By Bill Holter:
Ben Bernanke testified last week about the Fed’s “exit strategy”. As I’ve written before, there is none, there can’t be one, and there never will be one! Every time in the past when the Fed let up (even just a little) on the accelerator the markets (and economy) would begin a hissy fit. Now, the Fed is even funding the European banking system as reported by Zerohedge .
Last week, the Fed injected $99 billion which all ended up in Europe. Why? Suffice it to say…”they had to”. This was done as I just mentioned at the SAME TIME Bernanke was testifying about the “exit strategy”.
Do you see that there are too many holes in the global banking boat that need to be filled …and that the central banks (led by the U.S. Fed) are doing their best at plugging them? Economies are slowing around the world which is making more and more loans (debt) suspect. Debt is being destroyed at a faster clip than the central banks are creating new money to cover this. (This is not just a U.S. problem, even if it were the system could not handle it as the Dollar is the reserve currency for nearly all other central banks). My point is this, the past several weeks (and topped off by the latest $99 billion European fiasco) have shown that all central banks, The Fed, ECB, BOE, BOJ and others are going “all in”…because they have to. They know that they can no longer keep a constant speed even if the cruise control is already set at 110 miles per hour. They must print… and do it at an ever increasing rate of speed!
This is becoming obvious now and the “timing” is quite interesting. The “can” was kicked down the road and Gold started into reaction some 18 months ago, then kicked again and another reaction (though small) began 5 months ago. The problem is that everything is coming to a head all at the same time. Economies are slowing, debt destruction again speeding up, sovereign treasuries stymied with the need to issue more debt while being “austere” at the same time. From a sentiment standpoint, global equity investors are giddy, CNBC is parading real estate analysts who claim “nirvana” while even the most staunch Gold bulls are giving up. The ONLY way that equity markets, real estate markets and the global banking and debt system don’t collapse into a heap is if the central banks are successful…at their task.
Their “task” is an interesting one and in fact diametrically opposed to what they tell you publicly. They absolutely MUST turn their “product” (currency) into Monkey Money! In order to pay back debt that was and now is being created the world must become one GIANT banana republic plain and simple! Above I mentioned “timing” and that it was coming to a “head”. It is. Friday was an important day for Gold, it was and we in fact erased all of the losses to put in a potential reversal day. This week and next will also be important as any upward movement will turn the charts bullish at a time when everyone is bearish (and positioned that way). The “shakeout” has occurred, many have sold and now many are even short which sets the precious metals up for a moon shot fueled by the central banks and their collective banana republic policies.
We have sat back and watched as Gold was rarely “allowed” even a 1% day to the upside over the last 5-6 months, this I believe will change in a big way. I suspect that as short and “sold out” as Gold has become we will soon see our first $50 up day in over a year and a half. I also believe that before the year is up we will see $100 days and maybe even a $250 day (which is where this bull market started from) before we enter a “bank holiday” where everything gets re marked…to reality. The reality being that a bunch of monetary rocket scientists hijacked and experimented with the system. The experiment was a failure and thus the result is that they have turned the entire West into a banana “republicland”. “Monkey Money” is soon to follow. Regards, Bill H.