The Greatest Money War of All Time

MONEY AND MARKETS
by Martin D. Weiss, Ph.D. 02-08-10

We are caught in the grips of a great war!

It is not a traditional land or sea war with tanks and battleships.

Nor is it an anti-terrorist, guerilla war for hearts and minds.

Rather, it is war of a third kind — pitting government bureaucrats against millions of investors … and causing massive collateral damage to innocent Americans.

Battle #1 began in Thailand in 1997 when global investors suddenly ran from its currency, dumped its stocks and abandoned its real estate.

Battle #2 began when the Tech Bubble turned into the Tech Wreck of 2000-2002.



Total Tech Wreck losses: $6.6 trillion. (For the proof, click here.)

Battle #3 was the monster born from the ashes of Battle #2:
The Fed’s response to the Tech Wreck created the Housing Bubble, which, in turn, spawned the Housing Bust.

And alas, the losses resulting from the Housing Bust of 2007-2009 were 2.4 times greater than the losses from the Tech Wreck of 2000-2002.

For a third time, they’ve retaliated with easy-money fire hoses, this time driving short-term interest rates to practically ZERO.

For a third time, they’ve deployed bigger guns. This time, with bailouts and stimulus that add up to 30 percent of GDP — TEN times more than the average of all prior postwar recessions.

And again, they’ve had the audacity to declare “victory” … to say that the “crisis is over” … and proclaim that the “recovery is sustainable.”

Inevitable result: Another gigantic bubble, another bust, and another round of devastating losses — this time in sovereign government debt (e.g., Treasury bonds).

This is why the collapses of sovereign debt markets in Greece, Spain, and Portugal are so alarming. (See “The Next Contagion.”) FULL STORY