QE 4: Folks, This Ain't Normal - What You Need To Know About The Fed's Latest Move

Tyler Durden's picture

Submitted by Chris Martenson of Peak Prosperity

QE 4: Folks, This Ain't Normal

What you need to know about the Fed's latest move

Okay, the Fed's recent decision to boost its monetary stimulus (a.k.a. "money printing," "quantitative easing," or simply "QE") by another $45 billion a month to a combined $85 billion per month demonstrates an almost complete departure from what a normal person might consider sensible.

To borrow a phrase from Joel Salatin: Folks, this ain't normal.  To this I will add ...and it will end badly.

If you had stopped me on the street a few years ago and asked me what I thought would have happened in the stock, bond, foreign currency, and commodity markets on the day the Fed announced an $85 billion per month thin-air money printing program directed at government bonds, I never would have predicted what has actually come to pass.

I would have predicted soaring stock prices on the expectation that all this money would have to end up in the stock market eventually.  I would have predicted the dollar to fall because who in their right mind would want to hold the currency of a country that is borrowing 46 cents (!) out of every dollar that it is spending while its central bank monetizes 100% of that craziness?  

Further, I would have expected additional strength in the government bond market, because $85 billion pretty much covers all of the expected new issuance going forward, plus many entities still need to buy U.S. bonds for a variety of fiduciary reasons.  With little product for sale and lots of bids by various players, one of which – the Fed – has a magic printing press and is not just price insensitive but actually seeking to drive prices higher (and yields lower), that's a recipe for rising prices.

Then I would have called for sharply rising commodity markets because nothing correlates quite so well with thin-air money printing as commodities.

That's what should have happened.  But it's not what we're seeing.

Instead, stocks initially climbed but then closed red.  Gold was mysteriously sold in the thinly-traded overnight markets and again right after the announcement in large, rapid HFT blocks that swamped the bids. U.S. Treasury bonds actually sold off on the news.  The dollar hardly budged. Commodities were mixed across the board but more or less flat on the day, with the exception of the metals, and especially the precious metals, which were sold vigorously.

The markets are now well and truly broken.  Not because they don't conform to my predictions, but because they are no longer sending useful price signals.  Instead, my hypothesis here is that the markets are now just a giant and rigged casino, where a relative handful of big firms and other tightly coupled players are gaming their orders to take advantage of this flood of money.

When your central bank badly misprices money and then bids up everything related to bonds, nothing can be reasonably priced.  Risk is mispriced; the few remaining investors (as distinct from speculators, which are now the majority) are forced to accept both poor yields and higher risk – so we know the price of everything, but the value of nothing.


So what exactly is this new thin-air money printing program all about?  Well, unlike any prior Quantitative Easing (QE) announcement, this one was tied to a fuzzy and quirky government statistic: the unemployment rate.

QE4 is Just-In-Time Fed Policy to Avoid Calamity

Dec 13, 2012


We got the most thunderous Just-In-Time monetary policy today that is a substitute for the absence of any degree of stimulative fiscal policy.


You might say that QE4 is now going to act as both monetary and fiscal stimulus– another $85 billion worth of Fed accumulations of Treasury bonds and mortgages- that is meant to keep stock prices moving higher and residential home sales climbing briskly.


The goal is to drive economic activity, especially residential home building, so that unemployment drops from 7.7% to 6.5%. The surprise move is meant to signal the Fed’s awareness of the softening economy; it sees the gritty numbers before we do.


Getting unemployment down to 6.5% without inflation rising to a level higher than 2.5% is not expected to happen until 2014 at the earliest. And it could go longer if there is no deal and we go over the cliff.


But, you should know that the only reason unemployment is 7.7% is because hundreds of thousands of males have dropped out of the search for regular work. A very depressing tale.

The key point here is that the Fed is now actively running both monetary and fiscal policy because it will now be in the business of funding nearly 100% of all the new government deficit spending in 2013.  And it is pumping a bit more than $1 trillion of hot, thin-air money into the economy as it does so.

The odd thing here is that by tying their policy to the unemployment rate, we could be in for a very long wait for the stimulus to end.  The reason is that the unemployment rate has a couple of moving pieces, one being the number of people who are unemployed, and the second consisting of people who have given up looking for work, which is tracked in something called the 'participation rate.' 

As more people leave the labor force and the participation rate goes down, the unemployment rate goes down, too.  Somewhat confusingly, as more jobs are created, the unemployment rate goes down, too.  As you can see, these numbers work in opposition to each other because as more jobs become available, more people re-enter the work force.

Before the crisis struck, the participation rate was around 66.5%. But now it sits at just 63.6%, meaning that, at roughly 1.4 million jobs for each percent, a bit more than 4 million jobs would have to be created just to absorb the folks who left the labor force but presumably would like to work again. As those 4 million folks come back to work, the unemployment rate will not budge at all.

It will require two full years of 150,000 jobs per month just to absorb the 4 million missing workers, which means that this QE effort will be with us for a very long time.  Three to four years is my best guess, and that's only if the economy magically recovers.  And I have very strong doubts about that.

This means that the Fed is most likely on track to increase its balance sheet by another $3-4 trillion.  Ugh.  That's 300% to 400% more money created in the next year than was created than during the entire 200 years following the signing of the Declaration of Independence.

The other part of this new QE policy is that they will continue this as long as inflation remains below 2.5%.  Again, this is a very fuzzy government statistic subject compared to the usual massaging and political biases, but it has top billing as the one that is most likely to force an early termination of the thin-air money printing efforts.

However, I remain convinced that the Fed will change any rules and move any goalposts it needs to in order to continue its mad money printing experiment.  Because there really isn't any other alternative at this point.

Secretly in the Open

Once upon a time, it would have been considered in bad taste to suggest that the world was being centrally managed in secret by a small-ish cabal of bankers whose actions served to either prop up the excessive spending habits of the very governments that conferred upon them the power to print money, or to bolster the health and profits of the banks they mainly serve.

That was then. Today you can just read about it in the Wall Street Journal:

Inside the Risky Bets of Central Banks

Dec 12, 2012

BASEL, Switzerland—Every two months, more than a dozen bankers meet here on Sunday evenings to talk and dine on the 18th floor of a cylindrical building looking out on the Rhine.


The dinner discussions on money and economics are more than academic. At the table are the chiefs of the world's biggest central banks, representing countries that annually produce more than $51 trillion of gross domestic product, three-quarters of the world's economic output.


Of late, these secret talks have focused on global economic troubles and the aggressive measures by central banks to manage their national economies. Since 2007, central banks have flooded the world financial system with more than $11 trillion. Faced with weak recoveries and Europe's churning economic problems, the effort has accelerated. The biggest central banks plan to pump billions more into government bonds, mortgages and business loans.


Their monetary strategy isn't found in standard textbooks. The central bankers are, in effect, conducting a high-stakes experiment, drawing in part on academic work by some of the men who studied and taught at the Massachusetts Institute of Technology in the 1970s and 1980s.


While many national governments, including the U.S., have failed to agree on fiscal policy—how best to balance tax revenues with spending during slow growth—the central bankers have forged their own path, independent of voters and politicians, bound by frequent conversations and relationships stretching back to university days.


If the central bankers are correct, they will help the world economy avoid prolonged stagnation and a repeat of central banking mistakes in the 1930s. If they are wrong, they could kindle inflation or sow the seeds of another financial crisis.

If it feels like you are part of a very grand, high-stakes experiment, congratulations!  You're exactly right. We are all collectively prisoner to whatever outcomes are in store.

The rather politely ignored truth right now, at least by most news outlets and politicians, is that the world's central banks have wandered very far off the reservation and are running an experiment that really has only two possible outcomes.  One is a return to what we all might call 'normal and stable' economic growth.  The second is the complete collapse of the fiat money and their attendant financial systems and markets.

While it is technically possible to achieve some other middling outcome, that possibility has been receding to ever more remote territory with every passing month and new round of money printing. 

The basic predicament here is that more and more money is being printed while the world economy, predictably for those who follow the net energy story, has been entirely stagnant and constantly threatening to slip back into economic retreat. Of course, more money + the same amount of (or even less) hard assets = the perfect recipe for inflation.

So the rise of inflation will signal the beginning of the end of this slow-motion tragedy.  I use the term 'tragedy' here because it doesn't have to end this way.  We have other options; we could make other choices and use our time and resources to try and do something other than maintain a broken financial system that desperately needs to be changed.

In Part II: It's Better to Be a Year Early Than a Day Late, I explain the facts behind why I am more convinced than ever that this all ends in one of the most disruptive financial and currency events ever seen on this planet.  And while the repercussions will be felt by all, taking prudent action while there is still time can greatly improve our individual odds of weathering them safely.

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RopeADope's picture

There is no inflation if it goes to the top 0.25%. Rather you will have deflation of civil liberties and property ownership.

ball-and-chain's picture

People claim there's no inflation.

Yet I can't afford gas.

I can't afford food.

I can't afford insurance.

If inflation does hit one of these days, I'm completely screwed.



rbg81's picture

Yup.  QE as far as the eye can see indeed.  Because, in the eyes of the Elite, stagnation is better than the chaos that would occur if real market forces were unleashed.  Central bank printing is a straight jacket on the Market, and by extension, the World Economy.  They are doing it because the structural economic imbalances are too great to cope with politically.  Too many people in the West & Japan are enjoying too high a standard of living for what they actually produce. 

How do these Central Bankers imagine they will get away with it?  Easy, they are ALL doing it in unison.  Since they control the world, where is anyone going to go?  If "The Market" starts to act up, they have sufficient power to smother it until it behaves itself again.  It will only end when either the excess population has died off or all production is automated and becomes free.

saturn's picture

Crucify The Bernank, will ya?




AldousHuxley's picture

fed prints according to taylor and mankiv rule.


QE until unemployment < 6.5%

and 6.5% unemployment isn't all that great




GetZeeGold's picture



Well it all seems pretty normal to me.


So what did you think was going to happen when the wirld decided to go full tilt stupid?

GMadScientist's picture

6.5% according to them is what 10-12% real world UE?

And aggregate income still trumps "seats filled".

So it's obvious they're printing as long as they want since they've chosen a completely bogus metric to use as a yardstick for "success".

DoChenRollingBearing's picture

+ an almost uncountable number!

You are completely correct.  By using bad metrics and by not well defining their policies they can whatever they want.

Ding, ding, ding!  You rang a bell with the clearest tone I have read in a while, H/T.

AldousHuxley's picture

6.5% UE is the number they determined keeps masses busy enough with jobs that they won't come out to protest in the streets and overthrow the status quo.


don't need to count. If there are bunch of youngsters protesting in the streets, then unemployment is too high. Time to start a war to send the young males to die off or get them back into educational debt servitude.

kito's picture

Rbg you are clearly not as smart as ray dalio......its all part of the "beautiful" deleveraging.....settle down....its just cyclical.....a few cuts here...a few trillion printed there.....mix in some mass killings......all will be fine soon.....ray says so.......

GMadScientist's picture

You're right. Crack open the Chateau Latfite and fist a hooker.

"Merry Christmas everybody!!" - George Bailey

Ness.'s picture


Where's that money, you silly stupid old fool? Where's that money? Do you realize what this means? It means bankruptcy and scandal and prison! That's what it means! One of us is going to jail; well, it's not gonna be me! 


rbg81's picture

It'll be uber interesting to see how long the Central Bankers can maintain unity and keep this farce going for.   Of course, most probably know better but the Politicans may have given them no choice.  Some, like Rick Santelli and Kyle Bass, have ultimate faith in the Market; in Bass's case, he's bet his company on a hedge (collapse of the JPY bonds) that looks increasingly unlikely.  The Banksters just won't let it happen.  And anyone capable of throwing a monkey wrench into the System has surely been co-opted by now.  Right now the Game is so rigged at the highest levels that its hard to see how classical Market mechanisms can reassert themselves.  It will probably take some Black Swan event that catches the Smartest-Guys-In-The-Room by total surprise and even the most distractable Sheeple can't ignore.  Luckily, these do happen from time to time.  But, even so, the Powers-That-Be will be desperate to keep a lid on things.  How will we know the end is near?  Look for Nay-Sayers (like Santelli) to suffer freak accidents that make those in "The Omen" look plausible and sites like ZH stay down due to "technical difficulties".

Captain Kurtz's picture

It will only end when either the excess population has died off or all production is automated and becomes free.

Pretty much.


Ironic, isnt it? Unemployment isnt for the unemployed.  And a prolonded "Crisis" is always preferred over Uprising.  This is straight out of the handbook of the "managing" elite central bankers.

Carp Flounderson's picture

this may be the most intelligent thing I've ever seen on zerohedge... too many hedgies swear by the hyperinflation party line.  Not going to happen guys.  You could double the money supply from here, I'll take the extra money and bury it in my backyard (which happens to be in an offshore tax haven.)  Your prices wont go up.

dmger14's picture

IDK, I tend to think there will be a loss of confidence in the dollar and commensurate spending/velocity scramble for all things real and not paper.  Confidence and velocity are key.  I think China's decrease in treasury ownership and purchase of the AIG segment is the tip of the iceburg.

Bobbyrib's picture

Do you prefer the economic advise of Krugman, Bernanke, or Obama? Go to a grocery store, gas station, or buy health insurance, then lay on the bullshit that prices won't go up...

EmmittFitzhume's picture

Labor participation down.  Wages down. The economy is shrinking. Products are still being made at a pace too fast for this. This points to deflation no matter what the Fed does.  Market forces will reset this madness

CH1's picture

Market forces will reset this madness

Sadly, those have been overcome. All is regulated, which means "controlled by the state."

This is a Bernays Tyranny. Any remaining "market forces" that get in the way will be "removed for your safety."

The only answer is to quit the game and look up Agorism.

kaiserhoff's picture

The real economy is shrinking, yes, maybe diving. Market forces?

The drunken expansion of government still can't keep up with the depression in the productive economy.

The Fed has little or no effect on the debt crisis.  Too much stuff under water, and nothing that is left is really interest rate, or liquidity sensitive.  In foreign trade, we are still the best looking horse in the glue factory.

Still, something big will break soon.  When Ben destroyed the free market in long bonds, he messed up all sorts of prices, wages, and feed back mechanisms.  The errors are cumulative.  Central planning always fails.


zhandax's picture

Far more that half of the productive activity in the country has been driven offshore.  Around half of US GDP is derived from FIRE.  The bailouts were specifically to preserve/sustain the FI side and much of this QE nonsense has been in hopes of resuscitating the RE portion.

The bulk of what remains are services.  Food service continues to see headwinds, but content creators are dealing with manageable declines.  Medical services are, for the most part, fat, happy, and increasingly benefiting from federal largesse.  If your business is writing code, do you really care if your next contract is with Deer or Raytheon?

I don't disagree with you, but these are some of the reasons I am short one contract instead of 50.

slovester's picture

The FIRE acronym leaves off another elephant in the economy - medical.  Toss that one into the mix and you get FIREM.

Somehow seems appropriate for the times...

Bobbyrib's picture

You forget that the United States does not produce most of the items we use. We have a huge trade deficit for a reason. If China decides to give its workers a wage increase  and so does Brazil, Vietnam, and all the other EM's that produce our goods. How do you think inflation doesn't occur? It will take the multinationals some time to find a new country to produce their products for pennies on the dollar (in terms of price). If less products are produced and less of a supply is available it could keep prices from going down. Bascially the idiots who buy I-Pads could be fighting over an even bigger supply shortage, or they will pay more for their I-Pads. You are right about market forces adjusting, I just think they will eventually (2-3 years) go to the upside.

cranky-old-geezer's picture



Getting unemployment down to 6.5% without inflation rising to a level higher than 2.5% is not expected to happen until 2014

It will never happen, (real) inflation is already 15%.

And buying MBS by the boatload won't help home prices, just banks.  

Reducing home prices would help home sales and help the unemployment rate drop, pobably not enough to measure, but whatever.

So QE4 is just nonsense ...unless you realize it's another step in the big looting spree ...then it all makes sense.

See, you just have to understand what they're really doing.  Then it all makes perfect sense.

TheSilverJournal's picture

The Federal Reserve is on a pace to own every single MBS in the US within ten or twenty years. Likely, this pace will increase too but even now, that is a maddening pace...and yet the majority don't even know what QE3 is. The largest asset (or liability nowadays) that most people own is their home, and the Federal Reserve is about to become the largest landlord on the planet. How does this not bother people more?

The inflation target of 2.5% is simply ludicrous too. As you pointed out, real inflation is much higher than 2.5% already, but it gets better. The 2.5% inflation target isn't just on the government's measure of inflation, but it's on the expectations that the government's measure of inflation will be at 2.5% ONE OR TWO YEARS FROM NOW. So that means the government's measure of inflation could be 3%, 4%, 5%, or maybe even 6% and as long as they say they expect inflation to come down to 2.5% in a year or two, the Fed will still be within its current guidelines.

cranky-old-geezer's picture



The Federal Reserve is on a pace to own every single MBS in the US within ten or twenty years.

...and the Federal Reserve is about to become the largest landlord on the planet.

Nope, don't think so.  My understanding is MBS trusts hold notes but not mortgages, so there's really no collateral in them, just expectation of cash flow ...which isn't happening of course.

This is where banks screwed MBS trusts.  Banks kept the mortgages ...or turned them over to MERS, which still doesn't give MBS trusts any legal claim to properties.

And yes this is where homeowners can take action, note separated from mortgage, MBS trust can't foreclose, they don't have the mortgage, bank can't foreclose, they don't have the note.

And Fed is completely fucked.  MBS is just a share of an MBS trust, like stock of a company.  Fed has no legal access to the note, much less the mortgage.

Fed is buying MBS just to keep the MBS market from collapsing and banks from taking huge losses.  Taxpayers will bear those losses as MBS lose value sitting on Fed's balance sheet.

mewenz's picture

Good information but don't at all understand how the Fed is completely f@@@ed.  Say they buy 1 trillion of MBS and ultimately it is only worth 25% of what they paid.  Where did they get the $1 trillion to "pay" for the MBS...so did they "lose" $750 billion or simply obtain $250 billion in assets for effectively nothing.  Further, what is to stop them from just creating another $750 billion if they feel like it anyways.

cranky-old-geezer's picture



Where did they get the $1 trillion to "pay" for the MBS(?)

They created it out of thin freikin air, just conjured it into existence like magic, what we call "printing", like printing it up on a printing press ...which they could also do, but who wants to mess with paper currency when you can punch a few keys on a computer and have the 1 trillion paid for those MBS magically appear in some bank's reserve account.

Oh yes, it's all a big fucking fantasy. 

Imagine that.  The world reserve currency just a fucking fantasy now, just numbers in computers.

Big Slick's picture

I think that was mewenz's point, posed in a rhetorical question.

The whole thing is sick... beyond reality... and unsustainable.

TheSilverJournal's picture

Yeah, it was unsustainable starting way back when the first counterfeit gold note was printed. The banking cabal grew until it engulfed the world with the Bretton Woods System...and then the world grew, allowing the central banks of the world to suck in the dollar like it ain't no thang. When the dollar goes, all fiat goes. How long until QE5? February? QE6 in March? QE7 later in March? Maybe it'll just be a one time zap of $800B in March. And then in May they have to do another one time zap of $800B, on top fo the QE3 and QE4, of course. And then in June they have to do a $2T zap. The entire deal is so noticeable that critical mass is arriving shortly.

TheSilverJournal's picture

The ONLY goal of the Fed is to retain power over their printing press meaning keeping the fiat ponzi going so the fiat that they create has value. When fiat collapses and the printing press becomes meaningless, the Fed becomes powerless. EVERY other other reason they give, like controlling price inflation, helping unemployment, helping homeowners, etc., are not real reasons for their actions, they are just the reasons that sound good that they tell the public so they can justify their actions of perpetuating the ponzi. The real truth is that it is impossible for the Fed to help the economy. Stealing value from dollar holders and centrally planning the redistibution of those stolen resources leads to the destruction of wealth with there being no profit motive, no check on efficiency, and no real penalty for waste.

The Fed will adjust the numbers by a factor of 10. We've had rates held too low for decades, and 0% rates + QE for years, a credit based / service sector / entitlement dependent system in which the debt, unfunded liabilities, and contingent liabilities are out of control and the only way to keep this beast going is to rapidly speed up the rate of printing. The printing won't stop when another 0 is added to the currency. It's a ponzi and a ponzi must inflate or die. The real problem is that the printing will start reaching for infinite in a hurry, and then by definition, currency loses any aspect of scarcity and becomes worthless.

The fiscal cliff is a fiscal farce. All the fiscal cliff is an attempt to cut the deficit and it's this cutting of the deficit that's seen as the threat. The real threat is the deficit and the debt. What the fiscal cliff shows is how impossible it is to cut the deficit. There never will be a cutting of the deficit. The US is bankrupt. The only way to postpone realizing bankruptcy is to pay the credit card with more credit, leading to an even more impossible situation. The mind boggling piece of this puzzle is that even as the US teeters on the verge of bankruptcy, suckers are loaning the US money, which clearly can never be paid back, at negative real interest rates.

The emerging world will feel a sigh of relief when currency collapses. Right now, they ship us their goods and we sheep them currency created through keystrokes. When currency collapses, they'll actually receive real goods in exchange for the goods they ship us.

I, for one, can't wait. The central planning of money is destroying productivity because the mispricing of interest rates and counterfeitting causes resources to flow into unrproductive areas. Being productive and feeling useful is a key component to the human spirit. Not only is this fiat ponzi stealing the benefit of techonological improvements leading to gains in productivity and therefore falling prices, but the system is also literally destroying the human spirit as being productive and gaining a feeling of usefulness is increasingly difficult. Hmm..no spirit...did somebody say Zombie Apocalypse?

The dependency on government is enormous. You want to start a small business?...you better work your ass off, bypass all the regulations, and hope you don't sued...speaking of that, you may not want to hire anybody either and especially don't hire more than 50 people with Obamacare rolling out. If you employ 80 people, you may want to fire 31 of them. You want to make it to the top of a large company?...then they better be well connected in Washington, or at least have an infuential lobbyists, to make sure they remain in existence. I wouldn't recommend coal because the government doesn't like that one, but put on a facade to make it seem like you know what you're doing in solar and you're good to go, mandates to burn our food and subsidies to grow the food that's burned, endless bailouts for the banks, government takeover of cars, blatant theft by Corzine and no consequences because he's well connected, complete and total manipulation of the media to benefit the government...think fiscal cliff which came out of left field and now that's all we hear just in a effort to convince the public of how dangerous it is if there's a smaller deficit next year than there is this year, or Hilsenrath's reporting, Liesman's reporting, how about the Reuters article on Sunday talking about in no uncertain the coming announcement of QE4 on Wednesday, Cramer puts on his "we need the central bank to save us" hat every night, $2B centralized data center being built to monitor CITIZENS, Warren Buffett putting out hit pieces on gold when it's not what he truly believes and he knows very well exactly what gold is and touting for higher taxes just to be in favor of the government, Obama telling the public to not concern themselves with the inner-workings of the bond market and go back to worrying about their daily grind and leave the concern of the bond market to the "professional politicians." 17% on food stamps. 7.7% receiving unemployment, 8% work directly for government, 63% labor participation rate, social security / medicare / medicaid are enormous and growing rapidly. 104% debt/GDP (and those are the official numbers, poke around a bit and see how favorable those numbers are being made), almost every newly issued mortgage is backed by the federal government, and the Fed is monetizing what percent of our long term debt? 70% or is it 90% now? Regardless, the debt is no longer a burden to the tax payer, but it's now much moreso a burden on dollar holders because is largely paid for through the inflation tax. It may help to avoid large US cities when this debt/credit/fiat/government/servic sector bubble pops. Very few are prepared, most are clueless, and  many refuse to prepare no matter the evidence put forth simply because they are afraid to go against pop culture.

However, this is not a time to blame other or depend on others or to get angry at friends and family that seem to not care that their entire life savings may soon vanish and they may be left with no means to survive themselves, much less support their family. You can only control your own actions and personal responsibility must be taken now. Without resources or the ability to create value, you are a help to nobody and a burden to everybody. Now is the time to make money. This is the time when vast fortunes will be made very rapidly, vast fortunes will be lost, and the tremendous amount of malinvestments that have occured due to the central planning of the monetary system will be realized. The greatest, swiftest transfer of wealth in history is unfolding before our eyes.

samcontrol's picture

good reading but you could give some examples of how to be on the right side of those fortunes .

An Example. I recently sold an apartment in Buenos Aires and bought farming land in patagonia.
Another. When buying paper gold i prefer phys and sgol over gld.

TheSilverJournal's picture

The best play is to buy physical silver. There are very few better investments on the planet than gold, and silver will crush gold's performance. Gold is set to hit at least $10,000 in the next few of years and the silver to gold ratio will sink to at least 10 to 1, meaning silver will be worth at least $1,000 an oz in real terms. There are also riskier ways to play silver that may offer even more tremendous returns, but the risks of being wiped out may be greater. Then there's other goods necessary to be prepared like food, water, arms, toiletries, energy, and a plan to skip town/country if necessary.

Of course, these are all assets that can be purchased, but there's also preparing for better ways to create value with your time. Your farm land is a great example. Rule of thumb is don't depend on anything from the government (including money in the bank, government job, pension, entitlements), and get out of the US service sector.

trebuchet's picture

Printing is taking a negative interest loan against future savings. 

Future REAL goods/Wealth is pledged to redeem current unproductive application of wealth and represents a transfer from future to present. By smart money from dumb money.

Paid back in future via inflation (if the economy is lucky)   or  riots/expropriation/system reset. 


Get yourself a loan, buy a house, borrow against the house, deposit the money get a loan against the deposit, etc... if you do it efficiently you should be able to match the financial systems "asset" to core liability of 10 to 1

Then buy somethign likely to hold value (gold) bury it and then let the banks/fed take the hit. You pay it back (after bankruptcy court) via future taxes any way


TheSilverJournal's picture

Purchasing a house isn't that much of a gimme. Housing prices are set to fall at least 75% in real terms. If going this route, the key is to have a very low down payment and a fixed interest rate. It is largely the down payment that's being put at risk while future payments will be wiped away from inflation. The other key is to commit to keeping the home through at least very high inflation because between now and then, the property may be underwater.

A home is no longer the appreciating asset it once was while interest rates were being dragged down and the government backed the entire mortgage market. There are costs to owning a home like maintenance and repairs and renting may be a better option. Housing may have little value after currency collapse. Housing is simply way overbuilt. A prospering new business during currency collapse may be tearing down existing homes.

TheSilverJournal's picture

'Tis true. Losses don't effect the Fed because they can print whatever they please. Gains aren't a concern for them either. Neither is the economy or the public's well being. The only concern for the Fed is to retain power at the Fed.

Any losses at the Fed aren't born by the tax payer, they are born by dollar holders. Same with the debt. The debt is no longer serviced through future taxes, it is now being serviced by taking value from dollar holders.

cranky-old-geezer's picture



Any losses at the Fed...

Fed really doesn't have any losses, they can say the trash on their balance sheet is worth whatever they wana say it's worth, and nobody is gonna say otherwise, Fed's "assets" are never audited.

If MBS lose value on the market, so what?  Fed can still say MBS on their balance sheet is worth full par, even more.

And if they do book a loss for whatever reason, it's passed on to the govt via less interest refunded to Timmy.

Man I'd love to be a central banker.  Ruling a nation by controlling its currency has gotta be fun.

"Give me control of a nation's money and I don't give a flyin fuck who makes their laws, nor what fuckin laws they make, they can all kiss my ass ...and they do, every fuckin day :)"   ---  Amschel Rothschild

TheSilverJournal's picture

Any marginal increase in federal government spending no longer effects the tax payer, going deeper into debt now only effects dollar holders. If they give Timmy less money, all that means is Timmy has to ask the Fed to print more money to purchase more bonds, so Timmy and the tax payer are never really effected.

rwe2late's picture

 theoretically no effect, but

practically speaking, will not

1. taxes increase in an attempt to mitigate inflation, as well as increase because of inflation;

and more importantly,

2. increase to give dollar holders the appearance that the fiat dollar is sound and no scam, but is backed by the full faith and credit of the US taxpayer?

TheSilverJournal's picture

My guess is that even if tax rates increase and more assets are taxable due to inflation pushing up asset prices, there won't be a real increase in tax revenues. Many working professionals will be pushed into paying over 50% into federal state and pay roll and what not which is not a good formula to incentivize people to produce.

edb5s's picture

Yeah, not to mention agencies are backed by the full faith and credit of the fed gov't, so if the SHTF they can repay themselves the principal.  Brilliant.  They can't lose!

jvetter713's picture

Yes, thank you for clearing that up.  I was afraid Ben owned my house.  Course if he came to take it from me...

cranky-old-geezer's picture



...and had 20 cops with him, he'd get it, no problem.

tip e. canoe's picture

excellent point, however here's a question:  if one entity could collect all the MBS slices that comprise an individual mortgage, it would in essence, own that mortgage (and the underlying asset in a foreclosure proceeding), yes?

A Nanny Moose's picture

If I understand you here...the Fed is just buying a bunch of paper, backed by no assets whatsoever.

FEDbuster's picture

"If I understand you here...the Fed is just buying a bunch of paper, backed by no assets whatsoever."

The irony is they are buying the worthless paper assets with worthless electronic currency backed by nothing, created on a FED computerIt doesn't get more fraudulent than this.

Buy real assets (land, food, metals, tools, etc...), ones you can stand in front of and defend with an AR-15.

Winston Churchill's picture

Sorry Old Geezer.

The loan is the Note.The Mortgage or Deed of trust is the INCIDENTAL security instrument

to the promissory Note.

MERS was the vehicle that allowed the banks to sell the Notes ( on average) ten different times

to  REMIC trusts.All that money is sitting offshore somewhere.

Most of the RMBS trusts are hollow shells,by math 90% of them.

The FedRes needs to buy those securities to cover the fraud.

The servicers,all subsids,of the trust depositors are still on the hook to pay the income

stream to the RMBS investors,and the money stolen cannot be brought back,to pay,

without admitting the original frauds.Robosigning was just a continuation of the original criminal

theft.An ongoing conspiracy to defraud with Govt., as a now willing partner.


oldschool's picture

There are many things about the CDO debacle that are costing us and the banks dearly, but I don't believe splitting notes and mortgages is generally one of them.  Banks didn't keep the mortgages.  Mortgages without notes are worthless.  They didn't "give" them to MERS either.  MERS is merely a registering agent whose legal effectiveness as agent of the note-holders is sometimes questioned, but generally upheld. 

I suspect you're right about the Fed (and ultimately us) losing money on many if not most MBSs, but not for the reason you cite.