Tag Archives: The Fed

Impending Systemic Financial Insolvency

Suffice to say, whatever happened went far beyond what might be considered normal in terms of end of quarter window dressing. It’s impossible to tell, but it may have been related to Glencore and its counterparties (banks and other commodity traders?), or to increased mar-gin calls on derivative trades. The timing is also thought provoking given the recent announce-ments regarding write-offs and capital raisings from Deutsche Bank and Credit Suisse.  – Paul Mylchreest, “Do Central Banks Need A Plumber? Part 2”

I suggested in a blog post last week that the extraordinary “outlier” amount of reverse repo transactions conducted by the Fed with its system member banks beginning in mid-September went several standard deviations beyond the amounts used in quarterly bank “window dressing” maneuvers.

I received several emails, of course, suggesting I was wrong and that the all-time record amount of reverse repos was de rigueur.   Rather than write a blog post explaining why the “de rigueur” view is wrong, I was able to discuss the entire reverse repo process on Jay Taylor’s “Turning Hard Times Into Good Times” radio show:

The big spikes in reverse repos is designed to put collateral in the financial system which can be posted against losing derivatives trades.  As everyone knows, there has been highly problematic collateral shortage in the market for several years now as a result of Central Banks vacuuming up all the sovereign-issued paper for the purpose of being able to refer to Central Bank money printing as “QE.”

This shortage of collateral is a big problem when events occur that cause volatility in the OTC derivatives market.   While banks have access to the collateral of Central Bank balance sheets, non-Central Bank system financial entities do not (hedge funds, mutual funds, insurance companies, pension funds, etc).   But these are the entities that are often on the losing side of derivatives trades.  Thus they need collateral to post for margin.

Through the “magic” of hypothecation, banks can borrow collateral from the Central Banks (primarily the Fed) via the reverse repo operations and then hypothecate that collateral into the general financial system as needed.

UntitledTo be very clear about this, the timing of the Glencore stock plunge and the beginning of the spike up in reverse repos in mid-September is unequivocally not a product or natural random probabilities.   Especially when we find out a few weeks later that Deutsche Bank – a big lender to Glencore – seems to be “walking the financial plank.”

And, furthermore, Black Rock issues a public statement calling for markets to be “turned off” during times of high volatility.  Make no mistake, Black Rock is probably one of the most systemically dangerous financial institutions out there now.

And, perhaps the strongest signal in the market place that the Fed is terrified of an event that could crash the markets is the continuous and blatant intervention in the stock market.   The divergence between the valuation of U.S. stocks and underlying fundamental economic reality has never been greater in the history of the United States.

Something Blew Up In The Global Financial System

Earlier this week I suggested, based on the sudden big spike up in Fed reverse repos in mid-September that there was some kind of derivatives accident that required the Fed to flood the global financial system with Treasury collateral, which is used to satisfy derivatives margin calls.

This was likely connected to everything that has cratered in value since June 2014, when the price of oil crashed:    high yield bonds, industrial commodities, emerging market currencies, biotech stocks, Glencore, Volkswagen and now Deutsche Bank.

Glencore was originally said to have $30 billion of debt.  However, that number did not include the $50 billion in bank credit lines outstanding plus an undetermined amount of unsecured trade finance deals.  The total exposure to Glencore debt by banks and investors is now estimated to be as high as $100 billion – LINK.

To put this in perspective, Enron had $13 billion in debt at the time of its collapse.  Moody’s continued to assign a triple-A debt rating to Enron until shortly before it filed for bankruptcy.  I mention this to illustrate the unreliability of “expert” hear-say analysis.

With Glencore the hidden OTC derivatives skeletons are likely much more lethal to the financial system than has been estimated.   Just ask AIG and Goldman Sachs about that.

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I would suggest that the record spike up in reverse repos and the plunge in Glencore stock, after it had previously lost 56% of its value since the beginning of May, was not coincidental.

On that list of asset sectors that have imploded in price, Glencore has exposure to industrial commodities, oil and EM currencies.  It also is exposed to the price of silver and gold.  Ironically, its precious metals assets seem to be getting by far the most attention from potential buyers (royalty stream investors) as a source of cash.

But Glencore is only part of the story.  Today Deutsche Bank announced a $7 billion quarterly loss from impaired asset write-downs litigation reserves.  Some reporters have suggested this was “kitchen sink” event in which Deutsche Bank piles all of its potential losses from bad investments and business lines into one quarter in order to make its results going forward look better.

But there’s no way a “kitchen sink” maneuver will come even remotely close to covering DB’s exposure to toxic assets.   For starters, the bank has heavy exposure to Glencore.  It also is the largest lender to Volkswagon and Volkswagons suppliers. It also has rather  large exposure to emerging market currencies and related derivatives.

Deutsche Bank, at $75 trillion in holdings, is the largest derivatives player in the world now.  This amount of derivatives is 20x greater than the GDP of Germany.   And that’s DB’s “net” exposure.   As counterparties default, that $75 trillion blossoms at a geometric rate. Deutsche Bank is too big for the German Government to bail-out without implementing Weimar-era money printing.  It’s balance sheet is a nuclear cesspool of toxic assets.

The $7 billion charge to earnings this quarter is unequivocally not  “kitchen sink” accounting gamesmanship.  It was either wishful thinking by upper management – not likely – or it was the result of a concerted effort by the bank to put out a shock-value number that reflected the expectation by analysts and investors that DB would have to admit to a large loss this quarter given the nature of its assets. I would suggest that it a mere fraction of the true mark to market losses sitting on and off DB’s balance sheet.  For me it’s a number so unrealistic that it’s silly.

As of its June 30 “interim” financial report, DB had $1.51 trillion in assets supported by a razor thin $67 billion of book value.  That’s 22x leverage.   This number does not reflect a realistic assessment of the value of its derivatives.  At 22x leverage, DB’s balance sheet in and of itself is massive OTC derivative.  

DB is not only now the lethal sovereign risk of Germany, it is the sovereign risk of the entire EU. Whereas Bear Stearns the Lehman triggered the Great Financial Collapse in the U.S., Deutsche Bank could potentially trigger the collapse of the global financial system.

The graph above is evidence that a massive monetization operation was implemented by the Fed in mid-September in an effort to contain the damage from something big that has blown  up behind the facade of fraud that has been erected over several years by western Central Banks and their Too Big To Fail appendages.

All Ponzi schemes eventually fail.  The global financial Ponzi scheme, of which the U.S. financial system is the largest contributor, will end in some sort of financial Apocalypse…

SoT – Paul Craig Roberts Pt 2: The U.S. Faces Catastrophic Financial Risk

Try to find people you can have an intelligent conversation with about all of this – they’re all inside the matrix including all those idiot economists who thought the Fed was going to raise interest rates. How can you be an economist and think that? – Dr. Paul Craig Roberts, Shadow of Truth

Deflate-gate: if you dropped into the U.S. from another planet on the first day of 2015, you would have that “deflate-gate” was the most serious issue facing this country. This is because the entire media system in the U.S. is one massive propaganda machine designed to deflect the public’s attention away from the truth by inundating us with stories designed to calcify our brains with an overdose of useless news that should be relegated to the back-side of bubble gum wrappers.

The truth is that this country’s economic and political system is collapsing while the U.S. neocons running the Department of Defense are busy fanning the flames of war all over the world.

Perhaps the most serious “unspoken” problem facing the U.S. financial and economic system is the $100’s of trillions in derivatives that have been created by America’s Too Big To Fail Banks.

It’s a new thing and we don’t have experience to go on because we’ve never had this type of exposure to risk that no one can quantify. How it plays out we have no real way of knowing. We can not go by the past because it wasn’t there in the past. When I was in the Treasury none of these derivatives existed. In fact, they called derivatives “Treasury bond futures.” – Dr. Paul Craig Roberts

The size of this cache of weapons of mass financial destruction is even bigger now than it was in 2008, when derivatives caused the de facto collapse of the financial system.

Even a small rise in interest rates could cause all kinds of problems with the trillions and trillions of interest rate derivatives. I don’t know much about them – I don’t think the banks that are holding them knows much about them…if all those derivatives start blowing up, the Fed would have to print trillions and trillions more dollars to save the banks. And all those trillions and trillions of dollars would sink the dollar. – Dr. Paul Craig Roberts

PCR5The Fed has been threatening to raise interest rates ever since Ben Bernanke’s infamous “taper” speech in May 2013. In between every FOMC meeting the Fed officials play out a well-choreographed stage-play of “good cop/bad cop,” where mostly “bad cops” give speeches threatening us with a rate hike at the next FOMC meeting. Then, at the next meeting the Fed invariably defers.

Twenty-five basis points. The Fed is terrified of raising its Fed funds rate by even a measly 25 basis points. One-quarter of one percent. If the Fed can’t lift rates by one-quarter of one percent, it’s because to do so would cause irreparable damage of some sort in the financial and economic system.

Here’s is Part 2 of the Shadow of Truth’s conversation with Dr. Paul Craig Roberts in which we process the Fed’s inability to raise interest rates at the September FOMC even though more than 80% of Wall Street’s “brain trust” expected the Fed to move needle a paltry 25 basis points:

Central Bank Interventions Have Become Extreme

There are no markets anymore – only interventions.  – Chris Powell, Treasurer of GATA

Markets are supposed to act as information transmission mechanisms, with asset prices reflecting all of the fundamental information that goes into the process of “price discovery.”  But when Central Banks and Governments interfere – or intervene – in markets, it completely disrupts the information transmission, price discovery function of markets.

If Central Banks and Governments interfere with markets, there’s no reason to even have markets and it becomes completely useful to participate in financial markets in any capacity, unless of course you have access to the inside information connected to the market intervention.

The extreme volatility of the markets right now is nothing more than 100% evidence of Federal Reserve intervention in U.S. markets.  It also reflects the extreme degree to which the Fed is interfering and manipulating the markets.  Take yesterday for example:

This intra-day graph reflects the tug-of-war that occurred among the Fed’s interventions to prevent the market from a catastrophic drop, the hedge fund algo programs trying to time the Fed’s interventions and the rest of the market trying to unload extremely overvalued stocks.   That demonstrates the degree to which the U.S. capital markets have gone completely off the rails.

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It is now widely understood and accepted that Central Banks are actively buying stocks in order to support the equity markets.   Japan openly admits this.  The Swiss National Bank files SEC 13-D filings disclosing its purchases.

If central banks purchase stocks in order to support equity prices, what is the point of having a stock market? The central bank’s ability to create money to support stock prices negates the price discovery function of the stock market.

Dr. Paul Craig Roberts and I co-authored a report which discusses the issue of Central Banks buying stocks.  As it turns out, the Fed is likely the entity funding the Swiss National Bank’s purchases of stocks like Apple and Google.  You can read the entire article here:   Central Banks Have Become A Corrupting Force

With Central Banks attempting to control the direction of markets as a means of dictating policy, it has made any participation in the financial markets completely meaningless.

This will not end well.  History tells us there’s a limit to a Government’s ability to manipulate markets.  At some point the money printing and market support mechanisms will fail and the result will be much worse than if they had let the markets freely determine the outcome.  It’s not a question of “if,” it’s just a question of “when.”

The Economy Is Starting To Crash – There Will Be No Rate Hike In September

“Dave I got your emails – it’s over” – Good friend in NYC who called this morning, has worked on Wall Street for over two decades

All of the meaningful, least manipulated economic indicators are now collapsing at the rate at which they collapsed in 2008/2009.  For instance this morning’s Empire State Fed manufacturing index:

UntitledThe index itself is back to where it was in 2009. The new orders index – the best indicator for current wholesale demand – plunged to a level last seen in 2010, when the Fed was in the early stages of pumping nearly $4 trillion in fresh printed money into the financial system.

The collapse in commodity prices has been widely acknowledged, but the most important commodity barometer of economic activity is oil.  The price of oil began to collapse in the middle of 2014, which is when I have suggested the U.S. economy started to hit a wall.  After a dead-cat bounce, the collapse has resumed:

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The big Wall Street banks have huge incentive to try and keep the price of oil propped up. Why? Because they are sitting $100’s of millions of unsold bank debt issued by rapidly collapsing U.S. oil shale companies. Sure, paltry fines levied by the SEC and CFTC for breaking the law and engaging in fraudulent activities is written off as the cost of doing business. But the prospect of losing $100’s of millions on senior “secured” bank debt is looked upon a “blood money.”

If the big Wall Street firms, with the help of Central Banks, can’t keep the price of oil propped up, it means there’s a big problem in the global economy, including and especially the United States – the world’s largest source of demand for oil.

Finally, perhaps the best overall indicator that the end to the insanity that has gripped the markets is over is the degree to which the Fed’s intervention in the markets has become so painfully obvious.  Everytime the S&P 500 is on the verge of falling off a cliff – like today, for instance – a big bid miraculously appears – a big bid that the hedge fund HFT-driven algos embrace and front-run, driving the stock market away from the edge of that cliff.  I know a lot of people who are still highly irritated by this.  But I would be more shocked if Yellen and Company didn’t intervene in the stock market on a daily basis.

Even worse is the intervention in the Treasury market.  Interest rates are on virtual “lock-down.”  In fact, I would argue that, on a de facto basis, the Treasury market for all intents and purposes has been “shut down.”  The Fed has become the largest holder by far and, via its network of Wall Street primary dealers and the Bank of Japan, has ensured that a meaningful supply from sellers will never hit the market.  To refresh everyone’s memory, recall that the Bank of Japan is buying JGBs from Japan pension funds using printed yen and replacing them with U.S. Treasuries.   Indirectly Japan has become the Fed’s warehouse for loose Treasuries – “loose” as in Treasuries being unloaded by Russia and China.

Do not mistake the money that has been “created” by the insane rise of a stock market that has been pushed to its highest valuation level in history.  This is not “wealth” – it’s shifting the deck chairs around on the Titanic.  The revenues of the S&P 500 companies have been declining for several quarters in a row now.  If we were to use the accounting standards that were enforced in 2000 – instead of the highly misleading accounting rules in place now –  the p/e ratio, forward p/e ratio and the dubious “Shiller p/e ratio” would show their highest levels ever.

Perhaps the biggest issue I’m grappling with now is what will happen when the Fed loses control?  Rather than watch helplessly as the stock market collapse, I am beginning to wonder if they’ll just shut the markets down…

NYSE circuit breaker

“AAPL Is Crashing – It May Be Over”

We’re dying to see Icahn’s next filing on Apple. The fact that Carl has not Tweeted anything on Apple since June 24 is interesting. – The King Report, M. Ramsey Securities, Aug 4, 2015

AAPL has been by far the biggest contributor to the run-up in the stock market since the Fed began printing trillions of dollars to save the big banks and reinflate every paper-fueled financial bubble that has infected our economic system since the mid-1990’s. While everyone points to Bernanke as being the “king of the printing press,” the Maestro himself, Alan Greenspan, worked his “maestro-ism” by pressing down hard on the money-printing accelerator in order to “fix” every big financial collapse since the 1987 stock market plunge.

Now one-by-one the bubbles are popping. EU sovereign debt and the Chinese financial system are clearly the most visible for the time being.  It also looks like the pancreatic financial cancer that took down Greece has now invaded Spain.

But the bubble-popping pin is also starting to invade the U.S. economy. One has to wonder if the Obama Government will invoke the “national security clause” of the Patriot Act and try to incarcerate the bubble-popping-pin without a judicial hearing at Guantanamo (the Guantanamo that Obama promised to close after he was elected in 2008). Maybe Wesley Clark will suggest putting the bubble-pin in an internment camp…

The poster-child for the U.S. financial system bubble has been AAPL.  Aside from Carl Icahn pimping his big position in the stock for a few years, Wall Street money slaves have tripped over themselves to drool over the Company’s overpriced cellphones and computers.  Not only is the price of AAPL stock a bubble, but it is a bubble in marketing, shameless promotion and the amount of unused tech gadget computer power for which the AAPL cult adherents happily pay – often with credit.

While no one knows which coming event will ultimately crash the U.S. financial system, the economy is clearly receding deeper into recession.  The GDP bounce reported for Q2 is nothing more than statistical smoke and mirrors fabricated by Government statisticians and Orwellian propaganda.  Every private-sector economic metric is now showing declines further into negative territory.  Today, for instance, factory orders plunged for the 8th month in a row, down 6.2% for June vs. June 2014.

Along with the deteriorating economy, the dislocation between the fiction of stock market valuations and the reality of Main Street continues to widen.  This will not have a happy ending.  The law of “regression to the mean” will at some point assert itself in brutal fashion and the multiple paper-fueled financial bubbles blown by the Fed will pop and decimate our entire system.

I doubt AAPL will be the trigger, but anyone blindly bullish on the stock market has to take notice of the 15% plunge in AAPL’s stock since its recent all time high:

AAPL

With Carl Icahn likely selling furiously, if not out of his position entirely, and every large hedge fund over-weighted in AAPL, who will catch the falling knife?  If the Fed or the Swiss National Bank does not insert a safety-net – and it appears as if the SNB is already filled on AAPL paper – AAPL has a long way to fall before it reaches a fundamental price that makes any sense.  Of course, the same can be said for the entire stock market…

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Comex Paper Gold Open Interest Continues Its Vertical Ascent

 From sublime to ridiculousness there is only one step.  – Napoleon

The Fed is nothing but a mafia organization that took control of the United States starting in 1913 (Rory Hall, The Daily Coin).  In sheer defiance of all free market principles, the paper gold open interest on the Comex continues to move inversely to the price.

Yesterday the open interest in fraudulent paper gold futures open interest spiked up another 8,056 contracts to 470,720 contracts.   This added another 800,560 – 25.1 tonnes – ounces of paper gold to the Comex open interest, while the amount of gold “received” into Comex vaults increased by only 35,107 ozs.

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COMEXGOLDRecall that Germany is trying to get back just 300 tonnes of gold from the Fed but has to wait seven years for this to happen.  But the Fed, through its agent bullion banks, can create more than 300 tonnes of paper gold in just one week (remember Bernanke’s magical electronic printing press).  Why won’t Germany just agree to hold paper gold?  Based on the business activity of the Comex, paper gold is perfect substitute for real gold.  Angela? Wolfgang?  Jens (Weidmann, head of the Bundesbank)?

The amount of fraudulent paper gold created by the banks yesterday is 165% of the total amount of gold that is being reported as “registered,” or available to be delivered.  No other commodity in the history of the world is allowed to operate with kind of paper to physical ratio.

The entire U.S. financial and economic system is nothing but one enormous fraudulent Ponzi scheme enabled by the complete takeover of the U.S. Government by corporate and banking interests  (see this podcast with John Titus on the Shadow of Truth for direct proof of my assertion).   The Comex is ultimate symbol of complete fraud and corruption that has completely engulfed the system.

Historically the level of open interest in gold and the price of gold have been highly correlated.  The last time the paper gold futures interest was as high as it is now was November 27, 2012.  The price of gold was $1741 per ounce.

The only conclusion that can be drawn is that the Federal Reserve, likely on orders from the BIS, is going to try and suffocate the price of gold.  The unintended consequence is the enormous drainage of gold from western vaults into the eastern hemisphere.  I suspect the bullion banks themselves are on the receiving end of that gold.

At some point the Comex itself will suffocate under the weight of paper gold.  The elitists will conjure some event of force majeure and the Comex will exercise its right to settle the paper with more paper, i.e. U.S. dollars.  At that point they may as well use drachmas…

Paper is a check drawn by legal looters upon an account which is not theirs: upon the virtue of the victims. Watch for the day when it bounces, marked, ‘Account overdrawn.’  – “Ayn Rand, Atlas Shrugged”

The Public Is Being Set Up For The Scalping Of A Lifetime

Over the last three days, we have reported that some of the most important investment voices in the world are more than a little scared about the ravenous appetite for risk playing out in the market, and the fact that they have been ignored is beyond unnerving. Central banks are driving all investment decisions, and what this implies is that they are in this trade so deeply that there is no obvious or practical exit.  Richard Brewlow via Zerohedge (link)

Zerohedge posted an essay by Bloomberg’s Richard Breslow that needs some additional commentary.  We already know that western Central Banks have been buying nearly ALL new Government bond issuance for the last 5 years.  We know that Japan’s CB admits to buying equities.  We know that the Fed sticks huge bids in the market for the S&P 500 eminis in order to trigger massive hedge fund HFT algo buy programs of the big S&P 500 contract.   I suspect that the Fed is also buying stocks, which is one of the reasons it is spending million on lobbying to prevent Congress from passing a law forcing an audit of the Fed.

It’s no secret the Fed is thus pushing up the S&P 500 to new record highs almost on a weekly basis. It has prevented the stock market from undergoing a meaningful price correction now for nearly 4 years. Concomitantly, the Fed/Government is now continuously preventing the price of gold from moving higher, although it seems to have lost all ability to push it much lower than $1150.

Meanwhile, the underlying fundamentals of the economy are deteriorating at rate that now rivals the rate at which it was deteriorating in 2008.  I just got an email from someone today who told me that financial analyst Dave Skarica has stated that all midwestern regional banks who gave out loans to U.S. shale producers do not have any loan loss reserves for when these loans go bad.  He also said that NONE of these banks have taken write downs yet on the loans that are now trading between 50 and 70 cents on the dollar in the market.  This means that $100 million loan on a bank balance sheet is worth only $50-70 million based on real market market data, yet the bank is carrying this loan at $100 million.

This situation is magnified at the at the Too Big To Fail Bank level.  Every single TBTF bank has released most of its loan loss reserves back into its income statement over the last 4 years in order to generate GAAP accounting “net income” beats of estimates.  But this is non-cash, phony money.  How about if we get to see JP Morgan’s inside books and see where it has marked unsold, unsyndicated bank loan paper to near-insolvent shale companies. I’d bet my dog’s life they have that debt marked at 100 cents on the dollar even though it’s likely worth, at most 50 cents.

The Fed has no choice but to chase the stock market higher and keep interest rates at zero. Hell, if the Fed were to let rates normalize, it would suffer huge losses on all the Treasury and mortgage debt it purchased over the last 5 years – $3.6 trillion of debt that would lose at least 5-10% of its value.  The Fed would be technically insolvent.

Central Banks and their sovereign wealth funds have become the major players dominating market activity. One central banker after another has admitted they are fixated on market reaction to their comments and actions…A wise central banker told me I should learn to live with central banks being the dominant force in the market, whether I like it or not.  – Breslow from link at the top

Note:  I disagree with Breslow’s description of the referenced central banker as being “wise.”  Ruthlessly unethical and insidiously corrupt, yes.  “Wise?”  Probably not.  

Futhermore, the only dynamic keeping most pension funds from imploding is an overexposure to the stock market that keeps going higher on manufactured monetary helium.  If the Fed were to let the stock market find it’s natural trading level, it would lose at least 50% of its value – quickly.  It would blow up countless pension funds.  The problem would be magnified by a factor 2-3x if the Fed were to let interest rates embark on true price discovery.  Pension fund fixed income holdings would plunge in value.  Pension funds would become hopelessly underfunded from their current status of being just significantly underfunded.

In other words, if the Fed were to step away from its non-stop market intervention and manipulation, the entire financial system would collapse.  At some point this entire Ponzi scheme is going implode, despite the increasingly blatant and obvious attempts by the Central Banks to keep it the steroid-addled gerbil on the wheel.

Remember Enron?  It was one big fraud, for the most part.  Almost no one saw the speed and force with which Enron was incinerated.  I was short Enron stock in the $40’s.  It dropped to the teens and I covered, thinking the worst was over.  Not too long after that Enron filed bankruptcy and was revealed to be largely an empty shell.  It had erected entire floors of energy trading desks that were only used when the Company was trying to sell stock or bonds to investors doing due diligence. It was complete lie.

Enron is a microcosmic metaphor for the entire U.S. financial and economic system. It has little substance and an unimaginable amount of fraudulence masquerading in the form of an economy.   If you were to subtract all of the fraudulent accounting, the fraudulently compiled Government economic data, all of the debt and all of the derivatives on a true mark to market basis, the United States would be nothing more than one giant version of Enron.

Most people have no clue whatsoever of the economic devastation that is coming at us down the system pipeline.  But Central Banks will eventually lose control of this insanity they have created – history has already spoken repetitively on that matter.  And certainly no one can predict the timing of when Central Bank control is lost. But when this does occur, the entire U.S. financial system will be incinerated like Enron. Only this time around everyone will be ruined, rather than just a few stupid Enron stock and bondholders.

10 Reasons Washington Has War Fever

War is merely the continuation of policy by other means.   – Carl von Clausewitz  (he is commonly attributed with the phrase “the fog of war”)

This is a must-read article that was written by Ron Holland for The Daily Bell.   I have said for several years now that the U.S. Government will start a war to avoid being completely exposed in everything related to the ongoing collapse of our system – a collapse that is both economic and political in nature.  It’s just so much easier to point the finger at the war as the reason our system is collapsing rather than wait for everyone to figure out what happened and start a revolution.

Holland explains in this article why the U.S. is in the process of provoking a global military conflict:   10 Reasons Washington Has War Fever

[post_ender]

Janet Yellen Says The Economy Is Fine And Price Increases Are Just Noise

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If the economy is hunky dory, then why is the money supply going parabolic?

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The adjusted monetary base is all currency either in circulation with the public or held in bank reserve accounts at the Fed.  This chart reflects all of the money the Fed has printed since QE started.  As we know, most of this money has ended up in the  Fed’s “Excess Reserve” accounts of the Too Big Too Fail banks.  This is more than just “noise,” to borrow Yellen’s term.  There is a very specific reason for this and my co-producer and I are working on a multi-part video series explaining what we are pretty certain is going on and why most of the money printed up by the Fed – and most of the money the Fed continues to print in a parabolic fashion (see the graph above) – remains on the big bank balance sheets.

Hint:  there is a massive derivatives melt-down brewing, the likes of which will probably trigger the collapse of the dollar.

Other than that minor occurrence,  the graph above raised some interesting questions that no one in the media or Congress seems capable of asking Fed Chairman Yellen.  So I will ask them.  Please feel free to email them to the Fed.

If the economy is recovering, why is the money supply still expanding at a parabolic rate?  If the recent numbers which show accelerating inflation are just “noise” – in your words, Janet – how come my monthly grocery and gasoline and housing expenditures are roughly 25% higher than they were this time last year?   Janet, when is the last time you spent money at the grocery store or at a restaurant?  When are you going to drain the excess reserves of the big banks, which are just sitting there collecting more interest than a 30-day T-Bill?

For everyone else reading this, why are you still holding money in bond mutual funds and money market funds?   You are watching a speeding freight train with no brakes come straight at your car stuck on the tracks and yet, you seem incapable of getting out of your car and running to safety?

Get your money out of bond and money market funds and buy every dip in gold, silver and mining stocks.  For some great junior mining stock ideas, see this:  Junior Mining Stock Research Reports.