Boomberg.com is reporting that JP Morgan is bailing out one of America’s largest brokerages Bear Stearns who is reporting their cash position have ``significantly deteriorated.'' The market response was cut the share price of Bear Sterns by half. The Federal Reserve found out about this last night and by this morning was able to put together this bail out with JP Morgan. My response, WOW! Americans should not assume Bear Sterns is an isolated event and all Americans need to take immediate actions to protect themselves from failing brokerages and banks. This bail out deal is telling in how much trouble the financial markets are really in.
If you look at the details, JP Morgan has no risk from this deal because the United States Federal Reserve has taken on all of the risks or in other words the United States tax payers have accepted the burden if Bear Sterns goes belly up. I discussed a situation like this in a early post titled "The Federal Reserve in A Panic" were I discussed that things will deteriorate to such a level where banks will no longer lend to each other, business, or banks.
I went on further to explain, a Federal Reserve staffer was looking into how the Federal Reserve would be able to lend directly to the public if banks stop lending. We are getting very close to that point and the deal with JP Morgan Bear Stern bail out looks like the last stop on the financial crisis before the Fed actually begins to lend to the public directly. The financial domino’s are falling which started out with the sub-prime mess back last year. It then spread to level thee assets, CDO, and municipal bonds. It is an infection that is spreading and no matter what the Federal reserve does it can not stop the tidal wave of the unwinding of the markets. The dollar is at an all new time low which has pushed commodities to all new highs. Say hello to the arrival of a lower standard of living for the bottom 90% of Americans.
Next week you will see the Fed drop the interest rates by .75 to a whole point with the "goal" of increasing liquidity. Liquidity is not the issue it is lack of confidence that is clearly the issue in the JP Morgan bail out of Bear Sterns in that JP Morgan is only a conduit for the Federal Reserve. The best position to be in is some gold, silver, and the rest in short term US treasuries. We are headed for a depression and nothing will stop it!
FYI: CNBC will be carrying the Bear Sterns Conference call at 12:30pm EST.