Focus on US Economy

Federal Reserve Asset Balloon

• The Fed:– Took a lot of toxic debt load onto its own books– Has, since QE2 been purchasing US bonds

(treasuries) to as much as $100 billion/month– Result is massive drawdown of its income and

massive increase of perhaps worthless “assets” on its books

– Fed also lowered interest rates to essentially zero

Commodities take off

What happens next?

• A QE3 begins– Signal will be that dollar is to be sacrificed– Other buyers will back away without more interest

to justify the risk• No QE3 further easing– The government needs to find new treasury

buyers– Which will require higher interest– Which makes the debt more burdensome

Possible reason of slower spike

• Suspicion declining dollar is due for rebound among investors

• Treasuries still seen by many as place to park serious money in downturn

• Ending “easing” will give some more hope that saner well-based policies are forthcoming

• The end of easy money will likely cause a move out of stocks and possibly into Treasuries

Survive the 20 year downturn

• Produce more than you consume, save the excess– Avoid consumption craziness

• Own gold and silver– No longer cheap but headed higher

• Watch out for manias and panics• Diversify assets and yourself geographically– Your government is likely your biggest risk

Energy Update

• Japan nuclear scare is likely to mean “no new nukes”

• Japan reconstruction cost now estimated at $300 billion

• Natural gas is much cheaper than nuclear or oil in the US– New finds of a lot of natural gas in US

• Middle East unrest continues to eat into oil supply

Libya conflict

• Ferocity of bombing raids has turned off many Arab states including SA

• Troops in Libya are a likelihood– CIA operatives involved now

• We are losing influence relative to the apolitical Chinese market actions in region

• The all too obvious motive for US actions is oil

Not just Libya

It is about Energy

• Expect resource wars– Already begun on small scare

• Energy is vital to every country’s economy– Prosperity directly related to energy access– Economic abundance is built on energy

abundance