What about the myth that we have a deflationary debt contraction going on? That would be news to anyone who examines the numbers. Please see this chart:
As you can see, the amount of money recovered by banks from foreclosed homes is about 30%. Statistically, it's probably not unreasonable to extrapolate this data to the whole country. But keep in mind, the banks are not taking the hit on this, as they have largely "marked to market" back up all of the charges they took on toxic mortgage paper and you, the taxpayers, are going to bear those losses because a large portion of those losses have been transferred to the Fed and the Treasury. Rest assured, next year's Obama budget did not contain an expense provision for this. And no, the recovery rate shown on that chart has not bottomed. In fact, if Obama lets the homebuyer tax credit expire in April, and as banks start to unload all of the foreclosed homes on their balance sheet in order to raise capital, the whole housing market will experience another painful leg down.
And finally, just a quick note on the situation in Europe. It's stuns me that everyone one in this country is focused on the financial troubles occurring in Greece right now. Greece is about 3% of the total EU GDP. In reality, the bell tolling for California right now is much worse in terms of its potential impact on the global economy. California is about 13% of the U.S. GDP and California is the world's 7th largest economy. And what about the list of other States teetering on bankruptcy: Illinois, Michigan, Pennsylvania, New Jersey, New York...it seems to me that the financial media, Wall Street and the Obama Government is spending a lot of energy keeping Europe front and center in front of everyone when, in reality, we should be looking at ourselves.
The golden truth is that the Fed is going to be forced to embark on a money printing operation that will blow our minds. It will be interesting to see what kind of smoke screens they put up in order to mask the truth. At some point this nasty short-squeeze rally in the dollar will rip in reverse and the rest of the world will flee from the dollar the way they are fleeing from the euro right now. When that happens, gold will finally become the ultimate safe haven investment and those who poo-poo it now will be left chasing a train that leaves the station suddenly, quickly and with a sharp move higher.