The Fed announced that it was ending QE yesterday because unemployment was improving and the economy was fine. But it’s a lie. The Fed is not ending QE. It will still be reinvesting the proceeds of the bonds on its balance sheet – $4 trillion worth of bonds – as they mature. It also reinvests the interest income on this portfolio. Interest that is paid with printed money. This is not “ending QE.” It’s perpetual QE.
If the Fed wanted to end QE, why doesn’t it withdraw the $2.6 trillion in printed cash that it has injected into the Too Big To Fail Banks? The banks have roughly $2.6 trillion in cash sitting in their “excess reserve” accounts at the Fed. “Excess reserves” are cash held by banks that does not need to be set aside against bank assets in case the assets decline in value. I say “assets” loosely because a fair percentage of these assets are nuclear garbage that even the Fed won’t buy from the banks. This cash in excess reserves, by the way, is getting .25% interest paid on it by the Fed, with printed money. If you invest your own cash in a short term T-bill, you’ll get .01%.
Here’s the next to biggest lie (click to enlarge):
This is a 3-yr daily graph of the S&P 500. It has what looks to be a titanium floor placed under its 200-day moving average. Except for that brief period in mid-October, the Fed has not allowed the S&P 500 to decline by more than 5% in three years. Unprecedented. This graph shows that the stock market is one big lie. As you can see from the continuous series of small drops followed by a “V” bounce, the market has not been allowed to fall for three years. And every “V” bottom is followed shortly by a move to all-time highs.
Has QE worked? If you look at the stock and bond markets it’s been a smashing success. But the real economy? By the Government’s own rigged number – the U6 sub-report in the monthly BLS employment report – the unemployment rate is still over 12%. Furthermore, the labor force participation rate – the percent of the population that is part of the workforce in this country – is at a low not seen since the late 1970’s, when women largely did not work. In fact, this metric has dropped continuously since 2000: LFPR LINK. How about real household income? That has been declining almost continuously since 1998: Real Household Income LINK. How about the home ownership rate? It’s been dropping since 2004 and is now at the same level that it was in in 1994 and 1983: LINK.
These are all indicators that QE has failed – miserably. The price of gold is the biggest lie of them all. The Government has no choice but to try and exert downward pressure on the price of gold because if the price of gold were allowed to trade freely, it would expose every other big lie.
A poll released 2 days ago by ABC showed that the nearly 80% of the country thinks the economy is on the wrong track. If the economy is fine and QE worked, like we’ve been told by Yellen and Obama, how come 80% of the population believes the economy stinks? A good friend of mine – a hedge fund consultant in NYC – told me that, in general, the mood on Wall St. is one of “walking around on eggshells.” He said there’s a lot of layoffs going on and the only people making money are the upper level bankers. He said everyone knows that Wall St. banks are corrupt to the core.
What is being done to the precious metals sector is like what happened to the metals and mining stocks 2008 only 5x more brutal. The precious metals had hit an all-time high for gold and a secular high for silver in March that year. As Bear Stearns, Lehman, AIG and Goldman were collapsing behind the scenes, gold and silver were smashed. They were smashed even harder when the system openly collapsed in September that year. Based on this precedent, I would guess that what’s coming at us is 5x more brutal than what occured in 2008.
Everyone knows that the ECB banks are all bankrupt. The only reason the TBTF U.S. banks are not bankrupt is because the Fed has injected nearly $2.6 trillion of cash in to these banks. But if everything is getting better, like they are telling us, then why do the banks need this $2.6 trillion of protection?
You know that when the likes of Alan Greenspan comes out and says, “the system is screwed/buy gold,” something very wrong is going on behind the scenes. You know, for as big of a phony that Greenspan was during his tenure running the Fed, I can not find one instance in which he said gold is not money, unlike the even bigger fraud that succeeded him.
The poster child example of The Big Lie is Obama running around telling the world that the U.S. spending deficit was only $600 billion in Fiscal Year 2014, yet the outstanding amount of Treasury debt increased by $1 trillion. What happened to this other $400 billion issued by the Govt? Who spent it if the Government didn’t?
This whole system is one big fraudulent lie. A Ponzi scheme of the magnitude that makes Madoff and Enron combined look miniscule. When they can no longer cover up this big lie, the stock market is going to drop – and gold and silver will rise – more quickly and violently than anyone can imagine. It will be the end of our political and economic system as we know it.