Reintermediation

Reintermediation occurs when interest rates are rising or when there is too much uncertainty in the financial markets regarding risks, too much confusion regarding the returns potential.

The three largest, best/ smartest performing and most conservative pools of money in the world, China, Saudi Arabia and ADIA have been almost completely in US Dollars and US Treasuries for the past five years. Medium term cycles tend to move in five year blocks......what these pools of money decide to do next is going to be very key. China has already begun to complain about the dollar, (their) Treasuries and our budgets.

There is not a venture capitalist, vulture capitalist, debt investor or equity investor on the planet that would invest in a ten year projected cash flow statement shown here. Yet this is what our career politicians and new professors in the oval office think is rational and "salable" to the world. NO WAY. This math does not work. In the short term the only real buyer will be the unprecedented moves by the FED buying from the Treasury....then for years to come the remaining cash globally will simply be soaked up by these deficits. There will be little to none available for the general economy and business. Growth will (at best) slow to a crawl, globalization will be unwound. This budget is not only reckless but will be catastrophic in the long run.

Slow global growth will be the nail in the coffin for the four worst run countries this decade, Iran, Russia, Mexico and Venezuela.

Obama is trying to do too much and continues to not only get poor advice but seems comforted by Congress. This is going to lead to an unwinding of the Dollar and its equivalents. The largest market in the world, of course, currencies and treasuries are about to be flooded with unprecedented supply......much higher interest rates are coming and a vastly diluted dollar is about to be hammered.

Global inflation will mean the surviving companies will sell less for more. We are very early in this new cycle. Maybe the ensuing pain will stop some of this blind spending and social programs because the markets at some point decide to not fund the amateurs.

Creditor nations continue to outperform the debtor nations. We would not be surprised to call this a new world war on debt in future years. Most of this will never be repaid.

Danny Boy not seen here, allows for a chart that speaks a trillion words.