Phoenix Capital Research is convinced that a financial crash is coming and that the recent market rally is merely short-covering.
Frankly, no one knows what is going to happen, but the following points they cite are hardly comforting:
1) Europe’s banking system faces potential systemic collapse: the insolvency issues are beyond PIIGS’ debt at this point. Even Belgian banks which no one thought were problematic are now going to $0.
2) The “powers that be” have lost control of the markets. Both the IMF and the Bank of England have warned we are facing a financial meltdown of historic proportions and possibly the worst ever in history. These are the very groups that are supposed to hold up the financial system… telling us that we’re facing a “meltdown.”
3) The world Central Banks cannot hold the markets together anymore. Indeed, even China is now having to actively buy shares in its own banks to prop up its financial system. This is CHINA, the supposed largest creditor nation in the world… having to step in to BUY bank stocks to stop its ongoing Crash.
4) The US Federal Reserve is insolvent. With only $50 billion in capital and a portfolio of $2.8 trillion, the Fed is leveraged at OVER 50 to 1. Lehman Brothers was leveraged at 30 to 1 when it collapsed. And the Fed’s portfolio of toxic debt and other junk it bought from Wall Street has tainted the US’s balance sheet.
I could go on and on, but the fact remains that we have now entered a Financial Crisis to which 2008 was just the warm-up.
I wonder what it means to say that the Federal Reserve is in solvent when it is the agency that has the power to create money. I have a hard time believing that the governors will restrain themselves from making more money and allow the Federal Reserve to go bankrupt.