Why so many bailouts, and trillions of newly printed dollars, STILL aren’t fixing the world’s problems!

Mike Larson | Friday, July 15, 2011

The European sovereign debt crisis. The double-dip in the U.S. housing market. The resumption of the U.S. economic slump.

Policymakers certainly have their hands full right now. Hardly a day goes by without some new proposal to “solve” these problems — from academia, from the major global financial centers, and from politicians on both sides of the pond.

But folks, I’m going to let you in on a little secret nobody in Washington or on Wall Street will speak out loud: There is NO EASY FIX! Nothing can be done to eliminate the multiple threats facing us right now. They’re the result of years and years of failed policies, out-to-lunch regulators, too much easy money, and more.

The only “cure” is a long, drawn-out period of paying the piper. Or as Treasury Secretary Timothy Geithner finally came clean about in an interview with NBC’s Meet the Press a few days ago:

“It’s going to feel very hard, harder than anything they’ve experienced in their lifetime now, for a long time to come.”

 

So the only sensible strategy you can pursue as a prudent investor is to avoid getting sucked in by rallies like we had earlier this month. Instead, take immediate steps to protect your hard-earned capital!

I’m going to tell you how in this issue. First let’s address …

Main Street’s Key Question:
Did the Great Recession
Ever REALLY End?

If you ask the Ivory Tower economists, they’ll tell you the Great Recession in this country ended in June 2009 after 18 long, grueling months. But if you ask many people on the street, they’ll say it seems like the recession NEVER ended for them. And no wonder!

Wall Street brokers, big multinational banks and other politically connected institutions and individuals got hundreds of billions of dollars of bailout money through TARP and other government programs.

Large investors were able to take the hundreds of billions of dollars printed by the Federal Reserve and speculate in commodities, junk bonds, and stocks.

But the average guy in the street? He just got stuck with a higher grocery and gas bill. And he got virtually no help on the most important front of all … jobs!

Case in point: We were told the massive $800-billion-plus economic stimulus program would create a veritable job boom. That it would shrink unemployment dramatically.

But just look at this chart and you can see that the unemployment rate is far, far above where it was supposed to be as a result of the stimulus. Heck, it’s higher than where it was supposed to be WITHOUT the stimulus!

Source: Heritage.org

We never got anywhere near the boost we were supposed to get from the almost one trillion dollars in Washington spending. And the latest jobs figures prove that we’re sliding back down a slippery slope!

Our economy created a pathetic 18,000 jobs in June, the worst level in nine months. Private hiring fell to the lowest level in 13 months, while the “all in” unemployment rate that includes discouraged workers, those who want full time work but can only find part time employment, and so on surged to 16.2 percent.

Finally, the participation rate that measures the percentage of Americans 16 years or older working or seeking work dropped to 64.1 percent. That’s the lowest percentage in a stunning 27 years!

I’m an equal opportunity analyst by the way. It’s not just the Democrats, the Obama administration, and the Fed whose stimulus plans have failed miserably. The Republicans haven’t managed to get job growth going either. And the policies pursued by former President George Bush left Obama saddled with hundreds of billions of dollars in crushing debts in the first place.

Why the Economic and Credit Market Problems

Are So Intractable — and Immune to Easy “Fixes”

So why didn’t the economic stimulus program work? Why didn’t the Fed’s QE1 and QE2 programs boost the real economy, rather than just fuel more reckless asset speculation?

Why are the repeated bailout and stop-gap measures in Europe failing to cap European yields? Or prevent governments in the PIIGS countries from tumbling toward default?

Because policymakers are still … STILL … failing to grasp the simple, undeniable nature of this crisis. It was one created by too much leverage, too much borrowing, and too much debt. We borrowed and spent far beyond our means — for many years, not just a few quarters. A collapse was inevitable.

Those in charge burned through too much money, for way too long. Now it’s payback time.

Sure enough, the housing and mortgage bubble started popping in 2005. Then the crisis migrated to the entire credit market in 2007-2009. But rather than let the cleansing process play out, governments decided to stand in the way!

Result?

Excess debts were never written off as aggressively as they should have been …

Many of the banks that should have failed weren’t allowed to …

And many countries are now so indebted that the only way out is default and restructuring. But the politicians keep trying to prop them up with short-term, flawed bail outs.

Indeed, while trying soooooo hard to “avoid another Lehman Brothers at all costs” policymakers are just prolonging and dragging out the crisis. They’re just delaying the inevitable, and running up hundreds of billions of dollars in costs in the process!

So folks, here’s what you need to do:

Stop listening to the happy talk that’s being spewed in the mainstream media. Instead, take immediate steps to protect yourself — not just against stock market losses, but losses on risky bonds, real estate, some commodities, and even currencies. You can buy inverse ETFs that hedge against declines in all of those asset classes, and I believe you need to own them!

I’ve been sharing specific names with my Safe Money subscribers, and I’m happy to report that some of those recommendations are already heading nicely higher.

If you’d like to get the full details, just click here or call our customer service team at 800-236-0407. You can join us for just 13 cents per day.

Remember: The time for aggressive risk-taking is over. The time to hunker down is now. 

Until next time,

Mike