Into The Grey Zone The future is always a grey zone, never black and white.

Ham radio operators were fired upon when they tried to reach Port Au Prince to assist in setting up communications. They were fired upon by escaped convicts. Gangs return to Haiti slum after quake prison break. The gangs also went to the Justice Ministry and burned everything that still stood in order to destroy all criminal records forever in Haiti. They are armed with automatic weapons. They are killers. And now they are back in the population, en masse.

People assuming hyperinflation are assuming that the cash injected into the system will be spread equally or nearly equally, resulting in competitive bidding with more dollars for the current pool of goods and services. I believe this assumption to be in error.

How do we fix it? This is a question I hear over and over again. People want to know what regulatory reform to take, what laws to pass, what criminals to prosecute, all in order to "fix" the system. Another variant to this question is "How do we undo the damage done so far?" Each of these questions assumes that the system continues as-is, that is to say, broken, or that the system gets fixed. In posing the question, the biases of the questioner are exposed. I'm not suggesting malicious intent on the part of those asking these questions, but rather culturally imparted ignorance of the alternatives.

Commercial real estate turned uglier this month, as expected. Many people have lost sight of the fact that October 15th was the end of the extension period filed by businesses for filing 2008's taxes. Many small businesses took this extension hoping that 2009 would provide the growth and the revenue necessary to pay 2008's tax burden. Alas, it was not to be and as these small shops close down, the commercial real estate they occupy now becomes vacant and non-paying resulting in further deterioration of the CRE market.

The US government continues borrowing at a pace that seems beyond absurd. For September 2009, the Treasury borrowed $572 BILLION dollars in that month alone. As I write this it is only October 7th, yet the Treasury has borrowed $130 billion so far this month. These numbers are so absurd, so far beyond the pale that I don't think anyone really understands the magnitude of this mess. And yet at the same time, asset values continue to collapse. Deflation is clearly winning this game but the government printing press is going to have an impact even in deflation, mainly in the form of transferring your wealth to the robber-barons of Goldman Sachs.

Over at Calculated Risk, I was recently compelled to respond to a story about homelessness. I like Calculated Risk. I really do. But I feel that its author ignores one of the key aspects of this entire recession - fraud. My comment that I left there is below the fold, reproduced here since I'm not sure the blog owner will allow it to stand.

Taylor, Bean & Whitaker Shuts Down Lending Operations. One of the last large independent sources of mortgage funds is being shut down. Loans that were in the pipeline are dead and will not close. TBW laid off 5000 people yesterday as well. Additionally, TBW is tied tightly to Colonial Bank who has already reported negative core capital ratios (which are grounds for shutdown and seizure by the FDIC). If you read the article, Colonial's rescuers was... TBW! And now TBW has been shut down. Colonial is a dead bank walking. The only question is why hasn't the FDIC shut them down? Karl Denninger (amongst others) asks Is The FDIC Broke And Covering It Up? It sure is starting to look that way.

Below is a chart that I lifted (with slight formatting changes) from Bill Downey's article The Day the Dollar Died - And the Day Gold was Reborn. The chart demonstrates the massive ongoing impoverishment of US taxpayers via the deliberate actions of the Federal Reserve, since it is the Federal Reserve itself that is the root of all inflation.

So the bond auction Wednesday went very poorly and the Tuesday auction was lackluster as well. I'm waiting to see what the Thursday auction does but expectations are low already. Prices are falling, causing interest rates to rise. Our foreign creditors are sending a message to Washington, DC, assuming there is anyone in Washington smart enough to actually read it. If not, China may do something even more drastic, not to permanently hurt us, but to warn us, to force us onto a fiscal track that would ensure that China gets paid back.

There are a body of quotes from the Great Depression that should be required reading for anyone before they trust the words of Ben Bernanke, Timothy Geithner, Larry Summers, or any of the talking heads at CNBC. Hopefully these quotes will both amuse you and remind you that economic "authorities" have a horrible track record. It was horrible then and it's been horrible now. I strongly suggest you read these then compare them to the comments from our economic "experts" over the last two years. If you still want to believe the Bernankes, the Geithners, the Summers, and the CNBC talking heads, go right ahead but don't you dare say you were not warned.