"We Stand At The Brink Of The Next Great Crisis"

Former Wall Street trader, author and founder of research firm SmartKnowledgeU, J.S. Kim, is out with another quarterly update on his view on the global economy. Although little have changed about Mr.Kim’s basic bearish attitude, it seems like a proper time to repeat some of the highlights. You can agree or disagree with him as mush as you like, but history proves him right in at least one thing; it’s in the times of great crisis the big fortunes are made.

“I  see nothing in the present situation that is either menacing or warrants pessimism. I have every confidence that there will be a revival of activity in the spring, and that during this coming year the country will make steady progress.”

Treasury Secretary Andrew Mellon (1929)

At the end of 2008, all the pundits stated that the worst of the crisis was over, the dollar was strengthening, prolonged deflation was here, and gold was no longer a “safe haven” when gold dropped to nearly USD 700 an ounce from a high of more than 980 several months prior. As it turned out, every single one of those “experts” predictions were wrong.

“In November 2009 all the experts were spreading the same disinformation,” J.S. Kim writes in his quarterly update to his clients.

Mr. Kim’s great accuracy in calling the procession of this global financial crisis for 3 years running on his investment blog, his subscription services, and a series of YouTube videos has led to a high level of interest in his future predictions, with many of his articles reprinted online by Reuters, the New York Times, USA Today, the Wall Street Journal, the Financial Times & the International Business Times.

He recently authored the timely book, Confessions of a Wall Street Insider, A Zen approach to making a fortune from the coming global economic crisis“, and actively maintains a blog, The Underground Investor where he strives to bring the retail investor timely global investment news that rarely receives mainstream coverage – the “real” news behind the headlines.

He founded his research firm SmartKnowledgeU in 2006.

According to J.S. Kim, and those who shares his view, it’s not possible to fix the worlds economy and solve the systemic debasement of the U.S. dollar, the U.S. Federal Reserve’s implementation of unsound monetary and fiscal policy for the past three or four decades in three months, 6 months or even a year.

A new U.S. President, despite all the hope that will accompany him into office, he can NOT solve a crisis that has been brewing for more than two decades, Mr. Kim argues. Adding; “Unless he re-institutes the gold standard.”

“This is why we find all the chatter about the worst of the financial crisis being behind us so amusing,” he continues.

Here’s The Deal

“The introduction of a perpetually growing Term Auction Facility, unprecedented interest rate cuts, an unprecedented Primary Dealer Credit Facility that allowed banks to use near worthless assets as collateral to solve liquidity problems, a bailout of Wall Street firm Bear Stearns,  perpetually growing bailout money for AIG, Fannie Mae and Freddie Mac (soon to be followed by bailouts of the U.S. auto industry and bond insurers like MBIA and Ambac), and perpetual lies from governments about unemployment and GDP statistics will not solve decades of poor fiscal policy.”

Here Are The First Two Pieces of Advice From Mr. Kim:

* Beware of anyone that tries to discuss an inevitable highly inflationary environment in terms of rising prices (a disingenuous argument designed to distract you from the true cause of inflation, that of fiat currency debasement).

* Beware of any investment professional that quotes inflation in the U.S. to be 3% to 4% today and know that such a person is not to be trusted.

Here’s The History Lesson

“Are you aware that immediate before the Great Depression hit the United States in 1929, U.S. stock market had skyrocketed straight up for nearly a decade and that unemployment was at an all time low of less than 1% ?”

“Did you know that immediately prior to the 1997 Asia Financial Crisis, South East Asian economies (in particular Indonesia, South Korea and Thailand) were booming with high single to low double-digit growth rates as foreign investment flooded these markets?”

“During the height of these two crisis, though a great many people lost massive amount of wealth, an extremely small minority, the most savvy of investors, along with crooked banksters and their politician friends, actually built great wealth during these times.”

“And just like during past economic crisis, this coming and unfolding monetary crisis will undoubtedly offer one of the best opportunities of our lifetime to build great wealth as well.”

“Unfortunately, the vast majority of investors, just as in the prior two instances, will participate only in the downside while banksters once again laugh their way to the bank – literally.”

Here’s Some Explaining

“If you wonder why the mainstream median was silent regarding this crisis until they could be silent no more, you need only remember that news of an imminent crisis never preceded The Black Monday in 1987, never preceded the 2000 Nasdaq-crash in the United States, and never preceded the 1997 Asian Financial Crisis.”

“However, simply stated, great crisis such as these never develop overnight.”

“At SmartKnowledgeU, we had been warning about this Peak Investment Crisis since 2006 on our investment blog. We recently called the September/October crash publicity on our blog April 23, 2008, even as U.S, media was plastering the predictions of Wall Street and U.S. banking icons all over their front pages stating; The Worst Is Over”.

“The structural signs of such crisis are still evident in late 2009, simmering below the surface, and warn us of great risk in the stock markets and the greater economies in 2010 and beyond.”

“But how have the media and politicians reacted to this still clear and present danger in the global economy in late 2009?”

“They do what they do best – lie.”

The Similarities

“They call every bear market rally in stocks and the U.S. dollar as the beginning of a multi-year bull market instead of its last gasp before an even deeper crisis develops.”

“Recall this quote from Andrew Mellon the U.S. Secretary of Treasury in 1929, just a couple of months after the 1929 U.S. stock market crash: I  see nothing in the present situation that is either menacing or warrants pessimism….I have every confidence that there will be a revival of activity in the spring, and that during this coming year the country will make steady progress.”

“Of course, after Mellon issued this statement of confidence, the global economy plunged into the Great Depression for an entire decade.”

“Politicians and bankers are telling the same lies today. If you can’t learn from history, you will never learn.”

“How can we be sure that the majority of investors will lose a great deal of wealth during this time? Because during every prior major financial crisis, only a small minority of people (outside of the corrupt bankers and politicians that created each crisis) had the foresight to plan and prosper during these times.”

“Today, we live in a very different world than our forefathers did. Today, governments are run by bankers that will try to hide knowledge of future developing crisis from you until you are financially ruined as their agenda of self-interest overrides any concerns they have for the citizens of the countries they live in.”

“These very leaders told you not to worry about the subprime problems in April 2007.”

“In fact, after Treasury Secretary Hank Paulson, called the U.S. subprime housing crisis “largely contained” at a mere USD 100 billion of losses, some 20 – 50 additional trillion dollars of capital were permanently destroyed.”

“Today, the same leaders are again seeking to deceive you about the severity of this very crisis.”

The Zen Strategy

“Markets are not free and constantly manipulated require constant strategic adjustments as well as sometimes nothing more than excessive patience.”

“Sometimes all that is required to profitable during a crisis is to know that you are on the right side of the equation and to wait for that equation to manifest itself. However, only knowledge can lead to patience and making the right decisions versus panicking as crisis deepens.”

“Other times it will be necessary to sell out or employ hedges to protect profits and doing nothing can be very harmful.”

“As this Monetary Crisis deepens, governments-led free market interventions will keep occurring, eventually losing their effectiveness. At this point and time, when the masses of investors realize what is happening, it will be too late to re-position your asset to protect yourself.”

You Must Be Ahead Of The Game.

“In July 2008, U.S Congress and the SEC instituted motions to limit oil future speculators and prohibit speculators from short-selling financial stocks.”

“When this happened, if you can recall this period, did you notice the stark absence of any talk to limit naked short-selling of any other sector besides the financial sector?”

“Again, The U.S. Federal Reserve will continue to punish and rob average American by taxing them to bailout and protect the moneyed elite.”

“Whether this tax is in the form of an invisible tax, like inflation, or a direct tax on your income, there is no doubt that American citizens will continue.to pay for the bailouts of Bear Stearns, Fannie Mae or whoever else the U.S. Federal Reserve decides is worthy of U.S. taxpayers money.”

Be Careful Who You Trust

“We have already seen numerous times when the most “trusted” financial figures in the world have been wrong multiple times regarding their very public statements. You can only draw two conclusions from these results.”


  1. These “experts” are the most incompetent financial analyst in the world,


  1. These “experts” purposefully lie to fulfill another ulterior agenda.

“Thus, as this crisis unfolds, many assets that are touted as “can’t fail”-investments will fail, and those that are slammed as terrible investments will evolve into shining stars.”

“Your beliefs will often be tested by directly opposing propaganda released by governments and financial institutions. Only those with intimate knowledge of why they are holding certain investments will have the fortitude to hang on during periods of corrections to eventually make a fortune.”

Do NOT Underestimate Psychology

“The vast majority of investors underestimate the importance of psychology in the wealth building process; however, the adoption of proper psychology can often be the one factor that separates’ the investor that knows what to invest in and make a fortune from the investor that knows what to invest in and makes a fortune from, but despite this knowledge, still loses a great deal of money. This is why we focus so much on knowledge.”

“As we experience steep corrections during this deepening crisis, investors should never own certain asset classes. Finally, with some asset, such as gold, there are multiple ways to buy gold, not just bullion and not just mining stocks.”

“Often guidance of commercial investment industry in regard to precious metals is the worst possible guidance you ever could receive, for their guidance is often based upon ulterior motives undisclosed to the unsuspecting investor.”

Related by the Econotwist:

Living In A Derivative World

Are Governments Producing Conspiracy Theories?

Wall Street: FED With A Fake Mustache?

Two Thirds of Americans Support Stricter Financial Regulations

Merkel To Push The Euro Zone Off The Cliff

The Truth, Some Truth And Something Like The Truth

AIG: What Did FED Bail Out and Why?

The Great Golden Lie

European Commission Warns Of “Lost Decade”

Italy Charge Foreign Banks With Fraud

Naked self-interest

77% of Senior Bankers Expect Another Financial Crisis by 2015

China: “Mother of All Black Swans”

Drug Money Saved Banks from Collaps

Organizing Financial Rebellion

Roubini: “The Worst Is Yet To Come”

Robert Schiller: – Recovery is just luck

The Banks Are Bursting

2010 Analysis: “11 Black Swans”

2010 Analysis: The Road to Disaster

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Filed under International Econnomic Politics, National Economic Politics