Tag Archives: QE

Thoughts On Rate Hikes, Money Printing and Jim Rickards

In times of universal deceit, telling the truth is revolutionary act.  – George Orwell

A subscriber to my Mining Stock Journal sent me this correspondence a few days ago while the precious metals were being pushed lower by the bullion banks:

I read an article before the July 4th holiday from James Richards. He said that China would use the G20 meeting to push for the SDR. I kept this in the back of my head while the PMs were being smacked around in August. Zerohedge came out with this story today that more fiscal stimulus was coming:  LINK

There’s no question that Fed co-chairman Stanley Fisher floated his “rate hike coming” propaganda all week last week, starting with his useless speech at Jackson Hole, as a device to help the Comex banks smack gold with their fraudulent paper gold.

It’s now clear that gold was taken down ahead of the G20 meeting because the insiders knew that a call for more QE would emerge.  And that’s about the only thing that emerged other than the amusing abuse of Obama by China and Russia.

This was my response to the above subscriber inquiry – I thought it was worth sharing:

Rickards is controlled opposition. He appears to be friendly to anti-elitists like our crowd but he’s a front for the Deep State that is pushing hard for the SDR to replace the dollar because the dollar will still be largest component and it will enable the Deep State to maintain a high degree of control of the global economic system.

I believe China/Russia are using the SDR as an intermediate step toward getting rid of the dollar completely. That the SDR will play some type of role for awhile is already priced in to the market. That Chinese SDR bond issued is an example. Rickards is regurgitating information that is already obvious and absorbed into the markets. More interesting is to figure out what’s next.

You saw how China treated Obama at the G20 vs. Putin. The writing is on the wall on the for the dollar and the U.S.

If the big Central Banks resort to more QE to keep everything from collapsing, gold will soar. If they don’t resort to QE, everything will collapse and gold will soar in flight to safety.

The only strategy “they” have left is to create as much disinformation and confusion as possible. Rickards is part of that disinformation apparatus. Note the heavy onslaught of anti-gold propaganda the past few weeks, primarily Fed heads chirping like pre-programmed monkeys about rate hikes. Won’t happen.

Why Is This Big Hedge Fund Manager Terrified?

When I saw this comment from Ray Dalio I said to myself, “this isn’t someone trying to be a prognosticator or compassionate person, this is someone that has had an epiphany that his huge success probably had more to do with his rolodex and endless supply of free money more than anything else and is becoming depressed over that realization.”  His All Asset fund was down 7% in 2015 and negative 2 of the past 3 years.  –  A colleague who manages money in an email to IRD today

Ray Dalio has achieved “rock star” status in the hedge fund world.  Per a report sourced by Zerohedge, Dalio appears to be frightened by the prospects of the “normalization” of Central Bank monetary policy.  In fact, he penned an op-ed in the Financial Times in which he states:  “Since the dollar is the world’s most important currency, the Fed is the most important central bank for the world as well as the central bank for Americans, and as the risks are asymmetric on the downside, it is best for the world and for the US for the Fed not to tighten.”

What has Ray frightened?  There are several highly problematic assertions embedded in that comment by Dalio.  First and foremost is the idea that the dollar is the world’s most important currency.  I wonder how China might respond to that comment?  China has been methodically getting rid of its use of the dollar.  In fact, it can be argued that the world’s most important currency is gold, which is why China and Russia have been accumulating gold on a daily basis with both hands.  I find it interesting that Dalio can discuss currencies and monetary policy and not utter one word about gold.

Dalio has been making the argument that economic vitality is dependent on asset levels. This idea is endemic to the hubris behind Wall Street’s financialization of the monetary system.  The truth is the only outcome accomplished by a system based on fiat currency, fractional banking and the financialization of assets is the monarchical enrichment of money skimmers like Dalio and his Wall Street bank cohorts. If the Fed were to begin raising interest rates in earnest, it would remove Dalio’s ability to skim the system.

As I discussed in a blog post last week – LINK – contrary to Dalio’s assertion, financial assets do not create real economic growth.  If anything, the proliferation of financial assets creates nothing more than Wall Street-enriching bubbles which culminate with a systemic collapse that destroys everything.   To correlate the trading level of financial assets with the creation and support of economic growth is either an intentional misrepresentation of the truth for the purpose of self-interested preservation or naive ignorance.  My inclination is to dismiss the latter as beyond probable.

Debts have continued to build up over the last eight years and they have reached such levels in every part of the world that they have become a potent cause for mischief…It will become obvious in the next recession that many of these debts will never be serviced or repaid, and this will be uncomfortable for a lot of people who think they own assets that are worth something.  – William White, former BIS chief economist – Telegraph UK

The debt referenced above by the former BIS chief economist are the credit market liabilities  to which Dalio refers.   It is the world’s inability to service or repay them that Dalio fears – not the contraction of economic activity.  Real economic growth has been contracting for at least 8 years.  Easy monetary policy only serves to exacerbate the predicament.  Of course, the removal of easy monetary policy sabotages Dalio’s ability to continue making a fortune off the inflation of financial assets.

A collapsing global financial system will take away Wall Street’s continued enrichment from QE and ZIRP.   This is what has Dalio frightened and this is why he is urging the Fed to refrain from raising interest rates.  Perhaps he’s also making an appeal for more QE.   What better way to re-inflate monetary assets than for the Fed to print more money?

Unfortunately QE will eventually lose its effectiveness as an asset inflator.  The old law of diminishing returns.  I have no doubt Mr. Dalio is familiar with that law of economics.  But he’s lost sight of this reality because he’s been blinded by wealth-induced hubris.  At some point that proverbial can being kicked by the Fed and the U.S. Government will no longer move.   That’s when the real fun begins and that’s when people will wonder why Dalio never discussed gold except in front of his elitist cohorts at the Council on Foreign Relations.

The Entire System Is Fake

I woke up this morning knowing that, for whatever reason, the S&P 500 would be up a least 20 points.  Of course I flip on the telly and see the Spoos up 23 and gold down $5.

Upon investigating possible news triggers, I see that civil unrest is fomenting in China (we’ll investigate that later because the Shadow of Truth is hosting “our man on the ground in Beijing,” Jeff Brown today) and the military confrontation by proxy (ISIS) between Russia and the U.S. is escalating in Syria.

Those are obvious reasons for the stock markets around the world to retreat and for gold to be higher.

With a little further rummaging for news I see that bad economic reports in Japan and Europe have Wall Street clamoring for more QE.  So the S&P 500 futures spiked up on the expectation that the BOJ and ECB would expand their “QE” programs.

We know that QE has definitively not helped the real economy other than those closest to the money spigot: Wall Street’ers plus those who benefited from the Fed dumping $2 trillion in the mortgage market and enabling the re-birth of subprime garbage mortgages – real estate pimps, mortgage whores and the smart homeowners who sold into the bubble.

The bottom line is that the S&P has spiked up – and gold was slammed, now down $12 after the near-daily hit job on gold when the Comex opens – on the expectation that Central Banks will print more money in order to buy more stocks.   To put it another way, the financial system is totally fake.   More QE expected.  This  is expectation that should have, best case, kept stocks from falling and certainly not spiking higher AND should have launched gold to the moon.

And no one outside of the GATA community ever questions why gold seems to get hit hard almost every morning when the Comex opens.

I got an email from colleague who tracks the non-farm payroll report expectations vs what might happen based on the past history the birth-death model plug number pattern.  Granted, his model has a good track record, but the whole exercise is patently absurd.

A bullshit number tells us that a bullshit number is going to “miss” expectations.  This concept is RETARDED. The Government’s employment report has been torn apart and proved to be a complete fiction time and again ad nauseum. It’s a complete joke that educated adults even bother analyzing the numbers as if they mean something, which they unequivocally do not.

Who cares if the employment report misses, beats or is in-line? It’s like debating whether or not the Star Trek Enterprise would get better mileage on hydrogren or natural gas.

This whole charade is beyond retarded.  The incredible volatility in the stock market tells us that the financial markets are starting to collapse, reflecting economic data from every non-Government source showing that the economy is starting collapse again. My personal view is that more money printing will not arrest this process this time around unless the Fed prints and directly buys stocks.  I’m sure Obama would happily sign an Executive Order allowing that to happen.

Of course, if the Government takes that direction, my best advice is for everyone to fold up their tent and start looking for a remote place outside of the U.S. to go live if you want to survive.  It’s getting that bad.

The Fed Will Not Raise Rates This Week – Here’s Why

The eight-times-per year Fed circus is about to begin this week (Wednesday), for a two-day  freak show that will be accompanied by rumor-dependent market volatility and the appearance ad-nauseum of “experts” on the financial media propaganda conduits.  Their mouths always seem to be moving but nothing meaningful ever comes out.

Perhaps one of the comedic highlights is watching Steve Liesman grunting over the policy statement, sweat pouring from his navel orange some might call a bald head, as he strains to look for any punctuation marks that might have been added or removed from previous policy statement released in July.  The whole spectacle epitomizes theatre of the absurd.

I still believe that the Fed will find some reason to defer raising the Fed funds rate even just one-quarter of one percent off the zero-bound, to which it’s been anchored since December 2008.  The economy continues to show all the signs of contraction.  Today, for instance, the retail sales report for August showed a meager .2% rise from July, which means that, after adjusting for inflation, real retail sales declined.  What happened to the “bump” retail sales used get from “back-to-school” shopping?

In addition, the NY Fed manufacturing index literally collapsed to -14.67 vs. the -0.5 expected.  It is the worst reading on the index since August 2009.  Employment and number of hours worked plunged.  The new orders sub-index continues to show a greater level of contraction than the overall index.

So what’s the Fed to do.  In reality QE and ZIRP were never about a Keynesian attempt to stimulate economic growth and create jobs for the masses.  The massive money printing and trillions in Government banking industry subsidies were always about keeping the big banks from collapsing.  Everything else was straight out of the “textbooks” given to us by George Orwell and Ayn Rand.

I wrote an article for Seeking Alpha explaining my rationale for yet another deferral on moving the interest rate needle just one millimeter off zero, once again:

ROFLMAOIf the Fed were to increase the cost of borrowing by raising the Fed funds rate, in all likelihood private sector borrowing, which is about 71% of the systemic debt outstanding, would contract. It is my assertion that this would cause a severe economic contraction. In this scenario, I believe the Fed would be forced sometime in the near future to address the economic contraction caused by hiking interest rates with more QE.

You can read the rest of this article here:  No Interest Raise Hike This Month

How Bad Will The Financial Collapse Be This Time?

The comparisons between the economic indicators in 2008/2009 and now have been coming ad nauseum.  The only way you can avoid seeing them is if you are a Fed official, a CNBC/Bloomberg/Fox Business talking head or a complete moron.

I wanted to keep this simple and just look at what is considered perhaps the best barometer of global economic activity:

Untitled

You’ll note that the price of copper is headed lower and is back to the price level where it was in the middle of 2008, right before the great financial collapse.  You’ll note that $3.6 trillion in Federal Reserve money printing – on top of trillions in Bank of Japan, ECB and People’s Bank of China money printing – has not been able to keep the price of copper from crashing again.

Is there anything that can keep the global financial system from collapsing?  Hint…

NYSE circuit breaker

The Price Of Gold Gets “Curiouser And Curiouser!”

I’m an atheist.   But if I’m wrong, God help this country.  –  Investment Research Dynamics

“Edward Bernays was Sigmund Freud’s nephew. He believed that the population had to be manipulated in a democracy to keep order. As I mentioned yesterday, Bernays was instrumental in getting women to smoke for his cigarette company client and to get the American people to support a CIA overthrow of a Guatemalan government that was uncooperative with United Fruit Company. Bernays uses the lowest instincts of humans and appeals to those “animal spirits” over their better judgement to influence mass viewpoints.”  This summary of the roots of modern U.S. propaganda techniques was sent to me by Jay Taylor, LINK.

Josef Goebbels implemented Bernays’ theories and techniques in crafting the infamous Nazi Germany  propaganda machine.  As Naom Chomsky chronicles in his preface to Bernays’ book, “Propaganda,” the U.S. Government and U.S. corporations hired Bernays in late 1920’s in order to utilize his techniques on the American public.  The rest, as they say, is history…anyone remember 9/11?

The propaganda effort against gold was ramped up starting in mid-December 2014. Around the same time, the blatantness of the effort to push down the price of gold and push up the S&P 500 and Dow intensified.  Both John Embry and I independently noticed both occurrences.  If it looks, walks and quacks like a duck…

The anti-gold propaganda took on extraordinary proportions last week as a prelude to Sunday nights vicious paper raid on the price of gold.  The media’s anti-gold media terrorism culminated with this silly, farcical article entitled, “Let’s Be Honest About Gold:  It’s a Pet Rock.”  Perhaps the most absurdly misleading article ever written about gold.

Paul Craig Roberts was at one time an editor and columnist for the Wall St. Journal.  He told me yesterday that he hasn’t been able to pick the WSJ to read for many years because of the high degree of fraudulent propaganda it now publishes.  I bet most of you were not aware that the WSJ is owned by the same propagandist who owns Fox News – Rupert Murdoch.

It was also around December that I started writing analysis of the economic data which showed that the U.S. economy was starting to hit a wall.  The most obvious signal was the fact that retail sales declined .9% in the month of December before the effect of inflation is removed.  I am convinced that the effort to push down the price of gold, and the corresponding media effort to publish highly misleading and negative reports about gold is directly related to an effort to cover-up the fact that the U.S. is systemically starting to collapse.

The elitists running the system know better than any of us what is really going on in the real economy as they have access to the unmanipulated, raw data – something to which they go to great lengths to prevent we plebeians from seeing.

The greatest amount of effort to cover up the truth about what is happening beneath the surface headlines is the effort being exerted to push the price of gold lower.  The truth is that the U.S. nothing a but gigantic bloated, debt-addicted Ponzi scheme that is quickly losing its global economic and military hegemony while the U.S. elitists steal everything in sight from the middle class.

If gold were allowed to trade freely, it would be priced at a significantly higher level than where it is now.  The problem is that a rising price of gold would signal to a large portion of the population that something is drastically wrong with the U.S. financial, economic and political system.

Perhaps the “poster child” for the propaganda and “thought control” behind the effort to drive the price of gold lower is this graphic which shows the price of gold in relation to the size of the Fed’s balance sheet (source:  Paul Mylchreest, Gold and the Silver Stand-off, edits are mine) – click to enlarge:

FedBalGold

As you can see, there was a high correlation between the directional movement in the price of gold and the growth in the size of the Fed’s balance sheet from “QE” (let’s be honest, “QE” is just a politically correct term for “money printing”).

However, and this is a key point, I would assert with confidence that, in fact, the price of gold began to rise at more rapid rate than the rise in the Fed’s balance sheet because of the leveraging effect of the high-powered banking reserves created by QE.

In other words,  every dollar printed enabled banks to extend leverage which has the unmitigated affect of creating even more money (most of this leverage has gone into the stock and bond markets).  Why?  Because every dollar of bank reserve “equity” can be leveraged in the form of debt.  Debt behaves like money until it is repaid, which means debt issuance has the outright effect of increasing the money supply. This is the fundamental principle underpinning “fractional reserve” banking.

Having said that, you can also see where the price of gold is pushed below the growth in the Fed’s balance sheet.  This is the unmitigated, unequivocal mark of outright official intervention in the gold market.  See my post yesterday for one of the primary ways in which this is implemented – LINK.

In one sense, the U.S. Government does not have a choice other than make an attempt to keep a lid on the price of gold in order to perpetuate the fraud it has created since 1971.  I said about 12 years ago that the elitists who control this country will hold up the system with printed money until they’ve swept every last crumb of middle class wealth off the table and into their own pockets.

If they were unable to control the price of gold, their scheme would fail.   It will ultimately fail anyway, as history has already spoken on this matter, but many of them will manage to escape this country with a significant amount of stolen wealth.  In fact, I would bet my last nickel that many of them, like Warren Buffet, the Rockefeller clan and the big banks, for instance, have amassed a large amount of gold that is being safekept in some remote area of the globe.  Certainly not in a U.S./UK/EU bank or Central Bank vault.  We know what happens to gold that disappears down those rabbit holes.

At some point this scheme to control the price of gold will fail – badly.  At that point it will be too late for most people to do anything about it because the price will shoot up vertically, in step-function.  Similar to the price of movement of the  tech stocks that are enjoying the collateral affects of the Fed’s money bubble.

That day (Feb 12, 1973) the United States announced that the dollar would be devalued by 10 percent. By switching the yen to a floating exchange rate, the Japanese currency appreciated, and a sufficient realignment in exchange rates was realized. Joint intervention in gold sales to prevent a steep rise in the price of gold, however, was not undertaken. That was a mistake.   – Paul Volker reflecting in November 2004 on the day the U.S. devalued the dollar vs. the yen source link

This Is Why A Gold Standard Is Required

(Treasury Secretary) Lew to Congress: US hits debt limit on March 16, needs to be raised ASAP (LINK)

Obama has made the claim that the U.S. Government spending deficit “narrowed” from about $1 trillion to $483 billion in the Government’s 2014 Fiscal Year (Oct – Sept).   But this is not possible.  Why?   Because the amount of Treasury debt outstanding increased from $16.74 trillion to $17.82 trillion during the Government’s 2014 fiscal year (LINK).   Once again, Obama has lied blatantly to the public.    Based on the amount the Treasury debt load increased, the true spending deficit in FY 2014 remained at around $1.1 trillion.

The debt ceiling has been raised 13 time since 2000.  It’s been raised 6 times since Obama took office and suspended twice.  “Suspended” meaning that the debt ceiling was removed temporarily.  In February 2014, Congress voted to waive the debt ceiling limit, which had been set at $17.2 trillion.  The current amount of debt outstanding is $18.14 trillion (LINK).  This “auto reset” expires on March 15, 2015.   Once again the public is going to have endure the absurdity of the Kabuki Theatrics conducted by Congress as they “debate” the issue of raising the ceiling.   We can be guaranteed it will happen at the very least to ensure Congressional paychecks and perks continue flow uninterrupted.

The U.S. Government prints and issues Treasury certificates just like the Fed prints dollars. When QE began, the Fed started with buying the garbage mortgage paper from the big banks.   In November 2010 it began to print money used to finance new Treasury issuance. Between that time and October 15, 2013 – when QE formally “ended” – The Fed was the biggest source of funding for new Treasury issuance.  It bought over two-thirds of all new Treasury debt.   Since then, Japan and the EU countries – U.S. lapdog countries – have been the primary suppliers of green heroin to the U.S. Government.

And now the Obama Administration, led by Jacob “Jack” Lew, are back to feeding at the hog trough by asking for even more debt.  This is debt that will never be paid back.  Debt issuance like this is also unsustainable.   Either the Fed/Treasury dynamic duo will eventually be forced to engage in hyperbolic money printing or let the Government financially collapse.  I don’t see the latter happening, which is why the former seems inevitable.

Perhaps this is why Alan Greenspan, in a continuance of his endeavor to salvage his legacy as “The Maestro,”  has admitted that the U.S. is on the verge of “explosive inflation”  (LINK).

All of the above would not be possible in a world in which the money supply is anchored by a gold standard.  Humans, especially politicians –  Fed members are ambiguously yet unequivocally politicians – can not be trusted to manage the money supply on their own.  Gold provides the requisite guard rails.