out Greece and Ireland with Portugal in process. Spain is next and that is more than a $1 trillion problem. European banks are buried in euro zone sovereign debt, which makes them very vulnerable. In fact bank balance sheets are in terrible straights and need to raise significant amounts of capital to further participate in funding markets. At the present time they are in no condition to take on more paper.

In Greece the budget deficit may be only 8.1% of GDP, but the economy is stagnant as GDP declines. Overall public debt is about 150% of GDP. We have a difficult time envisioning Greece not defaulting. That is why the moneylenders want almost everything the Greek government owns as collateral. The socialist government of Illuminist George Papandreau cannot handle the job just as his Marxist father Andreas couldn’t handle it 25 years ago. Today’s Greece is still suffering from terrible decisions made during the 1980s. The bottom line is Greece probably will default and they should default. It is the only answer for them and the other five insolvent countries of the euro zone.

All these six countries are victims of one-interest rate fits all that we wrote about 12 years ago, as a disaster waiting to happen. That is why in the first quarter in Ireland the average house price fell 43% from the peak. Prices have a lot further to fall. Some say to 63%, which will probably be worse than in some sections of the US. Ireland has been sold out by its politicians and has little hope of survival without bankruptcy. Their economy is not doing that badly – it is the debt of the banks that government assumed that would take them under. The banks that caused these problems cannot help or they’ll go under, which are just deserts considering they were running a Ponzi scheme.

Portugal on June 5th will probably get a new center-right government. The economy will continue to decline with a budget deficit of 7% of GDP, as wages and the living standard declines. Like Greece, Ireland, Italy and Portugal should have never joined the euro. The original mistakes to prepare Europe for world government are now coming home to roost. In the late 1980s we spent a great deal of time in Portugal and we could see it wasn’t going to work. Just as an example, in preparation for acceptance, we saw prices rise 50% to bring Portugal up to the levels of other more advanced European countries. As we have seen amalgamation was a very bad idea.

Spain’s banks are carrying real estate on their books at twice their real value. Again it is the banks that are the problem. The sovereign debt is low, but in recent years the socialist government has far over spent. The phony house prices will come down to earth sooner or later and you will see a replay of the US and Ireland. For the next few years’ growth will be negative. Spain will need a bailout, but can the IMF and EU afford another $1 trillion? We don’t think so.

Like in other countries inflation is rising in Europe and it is going to get worse. Do not think for one second that a ¼% rise in official interest rates by the ECB is really going to change anything. The official EU inflation rate is 2.6%, whereas real inflation is 5.5%. In the US the official rate is 1.9% and the real rate is 8-1/2%. Realistically far higher rates are on the way for this year and next year and that means higher real interest rates. The US will see 14% real inflation this year along with England and 10% to 12% in Europe. Will the US see QE3, or an equivalent and will Europe and England do the same – probably? If they do not there will be hyperinflation. Those countries will go directly into deflationary depression. The elitists who planned all this are quite well aware of the options. If the Fed stops buying Treasury paper the US will go into default. The same is true for Europe, but on a piecemeal basis. This is why if the Fed and the ECB are going to more quantitative easing they had best do it quickly before inflation makes it impossible to do so, Remember, all the monetary expansion done by the Fed and ECB over the past 2-1/2 years is still in the pipeline. A year and one-half from now you may not be able to sell sovereign debt.

Most analysts and economists look at all these events in a logical fashion. They say many mistakes were made, but few realize these were not mistakes. What we are seeing was deliberately created. The study of monetary and financial history shows you the way and lets you better understand what these elitists are up too. We are now entering a time frame that is going to be financially explosive. If you are not prepared you are going to be very unhappy. That is why gold and silver related assets are important for your future.

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Silver Continues to Outpace Gold

By: Merv_Burak

Once again silver is out pacing gold in the weekly performance. Is it too much of a good thing? Only time will tell. Lower gold volume versus higher silver volume seems to suggest the betting is really on silver.

GOLD

LONG TERM

The week started on the down side but ended on the up side. The long term indicators remained positive throughout. Gold remains above its positive sloping moving average line. The long term momentum indicator remains in its positive zone above its positive sloping trigger line. The volume indicator continues to move above its positive trigger line but remains below its previous high of late March. This is the one indicator still holding back. All in all the long term rating remains BULLISH.

INTERMEDIATE TERM

The intermediate term is just as easy as the long term was. Gold continues above its positive moving average line. The momentum indicator continues in its positive zone above its positive trigger line. The volume indicator continues to move higher above its positive trigger line. The intermediate term rating therefore remains BULLISH. This is confirmed by the short term moving average line remaining above the intermediate term line.

SHORT TERM

I guess the global environment is still not all that great as the gold investors and speculators continue to send gold into new high ground. It will be interesting to note who has the more power behind the move, investors or speculators. We’ll probably know that on the next serious correction. A serious correction will end with gold eventually moving into even higher highs if the investors have the upper hand. If the speculators have the upper hand gold would continue declining into a bear market move. So, we’ll just have to wait until that time, which is not yet here.

The weekly action was down and up BUT on low relative volume. Gold action volume has remained below its 15 day average even as the average has been steadily declining. Over the past 15 days there were only three days where volume exceeded the 15 day average and those were on down price movement days. This is what professionals mean when they say the price is moving up higher on a wall of worry. No one seems to be too enthusiastic about the move but on the other hand no one wants to be left behind either.

Gold continues to move above its short term moving average line and the line slope remains in a positive slope. The momentum indicator remains in its positive zone and is once more above its positive trigger line. It is just about to enter its overbought zone so do not be surprised if we get some lateral or negative action over the next short period. The daily volume action has already been mentioned. The upside enthusiasm seems to be somewhat suspect. Anyway, all told the short term rating remains BULLISH. This is confirmed by the very short term moving average line remaining above the short term line.

As for the immediate direction of least resistance, that seems to be to the up side but one should be on guard for some lateral or negative motion. Gold is once more getting quite far above its short term trend line and one might expect a move back towards the trend. The Stochastic Oscillator is positive and not yet in an overbought position but that could be just a day or two of more upside action. I’ll go with the up side for another day or two but the lateral or downside does not look like it’s far away.

SILVER

Silver continues to out perform gold but with the Friday boost into new highs it looks like the thrust is just about ready to take a breather. The latest action is butting up against the upper resistance trend line of a three month channel and that means either a lateral move or a reaction back to the lower support. The intermediate term momentum indicator is entering its overbought zone which further suggests a possible rest or reaction ahead. However, a decisive break above the resistance line would mean a new more aggressive up trend and much, much higher prices. 

For now everything is positive with the ratings for all three time periods being BULLISH.

PRECIOUS METAL STOCKS

Gold and silver up, stocks down. It looks like speculators have decided that the stocks have moved too high too fast and have started taking some profits. Declines were generally in the order of 3% to 4% with the Merv’s Spec-Gold Index taking the biggest hit at 7.0%. Of course, the speculative silver stocks have been the biggest beneficiaries over the past several weeks so a bigger decline during a bad week was no surprise.

I have been mentioning the potential negative divergences in the various Gold and Silver Indices. It looks like the reversals of trend may be coming due although one week does not make a reversal trend. We need a little more convincing than one week.

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Inflation Versus Hyperinflation, The Crucial Difference

By: Justice_Litle

Is it possible we will see hyperinflation in the United States? Yes, but not by the route you might think...

"Hyperinflation." You've heard the word. You may have talked about it on the golf course or at the dinner table. (Or even in the grocery store.)

There is a difference, though, between inflation and hyperinflation. They are not the same thing. And for the most part, there is no gradual path from one to the other. To wind up with true hyperinflation, some very bad things have to happen. The government has to completely lose control... the populace has to completely lose faith in the system... or both at the same time.

Consider the era of the late 1970s, a time of severe inflation in the United States. That was a bad scene. But did it count as hyperinflation? No, not anywhere near it. Federal Reserve Chairman Paul Volcker, aka "Tall Paul," came in and nipped that problem in the bud.

America had to undergo severe economic pain as a result of the Volcker interest rate hikes. But the point is that America had the ability to endure it -- to solve the problem with the right leadership. Things had not gotten so far gone that the populace lost faith, or the government lost control.

 

Faith in the Monetary System

Faith in the system is another very important concept. And it is very hard to kill. By faith I don't mean liking what the government is doing, or being happy about where the direction of the country is going. I mean basic things, like keeping your money in the bank.

Here are a few simple questions to determine whether you still have "faith" or not:

• Do you still have a meaningful amount of cash in checking or savings accounts?
• Do you rely on electronic payment systems (credit cards, bill pay etc.) for most of your transactions?
• Are you still comfortable with your employer paying you in legal tender -- or, if you own a business, with your customers paying in same?
• Does the percentage of your net worth tied up in physical hard assets, i.e. metal bars you can drop on your foot, count as less than 50%?

If you answered yes to the above questions, then guess what -- you are still invested in the functioning financial system as we know it. You still have "faith"... not in your heart but in your deeds.

Don't feel bad about this, by the way. I still have faith in the financial system too, as based on my day-to-day habits.

This is only rational after all. Do you know what a pain it is to REALLY go cold turkey? The only way to well and truly go "off the grid" involves physical barter and organic farming. (Not to mention guns and ammo.)

 

Inflation Versus Hyperinflation

High inflation, even double-digit inflation, can be handled within the confines of the system. The unofficial inflation rate in Argentina is somewhere around 25% right now, and people aren't even rioting in the streets. They aren't super-happy, obviously, but they are adjusting. (The government is pumping up wages, so that may have something to do with it.)

Hyperinflation, in contrast, means that all hell has broken loose. To get true hyperinflation, the economic engine has to break down... or there has to be a clear sense the government has lost all control.

This is why hyperinflation tends to come in the aftermath of wars, or at the tail end of badly mismanaged regimes where the economy has been going from bad to worse for a very long time.

The possibility of rapidly accelerating inflation in the United States is very real. When talking about sticker-shock effects like $7 for a gallon of gas, or a triple in the price of a gallon of milk, that is inflation run rampant.

But hyperinflation is a much darker prospect. To get to that point, cash has to be seen as not just undesirable, but worthless.

And not just worthless in an abstract "look what the currency is doing" sense either, but real-life nitty-gritty panic mode: Making an emergency trip to the grocery store as soon as the paycheck hits on Friday, knowing that prices will go up again on Saturday. Buying two months of food at a time... fighting for the last loaf of bread on the shelf... turning off the heat because the gas bill is double the rent.

(This isn't the first time I've written about inflation. Sign up for Taipan Daily to receive all of my investment commentary.)

 

Hyperinflation in the U.S.

Is it possible for hyperinflation to happen in the United States?

I would argue yes, but neither quickly nor easily. Americans won't just wake up one day and say "Gosh, look at that."

In fact, to get to U.S. hyperinflation, I believe something else would have to happen first -- the onset of a new Great Depression scenario, even worse than the last one.

Already the deficit hawks are yelling and screaming. In respect to high inflation risk, voices of great concern are increasingly being heard. In Washington, this is playing out as dramatic lip service to austerity. They are talking about massive budget cuts again, and the timetable for raising interest rates.

So here is the thing: If the inflation problem becomes too serious for the hawks to be ignored, eventually the Federal Reserve will be forced to cave in. Someone, somehow, will pull a "Volcker" and hit the inflation mule over the head with a sledgehammer.

This "Volcker action" could then trigger a collapse in the value of paper assets, as all the rebuilt Ponzi schemes pumped with Federal Reserve money come tumbling down again. The underpinnings of the U.S. economy were much stronger in Volcker's day. There was far less debt and leverage built into the system.

Or, in the absence of a Volcker-style austerity move from Washington, the stock market could crash on its own, as investors realize the stimulus rainbow has delivered them to the edge of a cliff. Either way, some aggressive action will be taken to stop the build-up of inflation, be it through Washington policy backlash or the organic effects of another Wall Street meltdown.

(As a side note, China and the Middle East are two other strong candidates for "meltdown catalyst." If the China miracle implodes, the global economy goes with it. If the Middle East goes up in flames, oil becomes the $200 a barrel grim reaper.)

When this happens -- some inflation-stopping event dropping the recovery in its tracks -- positive sentiment will quickly collapse. Recovery stats will then collapse along with sentiment. The dreaded "D" word, deflation, will be back on everyone's lips.

That is one of the great ironies at this juncture of financial history. The deflation monster still has not been vanquished! It is simply hiding under the bed, biding its time until the Fed-and-China-created stimulus bubble pops.

And when that bubble DOES pop, that's when things get really frightening. When the global economy endures some domino chain combination of Japan/Middle East/China/America implosion, the threat of Great Depression 2.0 comes roaring back, bigger and uglier than before (as all the extend and pretend actions taken until now have only made the problems worse).

That is the point where true panic comes in... when the attempt to stop "normal" inflation triggers an economic collapse that rivals Great Depression conditions. At that juncture, it will be apparent to all that the Federal Reserve has run out of bullets... that "more stimulus" simply cannot work... that trillions have already been thrown down the drain.

It is then, when the monetary authorities wet their pants in the face of a new deflationary panic, that the real threat of hyperinflation returns to the fore. If all hope becomes lost in a hopeless situation, we could see the Fed desperately propose something like QE2 times 10, on the order of not $600 billion but $6 trillion. That is when the real horror would begin.

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