Economic Bubbles About to Burst
February 11, 2013
Insider stock selling by billionaires – including Warren Buffett and John Paulsen – this week indicate something big is about to happen, something that may make the 2008 credit crisis seem rather benign. Last week the governments of Russia and Germany called in their gold being “held” by the New York Federal Reserve.
A couple of years ago the IMF announced that it would begin liquidating its gold holdings- the world’s 3rd largest stash after the US and Germany. Buyers included the governments of India, Sri Lanka and Mauritius. Do you think the IMF would be selling gold at a market bottom? Bubble #1 about to burst – Gold.
Both Venezuelan and Vietnamese governments announced devaluations of their currencies, striking fear into the hearts of Southeast Asian governments, who fear a repeat of the 1997 Asian Crisis. Vietnam has benefited from the highly speculative dollar carry trade, through which investors borrow US dollars at near 0% interest, then reinvest those free dollars in 12-13% Vietnamese bonds. Much of the money which we forked over to Wall Street banks via QE 1-3 has made it’s way into these speculative markets, rather than being loaned to US home buyers, for example. Bubble #2 about to burst – The US Dollar Carry Trade
Another financial shock came out of Dubai, where the overbuilt property sector is reeling. Dubai is one of five emirates ruled by undemocratic monarchies which make up the United Arab Emirates (UAE). The UAE only got its independence from Great Britain in 1973. As the Vietnam War wound down, the Golden Triangle (Thailand, Burma, Laos) heroin trade found a new home in the Golden Crescent (Afghanistan, Pakistan, Iran). And Afghanistan became a permanent war zone. Hong Kong had been built up as the banking center for the SE Asian guns/drugs/oil/war reconstruction trade. Now Dubai serves that same purpose – first for Afghanistan and later for the war in Iraq.