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Saturday, May 23, 2009

Week in Review: The Credit Markets, the Credit Markets (PODCAST)

"It is easy to dodge our responsibilities, but we cannot dodge the consequences of dodging our responsibilities." - Josiah Charles Stamp

Imagine you own a credit card.

Imagine you've gotten yourself in a lot of trouble with that credit card. You owe a balance on that credit card of $40,000.00

Now imagine, that some rich uncle comes along, and says: "Wow. I'll loan you some money. I'll lend you $5,000.00, on very, very low interest. If I see you behave responsibility, then we'll take it from there."

And you take that $5,000.00? And buy yourself a new home entertainment system. What do you think your uncle would start to think about continuing to help you, and your ability to pay back that $5,000.00?

Yeah. That's about where the economy is at right now.

(Podcast Included. If you're seeing this entry elsewhere and cannot play the podcast? Click this link to go to the exact podcast entry ...)

Click here to download this podcast.

The Bond Markets cannot indefinitely fund expenditures, when operating at increasing deficits. It's just simple math.

China and other bond market buyers could walk away. But that doesn't mean inflation. Hyper-inflationists believe that the Fed will not raise the rate. I believe the Fed would, if it faced that situation.

Because the Fed will protect their own interests. They will not commit suicide. They would raise the rate. Other Central Banks have done the same thing in the past in similar situations, and although it resulted in Economic problems in England? England is still with us.

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Note: This is not an investment or trading recommendation. The losses in trading can be very real, and depending on the investment vehicle, can exceed your initial investment. I am not a licensed trading or investment adviser, or financial planner. But I do have 13 years of experience in trading and investing in these markets. The Challenge accounts are run for the education of other traders who should make their own decisions based off their own research, and tolerance for risk.

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