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Posts Tagged ‘Colonial Bank’

In 2006, I was writing to my clients in my private client letter about what I felt was occurring in the financial markets.  I described what I felt was coming as a Category 5 hurricane.  I think that I even named it Hurricane Greenspan at the time.  Although he is a distant memory, he had a lot to do with the problems that we are facing today.

It feels like we were hit with a category 5 hurricane last year.  Unfortunately, I think that another one is brewing and might even be getting very close to shore.

Every Friday it seems another bank fails.  Last Friday we saw a sizable bank fail.  The Failure of Colonial Bank marks the 6th largest bank failure in U.S History.  It is a bank of $25 billion and 346 branches in 5 states.  Besides the troubling nature of this story and the fact that the Government cannot bail all of them out, the FDIC insurance pot takes another big hit.  It looks like the 13 billion dollar fund will lose another $2.8 billion because of this bank failure. That insurance fund designed to protect you and me is quickly dwindling.

Another hurricane indication would be the Government’s sale of Government Bonds. The Treasury Department sells bonds to raise money for Government spending.  It is the way the Government borrows money.  Last week the Treasury Department sold 75 billion dollars in bonds.  Do you really think that China and other countries are lining up to lend us money?  No, you would be correct.

So, who is buying these treasury securities and lending money to the United States?  Ok, if you have high blood pressure or a weak heart, please stop reading.

Our own Federal Reserve Board is buying many of those securities and lending money to the US. For a great expose on this, read this article.  I don’t need to tell you how desperate that is and how much trouble we are in considering that is occurring.

I hate to say it but this is going to end badly.  All of this is going on at the same time we are facing an unemployment crisis and a whole list of problems in this country.  Once again, I advise you to watch your risk and don’t fall for the notion that this is just a normal cycle.  In other words, don’t drink the kool-aid.

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