The Inter-Galactic Bailout Fund

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The Fed is now bailing out the whole world! But who will bail out the Fed?

After the news came out yesterday, the Dow rose 249 points. Gold was up $2.

Here’s the latest from Bloomberg:

Stocks jumped, sending US benchmark indexes to their biggest gains in three months, while the euro and commodities rallied and Treasuries slid amid improving data on the American and Chinese economies and speculation of a larger effort to end Europe’s debt crisis.

The Standard & Poor’s 500 Index gained 2.2 percent, the most since Sept. 1. The MSCI Emerging Markets Index rose 2.2 percent, its biggest gain since Aug. 2. The euro rebounded above $1.31 while Spanish 10-year bonds snapped an 11-day drop. The rate on 10-year Treasury notes increased 17 basis points to 2.97 percent, a four-month high. Oil and copper advanced more than 3 percent. After the US close, S&P 500 futures added 0.1 percent at 7 p.m. in New York and Japan’s stocks rose in early trading.

European Central Bank President Jean-Claude Trichet said yesterday that investors are underestimating policy makers’ determination to halt the region’s debt crisis and shore up the euro ahead of a meeting of the bank’s Governing Council tomorrow.

The Dow Jones Industrial Average surged 249.76 points, or 2.3 percent, to 11,255.78. The Dow has rallied in December more than in any other month over the last century, according to Bespoke Investment Group. The 30-stock gauge rose 1.3 percent on average in the month during the past 100 years and gained 1.5 percent and 1.7 percent over the last 50 and 20 years, respectively, the Bespoke data show.

Stocks and the euro extended gains after Reuters reported that an unidentified official said the US may support enlarging a European financial rescue program by adding cash from the International Monetary Fund. The US is not discussing extra IMF money for Europe, a US official in Washington told Bloomberg News.

“Whoa…did you see that?” asked an Indian analyst we met this morning. “This is it. They’re really turning on the presses now. They’re trying to bail out the entire world. I never would have believed it. But it makes sense.”

The US official may not be discussing it openly, but Fed figures show that the US central banks is already bailing out foreigners. Reports tell us that 35 foreign banks took advantage of its EZ money policies. It appears that the Fed is supporting Europe’s banking sector.

And it would not be surprising if the US also backed the IMF. It’s not just the banks that are in trouble in Europe. Governments are deep in debt too. They are so intertwined, that it’s hard to know where private debt ends and public debt begins.

Americans may see the dollar rising against the euro and feel a little patriotic pride. But this is not a good thing for Americans. If Europe comes unhinged, the crisis will waste no time in hitting American banks and the US economy. Ben Bernanke has been trying to get the dollar to go down. A rising greenback makes Germany’s products less expensive and US exports less competitive. It contributes to the threat of deflation…and encourages a long, drawn-out Japanese-style slump by prompting people to save, rather than spend.

Not only that, collapse of European economies would kill world trade. Exporters would be out of business. Importers would be out of money. The whole planet would be out of luck. The crisis would make its way around the world like a giant tsunami…wiping out stock markets immediately…and then swamping almost all economies.

Yes, dear reader…this is the downside of globalization.. One region’s problem can easily become a disaster for everyone.

So, what’s going to happen? We wish you wouldn’t ask us questions like that, dear reader.

But we’ll take a guess.

The European situation is more dangerous than most Americans realize.

It could still melt down. US authorities must know this. And they must know too that if Europe melts down, so will the USA.

So, the rumors will probably turn out to be true. The US will back the IMF. The IMF will back Europe. Europe will back Ireland. Ireland will back its banks. And the banks will back their lenders.

Meanwhile, the euro will be backed by the dollar, which will also back the US economy, US banks, the US government, and about half the households in Christendom…not to mention the others!

Who’s got the kind of money you need to do all this backing?

Ah…there’s the rub… There’s the weak link in this strange and magical chain.

Let’s see, if all the world’s debts are guaranteed by paper money…isn’t the paper money itself impaired by the amount of the losses? Won’t the losses be passed along to dollar holders everywhere?

Yes. But, no one knows how much the losses are. And no one knows how much extra “stimulus” money the feds are going to put out. And no one knows when people will get scared and flee the dollar…the euro…and all paper currencies. And no one knows what a panic out of the dollar would produce. And no one wants to find out.

So, what’s the solution? We won’t bother to offer a solution to the world’s financial authorities. They won’t pay any attention anyway.

But how about a solution for you? Did you buy gold when we suggested it, dear reader?

We hope so.

And more thoughts…

The New York Times tells us that astronomers had seriously underestimated the number of stars in the universe. They can’t see the little ones. Which means, their last count was probably a few trillion off. Or maybe a few gazillion off.

Which suggests to us that astronomers and federal debt analysts must be using the same calculators. Both are trillions off the mark.

But the reason we bring this up is to give dear readers hope. Maybe…circulating around one of these invisible stars…a few billion light years away from earth…is a habitable planet. And maybe, the people who live there are very good with figures…and money. And maybe they’re also very accomplished space travelers. And very generous.

And maybe they’ll show up – any time now – and offer to bail out the whole Milky Way …if not the whole damned universe.

Regards,

Bill Bonner,
for The Daily Reckoning Australia

Bill Bonner

Bill Bonner

Best-selling investment author Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter companies. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail The Daily Reckoning.
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50 Comments on "The Inter-Galactic Bailout Fund"

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peterg
Guest

video of Bernanke trying to explain why the US was giving bail out money to New Zealand, to the tune of $3000 per person in NZ. I didnt even know NZ had a problem. they do now. he also couldnt say where the $30b to Europe went.
heres a question, are you guys sure that its all just bad ideology and vested interests stuffing up, rather than a deliberate manipulation to make slaves of the world? method behind the madness in other words, something to consider. perhaps the aliens are already here, and they aint the good guys.

Biker
Guest

HaHa… Good one, pete.

I’m more interested in what one actually _does_ after discovering he has been enslaved, say for a coupla decades.

Take Andrew’s comment: “What you write is so true – pity it took me 20 years of being a slave before realising it.”

OK… now Andrew’s a free man. Sound of shackles and chains sloughing off.
Enormous relief. “I’m free!~” he shouts, “Fr-r-e-e-e-e-e!~”

Now what? What does Andrew do in the hours, days, weeks, months, years following twenty years of serfdom? ;)

Biker
Guest

Got it… If he’s in your area, he surfs!~

Stillgotshoeson
Guest

House is going to Auction early January.. Interesting to see what happens there.
Fletcher Christians now up 150% :) Should have been greedy and bought more ;) Still might.. Will probably still double from here over the next few months.

Lachlan
Guest

We’re already slaves peterg. Management’s just having a re-shuffle. Might need a new money system if all the livestock will just behave themselves while fences are fixed.

Bought some FML today Shoes….not the first time.

Lachlan
Guest

Couldn’t work out who FC’s were Shoes.

Stillgotshoeson
Guest

Comment by Lachlan on 8 December 2010:

Couldn’t work out who FC’s were Shoes.

Would be happy to let you know… I just do not want Biker knowing ;)

Stillgotshoeson
Guest

Am expecting a pull back in the price around 21st/22nd of December as profit takers sell some of their Share Purchase Plan shares for a nice tidy profit (SPP Price as 8 cents a share) I bought $10000 worth under the SPP. Whether that pull back brings them lower than current price or not will depend on how much higher they go between now and then..

Stillgotshoeson
Guest

Comment by Lachlan on 8 December 2010:

Bought some FML today Shoes….not the first time.

FML I am ecpecting to do Ok over the next 5 months or so.. 1st Quarter next year should be good.. 1st Quarter Report should give a good indication on where they are going.. I have 100000 of them Target price is 12 cents by end of April

Biker
Guest

“Would be happy to let you know… I just do not want Biker knowing ;)”

HaHa… . You think I’d follow your lead, Shoes?
You’re buying paper, son.

(Email him at his mafia address, if you believe he’s dinkum, Lachlan. ;) )

Lachlan
Guest
I have a similar target via TA but they’re just a micro position (low risk) for me to sit on hoping to catch a bigger move once/if AUD gold breaks for it. A trading strategy I used like is to sell half at an initial resistance area/target and hold remainder for risk reduction. However I am accumulating a number of small shares positions to hold through what I believe will be a rally in AUD gold to around $2000. A longer term strategy. Hope I can stick with it. I sold DGO because I’d had them quite a while and… Read more »
Lachlan
Guest

mafia?

Lachlan
Guest

ok I’m just backing away quietly towards door :(

Biker
Guest

Go on, Euan, don’t keep him in suspenders, mate.

Tell him yer mafia email address!

(Gold!~ :D )

Stillgotshoeson
Guest

You tell him Frank… I am sure you have it copied and past’d there

Biker
Guest

Nope. Only the seriously ‘floored’ stuff, like:

“Shoes 1st Nov 2010:

Next year it falls over.

Our dollar will be savaged.
The big four are on a hiding to nothing..
The Aus price property correction will be underway.
Unemployment will rise
Consumer confidence will wane even lower than it is.”

You must recall that optimistic post, surely? I’ll never forget your @#%&#@ response!

C’mon, mate. Lachlan’s a goldbug/PM guy like y’self. Give him yer
mymafia address. :(

Stillgotshoeson
Guest
Our dollar will be savaged. Bassanese Dollar looks to be on shaky ground PUBLISHED : 3 hours 39 minutes ago | UPDATED: 1 hours 7 minutes ago PUBLISHED: 08 Dec 2010 02:14:00 In the space of a few weeks, two key struts underpinning strength in the $A have been weakened. One important strut is remaining. The Aus price property correction will be underway. Clearance Rates are dropping, Prices are falling.. Circa 10% is the word from Ned up Brissie Way.. Consumer confidence will wane even lower than it is.” Retailers are screaming that it is a poor start to the… Read more »
Stillgotshoeson
Guest
Comment by Lachlan on 8 December 2010: A trading strategy I used like is to sell half at an initial resistance area/target and hold remainder for risk reduction. It is not a bad strategy Lachlan.. I use it quite often.. Often means you do not “gain” as much as you otherwise may have but you preserve some capital. I usually end up spending that on another share anyway, sometimes that one outperforms the one sold.. other times it does not. If the FC’s are above 20 cents on 21st December, I am most likely going to sell 50000 of them… Read more »
Biker
Guest

Why so shy? Decided mymafia no longer fits the psychic image?
Your ability to see into the future is… is… why, it’s like a … a…
God-like power!

I guess this stuff rubs off if you hang around it long enough.

Frank? Yes, I could go with that, Euan.
I feel born again.

Thanks,
Frank.

Stillgotshoeson
Guest

Actually… I used to play mafiawars and that was my mafiawars account.. don’t check it that much now.

Frank
Guest

Now FRANK… . I like it! It has three meanings: Free, Truthful and… wait for it… Javelin.

Let’s see now, what does Euan mean? Ah, here it is: ‘small and quick’.
Hmmmm….

Biker Pete
Guest

So, just tell him the mymafia address, Euan.

This could go on f-o-r-e-v-e-r….

Biker Pete
Guest

Should be Biker Frank now, I guess.

FRANK… . I like it! It has three meanings: Free, Truthful and… wait for it… Javelin.

Let’s see now, what does Euan mean? Ah, here it is: ‘small and quick’.
Hmmmm….

Lachlan
Guest

PIO looks a good one. I’d buy it now which is something… generally its hard to find a buy today. I wade thru Goldnerds plugging ticker codes into ten year charts (with volumes) to narrow down promising suspects quickly. Ive noticed an interesting trend developed in some types of shares over last 18months.

Steve
Guest

Ned wants a correction too so like all of us bar one (not mentioning any names) he will be very happy…

Biker Pete
Guest

You had your correction, son… *blinked* … and missed it.
Sorry… .

But look… if you play your cards right, Shoes will tip you his little secret. The legendary ’59 FCs.

Euan, these blokes need your psychic powers. Take Lachlan, for example.
His circumstances are similar to yours in many ways.
You have a chance to help your fellow DReAders.

Me? Truly don’t need it. Don’t want it.
Have more-than-enough to last us.

Give ’em that Mafia info… and they’ll all be retired at 45.
Even Ned!~ ;)

Lachlan
Guest

Alright i worked out your share Shoes. Starts with M. You have done well.
Too late for me, would be chasing the market. But maybe after a pullback which i agree will be likely at 20c but possible anytime soon. Sometimes they correct/pause by flagging sideways for an extended period which gets boring.

Biker Pete
Guest

Catch ‘n’ Release. ;)

Not my thing, but I’ve gotta admire it when I actually see it. :D

Stillgotshoeson
Guest

You’ve done well Lachlan..

A lot of shares purchased under the SPP. 37 million or so.
21st December they become tradeable. Expect a pull back then as many take profits of the table.
Expectations are high for good things next year from them.

Lachlan
Guest

Gotta hit the sack Shoes (big day on the trading floor ya know ;) ) but (a) hoping to buy PIO ASAP and (b)dont know about Mongolia but VOR was an interesting one I bumped into today. Geo reports in particular. If you hate it just tell me mate.
Happy fishing BP ;)

Stillgotshoeson
Guest
Checked out VOR Did not like it.. Not saying that there is nothing there because there may well be a good thing with the recent copper aquisition.. however.. Sovereign and Political Risks Associated with Operating in Mongolia The Company holds an interest in a number of projects in Mongolia. Mongolia is a young democratic country which is experiencing a transition to a market economy presents a certain level of uncertainty and risk. The Mongolian Parliament has previously passed laws that may restrict or limit the Company’s operations or make them uneconomic. These include the laws that impose the right to… Read more »
Biker Pete
Guest

I’d invest in McDonalds in the Phillipines, tho’ Euan.
Filet o Fish perhaps?

;)

Ned S
Guest

“Ned wants a correction too so like all of us bar one (not mentioning any names) he will be very happy…”

What I’d actually like to see, is a bit of stability in the world.

But given that seems highly improbable for the decade or two minimum now, I’ll settle for figuring out how I can arrange my assets so I’m not especially likely to ever have to work again.

And yes, a bit more of a drop in Brissie house prices could be handy in that regard – For me at this time.

Biker
Guest

“I’ll settle for figuring out how I can arrange my assets so I’m not especially likely to ever have to work again.”

Overrated goal, in my view. I guess it all depends what ‘work’ means.

“What I’d actually like to see, is a bit of stability in the world.”
Join the club!

The truly _hungry_ relish instability, warfare, chaos.
It presents numerous opportunities for the clans… ;)

Stillgotshoeson
Guest
Comment by Ned S on 9 December 2010: how I can arrange my assets so I’m not especially likely to ever have to work again. My goal as well… don’t need to be mega rich either.. do not have a lavish lifestyle to fund. Life is short.. I have better things to do with my life than work.. just a nice steady income stream will do me fine. When it is our time to go, The houses and cars don’t fit in the box, the trinkets do but we can’t use them… memories and experiences are worth more than material… Read more »
Ned S
Guest

“Overrated goal, in my view. I guess it all depends what ‘work’ means.”

‘Work’ – Anything that helps prop up our system as it exists that I don’t get such a huge personal buzz out of that it overrides my general distaste of contributing to a society that I genuinely reckons sucks.

When KRudd said “We are just all going to have to be more productive”, I went NOT me mate! Because our system takes so much more than it gives. IMO.

I’m a ‘coaster’ these days Biker.

Ned S
Guest

Yes Shoes. I have a disability pensioner living either side of me. One’s a home owner. (8 yrs older than me) The other is a tenant. (8 yrs younger than me) But they are BOTH spivs! :)

Figure if they don’t exert any effort to get by, them it seems a bit silly for me to?

Lachlan
Guest

Woh, thanks Shoes.
I think AUD and PM/commods are ready for next phase higher now. That should take things to a point where a larger correction will be likely.
Copper maybe ready to make new highs. PMs too after last nights sell-off. Benny and the Inkjets ready to rock ;) Ha ha ha, we’re all freakin doomed. Maybe. And maybe there’s just a reorganisation at the top..which consumers will pay for. My crystal ball is hazy. Life is less than boring but.

Don
Guest

As for myself I don’t ever think I will stop working. Once I have done what I can for mining I will probably look at teaching what I know either through the usual channels or start an online course or something along those lines.

When I get too old and grumpy to be of any use for that, I will go to some small city/village in South America and spend my retirement money there. Hopefully the Aussie dollar will still be worth something and that way you get more bang for your buck – no pun intended :)

Lachlan
Guest

market gapped me..stiff bikkies, not chasing

Stillgotshoeson
Guest
Comment by Lachlan on 9 December 2010: market gapped me..stiff bikkies, not chasing Have an order for 130000 PIO @ 3.8cents As high as I am prepared to pay. AVB is a good Copper play. Price is being held down by some 200million options at 1.5 cents still to come on market.. They have a signed deal with Vale over Iron Ore deposit may be worth as much as $40millionUSD.. Would go along way to making them a self funded Copper Miner. Mine is in Brazil. Deal with Vale is for Iron Ore only, If Vale find other metals on… Read more »
Biker
Guest
“Once I have done what I can for mining I will probably look at teaching what I know either through the usual channels or start an online course or something along those lines.” My exact thoughts. My only caution with your Part 2 is to make sure there’s a Western hospital somewhere nearby. Won’t recount the horrors of coming to, while being stitched up with butchers’ string… to later suffer electrocution while standing on a wet bathroom floor*… but we sometimes tend to forget the little niceties of developed countries… . ;) * Missus’ comment after rescuing me from this… Read more »
Don
Guest

I hear you Biker, I am kind of hoping that in 20 or so years time that medical technology will have advanced enough to leak out to the periphery just a bit. So instead of butchers’ string – they will have advanced to dental floss :)

Lachlan
Guest

Ol scrooge here left his buy down at 3.6c Shoes. Buckleys.

Stillgotshoeson
Guest

Comment by Lachlan on 9 December 2010:

Ol scrooge here left his buy down at 3.6c Shoes. Buckleys.

I would not say Buckleys..

Lachlan
Guest

Fireworks coming?
ZH went crazy on this on Wed night. But then they are a pretty exuberant lot.
http://stockcharts.com/h-sc/ui?s=$UST10Y

Frank
Guest

Your warning was spot-on, Ned, my son… :D

Must have rattled their teeth! ;)

Biker
Guest

Let’s see if THIS gets past the blockade!~ :D

Biker
Guest

Holy cow. I dumped the cookie…

Biker
Guest

OK, we’re back in business. Thinking of enrolling at a local uni for a year doing a computer engineering course next year, Don. Have a number of really interesting ideas I want to pursue, but I’ve reached the limit of expertise I need to make it all fly… . :D

Reflushed the poisoned cookie, anyway!~

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