Somebody Set Off Fred Barnes' Klaxon Again

AWOOOOOGA! AWOOOOOOGA! Liberalgeddon approacheth!

Thanks particularly to the month-long financial crisis, Republicans are in extremely poor shape with the election three weeks away. This means the worst case scenario is now a distinct possibility: a Democrat in the White House, a Democratic Senate with a filibuster-proof majority, and a Democratic House with a bolstered majority.

If this scenario unfolds, Washington would become a solidly liberal town again for the first time in decades. And the prospects of passing the liberal agenda--nearly all of it--would be bright. Enacting major parts of it would be even brighter. You can forget about bipartisanship.

In which case he goes into wingnut mode and rails against Democrats doing horrible things like "allowing workers to form unions" and "giving equal time for liberal talk radio" and "appointing Supreme Court justices that aren't Sam Alito" and totally crazy stuff like "universal health care" and "carbon emissions caps".

You know, truly horrible things like health care that will result in gangs of Liberals roaming the post-Bush wasteland like the Road Warrior or something, waiting to show people compassion or some shit. Fred needs new underwear. He has soiled himself in an unmanly fashion. Best ending ever:

If not, we face the liberal deluge.

That's right, Freddie. We shall fall from the socialist sky like rain, bitches.

And we will wield our Humanity and Compassion like twin scythes, cutting through wingnut souls like Fred's in a manner consistant with particularly thin butter, vulnerable to bladed farming implements.

It shall be glorious.

The Pros Get Off The Rally Bus

After this morning's 400 point upwards opening (continuing the rally from 3 PM Friday and through yesterday) covering a good 1900 points or so, the Dow is flat at noonish with profit taking the order of the day. The Krug, fresh off his Nobel Prize, says the Feds' third bailout attempt may be what the doctor ordered in the short run.

“In the last six days this thing has come together with a plan that really does address the critical problem of inadequate capital at the banks (and) addresses the need for guarantees to calm the markets down," said Krugman. "We don’t know this is going to work, I wish we were sure, but this is a much better. For the first time I’m starting to feel that policy is really getting some traction on the crisis.”

Krugman said the current financial crisis repudiates the financial-markets-are-always right principle.

“A certain amount of public intervention, oversight and—in crisis—partial takeover of the financial system is something you have to do," he said. "Leaving the financial system to work things out on its own was disastrous in the 1930s and brought us to the brink of disaster again now.”

“This is not a case for socialism, it’s a case for regulation, oversight and for government-led rescues when there’s an emergency," he added. "We’re not going to go back to Karl Marx, but we are going to rediscover some of the things Franklin Roosevelt learned 75 years ago.”

Even with the new bailout plan, Krugman thinks we're headed toward a "serious recession."

"Even before the financial markets went crazy four weeks ago…there was a lot of downward momentum in the economy, and this isn’t going to reverse that. This is just preventing that from getting much worse.”

“I think this is the right thing for the immediate financial crisis, but I would say let’s have aid to state and local governments, let’s have public spending, let’s have some expanded unemployment benefits, partly because people need it, partly to put cash in the hands of people who are likely to spend it.”

And of course...hyperinflation looming. We've escaped yet another impossible trap by walking into the path of another.

The Cost Of The Rally

Many investors are convinced the worst of the crisis is now over after yesterday's massive 900+ point gain on the Dow. It's shaping up to be another great day on the markets as the Nikkei ended up a mindblowing 1,171, up nearly 15%, to 9,447. With LIBOR and TED spread numbers continuing to fall (slowly, but falling) folks have their sights set on Dow 10,000 and beyond. Ben Bernanke says that things will be getting back to normal now.

Bernanke, writing an editorial in the Wall Street Journal, did not give details of the plan, which will be announced as part of government efforts to save the global financial system from collapse after a series of U.S. and European bank failures.

Details of the plan come this morning, and the Dow is licking its chops, hoping for another big green number today. Everyone who is kicking themselves for missing yesterday's rally will be climbing in today, for sure.

But it's the "beyond" part that worries me. While a bear market rally after a 20% weekly loss was inevitable, the core economic stats have only gotten worse. The sheer amount of cash pured into the market will lead to dramatic inflation, and soon. Don't get used to that $2.79 gas, folks. Oil prices will skyrocket again, along with other commodities.

Commodities will benefit the most from the coordinated bailouts because the plans are sowing the seeds of future poverty, fuelling an already raging inflationary fire, analyst Puru Saxena, CEO at Puru Saxena told CNBC on Tuesday.

"All this money-printing which is going on all over the world" will bring "tradable rallies" until the first, second quarter of next year, but afterwards economic woes will intensify, Saxena said.

In a research note, he compared the bailouts with shots of heroin to fix the problem of an addict and said they were poison for the long term.

"It's very good to prop up the asset markets … but many, many other countries have tried to print themselves out of trouble and the end result has been a total collapse of the economy as well as the currency," Saxena warned.

"What this is going to cause is sky-high commodity prices in the next few years and a general deterioration of the standard of living and sharply rising consumer prices and a huge contraction in the purchasing power of money," he added.

Say it with me now, folks: hyperinflation!

It's coming. In doing what we had to do to save the markets, we've only shortened the next boom/bust cycle to a period of months instead of years with a massive overcorrectional force worth several trillion and increasing almost weekly as the world markets join in to bail us out. When hyperinflation catches up with us next year, we'll be finally trapped for good and there will be next to nothing we can do about it.

We have traded in the credit crisis for the hyperinflation crisis six months from now:

1. The Greenspan rate cuts after 9/11 led to a huge credit and real estate bubble.
2. Deflation from the housing depression when the first bubble popped led to massive rate cuts and an overcorrection by the Fed that failed to solve the basic problem
3. ...and led to the second bubble popping in the credit markets, wrecking banks and leading to more inflation.
   
4. As the dollar continued to weaken, it led to a series of worthless Fed actions that led to a deflationary spiral, and then the Lehman Brothers failure that collapsed the confidence in the credit markets.
   
5. Pumping trillions and trillions into the system stopped the deflation for now but assured the next President will have to worry about an even worse hyperinflationary event in a matter of just a few months.

So enjoy that rally. Buy into it if you like. Everything the Fed has touched since 9/11 has led to a worse economy down the road. We're about to take the final step down that path to Hell.

StupidiNews!

• Republicans are virulently against another $150 billion stimulus check package.
• Another round of California wildfires means evacuations for the LA basin.
• The Democrat who replaced Mark Foley? He has his own sex scandal to deal with.
• Eager to sweep Vista under the rug, Microsoft says the OS's planned successor will keep the Windows 7 name for a 2009-2010 release.
• Phillies go up 3-1 in the NL, Rays stomp the Red Sox to go up 2-1 in the AL.