This page has been archived and commenting is disabled.
Why QE2 + QE Lite Mean The Fed Will Purchase Almost $3 Trillion In Treasurys And Set The Stage For The Monetary Endgame
Recently the debate over when QE2 will occur has taken a back seat over the question of what the implications of the Fed's latest intervention in monetary policy will be, as it is now certain that Bernanke will attempt a fresh round of monetary stimulus to prevent the recent deceleration in the economy from transforming into outright deflation. Whether or not the Fed will decide to engage in QE2 on its November 3 meeting, or as others have suggested December 14, and maybe even as far out as January 25, the actual event is now a certainty. And while many have discussed this topic in big picture terms, most notably David Tepper, who on Friday stated that no matter what, stocks will benefit from QE2, few if any have actually considered what the impact of QE2 will be on the Fed's balance sheet, and how the change in composition in Fed assets will impact all marketable asset classes. We have conducted a rough analysis on how QE2 will reshape the Fed's balance sheet. We were stunned to realize that over the next 6 months the Fed may be the net buyer of nearly $3 trillion in Treasurys, an action which will likely set off a chain of events which could result in rates dropping all the way to zero, stocks surging, and gold (and other precious metals) going from current price levels to well in the 5 digit range.
A Question of Size
One of the main open questions on QE2, is how large the Fed's next monetization episode will be. This year's most prescient economist, Jan Hatzius, has predicted that the minimum floor of Bernanke's next intervention will be around $1 trillion, which of course means that he likely expects a materially greater final outcome from a Fed that is known for "forceful" action. Others, such as Bank of America's Priya Misra, have loftier expectations: "We expect the size of QE2 to be at least as much as QE1 in terms of duration demand." As a reminder, QE1, when completed, resulted in the repurchase of roughly $1.7 trillion in Treasury and MBS/Agency securities. It is thus safe to assume that the Fed's QE2 will likely amount to roughly $1.5 trillion in outright security purchases. However, as we will demonstrate, this is far from the whole story, and the actual marginal purchasing impact will be substantially greater.
A Question of Composition
Probably the most important fact that economists and investors are ignoring is that QE2 will be accompanied by the prerogatives of QE Lite, namely the constant rebalancing the Fed's balance sheet for ongoing and accelerating prepayments of the MBS/Agency portfolio. This is a critical fact, because once it becomes clear that the Fed is indeed commencing on another round of monetization, rates will collapse even more beyond recent all time records (and if we are correct, could plunge all the way to zero). What is very important to note, is that as Bank of America's Jeffrey Rosenberg highlights, a material drop in rates, which is now practically inevitable, is certain to cause a surge in mortgage prepayments of agency securities: "Our mortgage team highlights a 100 basis point decline in rates would raise the agency universe of mortgages refinanciability from currently about half to over 90%." (full report link)
The fact that declining rates creates a feedback loop on prepayments, which in turn results in more security purchases and even lower rates, is most certainly not lost on the Fed, and is the primary reason for the formulation of QE Lite as it currently exists. Indeed, those who follow the Fed's balance sheet, are aware that the MBS/Agency book has declined from a peak of $1.3 trillion on June 23, to $1.246 trillion most recently, a decline of $53 billion, which has been accompanied by $25 billion in Bond purchases, resulting in such direct FRBNY market involvements as $10 billion weekly POMOs. These, in turn, are nothing less than a daily pump of liquidity into the Primary Dealers (who exchange bonds boughts at auction for outright cash) by the Fed's Open Market Desk, which then liquidity is used to the PD community to bid up risk assets.
If we are correct in our assumption that on November 3, the Fed will announce a $1.5 trillion new asset purchase program, the implications of the previous observation will be dramatic. We additionally believe, that unlike QE1, the Fed will be far less specific as to the composition of purchases this time around, specifically for the aforementioned resion. As the Fed adds an additional $1.5 trillion in total assets, and as 10 Year rates, and thus 30 year cash mortgage rates, drop, the prepayment frequency of the Fed's existing MBS/agency book will surge, until it approaches and surpasses BofA's estimated 90% in a very short period of time. And courtesy of its QE Lite mandate, the Fed will purchase not only $1.5 trillion of US Treasurys as part of its new QE2 mandate, but will actively be rolling those MBS and Agencies put to it by the general public. As a result, it is our belief that over the six months beginning on November 3, the Fed will end up purchasing almost $3 trillion in US Treasurys in total. This can be summarized visually as follows:
As the chart shows, while the Fed's balance sheet grows from its current level of $2.3 trillion to $3.8 trillion, it is what happens to the Treasurys held outright by the Fed that is most disturbing: from $800 billion, we expect this number to surge to nearly $3.6 trillion in just over half a year, a massive increase of almost $3 trillion. The implications of this asset "transformation" on the Fed's balance sheet, not to mention those of US retail and foreign investors, and capital markets in general, will be dramatic.
Offerless Bonds?
One of the main problems facing the Fed in indirectly monetizing US Treasurys (keep in mind the proper definition of monetization is the Fed buying bonds directly from the Treasury, as opposed to using Primary Dealer middlemen, which is how it operates currently), is that there simply are not enough bonds in circulation to be bid, under its current regime of operation! Readers will recall that as part of existing SOMA guidelines, the Fed is limited to holding at most 35% of any specific marketable CUSIP. Furthermore, applying the SOMA limit to the $2 trillion in upcoming next twelve month issuance, means that in the interplay of the prepayment feedback loop coupled with collapsing rates, the Fed will need to either change the cap on the SOMA 35% limit, or the Treasury will need to issue far more debt to keep up with the sudden expansion in the Fed's outright, and not just marginal, capacity for incremental debt. Priya Misra summarizes this conundrum facing the Fed best:
We examine the Treasury market to analyze which part of the curve might benefit the most from Fed buying if it embarks on QE2. The constraints will come in term of the 35% SOMA limit as well as current outstandings and issuance profile. Table 5 provides the breakdown of average SOMA holdings and eligible dollar amount outstanding by sector. We estimate that in the nominal coupon universe, there is currently $1.3trillion in outstanding eligible issues for the Fed to buy. We compute eligible number of issues as the amount the Fed can buy without breaching its SOMA limit of owning 35% of the issue size. Considering that the Fed has not purchased 0-2 year securities in either QE1 or the reinvestment program so far, the eligible universe reduces to $935billion. Interestingly, $560bn of this is in the less than 7 year sector.
While the total eligible securities may seem like a low number in the context of QE2, we expect $2.1tn in gross issuance over the next year. Adding 35% of this gross issuance to the total, the Fed will have $1.67tn in eligible nominal outstanding to purchase without breaching the 35% limit. However, depending on the total size of QE2, much of the buying might have to be concentrated in the 2-7 year sector. To the extent that the Fed wants to keep long end rates low, it might have to increase the 35% SOMA limit, or the Treasury could change issuance.
We believe that the resolution to the limited supply question will be found promptly, as the last thing the US government and Treasury need is to be told that they need to issue more debt. We are confident they will obligly handily. From a purely structural perspective, suddenly the entire UST curve, and not just the "belly", will be offerless, as the Fed will now have a mandate of buying up virtually every single bond available in the open market, and then some! What this means is that rates will promptly plunge, and while many have noted the possibility that the 10 Year drops below 1% upon the formal announcement of QE2, we believe there is a very high probability that even the long-end can see rates drop substantially below 1%, while the 10 Year approaches 0%. Keep in mind that this move will not be predicated upon inflation expectations whatsoever (and in fact we believe this is merely the first step to an outright monetary collapse also known in some textbooks as hyperinflation), but merely as a means of frontrunning Ben Bernanke, as the entire bond market goes offerless, knowing full well that the Fed will buy any bond below its theoretical minimum price of 0% implied yield (we leave it to our readers to determine what this means price-wise on the curve). It also means that the Fed will finally cross the boundary into outright monetization, as Bernanke will be forced to directly bid for any new paper emitted by the US Treasury, to maintain the tempo of its purchases.
Asset Implications
As we have noted above, the immediate implication of the vicious (or virtuous if you are Ben Bernanke) feedback loop of collapsing rates, prepayments, and accelerating UST purchases, is that mid-and long-term rates will likely promptly approach zero, as every UST holder realizes they are now the marginal price setter in a market in which there is a bid for any price. The Fed will merely render the traditional supply/demand curve meaningless, and any bonds offered for sale at any price will be bid up by Brian Sack. The implication on stock prices is comparably obvious: to readers who have been confounded by the impact on stocks when there is $10 billion worth of POMOs in a week, we leave to their imagination what the impact on 4x beta stocks will be once the Fed floods the market with $90 billion worth of weekly liquidity, which is what we calculate to be the peak repurchase activity between the months of January and March, as QE2 ramps up to its full potential. In this vein, analysts such as Deutsche's Joe LaVorgna who this Friday came out with a note advising clients not to "Fight the Fed" (link) may take the message to heart. After all, if this last attempt by the Fed to spur asset price inflation, in which Bernanke is effectively telling the consumer that a house can be had for no money down, and for no interest ever, thereby eliminating the risk of price deprecitation, fails, it is game over.
And speaking of game over, we dread to look at a chart of the DXY in early 2011. The dollar will plunge, pure and simple, as the Fed makes it clear that it will not tolerate currency appreciation. Also, don't forget that as a side effect of QE2, another component that will surge in addition to Fed Treasury holdings, will be excess reserves held by the banks. If we are correct in estimating that the Fed's assets will explode to $3.8 trillion, then bank excess reserves will skyrocket by a factor of 150% from the current $1 trillion to well over $2.5 trillion. The immediate casualty of this will be the US Dollar: one needs to look no further than 2009 to see what happened to the DXY when excess reserves increased by $1 trillion, in order to extrapolate what happens when it becomes clear that Bernanke is prepared to put any amount of liabilities on the Fed's balance sheet in its latest reflation attempt. And if anyone had doubts about the Fed being able to successfully absorb $1 trillion in excess reserves accumulated through QE1, all those concerns will be put to rest once the number hits $2.5 trillion, or more.
Which brings us to gold. Needless to say, once the full "all in" realization of just what QE2 means for risk assets and capital markets sets in, gold (and other physical commodities) will promptly go from its current price of $1,300 to a number well in the five-digit range. We leave it up to our readers to provide the actual digits.
In summary, David Tepper may well be right that stocks will benefit from QE2, as will Bonds and as will commodities. In fact, every asset class will explode in a supernova of endless liquidity. To be sure, all of this will be very short lived. Very soon, all those assets denominated in fiat paper, will promptly collapse in the great black hole of reserve currency devaluation, as it becomes clear that the Fed will stop at nothing to win the race of global currency debasemenet. And of course, none of this is to be confused for an actual improvement in the economy, as QE2 will result in a dramatic and irreversible deterioration in the US, and thus global, economy, which, once the initial euphoria from QE2 recedes, will promptly progress to isolationism, protectionism, currency wars and exponentially accelerating monetization of each and every asset class, thereby rendering price discovery irrelevant, as central banks around the world stampede into irrelevant capital market, each buying up as much of everything as their printing presses will allow them, until the ink runs dry.
At this point we refuse to pass ethical judgment on the Fed's actions. The Fed will do this action regardless of what happens on that other fateful event scheduled to take place on November 3. If it does not, asset prices will collapse leading America into a deflationary vortex of deleveraging, and Bernanke is fully aware of this. The only reason the market has found some validation to the September risk asset surge, is the "certainty" of QE2. Were this to be taken away, stocks would plunge, as would all other assets. And since the Fed is uncontrollable, and unaccountable to anyone, it is now impossible to prevent this line of action, whose outcome is what some may be tempted to call, appropriately so, hyperinflation. The direct outcome will be an explosion in all asset prices, although we continue to believe that of all assets, gold will continue to outperform both stocks and bonds, as recently demonstrated. Those who are wishing to front-run the Fed in its latest and probably last action, may be wise to establish a portfolio which has a 2:1:1 (or 3:1:1) distribution between gold, stocks and bonds, as all are now very likely to surge. We would emphasize an overweight position in gold, because if hyperinflation does take hold, and the existing currency system is, to put it mildly, put into question, gold will promptly revert to currency status, and assets denominated in fiat, such as stocks and bonds, will become meaningless.
And while Zero Hedge refuses to condemn what is now openly an act of war against the US middle class and the country's holders of dollar-denominated assets, by Ben Bernanke, who is fully aware what the implications of QE2 will be, we were delighted to read a brief note by none other than Bank of America's Jeffrey Rosenberg, who analyzes the costs of QE2, and comes to a politically correct conclusion which recapitulates everything said previously.
The costs of QE 2 in our view however go beyond the cost benefit analysis Chairman Bernanke highlighted in his Jackson Hole speech. There, the Chairman highlighted two key risks to additional purchases of longer-term securities. First, that they do not know with precision the effect of changes in Fed holdings of securities on financial conditions. On this point we have emphasized on numerous occasions that the main consequences of QE1 to date have been financial asset inflation. Further purchases under QE2 hence in our view would likely be limited in impact to furthering this process of asset inflation. However, the costs of even further asset inflation would likely accelerate the risks associated with what we characterize as conditions conducive to the growth of a credit bubble: low global yield levels, tight credit spreads, and an excess of demand for credit relative to supply. While those characteristics create asset inflation and form the backdrop of our near term bullish outlook on risky asset class performance, the risks of sparking future credit bubbles with their attendant systemic risk consequences grows under a scenario of QE2, in our view.
It’s the (lack of) confidence, stupid
The second risk highlighted in Jackson Hole by the Chairman concerns the confidence effects of Fed’s ability to exit accommodative policy and shrink the size of its balance sheet. While we agree with the notion that the key risk is one of confidence, the confidence impact of greater near term importance may lie less with concern over the Fed’s eventual ability to exit and more with what expanding QE2 says about the Fed’s confidence in its ability to utilize monetary policy to address deflationary risks.
Bernanke acknowledged that fiscal policy needs to be part of the policy response and that “Central bankers alone cannot solve the world’s economic problems.” In our assessment, further liquidity injection beyond some additional marginal transmission mechanism into mortgage refinancing or housing affordability would achieve little impact on the real economy. Much of the liquidity benefit of QE1 for the commercial side of the economy already remains on display in the form of very high rates of corporate refinancing activity. Additional rate declines from QE2 would add only marginally to those trends well underway. For smaller corporates or small business, QE1 did little to expand lending, though QE1 likely did prevent even further declines in lending. However, QE alone appears incapable of leading to expanding lending as the problems today shift from one of supply to one of demand. Chart 5 illustrates the stabilization of lending and how most of the Fed’s expanded balance sheet remains in the form of cash, not loans. Chart 6 shows that even as banks have eased underwriting standards, the demand for loans remains low.
Rather than liquidity – and its potential augmentation from expanding QE - the key issue behind the inability to see credit expansion and the weakness of monetary policy more broadly to affect a more positive economic outlook is confidence. And this leads to our final cost analysis on QE2. Where confidence stands as the key issue for the economy, expanding QE2 may end up doing more damage than good as the confidence loss from a Fed indicating its fears of deflation through expansion of QE2 as well as the follow on loss of confidence from the diminishing impact of further QE leads to a loss in confidence whose costs outweigh those of the benefits of further reductions in long term rates.
Perhaps at this point it is prudent to recall what the first definition of credit is:
1. Belief or confidence in the truth of something.
By that defintion, America's "credit" has ran out.
»
- 85284 reads
- Printer-friendly version
- Send to friend
- advertisements -
If gold reverts to it's true role as money, what happens to silver? It's hard to buy food in gold, and silver has all been consumed through industry. The demand for silver as money could be truly astronomical. The only thing that scares me about silver is the collapse in industrial demand during the chaos. Which force will be more powerful determines silver's future.
Increasingly, the notion "money == gold" seems better and better. While I have nothing against silver (at all), having 2+ conventional forms of "money" causes problems, especially when one has considerably more non-money applications than others.
To make coins with small quantities of gold (1 gram, 1 milligram, or even 1 microgram) is not difficult. I can easily envision them being made as alloys with small percentages of gold (in mostly copper, nickel, etc). I can easily envision them being made as tiny coins or bars of gold inside a larger acrylic plastic disc.
But even if we do try to make a multi-metal "money" (gold, silver, nickel, copper are common in monetary coins already), you need to understand that the value of gold and silver must increase by 50~100 times to retake their place as money (ditto for platinum and palladium if they were to become monetary).
The revaluation is necessary to represent the current total value of all money in the world with the currently existing supplies of the metals chosen as "monetary".
No matter how you slice it, this would require the metals be "revalued", which is simply removing the fraud that has been hidden by central banking --- that they have destroyed the world economy, and hidden the true extent of wealth redistribution to non-productive gangster-banksters and government thugs.
A $20 gold piece from 80 years ago (one ounce of gold) is now worth $50,000 to $500,000 in fiat dollar terms when smoke and mirrors are removed. This is why holding physical gold is wise.
One major risk with silver is... that it might not become a "monetary metal" when the world of fiat collapses. In that case, silver would drop while gold soars.
Ehhh, maybe $50,000 to $500,000 in hyperinflated dollars, but not in real terms. I love gold as much as the next guy, but people are not going to be trading their gold necklaces for a small house. I can definitely see $5,000 to $10,000 in real terms, which is plenty. All the gold ever mined still exists, and the value of that gold is over $6 trillion. If gold goes to $10,000, all the gold ever mined is worth $50 trillion. A global money supply of $50 trillion is more than enough, significantly less would do just fine.
No need. Prices will go down based on the silver and gold money. Here is my scenario: You would see a McDonald's meal (currently 5FRNs) priced at .25 silver or 50FRNs at the window. Most european countries went thru the dual currency conversion where they priced everything in local currency and euros for a while until they no longer accepted the local currency. So it wouldn't be a stretch to walk into China-Mart and see US made goods (not enough profit margin to continue to import from China in gold), and paying hard silver at the cash register. Within months you would see banks re-open with gold/silver accounts available and debit cards drawing on your gold/silver deposits. You could negotiate your salary in gold or silver payed as allocations to your accounts from the bank's vault. Of course, your 100k a year salary would now be an ounce of gold a month, but at least your could draw it form the bank as cash (gold and silver eagles) on demand.
"Monetary metal" or not, Silver is still called a "Precious Metal" for a reason.
One thing is for certain when there isnt any physical gold available from the dealer at any price then where is Joe going to put his rapidly depreciating savings?
loving your all seeing eye
nice, isn't it?
ha nice one, more all seeing eyes please!!!
Ask and receive
And meeee...
great work...here's some more
www.vigilantcitizen.com
I can easily envision them being made as tiny coins or bars of gold inside a larger acrylic plastic disc.
Exactly what I was thinking. Alternately a clear plastic window showing a minute quantity of metal could be incorporated into a linen bill with all the latest anti-counterfeiting measures included.
"The only thing that scares me about silver is the collapse in industrial demand during the chaos."
most silver is produced as a by-product of mining the base metals
in the collapse scenario you are concerned about, new silver supply drops by a significant percentage (60%? more?)
in the collapse scenario, demand for tangible goods (silver, gold, bedpans, etc) increases as people try to protect any non-tangible wealth they control
significantly decreased supply, significantly increased demand - what do you think that does to price?
as FOFOA explained in his excellent article yesterday, price has to increase to fill the imbalance between supply and demand
""The only thing that scares me about silver is the collapse in industrial demand during the chaos."
Silver is one of the only two forms of "real" money...dont be afraid...
buy it while u still can afford it...
Suppose the Treasury made a surprise move to forgive the repayment of interest and principal on bonds held by the federal reserve (and no one else). I mention this only because these guys must have an end game plan that nobody is expecting. After all, a parasite does not want to kill its host. I just cannot believe they are going to intentionally bankrupt the country as many have speculated. I would look for a rabbit from their magic hat that no one is expecting.
"After all, a parasite does not want to kill its host."
As long as more is spent than is taken in the parasite will have sustenance. The parasite feeds on debt.
Actually parasites do end up killing their host eventually if left to fester and go untreated. Even a simple tape worm eventually breaks out of the stomach lining and goes for the heart. And that's one of the more benign treatable bugs out there. Want to see something neat, go look up the bot fly on youtube.
Anycase, after the idiot sticks are finished the host of the body politick and the financial system, there really won't be anything worth saving. Couldn't donate that body to science fiction afterwards.
"these guys must have an end game plan that nobody is expecting"
Stewart Thomas thinks the end game involves the re-valuation of gold by the central bankers of the world
the Fed announces they are a buyer of gold at $5000/oz and all assets get re-valued relative to the new gold price
all of the connected people (Pimpco, Buffet, TBTF banks, etc) have fore-knowledge of the re-valuation so they get to make boodles of money on both sides of the event
the first re-valuation buys them some time (18 months maybe?) before the next re-valuation is required perhaps at $10,000/oz
realize that bankers (and by extension, govts) don't care what the price of gold is as long as they can continue their fiat money games - a gold re-valuation might let them continue the party for awhile longer (the party that only they and their friends are invited to)
somewhere along this re-valuation path the banksters make a margin call on the short-of-gold derivatives that they required the miners to sign when they financed their mines (see Jim Sinclair and Stewart Thomas for an explanation of this)
the miners are unable to meet the margin call and the banksters take possession of the mines in lieu of payment on the short-of-gold derivatives
end game: gold re-valued at a price that allows the fiat money games to continue ($55K/oz?) and banksters own most of the gold mines
the only game-changer in this scenario is if we get a CONVERTIBLE currency - ie, a paper (or digital) currency that can be converted to some tangible good - it is the CHOICE to hold the paper currency or CONVERT it to the tangible good that lets the people put a check on the fiat games that banksters and govts play
I capitalize CONVERTIBLE to differentiate it from BACKED BY - 'backed by' is just a marketing ploy to help uninformed humans accept a fiat currency - look no further than the Euro for a modern-day example of a fiat currency which is backed by gold (supposedly 15% at its inception)
Excellent, except the mines will be nationalized before the banksters are allowed to repo them.
And/or the banks will be nationalized, after the bansksters are in prison for fraud.
Easy enough to do when enough sleepers awaken. We are at 10% awake IMO. Remember that a politician's first priority is to get (and then stay) elected.
And re: convertibility? Read FOFOA's posts on Freegold.
Aren't the politicans just the pawns / front men?
Excellent. This is how we stumble upon gems in ZH.
That is exactly I think EUR/BIS have in mind. FOA/ANOTHER mentioned this more than a decade ago. BIS will display the real prices for Gold when Paper Gold prices burn in huge fire. Miners are toast and nationalized when they cannot deliver on their promise to supply contago Gold far into the future.
"Perhaps at this point it is prudent to recall what the first definition of credit is:
.
A QE2 could also be 14 trillion dollars wipping out the entire deficit which would be the biggest reset button in history!
The dollar would only lose 50% of it purchasing power but the boom in economics would be so great that the disorder created from a QE2 of that size would be forgotten in 1 year time.
I own a pretty large amount of gold in my terms but to believe it will go X40 is a bit to much to believe. X2 maybe but not more then that. And even then I would be VERY VERY happy with that.
only x2? ... set your eyes for suprise ... there's a whole bunch of short contracts to be closed out from the years of price supression...It will overshoot fair value x 10 before it returns to it.
I'm with you on something like 10x. It'd seem like Wiemer Republic if it went to 50K and no one wants that, even if I'm sitting on gold. I'd run out of ammo.
Just re-reading "When Money Dies".
Pre war Mark to the Pound (sterling) eventually multiplied by the number of yards to the sun...and all the way people kept expecting it to fix itself. They did not understand what was happening. They thought prices were going up.
If gold goes 10x it'll go 50x and if it goes 50x you won't be able to buy it with dollars....and all the time people will keep expecting it to fix itself.
No one believed what was happening...even J M Keynes had an opinion and was out by a factor of 13 on his prediction for the Mark in a 3 month time frame...I am going to look up German WWI Reparations and compare it to US debt as a % of GDP...are we there yet?
"When Money Dies"
an interesting book - I just finished reading it - very dry reading but fascinating insight into the times
the numbers required for the debasement of the currency intrigued me - the world didn't have experience at the time with huge numbers and one of the finance ministers talked about the 'madness of the milliards' - they eventually had to talk about quadrillions
also interesting that they had to coin new words (milliard and billiard) to describe the massive devaluation of their money:
"In dealing with the stupendous figures with which Germany wrestled in the Weimar period, the book maintains the same numerical designations as were used then and as appeared on her banknotes. That is to say, when a milliard meant one thousand million, when a billion was still a million times a million, when the term billiard was coined to indicate a thousand times more, and a trillion was 1,000,000 cubed."
I don't think we will see that day
The day gold rises 150-200 dollars a day will be the last day markets and banks are open,
Mark my word, Nobody can trade gold for any price
Then SHTF Until then American Idol is No 1
Lets sing n dance baby!
What we the peasants do is pretty irrelevant. I believe what is more important is what foreign Central Banks do with their funny money. At the moment they're suppressing their currencies to front run Ben and to boost exports but at some point, some will be forced to support their currencies to avoid hyper inflation.
You're still X-ing in fiat, Raging. X(the moon if not Pluto) when FRNs collapse. Not soft, not long enough, and certainly not absorbent.
Everybody expected such things, just didn't know if it was going to be euthanasia by slow atrophy or a nuke. Looks like Dr. StrangeBernankelove has decided we get the economic mushroom cloud. A whiff of this will stampede the herd and make game over, as Tyler says. This is a default insofar as it renders payback to foreign creditors meaningless, so I wonder how they are gonna like them apples.
Speaking of wars, the one on the middle class that is, it is indeed confiscation of their stored value as well, and a default on the promise of full faith and credit of the USA, aka subsidiary of the Federal Reserve.
Time to end the Fed, or is the Fed already ending us?
This website is in the top 1500 websites on the planet. Many people have a whiff. And they stand there motionless watching.
speaking of which.. anyone have any links to surburban back yard root cellar design/building? I want to go all late harvest crops that I can pull from the earth after the 1st cold hard frost and load a cellar with same which should keep them good up to 6 to 8 months.. potatoes, beets, carrots etc. I need design ideas though.
Potatoes can be simply left in the ground. Several hundred years ago many Europeans switched from above ground crops to potatoes because rampaging armies can't destroy or confiscate the produce so easily. Potatoes in the cellar can be easily looted. Potatoes in the ground can be dug up for each days meal and are much safer from looters. Think "deep storage."
It has also occurred to me that if I want to use the space available in my highly visible front yard for growing food, potatoes would be better than tomatoes or corn for the same reason.
Thank you so much.. I had never considered that. I must must must know more about these things of which you speak!! I will still need some way to store the beets, carrots, kale, cabbage etc but as for the potatoes if what you say is viable, this is huge to me.
I grew potatoes last year and left them in the ground. We had a harsh winter in PA, third coldest with 2nd worst snowfall if I recall correctly. I dug the potatoes in the spring and they were perfect. If the potatoes freeze, they could rot. Perhaps the snow helped to insulate them. A layer of mulch would likely work as well. Search Google for overwinter potatoes.
In any case, one might harvest some and leave others in place. The remaining potatoes are secure from human mischief and have the added advantage of providing you with a "seed crop" (actually a root crop -- you don't grow potatoes from seed) if you've made the mistake of eating all the potatoes in your shed.
Another good crop for subsistence eating is collard greens. They are biennial, meaning that they live two years and seed in the second year. Collards will start putting on green shoots in the late winter or early spring and can provide nutrients (but not many calories) in the early spring when your fresh food supply is lowest. Collard greens are cruciforms like cabbage, brussels sprouts, cauliflower, mustard, radishes etc and if grown in proximety will cross with each other and the resulting seeds will have unknown results. If growing multiple cruciferous plants and you want to collect the seeds keep them separated.
You should also learn about which plants and trees fruit at any given time. Cherries for example produce about mid-June. Apples will produce later in the season. If you plant the right mix of plants you can have crops which become available throughout the season ensuring a steady food supply.
Cabbage is another easy one. Just leave it in the field and let the snow cover it. The outer few leaves will be brown and inedible, but the rest of the head will be fine.
My potatoes are self regenerating. Yes, leave them in the ground, only take what you need. My problem is thinning them out every year so they don't take over. Abundantly self propagating plants/crops are very important. That is why I also like Sunflowers. Sunflower seeds have a lot of nutritive value, you can extract oil from them. I have the same problem with Sunflowers as with my potatoes and a few other plants. It is a nice "problem" to have when your food crops are reproducing "out of control". Also helps if there is total chaos, if you can't plant your crops because of chaos. You will know that some of your food crops will still produce whether you are there or not. Johnny Appleseed. Plants, of course, will be differently self propagating depending on your climate, so you need to learn which ones will do that in your area.
Also, don't get the stupid potatoes that most American's eat. As with "heirloom" tomatoes and such, grow potatoes that have more and varied nutrition. Some of the Peruvian potato strains are very hardy under different climes and pack more of a nutritional punch, can be more resistant to mold, slime, other diseases.
potatoes? or is "potatos"? i've always had trouble with English. How about you?
i have been buying potatoes from the local farmers. all colors. purple and little, yummy. grill them with an olive oil marinade. he told me they last longer if you don't rinse and clean them. didn't know. my little farmer market homey's are so nice and friendly and i ask them all the time how business is and they say they are hanging in. i commend and praise them every time i buy from them. i go around and share the love with several different stands.
My potatoes are self regenerating. Yes, leave them in the ground, only take what you need. My problem is thinning them out every year so they don't take over.
Are you planting new taters in a field previously used and therefore getting the planted crop plus volunteers or are they all volunteers? Do you have a method for harvesting which encourages an even development of those volunteers or do you fill in with new planting or what?
Thanks! I'm new to potato growing but -- hell, I'll just say it -- I dig 'em!
Planted once 10yrs+ ago. See Davey Jones below, we should all be thinking permaculture and "guerrilla" crops. The only crops I "replant" are ones that are not nicely self-propagating in my clime. As long as you thin rigorously, or let the wildlife get some (attracting wildlife may be a good thing, source of protein if ya really need it), you can prevent disease and pests. I also do Johnny Appleseed or guerrilla gardening in "public" or wasted spaces. Just chuck out the seeds or tubers or whatever. Most people think things like Amaranth are weeds. My "volunteer" plants like tomatoes or cukes are usually the strongest and most pest/disease resistant, Darwinian gardening, coddled plants are often weak.
research the perennial vegetables and permaculture. Elliot Coleman has done some great work on growing through all seasons. Check out the Apios americana, native americans depended on them to survive and so did the early europeans, great source of protein. Quinoa and amaranth are also incredible protein sources and easy to grow. Also agree on the comment about peruvian potatoes. Hazelnuts will produce nuts quickly unlike most of the nut trees. Also a decent idea to research the wild greens and weeds that are edible. Some, like the dandelion, have an overwhelming amount of nutrition compared to domestic crops and are also perennial due to their long taproot. One of the best sites out there is "plants for a future."
it just hit me, you know the shit is hitting the fan when sites like this and Martenson are starting to talk about the other dirt.
dandelion wine. Paul Soldner, famous potter. we would make danelion wine around the raku kiln firings. F U N
Apios americana = beans & tubers, nice!
have to 2nd ya on the amaranth...amazing plant, incredible yield, self-seeds like a weed. plus it's a hyperaccumulator in case you have any plots that need bioremediation. experimenting with some quinoa this fall/winter.
DJ/kali : many thanks for the tips. to me, this is true wealth, freely sharing information that we can all benefit from and that does not take from anyone else. scarcity may only exist because we choose to limit the capacity of our imagination. are zero sum games a distraction?
couldn't agree more. Forgot to mention edibleforestgardens.com Their books are amazing. This is how we did it for thousands and thousands of years. That's the best thing about permaculture and edible forest gardens, your food is protected and masked from human and non-human pests
scatter:
dig a hole, pour concrete stem wall, put up masonry block wall w/ dirt floor, waterproof walls/lid if below grade. access/door design/placement up to you..................
http://www.motherearthnews.com/Do-It-Yourself/2004-12-01/Build-a-Basement-Root-Cellar.aspx
Also is you have access to an unused deep freezer; then a hole in the ground and use of the freezer as opposed to concrete will work as the freezer is already insulated; plus it has a lid.
I read something interesting recently about growing algae as a food source. I am having trouble finding the link I originally looked at but found this which is interesting as well:
http://shareable.net/blog/is-algae-the-shareable-answer-to-food-energy-crises
Algae really does have a lot of promise as a food source, bio-fuel, etc.
Sure beats the alternatives.
+1000 Great picture but yeah I am not quite ready for the soylent green alternative - yet ;)
Just because you aren't doing anything doesn't mean no-one else is doing anything.
Probably most readers have at least some sort of plan, and have set aside some sort of investment for such an outcome. I certainly have.
The focus of this website is still on convincing the majority, not what to do once you accept reality of whats on the other side of the Keynesian rainbows out of Oligarch assholes. Other websites are taking up that position under the guise of "prepping" where you can see more about root cellars, year round crops and how to hide your firearms in your yard.
Doesn't it seem odd to everyone that the only talk of response is taking care of oneself and not overtaking the ones who caused the problem? Why is that? It's fear. Don't give me the teaparty response with your poster board signs and roadside rah rah. That's like throwing spitballs at an aircraft carrier. A real teaparty that is dressed in war-paints carrying weapons and making advances in the dead of night is surprisingly still not in existence (at least openly). Why is it that ZH has to hide behind pseudonym's running around in demilitarized zone countries behind firewalls like they're this years incarnation of pirate bay? It's fear. People are afraid of their government, they're afraid to act.
I mentally and physically started preparing three years ago and feel like I'm living a dual existence ever since. It's the balance of not being locked up for insanity, divorced or being accused of starting a militia vs what we know is coming consuming the entire day.
I have a fitting video for the moment we are about to be in: http://www.youtube.com/watch?v=8TLD3Z6sJWA
But in the end, as is this post, it's still more watching and less acting. But the tipping point is closer every day, every article, every neuron finally being fired up and a cold chill slowly racing down another spine. Not just the spines of the victims, but those who have perpetrated such crimes and realized they are now exposed. The justice that they realize may actually arrive in their lifetimes once the point of recognition arrives and animal instinct and survival rules the day again instead of fiat fantasies. I mean we all know "mother nature always bats clean-up".
Great video from a great movie. I was thinking more of the part where the little girl wearing glasses and the V mask was killed by the fingerman. He was then promptly torn to shreds by the angry mob that formed around him in an instant.
We only need to be ready, alive, and have the resources available for that moment. Running around playing guerilla isn't going to do a damn thing except get you killed, and force people over to the other side. Let THEM be the aggressors. Don't give them a target to strike at. When the time comes, it will be obvious. A peaceful protest turned into a bloodbath on national TV, a large number rounded up and spirited away to some camp some where, a child murdered by police. Anything can be the trigger. Thing is, THEY have to pull it. This derives from human beings inborn understanding of the non-aggression principle. People will only rise up under certain circumstances, and forcing them to make a concious decision beforehand lessens the odds that they will side with you, and is instead more likely to lead to further consolidation of government power (see 9/11).
Looks the Mayans might have called this one correctly.
I guess if one expects gold to go up 10X , maybe 40X in a hyperinflation - the thing to do is lever up and go balls=to-the wall. Oh - and steel ones'self to ignore any little 30-50% corrction along the way - treat such correction with equanimity - secure in the knowledge that one is about to make 5-20X one's capital. Right?
i'm no historian but i'm guessing once hyperinflation sets in it can't be put back into the box. Therefore assets will go to infinite value in USD terms...this x10, x100 or x1000 in USD terms is just a messure of time as the USD returns to it's intrinsic value...0
There's a storm coming that the weather man couldn't predict - Eminem
www.vigilantcitizen.com
It's not a straight line.
Again, in "When Money Dies", the Weimar Gov't decided to support the Mark in February 1923, it was trading at 50,000 to the USD and went to 20,000 almost overnight... creating a stock-market collapse and currency speculators got burnt...by April when the Gov't could not support it any more it went to 100,000 to the Pound (sorry 'bout the currency change)...add some attempts by Herr Hitler to disrupt the May Day workers march and by the end of May it was 200,000 to the Pound...
Not all assets went to infinite value...Daimler Benz share price went up 15 times or so but the cost of their cars to such an extent that for the price of 327 of them you could have bought the whole firm, the stock, the land and equipment. US students bought rows of houses from their allowances. Hemingway was there, paid 38,000 Marks for a bottle of Champagne at lunch, the year before his de-luxe hotel room was just 600 Marks a night.
And all the time people blamed country folk for hoarding food, blamed the Jews, blamed the French (they got that right) but lashed out at everyone and the politicians took the easy path every time, no hard decisions.
Sold gold for essential food and coal...even when they had enough to back a new currency. No hard decisions were taken until matters were taken out of their hands...
But, this time is different.
Yup, world population is 6x the size, 5 billion person increase. And finding people that can perform the most rudimentry tasks is diffficult (sew a button on a shirt, repair a sock, basic carpentry, basic plumbing, etc) in the first world is a lost cause. Most of the infrastructure we rely on is 50 years old or older (building may be refinished but that elevator is as old as the building, bridges, overpasses, civic sewer, electrical, gas distribution, etc)
What has happened is we ignored the maintenance and adopted social programs that really didn't contribute anything to the requirements of an expanding human foot print. Just look at Nasa, the private secotr space programs are 30 years ahead of the ability of that dried out husk of a social program.
...the politicians took the easy path every time, no hard decisions.
My greatest fear, and one that no one will be able to assuage. Politicians specialize at pandering, nothing else. They know nothing, care about nothing, feel nothing; they are completely amoral and perfectly sociopathic. And the masses are gullible enough to follow them into oblivion.
So... this won't actually impoverish everyone as money goes into not gold but paying for the gas needed to get to work. Or a minimum of food needed to keep a family alive. Wholesale populations won't be selling everything else.
Screw gold. If this going to happen Goldman Sachs will know well beforehand and prepare accordingly. They have more valuted gold than most nations anyway.
That's worth some further investigation, can that ascertion be backed with facts?
They own Metro International Trade Services.
That company that GS bought doesn't even warehouse gold. They do aluminum, aluminum alloy, copper, lead, nickel, plastic, steel, tin, zinc....
They warehouse for ETFs.
Not for gold they don't. Produce a link to support the thesis that Goldman is holding more physical gold than most countries.
Bernanke -- "Central bankers alone cannot solve the worlds economic crises."
No, but they can sure cause them.
Too effing right: I'm not a violent man but that quote causes involuntary fist-curling!
Jim Rickards has mentioned this notion before, just a couple of months ago as one possible Fed option. Saying the Fed could take action to kill the fiat, forcing gold to $5000-10000 (or higher?) and making US gold reserves useful again in a move towards a gold standard. Rickards was just speculating at the time on one option the Fed could choose. With Tylers post, looks like the road signs are pointing due south for the USD.
Significantly, Rickards repeated this again, GATA reported on 9-25. videotape (CNBC?). If that's the case, we better get an audit and assays pronto of all the gold in UST for good delivery, and tungsten plugs. We don't need fiat gold.
If anyone on here thinks we have 8000+ tons of Gold in 4 different locations left.
Ft Knox, West Point,NYC Fed Treserve Bank, and one more I forgot at the moment.
I have some swampland to sell you.
Just the fact NO one has audited it except the Fed,nor has access to do so, tells me all I need to know.
Also, 8000 tons of Gold is squat compared to our obligations.And no way it get's revalued to 50koz,to get there.
If it did,no individual would be allowed to own it.With 50% of the known above ground suppply in ordinary citizens hands, and in Central Banks.
I agree with the general picture that QE2 will be inflationary and initially will push up stocks. And I completely agree that it's the endgame. But I doubt QE will push MBS rates very much lower or accelerate early repayments of the Fed's GSE-agencies all that much. There's no way it could spur early repayment of the entire $1.25 billion that the Fed's holding in just six months.
Besides, if refis did sharply accelerate, the Fed could start buying GSE-agency debt again. Refis repay old MBSs from the proceeds of selling new MBSs. The Fed for now is letting others take those new ones.
http://keynesianfailure.wordpress.com/2010/09/24/why-this-time-qe-really-will-spur-inflation/
For longs, I'm sticking with physical gold, grains (plus cotton), and oil. Stocks and bonds? Heh, No way.
People think QE2 is great and bidding up appl and goog is good for the economy; QE2 isn't great, but rather it is the death knell of America.
QE2 isn't great, but rather it is the death knell of America.
So right John. The Great Student of the Depression spent so much stupid time trying to study how to prevent IT that he never once, not for 1 f-ing minute, thought about the simple truth that IT was NECESSARY to properly move forward. Wake up BEN!! You are sacrificing the decades of prosperity we COULD have had to save a dying system riddled with financial termites.
If the USD goes into melt down then the global economies are also in shit trouble. I cant see why people would go to the AUD given our property bubble.
one to rule them.
Just picture this graph is Dollars.
http://en.wikipedia.org/wiki/File:German_Hyperinflation.jpg
yo!
any ideas for guests for "Keiser Report" send them to max at maxkeiser dot com
it's been a few months since we had Tyler on - time again perhaps.
John Snow- Mr.Strong dollar Policy.
yeah and this time we don't wanna see pic of Brad Pitt either:
http://www.youtube.com/watch?v=AqKFaYjqE2Q
OH, i had no idea that tape existed.
menage au trois: MAX KEISER face with tyler's voice. OMG.
i am in between, C U M !
where is the rest of the interview?
+ infinity: Tyler on.
There is no such endgame....
More volatility...yes....
.......................
Bottomline....When FEAR brings all to one side of the boat....
Go to the other...
This will be a classic "one side" play....
Interest rates can and will be very low for a long long time....
In the case of the US...longer than Japan's scenario....
TD - the analysis only covers half the equation: fiscal policy drives the outcome. Currently, the mix is deficit spending having lt multipliers of 1.0 or less. In effect, the "Stimulus" more or less simply digs a hole. Thats what the Fed is being forced to bank
Net, the essence of confidence is a shift in fiscal, one toward policies with a multiplier greater than 1.0, even if the net deficit remains at current levels.
Absent that, one has to play the trend
This was geithner's plan during the fall of 08. Those who are aware of this process knew that $700 billion or $1.4 trillion was not going to be enough. Even guarenteeing $12 trillion in debt wasn't going to do it. His idea, correctly using the insano logic, was to guarentee all debt, which is precisely what they've done. Buying it up is just a small detail of convincing people you're not printing money. Call it "reinvesting the profits".
Long: use of the word quintillion.
Isn't the net net effect of this the same as today if credit doesn't expand to get people to spend (rapidly) devaluing dollars they don't have? If we "built up" the economy based on credit and not actual wealth isn't the net effect the same unless we greatly expand available credit again? This is the part I just can't figure out how this would "work" (even in the short term).
Whatever they do, let's all just hope they get it right. I liked the economic conditions in 2007 a whole lot more then todays!
I aint buy'n nuttin. I'll just steal it.
Steal a casket first.
Nah. He wouldn't have 6 friends to carry it.
The part I have trouble resolving is other governments. Surely they will want to get out of dollar denominated positions prior to the fed defaulting by devaluation. And what is in it for the banks when the fed blows up it's balance sheet and the dollar isn't worth anything?
Like Rudolf Hoess, the infamous commander of Auschwitz, Ben Bernanke is diligently fulfilling his duties like any good little narcissistic sociopath would. Blissfully ignorant of the unimaginable destruction his "work" will impart on the nation and the world, he views his task as something that simply must be done. He truly believes that his cause is just and his methods are pure. That is what makes him so dangerous. We the (mostly) powerless, need to do everything possible to see that this man and his corrupt institution are someday held to account.
Well said, he knows.
If you mean "Hess" he was no Jew-killer. He flew to Britain just before the so called "invasion of Russia." He lived to old age...unusual for that set. Still..."he died in prison." He did have a fine epitath, tho. "I took the risk" it said.
He did it his way.
Please see the link below for Rudolf Hoess, NOT Rudolf Hess, who you refer to.
http://en.wikipedia.org/wiki/Rudolf_H%C3%B6ss
Rudolf Hoess was NEVER the commander of Auschwitz. He was Hitler's hand-picked Deputy, who flew a quixotic mission to Scotland to argue for a separate peace before the war with the Soviet Union began. One could argue that he was far from a sociopath, and indeed wanted a break from the Nazis (but there are many conspiracy theories about the man who eventually died in Spandau prison, including one that posits that he was a substitute for the real Hoess). Whatever the truth of the matter, the premise of your argument is inherently false. Perhaps you were thinking more of the head of the SS, that little slimeball Himmler. He also was never the commandant of Auschwitz, but he oversaw all SS operations, including those dealing with the camps. Please check your facts before you post.
Rudolf Hoess (not to be confused with Rudolf Hess) was convicted at Warsaw and executed by hanging. Maybe this link will help you my friend. My first MA was in Military History. Believe me, Rudolf Hoess was a sociopath, not unlike Ben Bernanke.
http://en.wikipedia.org/wiki/Rudolf_H%C3%B6ss
If this occurs, commodity prices will skyrocket!
What am I saying? They already ARE skyrocketing! Except for crude oil, commodity prices are approaching price levels not seen since the 2008 commodity bubble!
Prices denominated in what? Tyler posits fiat--all fiat--collapsing to zero value. As he suggests, there's an argument for strapping yourself to the rocket for the ride until the "inflection point" is reached, but how much faith do you have in your timing when you don't know how much fuel is in that rocket engine or, consequently, when gravity will violently (albeit impersonally) reassert itself?
My problem here is the same one I had back during the y2k hysteria. All the doomsters back in the late 1990s were basing their predictions on the idea that they were the only ones who saw "the truth," that everyone else -- the programmers, systems managers, CIOs, CEOs, etc. were apparently too blind or too stupid to see what could happen on 1/1/00. Naturally, the doom-and-gloomers were wrong. The programmers et al worked their butts off and y2k was a big nothing as a result.
Same problem now. If Tyler and everyone else here, including me, can see the logical outcome of this insane QE-2 strategy, why can't Bernanke, Geithner, bank presidents, economists, etc etc see it? And if they can see it, why would they do it? I raise this because I keep getting the feeling I'm missing something, an alternative outcome. The ones that come to mind frankly scare me to death, so I'm hoping finer minds than mine have some answers.
It's because the schools of economics they studied at do not acknowledge that our money is debt.
You bring up an important point: With Y2K, the "doomsters" were doomsters because that's how they made money. It was sensational. They sold books. They got speaking engagements. They got seven-, eight-, and nine-figure government contracts. The hysteria triggered establishment of "Y2K" teams with signature authority to buy *anything*, mostly to trigger purchase orders for stuff they didn't understand and which the organization didn't need.
Yes, some of that Y2K money accidentally went to non-stupid stuff, like standard migration of two-digit systems to handle "four-digit year" data entry. However, literally, tens- and hundreds-of $billions were blown on nothing whatsoever (in addition to the legitimate money spent to migrate old two-digit systems to four-digit years). Everybody loves a bubble, and that bubble was *fun*.
It was a fun bubble while it lasted. However, since that particular bubble had a fixed "end-date" (Year 2000), it came-and-went. However, the bubble was just "too good" to pass up, since it was simple to understand and you could skim $billions without a big marketing campaign.
Note to self: Don't give my cult followers a specific end-date for my predicted apocalypse, because that ends the game.
Three things, very important:
In short, the current system works because Bernanke (literally and legally) owns a private monopoly franchise called the "dollar". He likes his franchise, because it gives him wealth and power. He doesn't want it to go away. Any discussion regarding this exponential conclusion does not benefit him (ditto for Geithner and the other central planners).
However, they are out of options. This truly is an "emperor has no clothes" scenario, because unlike Y2K, nobody can make money talking about it. Similarly: Everybody is screwed when we admit the emperor is naked. Even for the layman, or retail investor, the implications are unthinkable (so he doesn't want to think about them). (The only exception is some book-talkers attempting to move beyond the current fiat system.)
No matter how you slice it, all of society's economics will be massively disrupted in a negative way when we admit the past fraud. Even if you're a "gold bug" or prepper, after the cloak is removed, all over the world new TVs won't be manufactured, new iPads won't be built, and your local home improvement store won't be stocking eighty different versions of ceiling lights.
Take-away message (seriously): Hysteria is used to get rich. No money to be made, hide the hysteria.
Good points. Ultimately, I think the one key element that has consistently allowed the power-elite to escape a true reset point over the last 150 years has been the existence of the energy subsidy.
And note that I include WWI, the GDI & WWII as "escaping" a true reset point. The reason for some self-doubt as to the true nature of our situation, and the tendency to look back and conclude that perhaps "this time is different" (as we have during every post-WWII recession), is because we could always "grow our way out".
A few months ago, my postings typically contained a certain hedge, in that I understood what the power-elite were doing in terms of buying time & hoping for some kind of growth miracle. I have always been amongst those who would be saying "sayonara suckers" to all the doomers if some out-of-rightfield technological and/or resource breakthrough was achieved.
I mean, think about this way: image humanity discovered some new, easily recoverable fields under Antarctica that were equivalent to 5-10 Ghawars. In real terms, that would imply that 2-3 billion Chinese & Indians could reach a nice Orange County suburban experience, along with all the attendant accoutrements.
$50, 100, 500 trillion in debt? Mere phiffles - the world economy would mainline to some new unheard level of production & output that would render all exsiting debts as meaninglessly de minimis.
Sadly, such miracles are not going to occur. Ben knows this, Timmy knows this, in fact, anyone who has a clue knows this. Hence, the people who are staying are preparing to hunker down, while the dual passport holders are boning up on the right of return clause.
Everything we see now is no different from the extensive rear-guard actions taken by the Grand Armee' as it fled Moscow. What does it matter if the majority of troops were lost as long as Napolean and other leaders got out alive?
The younger Bernanke (2002 "Fed has a printing press as last resort" speech) would likely be a sure bet to unleash Q.E.2. However, the older Bernanke (2010 Jackson Hole "Fed must weigh the pros and cons of further QE" speech) is less likely to be a sure bet to unleash massive Q.E.2. Time and experience (and maybe even the ripples from Zero Hedge's warnings about QE) have raised the possibility that Ben has learned something and now recognizes the risk that QE2 would pose to U.S. dollar as world reserve currency.
Every instinct and bone in Ben's body may be leaning strongly to QE2, but now the voice in the back of his head may be nagging him that QE2 may kill the goose that lays the golden egg (world reserve currency). Who knows if the voice of reason will restrain Ben? But, Ben's Jackson Hole speech suggests the possibility that Ben 2010 may at least see the folly of massive QE2, and perhaps restrain a QE folly that would go down in history as Bernanke's destruction of the U.S. dollar world reserve currency.
Even hardened criminals and pension robbers like Ben can recognize that some planned heists are too risky because of unintended consequences.
Austerity is NOT an option. Politically, this charade will go on until the washed out bridge ahead is reached -- at 100 miles per hour. No way to stop even though the maps clearly show the bridge is OUT.
I have been humbled too many times to think I understand the markets, but earnings season is right around the corner and I am very curious about the opinions of others regarding the effects of these coming reports.
Everything I see and feel tells me that business conditions have been deteriorating for the past few months. Reports from the past 2 quarters showed strong earnings comps. Can we expect those kind of reports again? Comps are getting harder to hit. What about guidance?
I understand liquidity bidding up prices while earnings are improving, or even flat, but what about when earnings are dropping? Help me out here, please.
Dear New Zero Hedge reader: Skip earnings season debate and take sides on whether canning tomatoes and keeping them in the pantry or potatoes kept in the root cellar pose a greater risk to theft than leaving them in the ground.
If you live in the city leave now while you still have time.
May I recommend this website for your earnings season studies:
http://www.thesurvivalpodcast.com/
Many thanks for your concern for my personal safety, and it is an interesting link you provided.
Also, just because I rarely post does not make me new to ZH. Been member for over a year, and a reader for longer. I started spending more time here last year as the Roubini site became less & less relevant.
I already live in the country, in the middle of 4 acres about a mile into a 2 mile dead-end road. The only thing visible is my gravel driveway and mailbox. By the end of the year, I will have moved my office into my home.
As to my ability to defend my little fortress, you can google my user name and find out what it stands for. I learned many skills that have not been needed for a long time, but still have most of them.
Now, back to what I thought was a very legitimate question about the liquidity pump vs. obviously deteriorating earnings. How can rising stock prices possibly be justified in the face of declining earnings and poor forward guidance?
Do you have anything to offer to the original question?
Good luck with your root cellar.
Perhaps I was a bit too presumptuous, please accept my apologies.
Regarding rising stock prices, I'd recommend a pass through the nanex.net website or the HFT keyword on ZH. I guess I left that reservation years ago where earnings meant anything worth discussing. You know when contract law was thrown out in favor of the 'greater good'. Much like the tooth fairy and santa claus, I'm quite cynical about any asset valuations these days. Be them houses or commercial properties in the middle of re-negotiations or mark-to-whatever-keeps-the-lights-on values, it really means that you can't believe anything the big accounting, investment houses or government does.
Thanks, OGW. No apology needed and I absolutely agree that so many of the numbers that get reported are little more than fairy tales.
What I am trying to do is get my head around how powerful this increased liquidity thing can be. If interest rates are almost zero, how high can bond prices go? If the real value of commodities comes from the demand created by expanding economies, what happens when there is no growth? What does that do to their hedge value? When earnings tank and guidance sucks, do stocks continue to rise just because there is more cash sloshing around?
If there is a 40, 50, or 60 Trillion Dollar problem in the greater financial system, does another 2 or 3 Trillion from the FED fix things? At what point does 'pushing on a string' begin in earnest?
There are many, if not most, on this site far more knowledgable than I, and I am very curious as to opinions about what earnings season portends. After all, strong and improving earnings have been one of the primary justifications for the market's rise from the ashes. Traditional metrics may seem to be meaningless at the moment, but ultimately, stock valuations can only be justified by earnings, not liquidity......or, am I a total Bozo?
Wait! Don't answer that!
There is nothing else they can do. They will keep doing what they are doing and hoping for some miracle to come along and save everything right up until the mob breaks into their offices and drags them out for hanging. As they're being strung up they'll be begging for one more chance because they're sure they just need to tweek things a little more or try this new tactic and everything will be fine. That is human nature. If they try to change anything, if they even were to tell the truth they'd only hang that much sooner. They're trapped. So are we. Hanging the perpetrators of our loss will be cold comfort as we watch our children starve. I thank God there are no little ones in my family. Even the grandkids are all nearly grown.
TD and fellow hedgers,
the massive naked short positions of JPM/HSBC and the banking members of the gold/silver price fixing cartel would BLOW up....this would collapse the member banks/cartel and with it for example, the 70 trillion dollars of derivatives just at JPM (something reggie middleton always is quick to direct attention to). why would Ben B risk the system in this way?
"massive naked short positions of JPM/HSBC and the banking members of the gold/silver price fixing cartel would BLOW up"
according to Stewart Thomas the naked short position is $20B and the long side of the short-of-gold derivatives is $400B
when the paper price of gold skyrockets the banksters lose $20B on their shorts, gain $400B on their longs and end up in possession of all the gold mines they financed and required to take on short-of-gold derivatives
ie, the naked short positions are chump change when you look at the big picture
Thanks for the eureka! I just knew they couldn't really be all short. The gold mine financing terms come as even bigger news--just when I thought they could no longer surprise me.
They may be pure evil, but they're damn good.
"They may be pure evil, but they're damn good."
the banksters are the best money makers on this planet - to think they will lose money when gold takes off is silly
More than half of existing gold is in private hands:
World gold holdings (2008) (Source: World Gold Council)
Jewelry 52%
Central banks 18%
Investment (bars, coins) 16%
Industrial 12%
Unaccounted 2%
http://en.wikipedia.org/wiki/Gold_reserve
I don't recall the source (FOFOA?) but I recently read that 150,000 tons has been mined to date with only 90,000 tons remaining in the ground according to USGS data.
by all means "lay it all on the line." unless of course you're just talkin' smack like all the rest of 'em. or are you just a bitch, too?
Time to shape up and actively create the kind of world you want to live in. Gandhi was right though, in the end all tyrants fall. Imagine that? Do what you know in your heart is right, and let the light show you the way. Say no to the tyrants. If there must be blood let the tyrant strike at you and let the whole world of those yearning to be free see the nature of the beast! But whatever you do REFUSE to go along with the darkness! If the beast is ever going to become a man then we must confront the beast both within ourselves and within our brothers.
buy silver, melt the witch!
http://news.silverseek.com/SilverSeek/1210917480.php
I am now in Italy. My cousin is-was a significant developer in the area where I was born. He has almost shut down shop. I spoke with his partners who also happen to be his grown adult children and this is what they had to say.
1. One son moved to Morocco to find work helping the state construct social housing
2. The second son is on his own because there is not work and he is hoping to hustle his own business in another region - good luck.
3. Third son working with dad. Finishing their last subsidized housing project here, than nothing. Apartments that once sold for $250K Euro are selling for $100K Euro. Nobody and i mean nobody is spending. The Italians have money because they are great savers. so the state is poor but individuals and families are well off.
There is a sense of impending doom. My contractor relatives have sold off assets to pay employees because they can not borrow money and they cannot sell apartments to pay labourers or for goods.
The company is approaching time zero. After three years the company has exhausted reserves and is now beginning to liquidate capital assets to pay the bills. They expect to shut the construction development company down this year.
From this small but indepth sample wherein I could the hard straight facts I can only conclude that zero time is upon us.
I suspect the Mafia is going to step in and fill the liquidity problem. It is happening and my cousin was approached already. Failure to satisfy terms of the agreement with them means forfeiture of assets and more. I will let you guess what the more is.
I suspect the same will start happening soon in the US where liquidity sharks will start putting momey into the market only when there is no downside for them.
Cheers from Europe. I have to decide weather to go to Morocco or Greece. Will have to see what happens over the next few day before deciding. I was also told that flights to Iran are inexpensive and that there are Italin construction firms trying to get work in the middle east
Thanks for the information and honesty. This is what makes ZH powerful and more useful than all the government stats in the world.
Thanks also for struggling through our odd and contradictory language. Whenever I try to speak German or Spanish, I am reminded what an effort that is, and that many things just don't translate.
Thank you for your insightful post.
Personally, I would choose Greece over Morocco, no other reason other than availability of food and water.
St. John recorded the Book of Revelation on the Grecian Isle of Patmos. Interesting symmetry.
All the best to you.
~Misstrial
All this talk of gold and silver. The crop failures are spreading around the world, a couple of billion hungry pissed off people will change everything. Get your self some food, a couple of "handles" of good booze, tis gonna be a rough ride.
Don't get a couple handles of booze...buy or make a still. The alcohol produced can be used for fuel, medical and 'medicinal' purposes.
It seems to me that asset--hard asset--values may indeed approach zero during the chaos you envision in a collapse, but I think we conveniently underestimate the speed at which TPTB can--and would--convene Bretton Woods III and impose a new reserve currency by mutual consent of the various PTB. Part of that could be a global currency, a newly balanced basket of revalued national fiats, or even a commodity basket, but realistically I just can't see the world surrendering to either anarchy or gold--either of which would amount to TPTB throwing in their hand and leaving the game. And I can't imagine the world population supporting them doing so, given the real, on the ground chaos that would result if they did.
I have no love for TPTB nor do I have anything against gold. I can certainly understand the wishes of those who hold physical gold, but I just don't see this playing out as they would hope.
Real assets, e.g., houses, food, etc., will retain real value, even if we yet lack the term for the unit of measure in which that value will be expressed, imo.
"just can't see the world surrendering to either anarchy or gold--either of which would amount to TPTB throwing in their hand and leaving the game"
banksters and govts don't care what the price of gold is as long as they can continue their fiat money games - it is OK if gold climbs to $55K/oz as long as their fiat currency can still be created via the printing press
the only game-changer is a CONVERTIBLE currency that allows people to CHOOSE between holding the paper currency or CONVERTING it to something tangible - it is the choice that takes power out of the banksters/govts hands
the difference to focus on is CONVERTIBLE vs BACKED BY
fiat currency backed by gold is still fiat currency and the game doesn't change
look no further than the Euro for a modern-day example of a fiat currency backed by gold (supposedly 15% at its inception) - the gold backing was just a marketing ploy to help uninformed humans accept the imposition of a new fiat currency
Hey, no objections to a convertible currency. In a perfect world, or even a reasonably intelligent and sane world based upon universal good faith, we might see such a system. But do you think TPTB really want to make--or even allow--such a world, if it were indeed possible?
I don't, much as I wish it were true. And, when all is said and done, it is those PTB who control the world's financial system.
What's smart (for the greater good) or right has little or nothing to do with it, as far as I can tell.
Fine work Tyler. There is no doubt that Ben wants to do one last "shock and awe" QE. At this point, he is about to go down in history as the worst Jew since Judas Iscariot, but let's work out the implications.
QE2 could easily make long rates spike. As Bruce and many of us have pointed out, there is no inflation risk built into long bonds. We're used to the fed jerking interest rates where ever they want to go, but historicly, they have weak influence on long rates. This could be their end game, if the bond market finally sees the risk and reacts.
The more interesting and uncertain scenario is curtain 2. What if this works for a while, and we get the flat yield curve Tyler seems to expect. Fascinating. We had an inverted yield curve under Volker, not a madman, and everyone understood it was a short term attempt to kill inflation. That game of choke the chicken worked out quite well. A flat or inverted yield curve is not always fatal.
This time, I think it would kill all state and municipal financing. Who would go long, given the Chinese fire drill we are living through, if short rates are the same as long rates? I'm beginning to think this is the way the world ends, not with one singularity, as Ms. Creant is looking for, but a swarm of small scale failures that will overwhelm any attempts by our Soviet Socialist Overlords to cover them up.
Also, remember that sunshine is a great disinfectant. As more of us understand what is going on, the ponzi's problems expand. I said last Spring that Ben and Timmy are juggling Buzz Saws. Nothing Obummer is doing makes that easier.
Happy Trails
"We're used to the fed jerking interest rates where ever they want to go, but historicly, they have weak influence on long rates. This could be their end game, if the bond market finally sees the risk and reacts."
The FED is the bond market. Have they not already proven this to you? They can buy rates down to zero if they so choose.
I have gold, silver, cash, gold/silver stocks and a years supply of non-perishable food.
and I've got a 12 pack and big wanker.
ya got a doo little, georgie?
Confidence...con man in a con game. When ego trumps sanity.
If this post is correct and the analysis is accurate, in 6 months there will be blood in the streets. I hope this is not the case, because it would be bad and very dark time for the world and country, not to mention my investment portfolio because I cannot move that quick with my positions.
What is the gist of this post and how it effects "main street" is that a gallon of milk would cost $10!!! Once you align all consumables prices that the "great unwashed" need to survive, and they recognise the reality that this "inflation" on commodities and stocks whipsaws their income to nothing, THEY WILL BE PISSED and THEY WILL WANT BLOOD!
And I think they deserve to have their destinies fulfilled.
That being said, if QE X.0 comes out and ramps from $800B to $3.X T, there will be open revolt in this country.
If the FED RES did do that, my opinion there would be open armed rebellion on Wall Street, and it would be open season on any GS, AIG or Government Official. The lies, and corruption, illegality, criminality, violation of the trust of the market and the body politic, and then an entire debasement of the money soursces?? Do you expect a "free thinking group" of 330,000,000 would simply sit on their asses when they are going from nanos in fourteen colors to having no food, whilst an elite few are raping this country??
It is not enough for these assholes to steal from the next 2 generations, but they have to steal everything of value in THIS ONE AS WELL???
The people simply will not stand for that.
Here is a little message from one of the "little people" oput here in "main street".
Quit thinking in financial and economic terms, because something like this translates directly to MOB UPRISING, and you will have to choose sides. I will be with the "Republic Peoples 2nd Revolutionary Army", and will join my fellow American Patriots to rid the USA of this elite scum.
Tyler, do you actually believe this is possible and/or will happen? IF so, the the real question is:
What side are you on if this comes to pass?
Why does it matter what side Tyler is on?
Tyler is not a person or a side. He is an idea. The idea thinks out loud for the benefit of all of us. The point is the light has been shone, now it is up to the PEOPLE to decide what to do. Not for Tyler to tell us what to do.
Yes, I know that thought, and that was the point of MY post, is by asking "Tyler" to choose side, I am in all reality asking "YOU THE READER" to decide which side you will be on.
Additionally, we know this site is read by GS AIG, and Fed idiots as well. So the post if for them as well, to stop the madness, and if they do not, well....
So I am not as "obtuse" as you think and we do not need "tyler" to choose sides. So sorry that the post was a little past you there.
Good posts, Everyman. Even with the 401(k)s in the stock market, a surge in equities in the current economic climate would accelerate the class distinctions in the U.S. When you said milk would be $10, I was thinking of those without 401ks and the people with nothing in the stock market; and now they are going to be killed. And as for those with 401ks, those are for retirements, right, and not for living? A rising 401k balance still won’t help you buy a car or a house.
You paint an authentic picture of what this massive monetization can do to create an elite, wealthy class with the rest of the country moving toward revolution,. You are absolutely right. The middle class, that unique class missing in the world’s undeveloped economies that built the American Dream by working and producing, won’t stand for this attack. Blood in the streets is literal; those private enclaves for the JPMs and the GSs won’t be enough; people will break through the brick walls.
IOW, Tyler, the consequences of this are greater than you explained.
The question I wish I knew the answer to is are the central bankers doing this on purpose to reduce the power of the middle class or is the underlying financial crisis so much worse than Bernanke has described that he is proceeding deeper and deeper into the abyss of speculative imbalances? The QE2 is a crisis oriented move, something a man who cherished sound money, as all great republics have, wouldn’t normally want to perpetrate upon his country—i.e., a further cheapening of the currency.
The less free a society becomes, the greater likelihood its money is being debased and its economic well-being diminished.
When Bernanke first took over the reigns from Greenspan, he began by driving the dollar deeper to debasement—transferring its value to the financial sector and destroying the prosperity of the people. Now, his solution is to use even deeper confiscation of savings and value. Even those who run a fiat monetary system are smart enough to realize that a country without jobs is a country without consumers and economic growth; that if you don’t have value and if you destroy savings and sound money all that’s left are banks with incredible reserves, and that prosperity and freedom can no longer exist.
Transferring the value out of the currency into big bank resources begs the question: is this simply stealing or is it an emergency measure to quell a fianncial crisis far more severe than has been told?
As for Hatzius, “prescient” seems to be an inadequate term to describe his economic forecasting ability; perhaps, it should be described merely as “insider disclosure.”
Number two my friend, number two. And doesn't that make it just that much scarier? While it makes for a fine novel to portray current events as some sort of coordinated attack and master-plan to instill a fantasy one-world government, the simple reality is the power-elite overplayed their hand.
And boy, what a hand they had! For 97 years (and longer), they have had a vertitable license to steal, and steal untoward $trillions in wealth they did. But at heart everyone is a biological organism, even banker criminals, and they too are subject to the same impulses that manifest themselves in the 'trajedy of the commons'.
The bottom-line is that in their over-reaching greed, they simply ate their seed-corn: us. So now they too must suffer a famine. No one is getting out of this, no one.
“ate their seed-corn: us.” LOL. A classic.
Nice one, yeah. I think I've about popped all my seed corn waiting for the movie to start.
JR
The last helicopter out is being greased with bonuses from the Red Fed. QE is providing liquidity at the margin so the criminal banking class (Lloyd just got a paltry $125 million) can establish their escape route. Believe me, these boys won't need a root cellar, just good timing to be on the last flight out.
I note a particular perversion of our prostitute politicians in "encouraging" China to accelerate the cobbling together of a Chinese "middle" class, all the while they are committing genocide on the American Middle Class.
Good comments. JR and B9K9
Thanks.
Kayman, if Lloyd is on that last copter out that’s the best $125 million ever spent.
In America the term middle class suggests political influence through representative government. No such definition exists in China. Sadly, all that the Chinese middle class has are temporary tickets that can all be pulled. Perversion by prostitute politicians, indeed.
Yours is a powerful indictment of our current situation!
That is OK if Lloyd is going outside the country, that means the bounty to be paid on his head will cost less.
Remember they are outsourcing to these other countries because Labor is cheaper. Same holds true for the rest. There is no place to hide when the whole world is looking for you. This thing blows up it is global in scope, and there will be no place to hide for these criminals.
The best thing that could happen is that whereever he lands they imprison him in THEIR JAILS just like Van DerSloot, and confinscate his money to pay for the losses their country suffered at the criminal hands of GS.
That is a more liekly event. He is not safe and is a "marked man" as all these elitists are. It would be better for them to just save everybody the trouble and committ Hari Kari. Oh, I forgot, the "no honor amoung theives" thingy.
i have a 150iq, and im a harvard grad. My thoughts are: Bernanke so clearly personifies the Madman here; one day that will be his epithet. Presumably he is creating hyperinflation with the expectation that his numerous friends on wall street etc will already have set up a quiet abode in the Caribbean somewhere, or in british columbia, or peru etc etc. He of course knows he is loosing the dogs of war on america, and isnt much bothered about it. He prides himself in the dual nature of his soul-- brilliant, thoughtful word-parsing Professor vs. capering and cursing Madman, and scampering scampering scampering. Its an intellectual and aesthetic pride, the pride of the dramatist at having wrought so sharp a contrast within one soul. He was the same as an undergrad- given to a mad midnight escapade now and again; delighting in the obvious contrast and tension created by his other professorial demeanor. The monetary Dr. Jekyll and Mr. Hyde, if you will.
Bernanke and his financial cronies will capitalize on the enormously devious event of hyperinflation. They know it is devious, of course. Its a perfect crime. Oceans 3 Trillion if you will. They know the public as well as some of the administration will be caught off guard by their chutzpah & ruthlessness.
Expect a civil war, short-lived. It will be a stereotypically American affair, to the end-- with the outcome like a Hollywood movie. Which is to say, the underdog will win. Why? Underdogs are cooler, and the hot bitches will be on their side ;)
If you initiate the violence, most will not hear your words, and those by your side may be ruled by angry emotion. You may not end up where you plan to go. If you peacefully refuse to serve the tyrants, and/or choose non-violent actions like "sit ins" on the system such as Washington, all the Fed structures, Wall Street beasts, Pentigon, all IRS faciliteis, etc, then they will initiate aggression like they always do. Let them. Make sure some of your friends are taping it all and get it on the net for the whole world to see. (As long as the net can stay up, then other means will be needed). This is how you can save the most that is good, inspire the best that is latent in those who serve the tyrants, while putting and end to the tyranny. This is how you reach a critical mass and once you do it will just end, period.
Please consider the Gandhi route and learn how to create the moral foundation of something that can endure. What ever noble things that you could say about our first revolution, the system we came up with did not succeed in holding tyranny at bay for very long. Consider voluntary exchange only this time around and no powers to "tax". No monopoloies of force or justice, just voluntary exchanges for the provision of "state" class services.
Passive resistance worked once, and only once in history. And so we are treated to a parade of endless exhortations of "what would Gandhi do"? Now, let us consider why passive resistance worked this one & only time:
Foe: British. Not Germans, Soviets, Chinese, or as Native American Indians found out in an earlier era, Americans.
Time: 1947. Not 1857, nor 1915.
Condition: Britain had been bled dry by WWII. They were a completely broken people who had no choice but to give up an Empire.
World opinion: Something about the Holocaust was still "bothering" people.
Other: Something about another little break-out of "social unrest" going on in Palestine as well that was taking up a lot of GB's "attention".
So, like I said, one guy, one country gets lucky due to a number of factors never to present themselves ever again. Passive resistance my ass. When this thing gets going, there ain't gonna be anything passive about it at all.
The resistance wasn't passive, it was quite active, such that the country was ungovernable by the British. There is a basic principle as to what makes a tyranny possible. If enough refuse to obey the tyrants the tyranny will fall. If you do it non-violently you will give space for change in your apparent "enemy". These are universal moral principles. I choose not to initiate violence, as everything ultimately returns to its source and the "tyrant" is my brother and in fact, a part of "me". I choose for the "tyrant" to learn how to not be a tyrant, and if that is not possible today, then I choose to avoid being the tyrant when my brother comes back to a planet to learn about tyranny from the "victims" perspective. I choose not to do the dance. Do you?