We're At the End Game For Fed Intervention

Phoenix Capital Research's picture

The Fed cannot and will not announce QE 3 barring a market bloodbath or major failing. It certainly won’t announce QE 3 when commodities prices never really cooled down from their QE 2 highs.



Commodities as a whole are only 8% off their QE 2 highs. Some commodities are actually higher than during QE 2. If the Fed were to announce QE 3 in this environment is would KILL the US Dollar and the US consumer. End of story.


So instead, the Fed is engaging in verbal interventions, trotting out guys like Evans who, if he were a Doctor, would be in jail for malpractice. Only in economics can you be completely wrong and promote ideas that make people starve and lose their retirements and not be arrested.


After all, why announce QE 3 when you can get the exact same impact just from speaking in public? It’s a heck of a lot easier. And it doesn’t involve people rioting and the economy imploding (yet).


So if you’re banking on QE 3 coming in September, you’re in for a rude surprise. Unless the S&P 500 craters to below 1,100 in the next three weeks, QE 3 ain’t coming.


The Fed has already gone too far with QE. QE 2 spent $600 billion and didn’t accomplish anything (as I and several commentators have recently noted). The Fed’s balance sheet (roughly $3 trillion) is already larger than the economies of the UK and Brazil. Has anyone bothered to ask how exactly the Fed going to unwind this? Everytime the Fed halts QE the markets implode. Do you really think the Fed could withdraw even $1 trillion in liquidity without forcing systemic collapse?


Folks, we’ve already crossed the Rubicon on Fed intervention. There is no way we can undo what the Fed’s done. All that is left is the inevitable debt restructuring and market collapse. The Fed will be dismantled within five years (if not, it will be significantly reformed). Bernanke is going to be stepping down within 18 months and possibly facing lawsuits.


This is the facts of the matter. The QE 3 debate is pointless. We’ve already begun the End Game for the Fed and its interventions. Sure, we might prop things up here and there temporarily, but the great unwind has begun.


Indeed, I fully believe we are about to enter into the next leg down for this Crisis. The financial system is on DEFCON Red Alert (no matter what stocks are doing). And smart investors are taking steps to prepare themselves and their portfolios NOW while the markets are still holing up.


If you have yet to prepare yourself for what’s coming, my Surviving a Crisis Four Times Worse Than 2008 report can show you how to turn the unfolding disaster into a time of gains and profits for any investor.


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Good Investing!


Graham Summers


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chinawholesaler's picture

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johnjb32's picture

Too bad it's not the end game for the Fed itself... yet. -- Michael C. Ruppert


dervish's picture

the fiat money principle is copied from other areas of human life, where psychological archetypes are exploited. best example: women. they go get fancy clothes and bling in order to be more attractive, that only attracts the wrong type of guys, they get exploited and fight this chain of misery just by starting it again with the same misconception, that bad concept (i.e. beeing attractive on the outside while beeing corrupt on the inside) can bring good outcomes, whereas they dont. more designershoes and bling does not attract mr. charming. it is only the belief in it that keeps the whole process running. and as long as everybody who participates in this fiat attraction/fiat money process keeps believing that it has intrinsically the value it displays onto the outside, that process will kepp turning like a wheel. so long as people start to recognize that real character is what they need and should be wanting, then gold and silver and other assets of real value will rise up again. but you need a collective psychological change for that to happen. this is not a financial crisis, it is a crisis on many many levels. the grand finale? armageddon bitches! ;-)

Zero Govt's picture

".. instead, the Fed is engaging in verbal interventions, trotting out guys like Evans who, if he were a Doctor, would be in jail for malpractice."

Your sharpest line in months Mr Summers ...and made me chuckle too :)

robertocarlos's picture

If the Fed prints like crazy then who gets the money and why? I thought you had to work for money or take out a loan and then do work to pay it back. If debt is forgiven then all us suckers who saved money will be very upset.

I think I need to buy a gun's picture

i don't think there are many savers.....the feeling i get around town is everyone is in major debt

mayhem_korner's picture

If the Fed prints like crazy then who gets the money and why?

Banks get it, with a wink-and-nod agreement to ensure POMO activity is sopped up, leaving the surplus cash to prop up the equity markets.  ZIRP loans for fabricated equity returns.

Ultimately, the "money" goes to the unquenchable spending appetite of the Fed Govt via the support of the Treasury auctions.

The complex is trapped.  This article, as well as other recent posts, make a pretty good case that the DXY is too fragile to overtly punch the start button on the presses real soon.  On the other hand, the levitation act can't go on forever - either equities will tank or interest rates must rise.  The Fed will not allow the latter, as it is the direct route to implosion.

sun tzu's picture

If the Fed prints like crazy then who gets the money and why?

The bankers get the money because they own the Fed

I thought you had to work for money or take out a loan and then do work to pay it back.

Only regular schmucks like us

If debt is forgiven then all us suckers who saved money will be very upset.

Savers are in the minority

Tom_333's picture

Very...very upset.Somewhere down the line this game with benign neglect of moral hazard will...change a lot. The system can only take so much abuse.

Mugatu's picture

Graham is the finance industry's version of Shamwow.


Both are shameless yet oddly entertaining.

Stuck on Zero's picture

What?  Did you say:

The Fed has already gone too far with QE. QE 2 spent $600 billion and didn’t accomplish anything ...

??  It made many banksters rich, provided fat bonuses to CEOs, fed the bloated bureaucracy and enabled profligate special interest Federal spending. 



essence's picture

Graham isn't alone in thinking dire things are about to happen. A qwick search among well known bloggers will show many predict we're in for a wild ride as the EU banks go, dragging the US/UK with them via derivatives.

Of course who knows, the PTB have many tricks up their sleeve to forestall collaspe, on the otherhand, if their preparations for a transfer to a new monetary paradigm are complete they might just pull the plug.

Think about it folks, the PTB pushing with all their might for Euro Bonds and EU fiscal union, over here they've prepped Homeland Security and the Military to step in with martial law. A shift over to a united western common currency (i.e.  SDRs composed of Gold and a basket of the exisiting currencies) would be hughly disruptive.  Note I don't imagine this SDR currency to be used internally, rather it would be for intercountry use.

Now of course it will be structured so that that top 0.001% of ultra wealthy still control everything, it's just that the mechisms of control will be different.  Think back to the founding of the FED and how clueless the public was as to the absolute monstrosity of it all. I suspect they've given deep thought and planning to setting up the new means of control.

Truth  is, I see our only hope being a violent reset that deprives the U.S. Federal government of resources  as the only method of escaping the clutches of the bankers. For the bankers control government and (indirectly) the military. As long as those entities exist in present configuration then they'll use force to prop up the status quo.

And the status quo is that a handfull of ultrawealthy form a shadow government that controls the US,UK and EU.








Smiddywesson's picture


You are suffering from too much reality.  Reality and history clearly indicate this can't end well, and suggests it will collapse soon, but that is where history misleads us.  Unfortunately, the Fed operates in the make believe world of fiat.  It requires "political independence" and "secrecy" to be effective, according to them.  This is, of course, another way of saying that conspirators and thieves need to operate in secrecy and without fear of the law, to have their way with the common folks.

I don't mean to be disrespectful, because I love your articles, which are short and to the point, but if you think the Fed is out of tricks, you are out of your ever living mind.  They will do anything, ANYTHING, to kick the can and buy up as much cheap gold as possible.  The lesson of the last three years is they will throw all the furniture on the fire to keep the party going.  It doesn't matter what the costs of kicking the can are, they are playing with Monopoly money.  

At this late date, that should be clear to anyone with any brains at all.  This has been a hard lesson for me.  I knew intellectually, that they could drag it out, but emotionally, I never would have guessed they could keep all the balls in the air.

This ain't over.  We are going to see incredibile volatility, both in the markets, and in the real world.  They use the upswings to quell panic, but it is just a low volume lie.

This is a controlled crash.  My personal opinion is the TPTB pull the plug before it crashes, but they can keep the can kicking going far longer than anyone would believe.


"The can can be kicked far longer than the bears can remain solvent, bitchez"  - Sir John Maynard Keynes  (Self promoting rock star economist)


[Pardon the spelling and grammer, Smiddy isn't getting any younger and this is a HUGE screen with tiny fonts.]

RockyRacoon's picture

Maybe you can help.   I trust your opinion.  In the article I read: "QE 2 spent $600 billion and didn’t accomplish anything"

I was wondering how anyone knows that since it did happen after all.   Doesn't the ramping up of commodities and the stock market rising on hot air count as an "accomplishment"?    I guess it's one of the proverbial proving a negative sort of things.   I have an aversion to folks who seem to know that what was done resulted in nothing changing.   That's just not possible.   The words "didn't accomplish" means that nothing happened.   Does anyone believe that?   The money ends up affecting some incomes so I'd say that QE2 certainly did accomplish something!   Good or bad seems to be the real question.   If I didn't get any, it was bad.

Smiddywesson's picture

Well, you have me there Rocky.  All of the versions of QE did in fact benefit someone, and that someone was always the same group of villains that caused this.  

I used to think that TPTB were stupid, but then I grew up.  The reason they are not spending any money at all to fix the system is because they know the system can't be fixed.  When on accepts this fact, all of the kick the can measures make sense.  They are kicking the can and slowly buying gold.  That is an undeniable fact.  Draw your own conclusions as to why, central banks that are hurting for liquidity, are all, all over the world, at the same time, buying gold and kicking the can.

maw53704's picture

i use this web site in order to increase my investment returns.  I try to analyze problems not on a political or philisophical approach  but on a  analysis of past events and best forecast based on information availble.   (my first paying job was reading a paper ticker tape and marking the most recent quotes on the front wall chalk board.  I've been shooting craps longer than most of you have been alive.)   FORGET  what the fed is supposed to or not to do.  Their purpose as evident by all fed actions  since Volker is to make the big finacial institutions highly profitable.  screw the middle class--hell screw the country.    just make sure the ability of the financial executives to pay outlandish salaries at capital gains tax rates is uninterrupted.  Once that is understood making money on speculation is easy.

Smiddywesson's picture

What you are really saying is that all markets are manipulated, on all time frames, all of the time.  You are further expressing that if you understand how these markets are manipulated, you can trade the scams and will advance to a master trader and cast away the fundamental and technical analysis based trading that fleeces most people of all the money in their trading account.

Er..., umm... yup.  Sorry, there are no markets, it was all a scam.

Agreed.  Well done, you have reached the master level.

(Silence Rocky you crazy rodent!)

maw53704's picture

not just markets but history.   When Gopldfinger told Bond he was going to blow up Fort Knox, Bond replird "How can you steal the gold?"  Goldfinger replied "I'm not stealing the gold. I'm destroying it to make mine more valuable."   Check out the price of TSO prior to the Iraq invasion and 6 months later.   Bush-Cheney  made many an oilman billionaires.  One of the most prescient trades I ever made.  You don't need to do that to often in a lifetime.

RockyRacoon's picture

Is this the generic text you post on all websites?   Can I use it to ingratiate myself at other sites as well?  Thanks!

fonestar's picture

Any armchair historian worth his salt knows how this will end.  Well, knows that it ends badly for almost everyone involved anyways.

Smiddywesson's picture

NO, it will end well for those with PMs.

I am going to hire nubile young females to paint themselves green and dance for me like I am James T. Kirk.

That's vindication in my book.

maw53704's picture

i use this web site in order to increase my investment returns.  I try to analyze problems not on a political or philisophical approach  but on a  analysis of past events and best forecast based on information availble.   (my first paying job was reading a paper ticker tape and marking the most recent quotes on the front wall chalk board.  I've been shooting craps longer than most of you have been alive.)   FORGET  what the fed is supposed to or not to do.  Their purpose as evident by all fed actions  since Volker is to make the big finacial institutions highly profitable.  screw the middle class--hell screw the country.    just make sure the ability of the financial executives to pay outlandish salaries at capital gains tax rates is uninterrupted.  Once that is understood making money on speculation is easy.

GottaBKiddn's picture


The overall purpose of the Fed has always been to systematically destroy the dollar, through monetary mismanagement so stealthfully accomplished as to put even the wariest of sheep to sleep. This they have done with precision, and nothing will stand in their way. No, not even Ron Paul.

zeroman's picture


Smiddywesson's picture

I didn't junk you because you are right in many regards.  The USD, in a linear view of the future, is doomed.  However, does history move in a linear fashion?  NO.  Did we have true inflation, or true deflation, or a mixture of both based on what the Fed wants?  

The central banks are buying gold.  They are not going to give up power, never ever, ever.  They can junk you because of your all caps, but you could very well be right.  Gold is going ot figure prominently in the new system.  I have my own opinions, but right now anything goes.  So I just can't junk you for writing that The Man is coming after our paltry amounts of gold.  It's unlikey, and wasn't necessary in the 1930s, but hey, there's no Constitution to stop them today, so why not?

ddtuttle's picture

The Fed is also engaged in QE3 Lite: every  time a security comes to maturity, the Fed reinvests those funds the same way they did in QE2.  In other words, they are rolling over their balance sheet.  This is not money printing per se, but it is letting the Treasury issue debt knowing the PDs will buy it and flip to the Fed.

However, this post gets at the cetral issues facing us: how much can the Fed do if things get really bad?  Technically, they can print as much money as they want.  However, things have to get pretty bad before they will actually have the political green flag. Personally, if we enter a deflationary recession/depression like phase, they print like demons to offset the colapse.  I don't agree with this, but I think they have A LONG WAY TO GO, before they give up.

This will determine whether hyperinflation is on the table.  If they stop and let the economy follow its course, we will have a deflationary depression.  If they are committed to fighting that (as they say they are), they will print endless amounts of money to combat deflation.  They know as well as anyone that we have incurred too much debt, but their current solution is to inflate our way out of it.  However, if this leads to hyperinflation (which will be global), then all bets are off.  Then we might see really extreme measures like a new gold backed global resreve currency, which will be a defacto debt jubilee (after hyperinflation debt will all be paid off with funny money).  The new currency will start life debt free.


hettygreen's picture

The thing about QE whatever is how does anyone know stocks will soar if it happens? All this daring or should I say pleading the Fed for this nonsense to happen is so obviously a desparate call for a way out. In other words there's a lot of important, stupid, greedy people who just have not had enough time to unload the crap they are jammed to the gills with. Well I say fuck you greedsters because you are now squarely in the crosshairs of an upcoming waterfall decline. And crater to under 1100? You've got to be fucking kidding if you think your getting off that easy.

Cassandra Syndrome's picture

The Dollar Index has to increase to the high 80s to justify QE3. Does anyone think that will happen? I can only see a huge sell off in equities to pump the Dollar index up, but how far will the selloff have to go? Furthernore how far can commodities fall to justify QE3 at least within the Central Planners dark mindset? 

They are wary of the social unrest that accompanies food and energy inflation.

mt paul's picture

rumor has it 

the fed is installing

a bigger back door 

to facilitate loading

 the QE 3 express...


dumpster's picture

more real time stuff

phonex is blind as as the herd .

Greenberger highlights the speculative pools activity of Goldman Sachs and Morgan Stanley. But there are far worse excesses being done by other actors through their own trading desks, among these JPM and HSBC it appears at least from government records, in the derivatives markets.

Anyone who watches the markets closely knows full well how derivatives and leverage can be used to manipulate the physical markets with paper in a fiat regime, especially where the "delivery" of goods can be financialized, leveraged, and nakedly shorted, behind the cover of opaqueness and complexity.

Thus the use of such financial tools allows some participants to essentially defer the equilibrium of supply and demand for unusually long periods of time, until some event or accident triggers an exposure, a sudden reckoning, and a subsequent collapse.

I think the extreme fractional reserve nature of the current metals markets is an accident waiting to happen, awaiting only the right mix of margin calls and short term demand. And then everyone will be surprised that such a grand theft went on for so many years, unnoticed, except that is by a stalwart few, much in the manner of the Madoff fund and Harry Markopolos.


Lucius Cornelius Sulla's picture

Whatever the FED does cannot interfere with low, low rates on bonds or risk the collapse of the USG.  That is a very real constraint on their activities.

cainhoy's picture

no one can imagine america post-collapse...fat people will, i repeat, will be eaten. stock up on carving knives. i shall simply drink a whole bottle of jack in one sitting and cross the river. jesus will forgive everything because he set us up to fail.

IAmNotMark's picture

I can imagine a few post-collapse scenarios.  Not all of them bad.  Any America that isn't ruled by the thieves and crooks in Washington has a chance to be a better place.  Unlikely, but...my magic 8 ball makes me hope!

Alcohol poisoning is a terrible way to go.  I'd puke so hard I'd see stuff from my childhood.


ZeroAffect's picture

OK, buying the first sentence but not the last sentence. "jesus will forgive everything because the ruler of this world set us up to fail." There fixed that for you.

Alea Iactaest's picture

How can you say the Fed is done, yet the only way there will be QE3 is if the SPX drops below 1100? If the Fed is done, it WILL go below 1100. The only way it does NOT is with QE3. See the problem?

andyupnorth's picture

My thoughts exactly Alea.

What’s up with all the contradictions?  No more QE because stocks aren’t much lower – therefore stocks will plummet?  The FED can’t unwind their stimulus or else the market will collapse – but stocks will collapse anyway?  QE will have no effect on stocks – but it’s the only way to keep stocks afloat?

Do people really pay for this kind of 'analysis'?

flaunt's picture

Right.  In other words, there will be QE3.  Question is what happens first?  Reasonable to assume the market has to make new lows.  I'm not sure what part of "no deflation" Summers doesn't get.  Bernankster has spoken many times about this.  Deflation is worse than inflation.  No way, no how he doesn't react to it.  He'd have to do a complete 180 on everything he's ever believed in for him to stand idly by while the debt implosion occurs. 

So I'm not quite sure whether Summers is calling for an implosion BEFORE QE3 or whether he's saying no QE3 no matter what.  It sure sounds like he's saying the latter now, but has said the former.  His writing style is a tad on the abrasive side so it's hard to hear the message without feeling like someone's inside my head screaming at me at the top of their lungs.

CompassionateFascist's picture

At this point, the stock "market" is like a dog track: the dogs keep running around the same circle chasing a bait - QE3 - that will stay just out of reach. Meanwhile the gap between the tip of the Universal Ponzi - the stock "market" - and the real economy of less and less work and less and less real wealth creation.....keeps widening. When the dogs get tired, they'll collapse into that chasm. Mmmmmmmmmm...dog meat for dinner.

Brian's picture

Don't forget Japan.  If the FED announces QE3 any time soon (and perhaps ever) the Yen will strengthen considerably - possibly up to 65 or 60, and all Japanese exporters will BK.  This will crush the Nikkei and it will make the government debt totally unserviceable.  It will result in massive layoffs in Japan, and it will force many former bond buyers to become sellers to pay their expenses (now that they are jobless).

Pretty much, QE3 is a declaration of war on Japan, and it will destroy the world's economy much faster than the "natural forces" of no QE.


cranky-old-geezer's picture




In that scenario Japan will simply flood Yen on world markets, and down comes the Yen against USD.

Japan does have a problem though.  They're a manufacturing exporting nation with a nice trade surplus, repatriating their currency fairly rapidly, which keeps the Yen relatively strong against the US dollar which has the opposite problem, a huge trade deficit flooding the world with dollars, which in turn makes the US dollar vulnerable to currency collapse.

WRC status is the only thing keeping it from happening now.

tip e. canoe's picture

nice analysis Brian, it seems like Japan has been an expendable lab experiment for USAInc. since 1945.   what i still can't figure out is why the Japanese continue to play the masochist role.   karmic maybe?

zeroman's picture


dumpster's picture

well the herd will trample his view.   Q3 has started .. interest rates at 0% was the beginning .

heis throwing a large fat bugger out their .. with what penalty ,, a failed call. and on phoenix goes with business as usual...

unless the monetization continues phonex will be stufing  enevelops for a living ,

and the 49 million on food stamps will be first in line at the dumpster .

While phoenix will be stammering and yadding .. As his consulting business will not have any takers 

ask him to bet 5 silver eagles .. and dont hold your breath

SheepDog-One's picture

I got to hand respect to Phoenix, theyre definitely putting it all on the line being damn near the only total contrarian to the 'QE3 yes yes yes 1,000 times yes' herd out there today.

Praetorian Guard's picture

If it all goes to shit, gold will be the last thing on your mind. Has anyone stopped to think what the socio-economic and social infrastructure would look like if everything goes south? Riots, unrest, you name it. When this happens everyone will have been baptized by fire, and many won't make it... scary times.

Citxmech's picture

That's one aspect of Rothschild's psychopathy that has been under-appreciated.  It's tough for normal people to "buy when there's blood in the streets" - it's against human nature.  But the ability to suck it up enough to actively negotiate the coming shitstorm will be necessary for each one of us or all those preparations will be for naught.

Lucius Cornelius Sulla's picture

Only in capital markets are the rules of supply and demand reversed whereby buyers run from bargain prices and clamber to buy more over-priced stock.  Human nature is a strange thing to behold.