Greetings,

Have you ever felt like just giving up on a project?  It goes along the lines of “If you can’t say something nice, then just don’t say anything”.

That’s how I feel about the world economies.  We just had a big move up in the equities markets today.  The dollar dropped – making our products slightly more affordable to the world.  Gold and silver rose.  Shouldn’t I have something good to say out of all that?  I do.  God is in control.

What about our economy?  Do I have anything good to say about today’s activities?  Sadly, no.

The markets of the world are excited.  They’re excited about the rumors that Greece might get bailed out of their economic catastrophe.  Isn’t that great?  Let’s look at some of the details.

First, what does it mean by the phrase: “Greece is in trouble”?  It means that they have debt coming due that their country can’t afford to repay.

Why doesn’t Greece just sell more Treasury securities like the United States does?  It’s because Greece can’t find willing buyers.  Their debt is not the reserve currency of the industrialized world – like the US.

What trapped Greece in this predicament?  This is where the misdirection and/or lies are being told, in my opinion.  Greece is in a position where the international banks are stepping on their throat – making it so they can’t breathe.  The banks are doing this through the process of credit destruction, just like they’re doing it to every other nation.

The citizens of Greece are used to a Socialistic government.  They’re used to handouts.  What’s happening is that the banks have cut off the supply of credit.  Just like in the US, credit = debt = money.  The government of Greece can’t create enough new debt to combat the bank-caused credit destruction, therefore their money supply is shrinking and they can’t pay their debts.

What is the ONLY thing that will keep Greece from falling into economic calamity?  They need to get new money – either by issuing new debt (which is money) or by having other countries give them money to temporarily kick the can down the road.

There are rumors that the European Union (primarily Germany) is going to give Greece money.  However, there are two points to consider that nobody is talking about.

First, is anybody wondering why it’s the European Union coming to the rescue, and not the European Central Bank (ECB)?  After all, isn’t the ECB supposed to be a lender of last resort?  Also, why isn’t the International Monetary Fund (IMF) coming to their aid?  Aren’t they supposed to be in the business of helping struggling economies?  Why are we looking at a situation of countries bailing out other countries over in Europe?  It’s because the international bankers have no desire to help.  Remember, they’re the ones with their boots firmly on the neck of Greece, seeking to stomp out any last gasp of breath.

Second, the European Union is saying that any help from them would require Greece to greatly reduce their budget deficit.  Do people fully understand how absurd this is in a debt-based economy?  They’re saying: “Greece, you got into this problem by not having enough money – so we will only help you if you promise to have EVEN LESS money!”

Here’s the last tidbit that should have people really sitting up and taking notice.  The European Union is now in talks to create an “Economic Government”, instead of having the various countries manage their own economies:

Germany backs Greek bail-out as EU creates 'economic government'

Look at the following quote from the article:

Herman Van Rompuy, the EU's new president, has submitted a text calling for the creation of an "economic government" that shifts responsibility for economic planning from national authorities to the "EU level".

In a parallel move, Commission chief Jose Barroso said Brussels has treaty powers allowing it to take the reins of economic management."

This is a time for boldness. I believe that our economic and social situation demands a radical shift from the status quo. And the new Lisbon Treaty allows this," he said.

"Economic policy isn't a national, but a European matter. No modern economy is an island. When a member state doesn't make reforms, others suffer because of that."

The economic moves taking place right now are not based on a return to economic strength.  Rather, they’re moves of terrified nations.  The Unities States is right there with them.

Today’s rally was emotional.  Investors do not understand the true underlying issue regarding the economic war that the international banks have waged.

Greece is a very small fish in a very large pond.  Next to knock on the economic handout door will be Portugal, Spain, Ireland, and Italy.
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Watch for these indexes to drop:

Chinese Shanghai Composite Index: 2,948.84 (change of 9.74% from July 20, 2009 base value of 3,266.92)
Shenzhen Stock Exchange Component Stock Index (SSE): 11,970.44 (change of 10.54% from July 20, 2009 base value of 13,381.22)
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Here are today’s numbers for the economic indicator:

1) Gold = $1,077.60
2) Silver = $15.45
3) Dollar Index = 79.78
4) Oil = $73.89
5) S&P 500 Index = 1,070.52
6) 3-month Treasury Bill yield = 0.10
7) 3-month OIS = 0.15

HEI = 33.91

(A value of under 100 indicates deflation, while over 100 indicates inflation – as referenced to Sept. 12, 2008…the day before Lehman Brothers collapsed)

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Here are the numbers for the day:

Dollar Index adjusted indexes:
Dow = (10,058.64) x (0.7978) = 8,024.78
S&P 500 = (1,070.52) x (0. 7978) = 854.06
Nasdaq = (2,150.87) x (0. 7978) = 1,715.96

3-month Treasury: 0.10

2-year Treasury: 0.82

10-year Treasury: 3.64

30-year Treasury: 4.57

2-yr vs. 10-yr Spread (Target > 273): 282 basis points – (Danger Zone)

2-yr vs. 30-yr Spread (Target > 369): 375 basis points – (Danger Zone)

3-month LIBOR: 0.25

3-month EURIBOR: 0.66

3-month OIS: 0.15

TED Spread: 15 basis points

LIBOR/OIS Spread: 10 basis points

Dollar Index: 79.78

Volatility Index: 26.00

JPY-EUR Exchange Rate (Target < 115): 123.6787

JPY-GBP Exchange Rate (Target < 145): 140.8949 – (Danger Zone)

JPY-USD Exchange Rate (Target < 90): 89.682 – (Danger Zone)

USD-EUR Exchange Rate (Target < 1.25): 1.3791

USD-CNY Exchange Rate (Target > 7.0): 6.8268

Warmly,

Brad

Comments or questions?  brhamill@hamill.com

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