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And That's Checkmate Bernanke
Today the US Federal Reserve announced that it would be implementing QE 4: a policy of spending $45 billion per month buying Treasuries on the long-end of the yield curve until employment falls to 6.5%.
So between this and QE 3 which was announced just two and a half months ago, the Fed will be printing $85 billion per month.
First and foremost there is no evidence that QE creates jobs. Consider the case of the UK.
Since the crisis began, the Bank of England (BoE) has announced QE efforts equal to $598 billion in the UK. The UK’s GDP is $2.43 trillion. So the BoE has engaged in QE equal to over 20% of the UK’s GDP.
Despite this massive amount of QE, 2.53 million people are out of work today in the UK, up from 2 million at the start of the Great Crisis in 2007. Similarly, the UK’s GDP remains well below its peak.
In simple terms, QE fails to generate economic growth or jobs. End of story. The BoE spent 20% of the UK’s GDP on QE (a truly staggering amount) and more people are unemployed now than when it started. And GDP has yet to get even close to its pre-Crisis highs.
The same can be said of Japan which has implemented QE over 20% of its GDP. There, as has been the case in the UK, there is no evidence that QE has created jobs or even economic growth.
So the Fed is flat out lying in its claim that QE will create jobs. There is no evidence that this QE does this. So the Fed is announcing this new program for a different reason.
Regardless of the reasons, Ben’s got a major problem on his hands. That problem is the fact that Treasuries are on the verge of breaking their upward sloping trendline. If Treasuries begin to collapse at a time when the Fed is buying up over 70% of debt issuance, then the Great Treasury Bubble is finally about the burst:
If we take out this line when the Fed is buying as much Treasuries as it is, then it’s game set and match for the Fed. Take out this line and you’re on your way to ending the 30+ year bull market in bonds.
Which means:
- Interest rates will be soaring
- The $700 trillion derivatives market most of which is based on interest rates will suffer some systemic events
- The Fed’s interventions are finished
We’ll have to wait to see how this plays out, but we’re getting dangerously close to a US debt crisis that will make 2008 look small in comparison.
On that note, we’ve recently prepared a Free Special Report outlining how to prepare for this as well as the coming economic collapse. It’s called: Preparing Your Portfolio For Obama’s Economic Nightmare and it outlines several investments that will profit from Obama’s misguided economic policies, including one targeted at potentially huge returns when the US Debt bubble bursts.
You can pick up your FREE copy here:
http://gainspainscapital.com/obama-nightmare/
Best Regards
Graham Summers
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Maybe four years; maybe they'll still be buying their own bonds when the Federal Debt is 25T$; but the only socially useful thing I can do is issue this warning; because I don't a crystal ball. it's okay to be early; it's not okay to be late. It's very difficult to understand that the bubble is now in dollars; we're inflating a dollar bubble; no; I don't really know when it will pop; but I try hard to get people to start thinking about it.
That's the problem with Summers. He's really quite naive, and historically ignorant. He should look at how corporatist/fascist economies are actually run. Summers' problems are bourgeois problems, and corporatist/fascist policies are designed to allay such fears on the part of the bourgeoisie. And they will, too. The only "collapse" that can come now is a collapse in employment. THAT'S what will cause the system to fall apart. But for now it's a matter of shuffling around paper and numbers. Summers is still fully controlled by the banksters/Feds/fascists. Just because HE can't make a move, he's assuming THEY can't make a move. That's a false assumption. Fascists can loot longer than Summers can stay sane.
If you take a look at that chart on a 30 year time frame, that trend still won't break, even if it falls to 125.
Graham, if I understand DT correctly, I have to agree...drawing a 30º angle as a trendline is marketing, not long-range TA.
Get the fuck off of my planet, you stupid, elitist central bankers!!!
The Fed would just buy more.
we havent begun to see a cornered Fed react. a cornered rabid animal can act very contrary to what is expected. we've already started to cross the rubicon with the fed buying mbs and foreign bonds. the charter indicates it can buy whatever it feels necessary, which i'll bet, includes equities and perhaps cds even....gotta keep everyone liquid, pay well above mkt for cds from tbtf banks, eat the losses with newly printed $....japan does it, why not the fed, it may be a matter of national security even
I'm glad you mentioned crossing the Rubicon; because this is when Julius Caesur made his famous statement; "The Die is Cast". That's really what this anouncement is telling you; we're going the way of all the other fiat currency experiments; and our "leaders" are as un-aware of reality as they always are. And also, I'm sure it'll be a matter of Nat ional Security; along with many, many, other things.
"Leaders" my ass. Read the other article tonight. The one about the CB MIT PhD experiment. The "leaders" aren't doing shit, and the CB douchebags are conducting an experiment on theoretical economics which has been tried (in principle) again and again over the course of history with a recurrent track record of failure.
i cornered a rabid coon one time and it reacted by throwing $20 bills at me...?
How could any sentient being buy 30 year bonds?
It's a long story; it's very technical; basically, human beings do stupid things for stupid resons all the time. don't worry about it; just don't buy any for yourself !
To make the 15% profit they made this year.
And will make next year and the year after as yields go nominally negative. The Fed is the guaranteed bid. With infinite capital to buy.
There's nothing else safe from the sort of transaction tax we'll see on gold should gold ever become significant.
There are always a certain number of people like you who don't know what they're talking about that willing to believe anything, any kind of impossible fairly tale, if it just allows them to go on believing; "it won't happen here"; not here; it can't happen here. It can; and it will.
"There's nothing else safe from the sort of transaction tax we'll see on gold should gold ever become significant."
The ultimate indictment of their own folly.
I interpret this comment as a rationalization of denial; there;s no use trying to protect myself. I mean, really; if you thought your financial survival depended on it; don't you think you could work out one of the 15 or 20 plans that will avoid "transaction taxes on gold". This is why I keep hammering on the Silver; Gold is going to be a battlefield for the power controllers; why not be a non combatent? It'll be a long time before they get around to trying to sweep up the few insignificant crumbs represented by private silver holdings.
If silver is in as short supply as some numbers indicate, silver may be the metal they look to confiscate first - for 'national security' reasons.... you can't make cruise missles, smart bombs, drones and all the other goodies our military loves without silver solder and we no longer have a few billion ounces in strategic reserve. Back in WWII when the Nevada was raised and refitted her electric panel bus bars wer made of SILVER because copper was in such short supply. They made nickles with silver because nickle was needed for steel alloys.... you're not going to see THAT again.
Problem is that with surveillance sucking up everything regarding transactions and financial records it's harder and harder to hide anythign from Big Brother. The only conoslation is that government has proven itslef to be incompetent on SO many levels that even when they HAVe knowledge (like BinLaden planning to attack the US) they can't get their act together.....
Just use FedEx for delivery. Just happened this week. 'We will deliver it'. 'Ok we will hold it'. 'Ok, we tried to deliver it, but you were not home'. 'Ok, we will hold it here'. 'No, we will hold it over there'. 'Our mistake, we held it where we said we would the first time'. Hell, I am trying to pick the shit up and I am not sure where it is. How is a guy supposed to have a boating accident with this comedy going on in the background?
This is after my bank grilled me about the wire transfer I sent. "This is for a loan?". "No, I am buying something." "What are you buying?". "Something shiny; it's Christmastime and I like 20-year-old girls.". At least that shut the bitch up (guess my silver hair in tandem with her advanced age let her know which way the wind wasn't blowing). Fuck their surveillance, they have to actually know where it is first.
Well, I don't know if he was or not but I'm always intrigued by the concept of a crashing fiat currency being valued at anything but it's actual worth...which is ultimately, zero...lol.
And yet, the attempt is, to impose a tax measured by that particular...very very odd. It is denial as you say.
It's the same with measuring a dollar/pound/peso etc. against gold & silver...its almost pointless to tell someone in the mindset of..."Wait, my currency has value, I worked for it!"...when it doesn't at the end of the line.
Labor theory of value?
Some arguments are so stupid and convoluted it's hard to know where to start. In a better time and place, one could pull out a broad sword...
You still can, it's just that the government has much better weapons (which is ultimately what underlies the value of fiat, it's lead by proxy).
I can remember hearing from many sources, just a handful of years ago, how the federal government would confiscate and/or punitively tax gold should the price ever reach $1000.
Good point akak, but some of us are older than dirt.
I remember a Washington Post headline that said 20 million Americans would be dead from AIDS by 2000.
If only.... Anyway, I'm sure Rufus the Great will sponser retraining for the formerly famous "journalists".
"Would you like some fries with that?"
Silver.
What? Didnt you hear Bernanke from a long time ago? : We have this thing called the printing press. He wasn't lying. The fed or whoever the handlers are can buy as many treasuries as they want or anything else for that matter. Game over is right, but not for Bernanke or his handlers. Got it?
Zzzzz
"Which means:
Bullshit, Qefinity has murdered the "bond vigalante".
in the new bizarro world, the fed owns all the long-dated treasurys
so when it buys $45B/mo of them, who is it buying from?
mm hmm
buying them from the fed
let the accountants figure out what to put on each side of the ledger.
They do not own all the long term Bonds; they buy them from the US Treasury; thus monetizing the debt; or the government spending. The Bonds trade in the after-market; they exist in the outer, or real world; their price peaked earlier this year; the author is not a very good chart reader; the bull market is over. The price you can sell your 30 yr. Bond for now, is significantly less than it was in June, for instance; it will continue to decline; the decline will accelerate; the bottom will fall out of the bond market; this is the sort of anouncement that govt. financing agents, (eg. the FED), make when they are one step from panic. Basically, this is one of your last warnings. The ship is down 15 degrees at the bows and it's a big cold deep ocean out there.
The Treasurey prints the bonds: sells them to the big banks: 3 weeks later the Fed buys them from the banks for a profit: puts them in their vault and uses them as collateral to print more money: which they use to pay the banks for the next batch of bonds: the Treasury prints more bonds and sells them to the big banks, etc ad infinitum.
But they aren't printing money ha ha ha ha ha.
This also explains the long term rise of bond prices and therefore, the fall of interest rates. The banks are happy to buy the bonds knowing they can sell them in a few weeks for a good profit: then they take the money and buy more bonds, to sell for a profit. Bernanke told them he would buy them and he does.
Every time this happens, bonds get bid up a little more and interest rates drop a little. There is no limit to how low they can go, even negative, since the interest rate is irrelevant to the banks who buy them since they will be selling them at a guaranteed profit in a few weeks.
here's a good chart (actually, schedule) to read
http://www.newyorkfed.org/markets/tot_operation_schedule.html
anticipated purchases in december are as follows
$35B-50B long-dated treasurys
$00B-00B short-dated treasurys
anticipated sales in december are as follows
$00B-00B long-dated treasurys
$35B-50B short-dated treasurys
e.g. twist
here's a good chart to read
http://research.stlouisfed.org/fred2/series/TREAS10Y
U.S. Treasury securities held by the Federal Reserve: Maturing in over 10 years (TREAS10Y)
spoiler: it increases from $80B in 2003 to $400B in 2012
Yes.
I concur. It's hard for bond prices to fall when the Fed owns all the bonds.
You concur because you know nothing. they do not "own all the bonds"; the bonds trade in the real world outside their control. Fiat currencies depend on Faith in the Credibility of the issuer; many, many, people who are hundreds of times better educated than you are understand exactly what this means; the process of loss of faith, and loss of credibility continues; at some point; it will become critical; then you will find out what it means to have an un-redeemable currency; or if you are one of the fortunate few; you will find out how badly some of the semi-survivors want to buy your Silver Bullion; (very, very, badly).
SAT 800 (nice score by the way), not arguiong your assumptions, I agree with most of them, but, I am very confused as to why, if it is so obvious, guys much higher up then we are, are not already backing trucks up over at the COMEX to take delivery. To rephrase my question, "Why has the event you predict not alreday come to pass?"
Seriously. What is holding this together?
That score is from 1960; before they dumbed down the test twice to make the minorities feel better. I finished 15 minutes early and held up my test papers for the proctor to collect, and he came down the isle and asked me in a library whisper, "don't you want to check your work, you might pick up some points from errors"; I told him I don't make errors and continued to hold out the forms to him. Nothing is holding this together. or to look at another way, inertia. it's all a matter of time frames. it seems like a long time to a human being since Nixon canceled the gold backing on the dollar; but in historical perspective it's an eyeblink. There was an interesting report last year by a Swiss Bank Employee who said a customer drove into their underground delivery dock and loaded up a metric tonne of gold in a Land Rover, and drove away with it. I thought that was interesting. Did you know that Warren Buffet once bought, for cash, about a third of the entire warehouse stock of the Comex Silver inventory? Not many people seem to know this. It caused the price to spike up a dollar to $7.00/0z. in 24 hours. He later changed his mind and sold it. His daughter says it was because his self-image as the kindly grandfather of Omaha is more important to him than being reviled as a speculator. Probably correct; self image is very important. Also, if you will recall the University of Austin recently bought all their gold holdings from the Comex. they are going to look pretty smart in a couple of years. The US Bond Market is enormous in dollar value; it makes the us stock market look tiny and the gold market look invisible. There is enormous psychological pressure to believe that "Tinkerbelle really can fly"; and/or it's different this time. Who you gonna call when you don't want your bond portfolio anymore ? Why has any event not already come to pass? Time is what the universe uses to keep everything from happening at once. All a "predictor" can do is look for a series of events that seem to be leading to a conclusion. A few months ago; it was thought QE3 would not happen because of negative reaction from the public, (tea party, etc.); well, Obama got re-elected and now we not only have qe3, we have qe4; the ruling class is delighted to see that the public basically has stopped listening and isn't paying attention. but this is a series of events that points in a direction. The direction it points in is the failure of the Ponzi finance process of the US Treasury, aka, the T-Bond market. It might be four years from now when the official us debt is 27T$ for all I know; but early is better than late.
Why didn't you check your forms for errors?
The Buffett silver deal in the late 90s was a classic short squeeze. He used his billions to corner the market and trim the speculators. Look it up.
http://seekingalpha.com/article/376711-evidence-that-warren-buffett-mani...
Dude; I don't have to "look it up" I traded it on the Comex in real time. I sold 25,000oz. short the second day, when it double topped at $7.00. The article is phoney; he didn't manipulate anything.
In the end.....that crusty old "sell-out" let his stash get away premature.
and why, remains a slew of speculations
Monetary expansions generally take 3-5 years. There is the “fun” phase, housing boom, and the bust. This one is about 4 years and 1 month.
That means about September/October 2013 it should get out of hand.
Are all “bubbles” 3-5 years? No it depends on the central banks, economy, and public perception. Some 6.6 years, it just depends.
I see this crashing around September/October because the fiscal cliff will be “solved” and the debt ceiling “solved” and then the recession kicks in, and then the panic.
About another year or so to play out.
One think that is 100% certain is the game will end badly.
very reasonable analysis. I have to constantly remind myself; that I really don't know what next year holds. But It must be significant that we are now confirmed to be inflating the dollar bubble; rather than merely the housing bubble, or the S&P bubble, and this is the last bubble. Europe could easily provide the trigger event for a system wide financial "event" next year; or as I keep reminding myself maybe the whole musical chairs charade will continue for a couple of more years. I didn't like this anouncement at all; because the un-employment language is just spin; this much printing added on to a recent big jump in printing means somebody is getting nervous in the service.
The Fed is trying to herd the cattle into the T-bill slaughter bin before the fall. Squids trying to get every last sucker into paper, in this case the “safe” T-bills, but equities work as well, and then off to the slaughter yard for the holders of paper.
As Tyler points out with the shadow banking every now and then it is starting to get out of hand. When that M-2 switches gears to M-1 watch out.