And We Out

A transcription of Denninger's video comments from 9/17/08, which can be watched here: http://market-ticker.denninger.net/archives/2008/09/17.html

The Potential End Of America's Government

History records that every nation that has printed money to attempt to get out of a financial crisis has failed politically, AND economically....every single one. Weimar Germany, Zimbabwe, Argentina, etc...if you're not a buff of history you might wanna read up on those things because THAT may be what's coming to America. For over a year I've been sending tickers, petitions, letters to congress, to Paulson, to anyone who would listen...but the one line I didn't believe the treasury would cross was the one that history says ALWAYS destroys your nation and your government. They crossed it today. Now, it may be a one time deal and you'll probably have people tell you it won't happen again, but....that's what they said after Bear-Stearns' bailout. These funds and these speculators will short each and every one of these financials until their credit ratings are downgraded. And as soon as they are, they will cash in their chips. These firms will be forced into a liquidity crisis JUST as AIG was. They will come with their hat in their hands to the federal government. Bernanke and Paulson will once again bend over.

The problem here, folks is; we don't have the money. Bernanke's Federal Reserve has already burned through the majority of its balance sheet. All of its short-term paper (debt) has been sold off. And that is where the money came from that they have used so far for the TAFF and the PDCF and the TSLF and all these other alphabet-soup things that they have done. You probably heard about them and you don't know what the hell they are and that's fine. It's not important. The important thing is that none of that was hyper-inflationary because there was no printing of money going on. It was from existing reserves that were held that were run off into the market and that's where the cash came from that was put into the system. That's fine.

This is different. You see all the Federal Reserve has left in its SOMA account is LONG term treasury instruments. 10 year, 30 year, which are things that are NOT easy to run off. You have to wait for the time to expire before you can redeem them in the market. If you SELL them, you DEPRESS the market for those instruments and you send interest rates MUCH higher. Ben Bernanke's in a box. Paulson is in a box.

So they did the ONE thing I hoped they wouldn't do, and I didn't believe they would do. They printed up some cash, literally, and showered it on Wall Street, potentially starting a cycle that could lead to the destruction of our nation.

Folks, this must not be allowed to stand. This video must go as widely as possible to everyone you can find. Congress must stand up, and stop this.

Congress, under our constitution, is the only instrumentality that is legally empowered to regulate our monetary supply. They delegated that power to the Federal Reserve and they had every right to do so. But that doesn't mean they don't have oversight authority, or responsibility. They do. The Senate and House are in session right now and will be until the end of the month. It is absolutely critical that this be stopped. Barney Frank is now talking about the Federal Reserve taking on ALL the bad paper (debt), a-la the RTC. Unfortunately for Barney Frank, in order to DO that, we would have to print hundreds and hundreds of additional BILLIONS of dollars of cash that we do not have. Folks, this WILL happen, unless you stand up and stop it.

Don't believe for a minute that this is in the best interest of our nation. It is not. Don't believe for a minute that somehow, we should keep these people who are over-levered and over-geared from collapsing. We must not. Yes, will be painful if we have a lot of bank failures. Yes, it will painful if we have Wall St. essentially implode and start over. It will be very bad.

A year ago last August, I started sending letters and petitions to the government as well as putting them up on the marketticker site, asking, pleading that the government intervene, that it perform its regulatory function and force this leverage to be taken down. They did nothing of the kind. These institutions have continued to lie, cheat, and steal. Now they're exploding. The time has run out, folks.

You must choose. If you watch this video and sit on your hands and do nothing, then what comes of it in this nation is your responsibilty. This line, once crossed, WILL be crossed again. OR, you can pick up the phone right now. You can call your Senators, call your Congressmen, call President Bush, and call the Treasury Department. You can tell them this must stop, and you can demand that you get their committment that it will- TODAY. Not next month. Not next year. Not in the next congress, but now.

If they refuse, and they probably will, you must choose. Do you consent? Or do you go on strike? What is our system of government, our FORM of representation, our representative democracy worth to you?

I urge you to do some reading -tonight- on Weimar Germany, on Argentina, and on Zimbabwe. I urge you to find me a nation that, in the past, has tried to hyper-inflate their way out of a debt crisis, and has politically survived. You can't find one, because it has never happened. The choice is yours, folks. You need to make it today.

-Karl Denninger 9/17/08