Ever try to deflate a bubble? It is absolutely impossible. Bubbles have to burst. Is there any question that the stock market bubble, real estate bubble, and bubbles of all sorts and descriptions, have inflated beyond their logical size? Can anyone argue the point? In places, the bubbles continue to inflate, and in my favorite small town, Silverton, Colorado, the bubble continues to inflate. A tiny town of 500, situated high in the San Juan Mountains of Southwest Colorado has real estate prices still climbing skyward, while across Black Bear Pass in Telluride, prices are stalled and going down, due to being overbuilt, oversold, and overpriced. Denver is the same, as are other cities and towns that are watching real estate prices go down, down, down. All bubbles have to burst eventually, as did the NASDAQ, and as others will soon. Will the banking bubble be next? Commerzbank, Germany’s third largest, is about to bite the dust, and last week lost a fourth of its value, if there ever was any. This brings on the obvious discussion about a bank. Any bank!
When a bank declares that it has “assets” of say a hundred billion, that simply means that it has deposits of a hundred billion. It ALSO usually has loans or an equal amount! Any bank in the world, and every bank uses the same phraseology of calling deposits “ASSETS,” while conveniently ignoring the plain fact that it has loaned all, more than, or close to all, of the deposits it claims as “ASSETS.” Where is the net worth? Other than physical building, equipment, and stuff like that, it is rare for a bank to have much more in REAL ASSETS, after the loans have been deducted from the deposits. This is why banks are in trouble. In Japan, non performing loans are $400 billion US. Commerzbank is in the same situation. JP Morgan-Chase also. Where is the safety in bank deposits, when the boobs who run the outfits, loan out your deposits to Argentina, poor risks, and finance the World Bank and IMF? Even if the loan officers thought they were making good loans, when an economy fails, all loans become bad usually. Responsible economists, like myself, have the chills running up and down our spines, just realizing what a stack of cards this whole world economic situation really is. It is frightening! People hold on to stocks that will fail even further, because they think the bottom has been reached, when it is no where near that point. People buy bonds, thinking that is “safe,” when anything denominated in dollars, pesos, pounds, marks, yen or whatever, are thinking that the bubble will be deflated, and that paper currencies have value. Bubbles have to burst, not deflate. Or have you invented a new system that defies common sense? More layoffs, $2 or $3 billion a day losses because of the overpaid teamsters refusing to work for less than $100,000 per year with $42,000 in benefits. Stocks continue to do down the slippery slope. Are you still “holding on?” Are you stuck in tradition, and a feeling that “It can’t happen here?” It will. My god, if there ever was a time to get gold and silver, and out of the stock market, bond market, real estate market, or anything even similar, it is NOW!