According to JPMorgan (who would know since as a primary dealer, they flip treasury take-downs to the Fed roughly 30 minutes after issuance for a handsome profit), the Federal Reserve is currently absorbing approximately 90% of new dollar-denominated fixed-income assets. 
Go back and re-read that last sentence.  That’s right, even the financial MSM is now admitting that the Fed is now nearly entirely monetizing the US deficit outright.
This is why QE4 will be announced next Wednesday (which has already been fully priced in thanks to multiple leaks from the Chicago Fed’s Evans as well as Bernanke last week) and why the Fed will ramp up outright purchases to $85 billion a month ($1.02 Trillion/yr) when operation Twist ends- there are simply no remaining buyers of US debt. 

Those who fail to see where this is headed may wish to acquire a copy of When Money Dies to grasp how the situation played out in Weimar Germany.

Even as U.S. government debt swells to more than $16 trillion, Treasuries and other dollar fixed- income securities will be in short supply next year as the Federal Reserve soaks up almost all the net new bonds.

The government will reduce net sales by $250 billion from the $1.2 trillion of bills, notes and bonds issued in fiscal 2012 ended Sept. 30, a survey of 18 primary dealers found. At the same time, the Fed, in its efforts to boost growth, will add about $45 billion of Treasuries a month to the $40 billion in mortgage debt it’s purchasing, effectively absorbing about 90 percent of net new dollar-denominated fixed-income assets, according to JPMorgan Chase & Co.

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  1. Real money–Gold and Silver–does not die, nor will it ever die.

    Debt fiat paper money is not real money–it is counterfeit money.  This fake money was destined to die from its very inception, and it was programmed to die by design.  Wealth in fiat paper money is a temporary illusion.  This illusion has become like reality for quite a few.  But an illusion has no basis in truth or in reality.  Many will come to accept this, whether they want to or not.
    “Buy gold, buy silver, have faith.”
    –Darryl R. Schoon

    • Actually, gold and silver are money themselves and the fiat currencies are not. Gold and silver preserve your purchasing power and they have intrinsic values while fiat currencies don’t preserve your purchasing power and they have no intrinsic values.

  2. @The Doc:  Good write-up.  It looks like the powers that be are keen on kicking the stuffing out of the precious metals market before QE-4 is announced so that the rise following the annoucement is partially blunted.
    I have a modestly different take on what is being priced in thus far.  QE-4 is not fully priced in.  As for average stocks as represented by the S&P 500, I would say only about 50 to 70 percent of QE-4 is priced in (which has been expressed in terms of supporting a sick market rather than pushing stocks higher).  When it comes to the precious metals space, nothing over 10% has been priced in and we have yet (as you know) to even price in a full share of QE-2, never mind QE-3.  The precious metals oddity is entirely the product of manipulation.  
    The absense of full pricing in for standard equities is largely the result of a very large percentage of the financial services professional community being nothing more than a bunch of sheep that have bought into the propaganda that the US is in modest recovery mode.  These sheep will be very surprised when QE-4 is announced.  Think back to the QE-3 announcement.  The same sheep were taken by surprise that time as well.  At that time we had a standard equities market levitation following the QE-3 announcement but it was only modest in magnitude and duration.  Without running numbers and attempts at correlation analysis that I don’t have time to do right now, I’d simply guesstimate that we saw something like a 30/70 split of pricing in of QE-3 (70% priced in before the announcement), which is what I think is roughly where we stand now regarding QE-4 and the standard equities market.  But that pricing in discount mechanisim is totally broken when it comes to gold and silver related assets.

    Back in the 1990s internet boom I used to attend a great many of the major technology conferences.  Quite often I’d find myself in confference rooms packed with money managers, each controlling an average of $5 billion dollars under management and I swear to god a good 70% of those dolts didn’t understand the investments they were holding.  I was a VERY well known technology analyst and these people would come to me with their questions. While a minority knew their stuff. It was nevertheless shocking how little most of these managers knew about what they bought and sold.  The only thing that has changed since then has been a greater share of financial services industry transaction volume moving to structured products (derivatives) and high frequency trading (where no one gives a rat’s arse about what a company does anyway so the money manager sheep baah blissfully).  Perhaps that’s at least some form of twisted improvement — i.e., profit generation in the industry is less in need of understanding actual company/industry fundamentals.  It’s just one more expression of the continued unhealthy evolution of paper shuffling rather than true capital formation and scarce resource allocation via true markets. 

    • They should have known their investments because if they don’t, then there will be a lot of risks that they might lose a lot of wealth. I buy physical gold, silver, copper and nickel and I know the reasons why I buy them unlike these “money” managers.

  3. The reason why the Federal Reserve is the only one who is buying the US bonds is because the other countries have dumped them because the bonds are losing values. Already QE4 next Wednesday? QE3 just happened recently on September 2012 which was about three months ago. It looks like we are closer to hyperinflation.

  4. I have  a question that might ruffle someones feathers and flip others out. Not to be taken as an indication of my possible bear silver outlook- quite the contrary- but just trying to look at all angles. It’s a curious possible move that could take shape and maybe not out of the realm of possibility.
    Case in point:
    It is a current fact that the ‘Paris Club’ has forgiven some 80% Iraq’s debt- for obvious market entry perks when the country gets their shite together. So, in comparison, why couldn’t the Fed forgive or ‘write off’ large chucks of their balance sheet for it’s not even worthy of being called debt- even in their eyes. Thereby collapsing the Mt Everest pile of ‘debt’ they are holding. Jubilees have an historical precedent-every 7 years- we’re over due
    A lot, if not all the paper will never see the light of day the Fed is holding and could be just cancelled – and crash the metals market(??)   I don’t know- the name of (their) game is to stay in power and keep the world in love with the fiat paper idea. Not to mention Americans who see their ship sinking and still can’t seem to buy silver from a guy in front of coin shop in Encinitas , Ca. for a buck over spot. So programmed and dumbed down the masses are. If they do forgive all of this fake debt then they can make some kind of concession to those holding US debt to keep the game glued together. …and we have a new round of debt paper issuance albeit under the appearance of Basel III terms- asset backed.
    This would take the power back from the people in terms of monetary freedom and keep the game going…. no, hope not. But have you though of this? 
    Do you have a plan if this happens?
    Am I crazy for even bringing this up?
    comment please and let me know if I need a vacation…

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