Bernanke helicopterWhile Obama is busy distancing himself from Bernanke and preparing to give the Fed Chairman the boot and bring in likely Yellen, Dudley, Summers, or Turbo Timmy, legendary gold trader Jim Sinclair states that it is QE to Infinity or Infamy for Bernanke.
Ahead of today’s much anticipated FOMC statement, with rumors of Fed “taper” swirling, is Bernanke and the Fed ready for what is sure to come should the market be convinced the Fed will actually taper down QE?

2013 Canadian Maples As Low As $2.29 Over Spot!

From Jim Sinclair:

A lesson on what interest rates are:

 

1. Interest rates are the price of federal paper in the federal paper bond market for all the various common periods of time.
2. Interest rates rise if the price of binds fall in the Federal bond market.
3. Interest rates fall if the price of Federal paper rises in the Federal bond market.

 

That is the total definition.

 

QE is the act of the Federal Reserve or any similar central banks making bids in the Federal bond market.

 

If the Fed wishes it can bid forever at any price to keep interest rates low but the unintended consequence is pressure on the US dollar or currency of the country doing QE.

 

QE is in fact debt monetization but central banks do not want to call it that because the historical and traditional understanding of debt monetization is and will in time be as follows:

 

Monetization
From Wikipedia, the free encyclopedia

 

Monetization is the process of converting or establishing something into legal tender. It usually refers to the coining of currency or the printing of banknotes by central banks. Things such as gold, diamonds and emeralds generally do have intrinsic value based on their rarity or quality and thus provide a premium not associated with fiat currency unless that currency is “promissory”: That is the currency promises to deliver a given amount of a recognized commodity of a universally (globally) agreed to rarity and value, providing the currency with the foundation of legitimacy or value. Though rarely the case with paper currency, even intrinsically relatively worthless items or commodities can be made into money, so long as they are difficult to make or acquire. Monetization may also refer to exchanging securities for currency, selling a possession, charging for something that used to be free or making money on goods or services that were previously unprofitable.

 

Monetizing debt

 

In many countries the government has assigned exclusive power to issue or print its national currency to a central bank. The government treasury must pay off government debt either with money it already holds or by financing it by issuing new bonds which are sold to either the public directly or the central bank, in order to raise the funds required to repay bonds that have come due. The central bank may purchase government bonds by conducting an open market purchase, i.e. by increasing the monetary base through the money creation process. If government bonds that have come due are held by the central bank, the central bank will return any funds paid to it back to the treasury. Thus, the treasury may ‘borrow’ money without needing to repay it. This process of financing government spending is called ‘monetizing the debt’.[1]

 

Central banks are usually forbidden by law from purchasing debt directly from the government. For example, the Maastricht Treaty(article 104) expressly forbids EU central banks’ direct purchase of debt of EU public bodies such as national governments. Their debt purchases have to be from the secondary markets. Monetizing debt is thus a two-step process where the government issues debt to finance its spending and the central bank purchases the debt, holding it till it comes due, and leaving the system with an increased supply of money.

 

More…

 

Bond Bubble Threatens Global Financial System: Bank Of England’s Andy Haldane Warns
By Satya Nagendra Padala | June 13 2013 2:24 AM

 

Andy Haldane, a senior Bank of England, or BOE, official on Wednesday, warned that the bond market was caught up in the biggest bubble in history, posing a serious threat to the stability of the global financial system.

 

Across the Atlantic, the United Kingdom also houses 22 of the world’s fastest growing companies, and is next on IBT1000. Bolstered by the world’s historically most valuable currency – the British Pound – the UK has Europe’s third largest economy behind Germany and France. As the cradle of the Industrial Revolution, the UK boasts large hydrocarbon resources including coal and oil, and has a highly mechanized agricultural base. The country, much like the United States has developed a large service and financial sector, but does produce large amounts of electric power equipment, motor vehicles, electronics and communication equipment and petroleum. The global financial crisis of 2008 hit the island kingdom particularly hard as its financial institutions are tied to global markets. Since then, the country’s financial health has seesawed as European debt fears keep global stocks on a volatile rollercoaster. The UK in recent years could also face an increasing level of diplomatic isolation, however, as Germany and France take the lead in reigning in the Euro zone’s debt problems.

 

 More… 

Gold Maples As Low As $39.99 Over Spot at SDBullion!

  1. Any chance my little bo pony can give us a reading on when we’ll be right? We can all agree we’ve been conceptually doing the right thing, all while getting our faces melted off. Until this happens, all the “worthless paper dollar” pontification is a hollow joke.
     
    stack… stack… crash… WEEEEEE!

  2. Dirtlump, you always get the first post on here.  All the Sinclair hecklers can keep it up as long as they want, the guys track record of market calling beats 99% of the rest out there over the long haul.   Who else predicted QE to infinity years before it happened, not by choice, but by necessity?   Who called for $1650 gold in 10 years when it was $300?   I bet it doesn’t take 10 years to reach the $3500 mile marker!   And everyone who buys silver this year will get a 100-200% gain before gold even prints $2000 IMHO.  I can wait.    The Dow isn’t going to 30,000 for a long time, but silver is going back to $40-50.    Good luck to all but the shorts and bankster govt trolls, don’t overcommit, but don’t be a nincompoop who isn’t building a stash of real money.

    • I”m not hating on Sinclair specifically. He’s definitely right. Or will be at some point. However, having a look at the chart says that anyone stacking silver for the last several years, myself included has been PLAYED by a corrupt system that desperately needs to collapse.
      the vast majority of silver cheerleading articles I’ve read for years make the mistake of trying to make sense of a thoroughly corrupt and controlled market, when it is as simple as… everything is a fake illlusion and will remain so until the reset button gets pushed, or there is a physical precious metal supply shock.

  3. Did anyone hear about England’s Co-op bank.  It is very large, 100,000 employees, millions of depositors AND a 1.5 billion pound hole in its assets.  The solution being seriously considered, and may have already be put into action, is having the bond holders bail-in this bank to fix this very large loss due it’s purchase of another Building Society bank.  The bondholders will receive stock for their bonds and deposits.  There you go, another bail-in and this time it’s being done on a large island. 
    Hmmmm?   Does anyone else have intel on this, particuarly if you live in England.  This is a story that is being covered up but will probably blow wide open once the bond holders start screaming bloody murder.
    Forgive inaccurancies in my terminology   The story is the thing to report

    • Yeh, agxiik,  I saw it on Monday and sent the link of the video (analyst interviewed on british tv talking about the “great bail-in possibilities”) to the Doc

    • @ AGXIIK: Yes you are right. The co-op has been bailed-in. Bondholders to get 50% haircut.
      This bank was a mutual bank, shareholders are the account holders. So effectively this is equivalent to depositors getting hit.
      Co-op have installed various hi level employees from existing big banks to handle the mess, and this has mean’t making sure the bank becomes ‘like the rest’. Fuckers.
      This was also the bank that was set to take over Lloyds and turned them down. I sense some spiteful revenge here. I think there is a lot behind this. I also think this is the UK’s test case for bail-ins. And it’s so far gone down very peacefully!
      The press here have been very pro the bail-in (can you believe). They have spun it that it has not been taxpayers footing the bill.
      Interesting that a mutual gets no help (not that I think it necessarily it should), but if this had been Barclays!!!! TBTF.
      This is a clear warning sign. And very few here in the UK can see it.

    • I did not see that but it does not surprise me a bit.  The thing that DOES surprise me is that we are seeing this in the UK before we see it in all of the PIIGS and France first.  As our dear friend in Holland, “Diesel Boom”, infamously said, ‘Cyprus is the template for future bank liquidity problems’.  Immediately thereafter, he disavowed this statement.  Unfortunately for him and his EU buddies, the cat was well and truly out of the bag by then and everyone watching the situation knew that his denial was definitely an attempt to cover up the truth.

    • @Ed_B: I must admit I’m surprised nothing has popped in Spain yet. They must be getting huge funding from the FED. They are off the chart screwed. As for Greece, they need €1.4 billion in one month to plug their hole. Good luck with that.
      JC

    •  
      @Marchas45
       
      “Using a “bail-in” rescue model, bondholders will have to swap their debt for new bonds and equity in the bank, which will be listed on the London Stock Exchange.”
       
      Yeah, here we go again.  These “bail-ins” always remind me of Lucy, Charlie Brown, and the football.  In this case, the bank stock is the football and it WILL be jerked away before it ever amounts to anything.  lol
       
      @Jccjktj
       
      I agree.  Spain is an economic basket case and everything they seem to want to do just makes their situation worse.  Also makes me wonder just how Italy is hanging on these days.  Their numbers are similar to those of Spain.  :-(
       
      Greece is dying, as a country.  If they keep going like they have been, the Turks will be able to walk into that empty nation and claim it without firing a shot.  The EU & Co. is like a spider and Greece is like a fly in their clutches.  They are not about to toss away the empty husk until every last drop of juice (wealth) has been drained from it.  At that point, they will burp loudly and look around for their next tasty meal.  Greece and its people would be FAR better off to adopt the Iceland model for economic success than to continue this asinine process of national suicide.  The Greek part of Cyprus would do well to go with them.
       

  4. WE ALL KNOW WHERE THE METALS ARE ULTIMATELY GOING, BUT I THINK EVERYONE GETS TIRED OF ALL THESE GURUS CALLING FOR AN IMMINENT EXPLOSION. AND BY THE WAY THERE WILL NEVER BE HYPER-INFLATION IN THE U.S.  INFLATION YES, HYPER-INFLATION, NO 

    • YES, there will be No Hyperinflation in the USA …. When the time comes, the US$ will be revalued to 1/1000th of its current value …. The whole country will be locked down, and the DHS will assign everyone a work task – if you disagree, shot and duried (can’t have infectious diseases floating in the air, you know) …. Everyone will be a prisoner, No travel without authorization, No wages …. All you will be given is print script money (masquerading as New US Dollars) for normal everyday purchases, at prices controlled by the government.
       
      You don’t like it? Tough luck! Everyone who wants to buy or sell or engage in trade will be Tagged on the right hand or the forehead! Embedded chips will allow DA MAN to monitor where everyone is, at all times. Since all labor is free to the government, the USA-GOV is now a single large corporation with Zero Wage Cost! Imagine how competitive it will be i the world market? Free labor, not cheap, FREE labor!
       

  5. One thing we can all count on is inflation.  10-12% a year; every year.  And, this is when the world situation is ‘normal.’  What happens to ‘real’ inflation when things (let’s just say, oil) becomes abnormal because of a ‘real’ supply shortage, not a manipulated shortage?  This world we live in is in a fragile state, the domino effect will be staggering.       

    • Getting back to the comment… lol… yeah, inflation is a lot higher than the fake Fed / Gov calcs show.  They have manipulated the formula they use specifically for this purpose and they have achieved it.  What they have not achieved, of course, is an accurate number that represents the rise in the cost of living for most Americans.  This saves the Gov ALL KINDS of money because of the cost of living adjustments to the retirement bennies they pay out.  Retired government employees and those on SS get smaller, if any, COLA because it is based on this artificially low inflation number.  Old people who are barely making it these days are being squeezed hard by all this.
       
      The logic of the need to adjust costs downward really escapes me.  As an example… if steak costs too much, we are told that we can switch to cheaper hamburger to “maintain our living standard” without our cost of living rising.  Personally, I consider a good steak well prepared to be MUCH better than a similarly well prepared hamburger.  Also, if this is reasonable, why doesn’t the government buy WW II class military hardware?  After all, a P-51 fighter costs a LOT less than an F-22 does.  No, sorry, living with less is for the citizens, not for the Gov!  All of this brings us to the crux of the matter, which is that as we have less and less, the Gov demands more and more.  Good for them, not so good for us.  They do give us some nice fairy tales, though, so we don’t understand why this is happening.  Those of us still capable of critical thinking, however, are not fooled by them.  :-(
       

  6. I bought my first 300 oz in 2008. I’ve watched the price go from the $20 I went in at to $9 a few months later. I hung in there.
    I bought the dips, as well as the times when prices were on a roll.  It was not just silver, but Gold and Platinum too over these very tough 5 years. So now, I’m all in, no longer have a job, getting a piddly SS check and in a bit of a liquidity crunch.  I’ve hung in there and have seen  SLW drop 30+%, along with PSLV, PHYS, and AG.  I’m getting really beaten down here gang. I’ve seen today’ s paper price fall almost .75 an ounce which means I’m out another $1000. I totally understand all the rational aspects but today, they really don’t mean a FUCKING THING. I keep saying “Today will be different” and again, I loose assets that have taken a life time to pull together.  Maybe someone is having a “SALE” today on silver but I’ll bet my ass it will be cheaper next week at this point.

    • I am sorry to hear that, Diz.  The commodity markets can be volatile on their own, let alone when manipulated by those who can do so for their own advantage.  This episode illustrates how diversification can help investors in general but the small investor in particular.  Hopefully, the gold and silver prices will soon recover from this recent barrage of price weakness.  With both now below their cost of production, one would think that they cannot hold at these low prices for long without some mine shuttering that reduces supply and drives up demand and prices.  How long that will take, however, is unknown at this time.

  7. Things are not looking good:

    http://www.spiegel.de/international/europe/new-anti-euro-figures-in-germany-offer-vague-ideas-and-fan-fears-a-906675.html

    http://www.spiegel.de/international/europe/cyprus-asks-for-improvements-to-bailout-deal-a-906558.html

    http://www.spiegel.de/international/germany/probe-shows-how-ubs-targeted-junk-securities-at-german-cities-a-906176.html

     
    A lot of bad economic news in one day out of Germany. And anyone notice Merkel put Obama behind a glass prison, and she didn’t seem impressed by his speech? And she timed it so that the sun blocked his teleprompters.. methinks Frau Merkel has had enough of Herr Obama.

  8. Merkel wants to get reelected.  She does not want to hear that Greece needs another 1.2 billion Euros. That wont look good on election day.  Cyprus’s President wants a complete redo of the Cyprus bail-in while their bankers are looking for a quick exit to a non-extradition country.
    President KLUMAC standing in his glass box, flop sweating and exhorting, trying to look Kennedy-ish but looking more like a turd in a punch bowl.  I give the dear girl some credit; she needs a laugh now and then, even if its at the expense of the prez.  Putin put him in his place too.  That photo op with them two sitting in what looked like Walmart folding chairs, appearing as uncomfortable as two finalists in the world spelling bee, that was pretty funny too.  Obama did his best to give Putin the turd eye but failed.  Putin ended up stealing BHOs wedding ring.  LOL

  9. After this minor correction in the pm’s space we foresee a positive guidance thru 2016, taking gold to all time highs of $12000 per ounce and silver repositioning to more historical gold/silver ratios taking spot pricing to the $500-$600 range.

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