Ever watched a sci-fi movie where the crew goes into stasis while they travel from one end of the galaxy to the other?  Ever contemplated Purgatory where heaven and hell meet?  

I feel as though this is a period of semi-consciousness awaiting judgement…  Last night I was catching up on some news online when I was watching the futures markets turning deeper and deeper shades of red.  The morning was locked limit down and then we had an immediate spike — DOWN.  However, the day is turning out to be mild in comparison to what may have happened.  

The reason I label this as purgatory is because I think we are either going to swiftly swing in one direction or the other.  Emotion is in control at the moment and perhaps irrational.  Once the herd stampedes watch out.  If people want cash watch out markets.  As I said in a earlier post we haven’t really seen an exodus or pure panic yet.  

The news from around the world is to be expected given the size of the credit contraction.  

I think we may see a rally, perhaps not today, but maybe next week as people see bargains.  News will continue to be increasingly gloomy, spreading a shadow around the world.  The contraction will not abate and people in a moment of fear and panic will sell.  Hedge funds will continue to implode sending equity prices down further.  Mutual funds will have to begin liquidating.  The dollar will roar ahead.  

Only problem is that we have never seen such a huge monetary expansion. Once banks decide to start lending again that money they are now hoarding and using to purchase other banks will flow into the system.  Bam!!@! huge credit expansion at a completely unsustainable rate, and thus hyperinflation.  Equities may rebound, but given the recession they will probably be somewhat stagnant as the new capital investment will take time to be realized.  Meanwhile, gold, oil, and food will goto the moon as the dollar plummets.  Interest rates will also soar as the reality of our debt burden takes hold alongside major inflation.  People will want to be compensated for holding a worthless and bankrupt currency.  

My only real complaint with this prognostication is strength in the dollar.  I’m having a hard time comprehending or even believing that this dollar rally will continue.  It is a flawed currency, and has no basis for strength.  Then again what fiat currency really has any value?

 

my2cents