Here are a few little items, just to set things up for what follows:
There's more, but that will do to be going on with.
If ever the phrase "their cup runneth over" was appropriate in the financial world, it was appropriate in U.S. markets in the last half of the 1990s. But now, the hangover has well and truly struck, and even worse, there is no "hair of the dog" available anywhere. NOBODY wants to invest in the U.S. anymore. It is getting so bad that even Americans don't want to invest there.
Now, consider all the measures that have been exposed on these pages and on many other websites to keep the "good times" going. Consider the fact that the Japanese Central Bank spent most of the last part of May and early June desperately trying to prop up the U.S. Dollar on the currency markets - look at it now.
Consider that the Japanese re-introduced a government "stock buying body" on May 17. That "body" had been originally set up on February 15 to prop up a Nikkei which was below 10000 and BELOW the Dow. That "body" operated until April 26, bought the equivalent of $US 130 Billion of Japanese stocks from Japanese banks, and ramped the Nikkei up to 11919. On May 17, when the Japanese got the government buying re-started, the Nikkei stood at 11847. On June 21, the Nikkei closed at 10354. That's a fall of 1493 points or 12.6% in a month - DESPITE OPEN BUYING OF JAPANESE STOCKS BY THE JAPANESE GOVERNMENT ITSELF.
The Japanese have been suffering from a bear market for well over a decade. They don't try to hide their manipulation any more, and it has NEVER worked. The U.S. does NOT announce such financial manipulation as "policy". They merely do things like lower official interest rates 11 times in one year (in 2001). But as U.S. markets are showing with more clarity every passing day, it isn't working in the U.S. either.
But in fact, that is not entirely true. It is working, at least partially, on GOLD. Despite the devastating falls on almost EVERY "paper market" that exists in the world since early June, Gold in $US terms has yet to regain the 2002 highs it set in early June.
"But as the "game" gets tighter, the potential for a loss of control increases. We shall see how much longer it can be maintained. The evidence will start from what comes out of the G-7 Finance Ministers meeting going on this weekend. This meeting is a preliminary to the G-8 Heads of State meeting in the foothills of the Rockies in Alberta, Canada."
(Gold Last Week - June 14)
In the lead up to last weekend's G-7 meeting, the Dow crashed 241 points in the first half hour of trading on June 14. By the end of the day, that loss had been cut to 28 points. On the first trading day after the G-7 meeting, June 17, the Dow rose 213 points. On the same day, Gold hit $US 317.40, which proved to be the low point of the correction. Even the $US index managed a small rise on June 17, up 0.20 from 110.80 to 111.00.
G-7 meetings are supposed to be IMPORTANT. They are supposed to give everyone the impression that everything out there in finance land is fine and that the assorted potentates gathered for the meeting have everything under control. If that takes a little "tweaking" of various markets, then so be it.
But this week has been the "hiatus" between the preliminary G-7 meeting and the much more important HEADS OF STATE G-8 meeting on June 26-27. The G-8 meeting is so important that it is being held in a little town that nobody has heard of in the foothills of the Rockies in Alberta, Canada.
The preparation for this HEADS OF STATE meeting has not been very well done, to say the least. Look at the markets! Devastation everywere. If ever the financial "powers that be" were going to get together and DO SOMETHING about crashing currencies, sliding stock markets etc, etc, they would have done it this week. Evidently, they either haven't - or it didn't work very well.
It gets worse from here, though. The hosts of the G-8 meeting, the Canadians, have announced that there will be NO FORMAL COMMUNIQUE issued at the end of this meeting. Instead, the Canadians themselves will give a general overview.
The FIRST thing to understand about important inter-government meetings, especially meetings between HEADS OF STATE, is that what is going to be announced at the end of the meeting is always decided BEFORE THE MEETING STARTS. That was, in large part, what the G-7 meeting in Halifax last week was for. It was to set the agenda for the G-8 meeting and to agree in advance as to what would be said at the end of the meeting.
Clearly, the Finance Ministers et al who met last week at the G-7 meeting could NOT come to an agreement on either of these points for the G-8 meeting. Early evidence of this came early this past week from complaints voiced by the Canadians that the U.S. was unilaterally trying to dictate the ENTIRE proceedings of the G-8 meeting. The proof came with the announcement that there would be NO communique.
Not to put too fine a point on it, the U.S. has been "ROLLED". The other participating nations are obviously NO LONGER prepared to simply go along with whatever the U.S. decides.
As long as there were seven other participants in these summit meetings, the U.S. could always win the game. Liken it to a no limits poker game. The U.S. simply kept raising and the rest of the players kept checking or folding. But now, there are not seven other participants, there is the U.S. and there is everyone else. Now, the game has changed, and the other side can "see" the U.S. hand. They don't actually need to, they know that the U.S. has been bluffing for years.
The direct evidence that the rest of the world can no longer afford to play the U.S. game and keep sending all their capital to offset U.S. trade, current account, and BUDGET deficits is what has happened on world and U.S. markets this week. The indirect evidence is the decision NOT to issue a communique at the end of the G-8 meeting.
The final piece of evidence to confirm that the game is OVER still awaits. That is a $US Gold price ABOVE $US 330. A new leg on the $US Gold bull market will be the final straw. The global financial powers that be have lost control over almost everything else, but they still have some control over Gold, as witness its correction since the June 4 high. People all over the world are searching desperately for SOMEWHERE to protect their capital. Gold has historically ALWAYS performed this vital task. It is on the verge of re-taking its historical role.
There are three MASSIVE financial events taking place over the coming week: