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We’ve reached the end game for Central Bank intervention.
When confronted with excessive debt, you can either “take the hit” or you can try to inflate the debt away.
In 2008, the Central Banks, lead by the US Federal Reserve, decided not to “take the hit.” They’ve since spent trillions of Dollars propping up the financial system. By doing this, they’ve essentially attempted to fight a debt problem by issuing more debt.
The end result is similar to what happens when you try to cure a heroine addict by giving him more heroine: each new “hit” has less and less effect.
Case in point, consider the Central Banks’ coordinated intervention to lower the cost of borrowing Dollars three weeks ago. Remember, this was a coordinated effort, not the Federal Reserve or European Central Bank acting alone.
And yet, here we are, less than one month later, and European banks have wiped out MOST if not ALL of the gains the intervention produced.
Here’s the Irish Bank Allied Irish Banks:
This is actually the best of the bunch I’m going to show you (by the way, this was a $4 stock at the beginning of the year).
Here’s the Spanish Bank Santander:
And lest you think it’s only the PIIGS banks that are in trouble, here’s French bank Credit Agricole:
Here's German Bank Commerzbank:
So we're at a point where the impact of a coordinated Central Bank intervention lasted less than one month. It's only going to be getting shorter from now on. And eventually, we'll reach the point at which NO Central Bank moves will be able to rein in the carnage.
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Though a lot of people tend to be fixated on 2008 as when things began to unravel, the Federal Reserve telegraphed their intentions when they scrapped the M3 report near the end of March, 2006.
http://www.federalreserve.gov/releases/h6/discm3.htm
http://blog.mises.org/4562/the-real-reason-why-m3-is-abolished/
Central Banks won't judge success by share prices. Intervention may have lasted a month in terms of juicing the market of zombie banks but the real issue was keeping credit markets moving. If they can continue to do that, the market will eventually re-price the stocks to suit.
Unfortunately, we are only in the early innings of the endgame and this game could go into extra innings. The central banks and their banker minions still have great piles of sheeple's accumulated wealth to loot via Ponzi fiat currency debasement, debt enslavement, and financial repression. Mr Summers does us a disservice in proposing that armageddon is near. Only political revolution based on widespread rejection of fiat currencies, central banks, and fractional reserve banking will end this.
"Book 'Em Dano!"
How George Soros ended up with MF Global’s client moneyI think an end moment that would restore investor confidence would involve hand cuffs, leg shackels, orange jump suits, and various financial and federal personagesin wearing aforesaid being drug by wild horses across a field of cactii.
Bernanke has already said over and over he's not going to print.
He's stuck w/ $100 crude which is too high a base to 'inflate' from.
US debt is indexed or short-maturity anyway. Trying to default by currency inflation is pointless.
The ECB is probably exposed to euro debt as they can be. The LTRO didn't put a meaningful amount of funds into (insolvent) Europeen banks. Short-term funds during the 2008 crisis were over $7tn from the Fed w/ + $1tn at any time. Net LTRO liquidity was €200bn, a drop in the bucket.
The ECB would have to add €10tn in short-term liquidity to have an impact.
At this point, more liquidity would be pointless and the central bankers know it. What they do now is window dressing. The funds-transmission mechanism on both sides of the Atlantic is broken. Funds really need to get to workers' bank accounts but get snared by the EU's repo men, first. Even if the workers were to get liquidity, they would save it or pay down debt. In the end, deleveraging always prevails, everywhere, all the time. It's the finance version of gravity.
The Fed is irrelevant, has been for awhile. The worth of money is determined by fuel purchasers when they fill their tanks. As motorists become broke, they spend less. Credit is extinguished, fuel prices decline, the worth of cash dollars increases.
That leads to carry-trade unwinds as is taking place in China, and capital flight, as is taking place in Europe. As dollars become more worth more they disappear from circulation: to the Fed looking at bank deposits and reserves there is a surplus of dollars, This is even as the street economy collapses with zero money in circulation. This has happened over and over (1932 in US) and is happening now. Diff is other times was dollar/gold driven, now it's dollar/oil.
System is out of capital (oil) not credit. We don't have a shortage of credit but a shortage of the means to repay.
The US went 'off gold' in 1933, to save ourselves we must go 'off oil', that means becoming the swing producer. We would have to cut 75% of our consumption! This is what is going to happen anyway, if we do nothing or the Fed prints or a cow jumps over the moon.
The only thing saving the banks in the EU right now is their positions -- in everything -- are too massive to liquidate. The banks bleed operating funds -- that they cannot raise -- buying time to have some sort of orderly disposal of assets. Once the big positions hit the markets -- huge blocks of stock, €hundreds of billions in bonds -- it will be like a nuclear attack. The ECB will be vaporized! They have no fiscal counterparty to turn to, after all. There will be no bids for 'assets'. What would Bernanke do? Buy all US stock? How about real estate? He would head for the bunker ... so a Fed exists after the onslaught is over.
If you want to buy gold do so, buy physical, don't worry about the price. Your argument is that money is worth less, yet you despair about the money-price of gold! Make up your mind!
2012 will be the year the paper fraud comes crashing to an end. Everybody with money in the fantasy will go down, and anyone with hard physical assets will rule the century.
Read:
http://www.amazon.com/Simple-Wealth-Mr-Andrew-Costello/dp/1463523017/ref
Ouch
What they dont know is that those flying first class dont survive the plane crash
Hence the legislation that allows for indefinite detainment and the many definitions of "terrorists" that target the 2nd amendment, veterans as well as Christians.
I believe he meant "Heroin" not "Heroine" - dang spell checkers
Is it bad that I look at the title, scroll to the name Graham Summers, and know I've wasted more time than the article is worth?
You're singing my song. That's exactly what I wrote in "Fiat Addiction" 2 1/2 years ago. The problem with this debt poison is that it doesn't just eliminate out of your system. It ends up poisoning someone else. "Contagion" is a good word for that.
http://georgesblogforum.wordpress.com/2011/11/02/the-daily-climb-2/
HR 3631
To approve funding of Newsletters with hopelessly flawed economics.
This bill allows the Treasury through the Federal Reserve to print monies to extend the existing circulations of said newsletters through February.
At which point we will all meet again to have the same discussion, and similar extension.
**************
"Now where's that eggnog?"
No.... I think they can keep the whole thing going for a couple more years at least, in fact, I think the only thing that will eventually break the intervention is inflation - like "Why is my coffee $6 a cup?" type inflation.
"We’ve reached the end game for Central Bank intervention."
I don't think so, scooter.
yeah, the FEDREs is an addict that can manufacture out of nothing, it;s drug, that we end up paying for
>We’ve reached the end game for Central Bank intervention.<
Chit Man! They're just getting warmed up.
Exactly! Fed has been printing since the crash 07/08 and the yield is still record low. The markets love printing.
Make that 1913.
Does anyone else think the price of gold and silver the last few days has been unsettlingly steady? Too steady?
there is no making sense of any chart in the gold and silver markets.
you'll make yourself gray trying, and for what? we all know it's heavily manipulated and doesn't even come close to reflecting reality? why try to draw some correlation?
The ten year gold chart looks pretty real to me.
I was thinking the same thing and was expecting more of a reaction/volatility.
There was a lot of emotional damage inflicted on bulls. Another way of looking at also is that gold and silver have been beating to a strong support level, and it is now like a coiled spring. I don't think that the Dollar index will go up too much higher than 80 because of the Euro at 1.30. Zero Interest rate, Insolvent banks, debt ceiling, and real estate are good arguments for prices going up. Not least, who wants a down stock market on an election year (spill over)? As a caveat though, in a market with so much uncertainty (FED/Government/Manipulation) it is a bit of a gamble.
It is unbelievable the amount of gold central bankers had to dump to cause that fall just to give "value" to the money they are printing. They literally gave China, Russia etc such a generous x-mas gift. The transfer of gold just blows my mind. The Chinese are building the back bone of their future currency, and they got it wholesale from ours. That is an incredible act of desperation and disregard for their own people. Unelected bureaucrats selling their countries' assets which are doing more economic damage than a war. If you through all of them down a well all that would hear is me me me
I believe that on the long run the markets will impose themselves like a force of nature. Hopefully, I am still around to see that day.
http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/12/18_Jim_Rickards_-_This_Will_Send_the_Price_of_Gold_to_the_Moon.html
Merry x-mas expendables
They are 'coiling', which given recent history the past few years means a healthy break to the upside.
They will continue it. Because they love their zero interest policy and they know nothing else.
The carnage will happen but not from lack of trying to avoid it but because there is no other way. The only option they have is devalue the currencies, IF they can hold on to the bolting horse. Imagine the horrific unwind if they just let it go! The weight of margin calls on the derivative debt mountain will be too much to handle. There will be an avalanche but not till they've covered their last bet with each other, in their inner circles..
Are we running out of paper? Or ink? I'm confused.....
They don't use paper and ink anymore. Just bandwidth.
We still have at least a few months. I know this because many more zeros can still fit on FRNs.
Jackson is gonna look like he up-chucked a bowl of Cheerios™! :>D
and when they run out of spaces for zeros they can switch to the Letters K and M.
but cnbc said there is "green shoots" over in europe and to expect a market rally
Does anyone else feel like we'e "reached the 'end game" about 1000 times? The end game is a slow motion trainwreck. It is not going to be instantaneous.
I think they were talking about Asparagus.
...Or after eating Asparagus, they had "green chutes".
Nah.. it was this:
http://i43.tinypic.com/eq896w.jpg
+1 Because I love a sense of humour.