Speaking in public

"Bill H." (An astute retired market veteran), posting at www.lemetropolecafe.com  08/04/08

To all; it struck me this morning while listening to 2 bearish guests on CNBC that someone soon will make the public leap regarding the Dollar and the broken financial system. This morning Merideth Whitney [the analyst who has been pelted by tomatoes and received death threats for past bearish prognosis] and Larry Lindsey both spoke about the contracting credit conditions and the current fragility in the banking system. As yet, no one has made the public leap as to how this will affect the Treasury's balance sheet and thus the Dollar. Ms. Whitney spoke about the capital raisings so far by the financials being only to "plug holes" and make up for past writeoffs. In other words these institutions have not been raising capital to make new loans, only to support past bad loans. They both spoke about how underfunded FDIC is but concluded that the Treasury would just "send money" if needed.

What no one has said publicly yet is how do you just send money if there is none. All of these bailouts, patch ups, etc. will need to be paid for. This line of reasoning is not new to any of us. We've spoken about, written and read about the "end game" as far as the Dollar is concerned. However, until now no one has suggested through the conventional media that we are headed toward a Wiemar experience. I believe it to be only a matter of time before someone spills the beans and makes this logical connection of the dots publicly. This is such an obvious outcome that even a child could make the leap.

As for the current credit conditions, commercial paper, mortgages, CDO creation etc. have been continuing their swan dives. The Fed's open spigots are not making past bad loans good ones today. They are only allowing these institutions the liquidity so to keep their doors open. The business model for the current banking system is flawed and untenable. It is only a matter of time before we see someone come out in the mainstream media and reveal the obvious. THIS IS SYSTEMIC! This is like the pregnant girl in High School that everyone knows about but only speaks about in private. Just because no one speaks publicly about her doesn't make her any less pregnant. Insolvent is insolvent, even if no one has, or has been allowed to speak.