The Big Lie

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.

22 thoughts on “The Big Lie

  1. Hi Dave,

    seems you are really pissed off as gold is dumped again. I think this will end when you get gold for free at the drug store.

    1. Hey Penthouse, what an idiot troll you are! This is a paper Ponzi scheme and it will end so badly and people like you deserve to suffer the most! You are a disgrace to the US!

    2. You sir have obviously not studied Economics or History.
      There is enough precedent in History alone to prove this article right.
      Continue in your ignorance, leaves more precious metals for us to buy.
      But dont expect many people to help you when your money is worthless….

    3. That won’t happen because the East will have a full gold backed monetary system. What happens in Amerika, stays in Amerika. And WTH would the metal come from? Wish I was paid to post as you probably are.

  2. Excellent commentary Dave. I whole heartedly agree. You may find this quote from Ludwig von Mises, made years ago, very interesting.

    “Rejection of fiat currency is not a technical problem, but of a political problem. Politics must fully renounce the inflation policy. This is only possible if politics also renounce the ideological commitment to imperealist, militarist, protectionist, statist and especially socialist ideas.”

    The above will NEVER happen. At least not in our lifetimes. Hopefully, maybe in our grandchildren’s lifetime, but don’t hold your breath. History has proven time and time again, that once an empire starts printing currency – it DOES NOT STOP, until said currency is destroyed and along with it, the empire that it represents.

  3. Trying to think of the proper watering hole in which to pay my respects to JNUG this weekend (still holding my shares)… perhaps ‘The Slaughtered Lamb’

  4. Surprised you would believe anything greedspam the sleazy dodgy lying lizard would spew.
    they have obviously marked this sector for complete destruction & oblivion, & they’re damn near there now.

    these sickening worthless spineless complicit miner ceos will all be passing burgers in bags out the mickeyD drive thru windows very shortly here, if they’re even that lucky.
    their christmas stockings are already begging for a pink slip.

    even at the 2008 low, this hit only $8.24.
    lowest in a dozen years here (use ‘max’ setting):

    1. He was uncharacteristically candid at that CFR event. He is a total system whore but he also likes to safeguard his intellectual prowess. He has always been clear about the fact that gold is money and that a gold backed system is superior to a human-dictated fiat currency system. I think he was signalling to the CFR audience that it’s time to buy gold before the world’s fiat system collapse.

      I loved this quote: “I never said the Fed was independent.”

  5. Dave, I think the S&P will break its 200-day sma again during November before going on another tear at the beginning of next year.

    1. Hard to say. If the Fed stops propping it for even a moment, it drops. The banks have a lot of “high powered” capital in the form of those excess reserves that would let them really drive the SPX higher. I don’t know what will trigger a sell-off. Any manipulated, highly controlled market is impossible to predict.

          1. I’ve been shorting the home builders with ya. However, I will likely close them in November and possibly even go long in December.

            We shall see.

          2. Depends on how DHI’s numbers look. This isn’t a swing trade for me although I trade around my core shorts. I think most of these builders will be trading below $10 w/in two years and some like HOV and KBH will hit the wall.

  6. You simply must understand that the mid-term elections are much more important than the health of the economy. The Fed ended QE 3 just before the mid-term elections to support the Democrats, while the present QE money, and funding days, carries the market through the elections.

    This also gives the Obama administration the maximum time to deal with the market fallout after the mid-term elections
    and the before the 2016 elections.


    After all, there can always be a follow-on Fed program by a different name of course. Perhaps the Fed will buy the mining rights to public lands, like Yellowstone, for $10 trillion and we will pump that money into the economy in the name of low inflation and lack of velocity.

    Was everybody fooled by this Fed move?

  7. he’s baaaack.

    he means “bombs away”!
    he called this same $13 target back about 5-6 weeks ago when it was $21.

    Me?…i’m gonna wait till we get near that $13, then put in a stink bid.
    no, not for sliver; for sprott’s jet!
    should be able to get it for free by then.

    The market bottomed on October 3 and began a mild and dull 3-week rally that took the form of a small rounding pattern or flag on the daily graph. The strong decline today — IF IT FOLLOWS THROUGH — would be an indication that the market will trend steadily to the 13.16 target.

  8. Gentlemen,

    The relentless attacks on gold (and silver) coincide with the rising of China as the world’s largest gold producer in recent years. The deliberate price suppression serves to hurt their profit in producing gold, this situation has been exacerbating since the Chinese launched their Shanghai Gold Exchange in September. This is no coincidence.

    One of the current weaknesses of the Shanghai Gold Exchange is that RMB is still not an internationally traded currency, so far it limits the liquidity, thus the participation of international players. The Achilles’ heel is the RMB internationalization. The Shanghai Gold Exchange will only and truly become the competitor, or even the threat, to the Western counterparts when RMB is finally rising up as a stronger international currency than USD/Euro.

       China began trading the Chinese yuan CNY=CFXS against the Singapore dollar SGD= on Tuesday, following direct
      yuan trading with major currencies including the euro, sterling, yen and the Australian dollar.
       Bank of China 3988.HK 601988.SS Sydney branch is set to win regulatory approval to begin clearing trades in
      Chinese yuan, sources with direct knowledge of the issue told Reuters on Monday.
       Yuan deposits in Hong Kong rose 0.8 percent to 944.5 billion yuan ($154.51 billion) in September from the previous
      month, the Hong Kong Monetary Authority said on Wednesday. Cross-border trade settlement surged to 605.6
      billion yuan, up 22 percent from August.
       London Stock Exchange Group LSE.L(LSE) is aiming to list Chinese equity futures in London in the next stage of its
      plans to tap the world’s second-largest economy, the bourse’s chief executive told Reuters.
       Banque de France and the Hong Kong Monetary Authority signed a MOU (Memorandum of Understanding) on
      renminbi business cooperation on Tuesday to enhance the breadth and depth of the business in both centres.

  9. Over in in N.J. Jeff Bell is opposing Cory Booker for the Senate and is airing commercials for a return to the gold standard. Naturally he’s getting monkey-hammered by the MSM but it is creating a buzz and at least it’s being discussed

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