This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Prepare for a New Banking Regime

Professional investors understand the "game" that propped up the U.S. debt market, and by extension, the global economy, is kaput. The Fed and other allied Central Banks can no longer suppress overnight interest rates, encourage allies to borrow at these low rates, and then urge them to purchase higher yielding sovereign debt. The "duration miss-match" trade, the one that was the cause of the "subprime" crisis, can no longer work.

To see the essence of our collective problem, consider this. From 1962 through 1999, the annualized overnight borrowing rate for "connected" financial institutions (the "Effective Federal Funds Rate") was 6.81% or 90% of the average yield on 10-Year Treasuries.

By comparison, Fed Funds averaged 0.145% or just 5% of yields on 10-Year Treasuries that averaged 2.77% during the four years from 2009 through 2012.

It cannot make sense to continue borrowing at rates so far below "inflation," while encouraging investment of these borrowed funds in longer-term debt securities, issued by a Federal government that has proven its dysfunctionality beyond all reasonable doubt.

Is there a solution?

I suggested one approach in February 2013, in the Washington Times.

It starts with a return to a sound dollar; tough, comprehensive and regular audits of the Federal Reserve System; and a trillion dollar commitment to inject common equity inside the Fed, sourced by proceeds from orderly sales of federally owned lands and natural resources.

Over one weekend or another, and in months, not years, the largest bailout ever seen could soon come and it will not technically "work" for the United States because the Fed will ultimately surrender its exclusive right to direct traffic in the global financial system.

The Phoenix That May Rise From the Ashes

Remarkably, leaders in erstwhile anti-capitalist nations such as Russia are now practicing economic common sense. Amazingly, Vladimir Putin, reputedly a man of enormous first-generation wealth, is enforcing low, flat tax, capital-friendly policies that are thousands of miles geographically to the right of Democrat and Republican policies inside the United States. It cannot be much longer before leaders in rising nations, sovereign wealth funds, and pioneering investors decide to create a new, mammoth financial institution that will supplant the existing market for opaque, fiat currency debt securities with a market for term deposits whose interest rates are linked to price changes in brackets of essential commodities.
2 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $118.30 0.00%
FB $104.72 0.46%
GOOG $742.60 0.00%
TSLA $231.10 0.36%
YHOO $33.81 0.00%


Chart of I:DJI
DOW 17,719.92 -78.57 -0.44%
S&P 500 2,080.41 -9.70 -0.46%
NASDAQ 5,108.6660 -18.8590 -0.37%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs