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Bear Stearns Collapse
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The latest blow against the financial system was laid over the weekend with the fire sale of Bear Stearn for $2.00 per share. James Saft of Reuters said something I had not considered until now. He said that the financial crisis is now a "crisis of solvency" instead of a "crisis of liquidity" which is what I have considered it from the beginning. I believe that he is right on target and the crisis has evolved and morphed into the terrible monster that it has become. I really fear for all of us at this point. Where is the Fed getting the money to bail everyone out? Since we have been spending more than our income as individuals and as a nation (due to the our system rewarding debt and punishing savings) it is obvious that the money is being borrowed. How much more can we borrow before the world comes to the conclusion that we are too high risk to do business with (just as they did with Bear Stearns)? What are the consequences for the dollar? Will we be like Germany of the 1930s where people brought wheelbarrows of money to buy a loaf of bread? Unlike many people, I have been responsible and have been squirreling away money in my 401-k plan and other places to prepare for retirement. Runaway inflation can render my nest egg worthless in a very short time. So where do you and I put our money? Housing prices are still going south in a big way. One thing that is going up is commodities. Some have suggested that the new commodities bubble might be the cure for the other now deflated credit and housing bubbles. I read this morning that the price of wheat and soybeans has tripled since 2006. The government says that inflation is "contained", but they omit food and energy from their figures. Good thing since at my grocery store eggs have doubled in price from six months ago. Some believe that we could face real food shortages in a short time. So my suggestion. Put your money in silver, gold, and potatoes. My mom was a poor country girl who always told me, "as long as you have potatoes you will never go hungry." Then when our currency collapses we can sell potatos for wheelbarrows full of money. People will come to you and say, "My kingdom for a potato." | ||
