The big event this week was the confessions of Jim Cramer hosting Mad Money on CNBC. You can listen to the video here. There is too much fiction involved here, he yelled as of 01/07…

We now banks which do not know what they are doing… Where the heck is the S.E.C? … I have never seen this level of fiction… I don’t know if I would want to tell the truth: this is too dangerous… the American people should be fed up with

On the real estate front, the series of bad news continues: Merrill Lynch says U.S. nationwide home prices may fall 30%… Stunning jump in foreclosures (500% in California)… Fannie, Freddie May Face $16 Billion Losses, Credit Suisse Says …
The consumer and real estate-led recession in America is going to have dire consequences. IMF’s Strauss-Kahn warned, as of 1/21, that an American recession would spread globally. Even the financier Soros acknowledged that it is the worst market crisis in 60 years. At the at the World Economic Forum in Switzerland, rumors concede that Europe and Asia face hard landings as bubbles burst:

Prof Roubini said Eastern Europe faced the biggest risk of a dramatic upset. “All the way from the Baltics down to Turkey there are countries with large current account deficits. People have been borrowing in foreign currencies, the euro or the Swiss franc, to buy houses, and so the situation could be like Argentina or Mexico where homeowners went belly-up. There is a severe risk of a crunch leading to a financial crisis,” he said.

Very deja-vu indeed!

This is so bad out there that the stimulus plan is most likely doomed from the start. First we’ll have to wait for at least 6 months before the effects are felt. But if we take a look at the big picture, it becomes obvious that something is amiss. The foolishness of economic ’stimulus’ . It is another deception in disguise because we’ll pay it back instantly via inflation; the money will come from the Federal Reserve, no matter how we look at the picture - not to mention that the USD will depreciate even further:

Such stimulus, however, is futile. Government cannot create genuine spending power; the most it can do is to transfer it from Smith to Jones. If the Treasury sends a stimulus check to Jones, the money comes from taxes, from borrowing, or is newly created…. Stimulus funded with newly created money is especially harmful. Most obviously, the inflation it causes prompts investors to flee the dollar. But because inflation can take time to show up, injecting new money into the economy can create a temporary sense that consumers and investors are wealthier than they really are. Such a false sense dangerously delays the necessary pruning of unfruitful investments. A bad economy is prolonged.

Many now worry that the Good Times were mostly a mirage. This global upcoming credit crunch will be a Crisis that may make 1929 look a ‘walk in the park’ and is going to morph middle-class citizens into ‘Tycoons of Debt’.

Banks, worldwide, are getting prepared for a brutal stock market capitulation. They just want you to know that and expect that consumers’ confidence in the system will soften the damages. Alas, we’re dealing with hard mathematics here.