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The Multi-Trillion Question For the Markets Pt 1

Phoenix Capital Research's picture





 

Given the
popularity of my previous article We’ve
Broken All the Trendlines
(Glenn Beck featured it on his show 3/15/11), I
thought I’d present a follow up regarding the implications of those charts.

 

When the
Financial Crisis took total hold of the financial markets in 2008 (the early
warning signs occurred in 2007), the Feds tried to regain control of the system
via three tactics:

 

1)   Suspending
accounting standards for financial institutions

2)   Pumping
money directly into the system (to everyone from McDonalds to Hedge Funds)

3)   Announcing
an indirect money pump, Quantitative Easing, through which it allowed the
primary dealer banks to flip their Treasuries for cash.

 

The primary
goal of all three of these was to shore up the large insolvent banks. However,
the Feds presented these efforts as intending to save the financial system/ US economy
(which, incidentally had been wrecked by those same insolvent banks).

 

These
efforts worked partially for a while. The system stopped imploding and most
assets began rallying again (especially stocks). However, it was clear that these
policies were at best, nothing more than a band-aid on the primary issues
plaguing the financial system (too much debt, unchecked leverage, and a lack of
trust induced by fraudulent accounting practices) and at worst nothing more
than a giant “funnel taxpayer money to the banks” scheme.

 

Anyone with
a working brain can see this. Wall Street bonuses have returned to pre-Crisis
levels while unemployment, food stamp usage, and the like EXPLODED higher. In
simple terms, the only ones who have seen a recovery are the bankers. Everyone
else has seen their situation worsen (not to mention their children and grandchildren
who are now on the hook for TRILLIONS more in debt).

 

Which brings
us to today and the charts I showed in my earlier article. The liquidity
induced rally of the last three years is now beginning to break down. This time
in 2010, the Fed was pumping between $40-50 billion per month into the system
to keep things afloat. Today it’s $100+ billion.

 

And yet,
stocks are still beginning  to break down.

 

Sometime,
and I cannot say when exactly, the markets will say “enough” to the Fed’s money
pumps. By “enough” I mean that additional liquidity will no longer have any
effect on the markets. This will likely occur simultaneously with a US Dollar collapse
or some kind of debt default in the US.

 

When this
happens, the REAL Crisis will hit. Those who think that 2008 was the REAL DEAL
are mistaken. The US is heading towards a situation similar to that which
occurred in Greece last year.

 

The Multi-Trillion
Dollar question is: IS it happening now?

 

Best
Regards,

 

Graham
Summers

 

PS. If
you’re getting worried about the future of the stock market and have yet to
take steps to prepare for the Second Round of the Financial Crisis… I highly
suggest you download my FREE Special Report specifying exactly how to prepare
for what’s to come.

 

I call it The Financial Crisis “Round Two” Survival
Kit
. And its 17 pages contain a wealth of information about portfolio
protection, which investments to own and how to take out Catastrophe Insurance
on the stock market (this “insurance” paid out triple digit gains in the Autumn
of 2008).

 

Again, this
is all 100% FREE. To pick up your copy today, got to http://www.gainspainscapital.com
and click on FREE REPORTS.

 

PPS. We ALSO
publish a FREE Special Report on Inflation detailing three investments that
have all already SOARED as a result of the Fed’s monetary policy.

You can
access this Report at the link above.

 

 

 

 

 


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Wed, 03/16/2011 - 06:40 | Link to Comment Doubleguns
Doubleguns's picture

Eventually 100 bil is not enough to move the mult trillion pound gorilla. Diminishing returns?  Please do not tell Ben he might try trillions next.

Wed, 03/16/2011 - 03:40 | Link to Comment Dirtt
Dirtt's picture

I've quoted your excellent work.  Timely and appropriately.

"Interest-rate" sensitive derivatives really says it all.  Really. Everything else seems irrelevant even though it is simultaneously radioactive.

Fast track that sailboat.  I'd rather be on the high seas than stick around for post-2011.

 

Wed, 03/16/2011 - 01:49 | Link to Comment mt paul
mt paul's picture

the best way to kill a debt based economic system 

is to save ...

remove the velocity of the fiat

and it's game over...

duhhhhh

bunch of debt heads

Wed, 03/16/2011 - 01:01 | Link to Comment JW n FL
JW n FL's picture

the fact that 30 to 40% of the U.S. income (Tax Monies) will be dedicated to paying for debt.. the fact that, that number will most certainly grow..

 

being top heavy with regard to debt? no one see's a balance issue?

 

paying more for less.. good money after bad?

 

why are we paying the Federal Reserve Corporation?

 

On June 4, 1963, a virtually unknown Presidential decree, Executive Order
11110, was signed with the authority to basically strip the Federal Reserve
Bank of its power to loan money to the United States Federal Government at
interest.
 
With the stroke of a pen, President Kennedy declared that the
privately owned Federal Reserve Bank would soon be out of business.
 
http://en.wikipedia.org/wiki/Executive_Order_11110

Of course, the fact that both JFK and Lincoln met the the same end is a mere coincidence.

Abraham Lincoln's Monetary Policy, 1865 (Page 91 of Senate document 23.)

Money is the creature of law and the creation of the original issue of money should be maintained as the exclusive monopoly of national Government.

 

http://www.john-f-kennedy.net/executiveorder11110.htm

 

"Whosoever controls the volume of money in any country is absolute master of all industry and commerce... And when you realize that the entire system is very easily controlled, one way or another, by a few powerful men at the top, you will not have to be told how periods of inflation and depression originate."

James Garfield 1881 Within weeks of releasing this statement President Garfield was assassinated.

 

http://www.youtube.com/watch?v=ZPWH5TlbloU&feature

Wed, 03/16/2011 - 12:45 | Link to Comment cranky-old-geezer
cranky-old-geezer's picture

Yes, the Fed with its printing press is the root problem.  

That printing press allows the federal govenment to borrow and spend endless amouts of money.

That printing press allows huge reckless  irresponsible insolvent banks to be bailed out over and over so they can continue their reckless irresponsible ways.

That printing press allows Bernokio to give huge sums of cash to anyone he wishes.

That printing press allows the money supply to be inflated and the dollar debased till it's worthless.

That printing press allows the Fed to transfer all of America's wealth to banker cronies and other insiders, quietly, behind the scenes, while the sheeple don't know what's happening and wake up one day wondering how they ended up in poverty with a million worthless dollars in their pocket.

Wed, 03/16/2011 - 04:37 | Link to Comment BigDuke6
BigDuke6's picture

Good post.

Very scary facts.

Add in this quote and i think you know who's pulling the strings.

"Give me control of a nation's money and I care not who makes her laws."
Mayer Amschel Rothschild

Wed, 03/16/2011 - 12:42 | Link to Comment grant
grant's picture

That's a very popular quote amongst conspiracy theorists, too bad there is no reliable source of Mayer having ever said that.    Which may explain why the wording changes all the time, or even the attribution (sometimes to Nathan, sometimes to the entire "House").  This supposed quote was never even attributed to Rothschild until over 100 years after his death.  

Fri, 03/18/2011 - 20:30 | Link to Comment BigDuke6
BigDuke6's picture

Good to know.

I knew he was too nice a guy to say that.

Wed, 03/16/2011 - 06:20 | Link to Comment FEDbuster
FEDbuster's picture

I am no fan of the FED, but aren't the "profits" of the FED returned to the Treasury after the member/owners take their 6% dividend (and who knows how all that is calculated?).

"Member banks must subscribe to stock in their regional Federal Reserve Bank in an amount equal to 6 percent of their capital and surplus, of which 3 percent must be paid in; the remaining 3 percent is subject to call by the Board of Governors. The holding of stock in a Federal Reserve Bank does not carry with it the control and financial interest conveyed to holders of common stock in for-profit organizations. It is merely a legal obligation that goes along with membership, and the stock may not be sold or pledged as collateral for loans. Member banks annually receive a 6 percent dividend on their stock, as specified by law, and vote for some of the directors (so-called class A and class B directors) of their Reserve Bank."  From the FED's website

http://www.federalreserve.gov/generalinfo/faq/faqbkinfo.htm#1

Wed, 03/16/2011 - 00:48 | Link to Comment apeakunderthehood
apeakunderthehood's picture

http://www.apeakunderthehood.blogspot.com/

GDX ETF which tracks large cap gold and silver miners has formed a lower high earlier this month. See post

 

Wed, 03/16/2011 - 00:40 | Link to Comment Ura Bonehead
Ura Bonehead's picture

The Multi-Trillion Dollar question is: IS it happening now?

 

~~~~~~~reply~~~~~~~

Of course not.  I'm rarely one to step on anyone's right to post, print, write, blog, 'tweet,' 'Face' (our whatever one calls using Facebook)....  But your original Beck-sian post was a little charting 101 about short-term technicals breaking trend lines.  Now Part II is an attempt to correlate these short-term chart movements back to long-term implications of misguided economic policy?

I mean, Charles Nenner at least predicted for us a good old fashioned major war at the end of 2012.  Now THAT'S a good reason to predict (as he did) a correction and 5,000 on the Dow.

Gov saves elite by creating debt, gov then destroys middle class by creating hyperinflation to get out of that debt (al la, Brazil in the early-90s).  That’s the storyline.

Also, this isn’t ‘it’ because the quants and computer programs pushing 80% of volume don’t give a flip about charts OR economic policy.  And the Russian’s running those computers can’t spell Bernanke or Obama.

Don’t over think this, people.  On the bright side....  With an endless supply of Gold Bugs out there talking about $5,000 gold and buying everything that isn't on grandma's pinky, the Fed my be able to inflate their balance sheet out of this mess by watching the value of Fort Knox gold quadruple.

Wed, 03/16/2011 - 00:55 | Link to Comment alien-IQ
alien-IQ's picture

you are assuming there is gold in Fort Knox...and lets be honest here..it is an assumption since it has never been audited or verified. we are taking the FED or Treasury's word for it...and how good is their word?

Wed, 03/16/2011 - 00:36 | Link to Comment alien-IQ
alien-IQ's picture

the answer to the "is this happening now" question can, in my opinion, be found by looking at the $DXY. In the recent past, when the market would drop the dollar would usually rise and vice versa. Lately, that has not been the case. A perfect case in point was todays trading action. despite the massive drop in the market (regardless of the rally into the close), the USD was down...in fact it went straight down from the opening bell. Also, the traditional "flight to safety" that the USD has be known for for, what seems to be, forever...is simply no longer there. It now seems that there is no disaster anywhere in the world, be it natural or man made, that one cannot profit from by shorting the USD. It seems to me that this is a global market sign of "no confidence" in the USD.

So...in conclusion...to answer the question "is it happening now". To me, the evidence screams a resounding: YES.

Wed, 03/16/2011 - 00:35 | Link to Comment prophet
prophet's picture

This is not pattycake, its a multi-generational stick save.

I'm curious how much weight you give slope when evaluating a trendline's importance and whether you exclusively use arithmetic charts.

Wed, 03/16/2011 - 00:16 | Link to Comment automato
automato's picture

And Nero fiddles as Rome burns.

Wed, 03/16/2011 - 00:13 | Link to Comment plata pura
plata pura's picture

It's all figured in.

Tue, 03/15/2011 - 23:25 | Link to Comment tiger7905
tiger7905's picture

To clarify Lndmvr comment above, 'paper' money is debt, cause REAL money is gold.

Martin Armstrong commentary see's $5000 gold with possible upside to $12,000, of course he's like to see a pullback in the gold price in mid Jun 2011

http://goldandsilverlinings.com/?p=248

Tue, 03/15/2011 - 23:18 | Link to Comment UP4Liberty
UP4Liberty's picture

It has been happening while we've been too distracted watching TV!

Tue, 03/15/2011 - 22:55 | Link to Comment Lndmvr
Lndmvr's picture

Maybe Beck could do 1/2 hour on the fed and how money is debt, and how the people are pawns, and all the rest. But I think he would have an "accident" afterwards.

Wed, 03/16/2011 - 07:05 | Link to Comment New_Meat
New_Meat's picture

He's done quite a bit on the Administration that authorized the start of the Fed.  Less so on "Colonel" House. - Ned

Wed, 03/16/2011 - 06:43 | Link to Comment cranky-old-geezer
cranky-old-geezer's picture

Maybe Beck could do 1/2 hour on the fed and how money is debt ...

Let's hope not.  The "money is debt" argument not only obscures the subject, it's also meaningless in a ZIRP environment.

When the Fed refunds back to the federal government all the interest paid on treasury debt held by the Fed, the "money is debt" argument is meaningless. 

Bottom line, the Fed is simply printing money and giving it away, steadily debasing the dollar.  That's what people need to be told.

Wed, 03/16/2011 - 09:29 | Link to Comment FEDbuster
FEDbuster's picture

Agreed.  That most of the interest paid to the FED is refunded back to the Treasury.  So this is a pure money pump into the system with the federal govt. getting the benifit of first use.  One could argue that much of the new money being pumped in is going out to unemployment benefits, social security payments, etc..  The continued devaluation of the dollar is assured, but that is the end game for the FED anyway.  They have already devalued the dollar 97% in the past 98 years.

Tue, 03/15/2011 - 22:55 | Link to Comment Breaker
Breaker's picture

"In simple terms, the only ones who have seen a recovery are the bankers."

The other principal beneficiary of congress' largesse are federal and state government employees. The number employed by the feds has exploded in the past two years. Washington DC and surroundings are the only metro area in the US that has not had a recession. At the state level, much of the "stimulus" package was designed to prevent unionized state employees from being laid off. It's fair to say the benefits to the banking community have been more concentrated. But big taxpayer bucks have gone to State and Federal employees and, via dues, to the public employee unions.

Nice article.

Tue, 03/15/2011 - 22:54 | Link to Comment RoRoTrader
RoRoTrader's picture

In the words of the American patriot John Paul Jones the FED has not yet begun to print.

Tue, 03/15/2011 - 22:52 | Link to Comment FreedomGuy
FreedomGuy's picture

We will find out if our government including the Fed is too big to fail, even with access to printing presses and the entire productive output of the United States (100% tax rate).

Most of us here know the answer.

Tue, 03/15/2011 - 22:52 | Link to Comment john39
john39's picture

the other real question is, intentional or negligent.  i believe the former.

Wed, 03/16/2011 - 00:48 | Link to Comment Bob Sponge
Bob Sponge's picture

A big crisis is needed for TPTB to implement big changes such as a world currency or whatever they have in mind.

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