Will There Be Another 2008 Style Crash?

I think there is going to be a point where QE will become ineffective. There will be a point when countries with a more sane approach, like China, stop buying US bonds and instead start selling them. That would lead to higher interest rates and have a negative impact on stocks. We have already seen the effects of the rise in interest rates on home and auto sales – the two biggest motors of the US economy since the beginning of QE3.

On top of that, I believe that the US government is insolvent. In fact, everybody knows the US is broke but people will stand by and let it happen.

An analogy for the Federal government is the city of Detroit. Five years ago, they already knew that they were broke. But it is not until they finally had to write a check that they could not write that they declared bankruptcy.

Even though the bankruptcy was inevitable, it shocked people. The City of Detroit recently announced that pensioners would get 16 cents on the dollar. Had Detroit faced its budget problems five years earlier, pensioners may have gotten 60 cents on the dollar. Allowing the situation to get worse led to great disappointment and damage.

The Federal government looks about as bad as Detroit five years ago. In financial year 2013 it brought in $2.8 trillion in revenues and spent 3.5 trillion, as reported by the Treasury department. Their current liabilities are something like 87 trillion with a national debt of 17 trillion. The situation is hopeless.

It is propped up by the Fed. When the Fed does an open-market operation, the stocks go up. When they are not doing any such operations, overall, they go down.

- Source, Eric Sprott:

http://sprottgroup.com/thoughts/

Marc Faber: "People With Financial Assets Are All Doomed"

by zerohedge.com

As Barron's notes in this recent interview, Marc Faber view the world with a skeptical eye, and never hesitates to speak his mind when things don't look quite right. In other words, he would be the first in a crowd to tell you the emperor has no clothes, and has done so early, often, and aptly in the case of numerous investment bubbles. With even the world's bankers now concerned at 'unsustainable bubbles', it is therefore unsurprising that in the discussion below, Faber explains, among other things, the fallacy of the Fed's help "the problem is the money doesn't flow into the system evenly, how with money-printing "the majority loses, and the minority wins," and how, thanks to the further misallocation of capital, "people with assets are all doomed, because prices are grossly inflated globally for stocks and bonds." Faber says he buys gold every month, adding that "I want to have some assets that aren't in the banking system. When the asset bubble bursts, financial assets will be particularly vulnerable."