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What Does A $4 Trillion Fed Balance Sheet Mean For Gold And Oil
Earlier we explained why Bernanke's actions today mean that the Fed Balance Sheet will likely grow to over $4 trillion by the end of 2013. Critically this flood of liquidity will raise the nominal price of every asset (from whimsical pieces of stockholder paper to barbarous relics and black gold). Some of these assets, like stock prices and high-yield credit spreads do have point-in-time 'value limits' to their price - though at times it seems a dream that fundamentals would ever matter again; but some have less of a binding constraint - such as gold. Should the Fed proceed, as seems likely, and do its worst/best to blow its balance sheet wad then we estimate Gold will be priced at least $2250 per ounce by the end of 2013 (of course higher if the Fed sees no evidence of recovery). Meanwhile, deeper underground, the world's mainstay source of energy, WTI Crude oil, could jump to record highs over $150 per barrel (which just happens to coincide with the 'pegged' value of oil in gold). It will be interesting indeed to see how the world's socio-economic infrastructure hangs together should that occur - can't happen? Different this time? Indeed it is now that Ben hit the big red 'panic' button.
Gold vs Fed and ECB balance sheets... notably for QE2, gold priced in all the Fed balance sheet expansion within around half the period (around six months from Jackson Hole) and then overshot - this would infer we see Gold $2250 around the end of the first quarter next year - and expect some overshoot...
Oil vs Fed balance sheet... (which fits nicely into the 0.07 oz of Gold per barrel 'peg' that seems to have been 'agreed' with the world's oil producers).
Charts: Bloomberg
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That's total bullshit.
There is no REAL U.S. economy.
its getting ugly out there
http://tinyurl.com/9emvzfc
Pump more hot air into the bubble. It can only end with a huge crash and deflation or hyperinflation.
This fucking idiot asshole Ben is destroying the entire world. He is worse than any terrorist.
He's doing the job he was put there to do.
It's more evil than killing babies for their eyeballs, but it's his job.
Ben hasn't been found with a live boy or a dead girl, so he must be doing what the bosses have hired him for.
Think about what that actually means and you get a lot closer to understanding what's really going on in the big offices.
This fucking idiot asshole Ben is destroying the entire world. He is worse than any terrorist.
Gold is now at $1776. A sign?
and the founding fathers, except for Hamilton of course, are spinning in their graves at 16 trillion RPM
It seems a little strange...
When I want/need to buy something, I either: work and make money to pay for it, take money out of my savings, or borrow money from the bank, which then needs to be paid back. In every case, the money represents the value of goods or services from the past or future carried forward to the present.
I get how the Fed creates money (Ctrl +P), but how are they able to buy anything with it? Is there no distinction between my money that represents value, and their money that represents nothing but policy actions? That's a damned nifty trick. Do they really "own" any assets?
You could make the same argument for banks in general. Do they really "own" that repossessed house?
Nope, no distinction. That nifty trick is theft by monetary inflation, the tax most average people don't realize they are paying. People complain about higher prices and cost of living without ever making the association of what/who is behind the destruction of their purchasing power and devaluation of their dollars.
I wonder how many people in Washington really get it.
The FED and US Government is so economically cornered right now because they:
Cant raise interest rates.
Cant Lower interest rates.
Cant afford to lower taxes (They really could but it would destroy the unions and other special interest groups)..
Cant raise taxes.
This is really it. The only thing they feel they can do is to print, and print like hell. They have choose what they believe is the lesser evil, and its rapid inflation, which will be the final leg in full economic collapse. This isn't the 1980's where the USA actually produced things other than military hardware agribusiness and financial products. There will be no way to grow their way out of this. That's it. Its only a matter of time now.
Seriously, wouldn't a literal helicopter drop of $40,000,000,000 a month be a better band-aid for the economy? You would immediately improve competition and cash flow throughout the parts of the economy that actually need it.
Sorry, Thats the road to Weimar Inflation.
As soon as you and your neighbors start flinging that money around, watch how fast the value of your money approaches that of two-ply charmin. Those people back then were literally wheeling their money around in wheelbarrows, It only led them further into the abyss.
Thank god we have debit cards and ATM systems instead of wheelbarrows. I don't think most of us could even lift the business end of a wheelbarrow full of FRNs.
Have you seen topend apt prices in NYC lately? The 1% are already roaring. Locked and loaded for Weimar Redux.
Drop $40 Bil and most would end up in hands that need to repay debt, so no immediate economic boost. Ben puts that money into the hands that create debt, immediately boosting the economy. Until it runs out. Which he won't allow.
You guys have legitimate complaints that are not to be tolerated in a democracy controlled by elite sociopaths. But maybe reality is not what it appears to be. So how do we know? Where did that clearing in the forest go? The underlying ethos that weaves through the fabric of society and holds all things together is being vaporized by the FED. The gods are getting angry. Look where my hand was. Water flowing underground. Same as it ever was. Same as it ever was.
You may ask yourself, how do I work this?
You may ask yourself, where is that large automobile?
You may tell yourself, this is not my beautiful house
You may tell yourself, this is not my beautiful wife
2250, them's Armageddon numbers. http://www.youtube.com/watch?v=Ou6zi_9sxJ4
0.07 oz of Gold per barrel 'peg'?!
You mean: 0.07 oz illusionary, never-to-exist, paper gold per barrel 'peg'.
As the paper gold market burns and takes all paper with it, watch for a far more realistic outcome: 0.07 g Physical Gold per barrel !!
Laugh, cry, criticise all you like. You will see it!
Serious question - how many months until the FED owns ALL of the MBS in the market? It's not "infinite", is it.
Ben just providing cover for a big print in Europe. Can't let currencies move too much too fast.
It seems to me the Fed has set it up so that; UE down = markets down, and vise versa. I say this because lower UE means less QE, less QE means less S&P.
Do I have thid right?
For oil and gold to continue to rise, the US Dollar needs to continue to fall. All reasonable.
One little nugget of info the herd continues to forget is that the US Dollar is weighted about 57% AGAINST the Euro - meaning when the US Dollar falls, the Euro in turn will go up.
Hmmmm. The Euro goes up. Because bankrupt and insolvent countries, not companies is bullish, right?
LOL...Sssshhh. They've been sneakier and much quieter with their backdoor printing.