The year 2008 is drawing to an end , which I know many investors cannot wait for but, 2008 will forever live in infamy in the mind of every person around whole globe, not just investors on and off Wall Street. I am here to discuss how I see the new year- 2009 unfolding and some key points to follow during the year, but before I get into that I would like you to watch this clip, it is a reflection on the crisis featuring some of your favorite actors, and  make sure you pay close attention to who says what, and the dates it was said.

Global Trends 2025: A Transformed World | Atlantic Council of the United States. Link for the full copy of PDF  www.dni.gov/nic/NIC_2025_project.html

2009 will indeed be nasty but all the money that will be thrown into the system will work, but it will have dire consequences to the US economy, massive job losses that could reach as high as a million a month, lower paying jobs in the future-creating more wage slaves, an unimaginable government deficit and horrendous inflation just to name a few. The reason I will say this will work is because, the FED has never taken rates-fake rates,  this low and printed this much money- horrible policy and hyper-inlfationary, so it will work, but this is the financial crisis that will have broke their printing press apparatus, so to speak. How do I know this? Well, to reach this conclusion I constructed probit -model using the quarterly  average -spread between the FED -Funds rate,so it would be  1st qtr  2005 FED FUNDS Rate average minus 1st qtr  2006 average FED FUNDS Rate, then I the tested it, and it worked. If you look below you can see the chart and the probabilities of a FED FUNDS rate cut which, in essence is a recession probability model. The US economy began to crumble and enter a recession in the 4th qtr of 2007, notice the probability of a rate cut- recession in 3rd qtr was 76.80%, and  what do you know, the rate was cut from 5.25% to 4.50%, 50 base points, and we officially entered a recession  the next qtr- 4th qtr of 2007. With that said, it makes perfect sense to me why Mr. Ben Bernanke, the Federal Reserve Chairman  did not officially cut the Rate to 0% , but instead made it a sliding rate of 0%-.25%, the rate will never be able to go above .25%, for long, without economic consequences.

The signal given  to  the financial markets, is  that the $USD’s days as the reserve currency of the world are numbered. The easy credit - inflation driven growth John Maynard Keynes approach, is destined to make the currency-$USD worth less and eventually kill it. The quote above prophecies that event, we will see a mixed basket of  6 currencies equally weighted after this crisis ceases. The  leaders of countries in the east, where the manufacturing base has been slowly outsourced to and majority of  the raw materials are located, oil, iron ore, etc, will support the mixed basket, because it gives them an even share of the global power pie. The US powers that be ( Federal Reserve, Treasury , & Washington D.C) will fight to the death to ensure the $USD remains the star of the show,the reserve currency of the world . 

“Dec. 29 (Bloomberg) — Israel massed tanks near the Gaza Strip and started calling up thousands of army reservists for what Defense Minister Ehud Barak termed a war against Hamas as Palestinians fired on the Israeli cities of Ashkelon and Ashdod.” 

“Dec. 29 (Bloomberg) — Congressional Democrats are seeking to expand funding for airport runways, housing projects and sewage-treatment plants through a new tax break for municipal bondholders.

The proposal is designed to make so-called private-activity bonds more attractive by exempting the interest on them from the alternative minimum tax. Richard Neal, chairman of the House Ways and Means subcommittee that drafts tax measures, wants to include the plan in economic recovery legislation that President-elect Barack Obama has made a top priority. Lawmakers also are considering proposals to exempt from the AMT other types of bonds, such as those issued by non-profit hospitals and colleges, and to allow banks to deduct more costs from purchasing and carrying tax-exempt bonds than they currently may write off.” 

This article conveys perspicuously,  that the US government has decided to clear up any misgivings about where it stands on the creation of market bubbles, they are the summum bonum. Are you surprised? With all the money printing and the quote from the article above it is fair to say the number  of Americans who fall into the Alternative Minimum Tax bracket will sky rocket during  Obama’s presidency. Keep in mind their is always a catch when the US government appears to do something for the  benefit of the populace, it does not benefit them at all ! 

via FT.com / Companies / Financials - Buffett and China banks top cash-rich list.

China will flex some of its capital muscle, and use it to position itself for the official dethroning of  US as the number 1 economy in the world, which will  happen in the next 10-15 years. 

 There is no better way to end this  blogg entry then with one of my favorite recent quotes  from the investment czar,  Jim Rogers. 

“inflationary holocaust” because of the money printing all over the world and especially in the US.”

via Jim Rogers.