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Dear Mr. Geithner, Let Me Teach You Something


Americans are pointing a finger right back at you.

Dear Tim,

Hearing you on TV Tuesday pointing your finger at American households about "getting educated on the pitfalls of taking on reckless amounts of debt" was beyond laughable!

Actually, it was more sad than funny because the United States government, which you work for and represent, is building the biggest credit bubble in the history of civilization.

Recently a prominent Fed Governor said our total funded and unfunded liabilities add up to nearly $100 trillion. Now that's a number to get educated about, and so allow me to represent disgusted Americans in this letter.

Mr. Geithner, let's start your education by simply looking at the number of zeros in $100 trillion. Are you ready for this? You better sit down because it should blow your mind away: $100,000,000,000,000.

I'll now give you another frightening number, and that's $1.144 quadrillion, which is the approximate notional value of all outstanding derivatives. This $1,144,000,000,000,000 is a number that will only continue to grow since you and your helicopter partner firmly installed a moral hazard framework into the whole financial system with your global bailout.

I hope a propped-up phony economy built on a Mt. Everest-size level of debt was worth bailing out failed institutions and investment bank speculators.

I digress.

You mentioned in your finger-pointing speech that "American households need to be better educated about the pitfalls of excess debt due to compound interest." Have you had this conversation with your boss in the White House? Because it would appear to me that unprecedented amounts of spending are sending USA Inc. into a future bankruptcy position.

Ironically, as you point your finger at American households for taking on too much debt, Congress is at the same time raising the government debt ceiling to $12 trillion, again that's 12,000,000,000,000.

In case you don't know, Americans see a coming US fiscal crisis as one of their top concerns about this country and they see Washington on a path that can only end in tears. Have you learned nothing from the 2008 crisis in terms of excess debt creation possibly destroying nations?

A fiscal funding crisis is the path America's on right now and Moody's has just warned you of that. That future funding crisis will make the 2008 credit crisis look like a picnic in comparison and we'll have you and helicopter Ben to thank for that.

You also mentioned in your speech that your actions basically saved America from a "second Great Depression". Let's get you educated on a quick history lesson about the first depression.

First, the 1929 stock market crash was the easy part for America back then. As the market recovered nearly 50%, Wall Street was singing "happy days are here again" just like today.

The stock market crash from October 2007 to March 2009 was a 1929 crash repeat but in slower motion. Because the recent collapse was more severe than 1929's, we've had a much larger and more exciting stock market rally.

Mr. Secretary, here's the lesson: What followed that giant rally after 1929 and the Wall Street celebration in early 1930 was a Dow Jones Industrial Average that fell an additional 86% until the bottom in July 1932. Now that you and your helicopter dollar-dropping partner have shot all your fiscal and monetary bullets, how will you handle the next part of this global credit crisis? I'm talking about the May 1930 to July 1932 part that could soon be coming from a US and global government debt crisis. History lesson over.

Now let me quote you again from your speech on Tuesday: "Americans borrowed too much in part because they didn't know how to save prudently, how to borrow responsibly, and they didn't understand that pension values, home prices, and equity prices will not always rise".

How you can say that to struggling Americans trying to put food on the table and with a straight face, especially after bailing out Wall Street "fat cats", is beyond me. Well, I have news for you Timmy, Americans are pointing the finger right back at you and your boss and I'm sure you know which finger I'm talking about.

You did say one thing that was correct: "Americans are now saving more, they are borrowing less and that's a necessary and healthy thing".

It's time for you and your administration to follow the lead of struggling Americans and act more responsibly where our nation's debt is concerned before it's too late. When American investors join foreigner investors and slow down or even stop buying propped-up, overvalued US government bonds, that will be their way of pointing their finger right back at you.

God Bless America,

Ron Coby

P.S. I'll be sending you a free copy of my book, Discover the Upside of Down, so you can get a better education on this credit crisis and more importantly the derivative-led financial crisis that's likely to come as interest rates start to rise.

For more from Ron Coby, check out Minyanville's newly launched Grail ETF & Equity Investor newsletter written by Ron Coby and Denny Lamson using their proprietary Lamson Grail Timing Indicator. One recent trade just closed +22% in just one month! Sign up today for a FREE 14-day trial. Learn more.

See Ron Coby's "letter" to Ben Bernanke here. And his "thank you note" to Ben here. See the "response" from Ben here.
No positions in stocks mentioned.
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