panic

Something nasty is going on behind the scenes in the financial system that is not yet apparent.
Treasury futures opened in the early evening and the 10-yr traded down to 2.25%
.
Something has the market incredibly spooked and I find it interesting that the U.S. Treasury Secretary and the UK’s equivalent will be running a big bank fail simulation test next week.
The movement in 10-yr Treasury yields AND the blatant smashing of the gold price since mid-July is exactly what occurred in 2008 before Lehman collapsed.

Is another TBTF mega bank on the brink of insolvency??

end badly

Thanks to the Fed’s monetary policies, which have encouraged an increase in demand for US Treasuries, the Federal government no longer has a problem funding its deficit. QE is therefore redundant, and has been since tapering was first mooted.  This does not mean that QE is going to be abandoned forever:  its re-introduction will depend on the relationship between the government’s borrowing needs and market demand for its debt.
This analysis is confirmed by Japan’s current situation. There, QE coincides with an economy that is deteriorating by the day. One cannot argue that QE has been good for the Japanese economy. The reality behind “abenomics” is that Japan’s government is funding a massive deficit at the same time as savers are drawing down capital to cover their day-to-day living requirements. In short, the funding gap is being covered by printing money.   And now the collapsing yen, which is the inevitable consequence of monetary inflation, threatens to expose this folly.

yellen
  • Yellen lays out Federal Reserve’s plans to “normalize” monetary policy
  • Fed to officially DC QE at next meeting if economic outlook holds
  • “Normalization” will not necessarily occur immediately 
  • Fed will use an overnight repo facility as needed during normalization process
  • Fed may raise interest rates as early as 2015
  • Committee is prepared to adjust its approach if necessary (translation- we’re going to try to pull the punchbowl, but we’ll eventually bring back MOAR QE )
  • Gold & silver smash commences on que as gold sent down a mineshaft below support at $1230

Full FOMC statement is below: 

Source: Banzai7

The QE program created substantial hedge fund interest in gold-related ETFs. Unfortunately, QE never created the inflation the funds had anticipated.
That’s because commercial banks held the QE money they received, “tight to the chest”, rather than loaning it to businesses and consumers.
In a nutshell, by enlarging the money supply while GDP was falling, the Fed created deflation.
So, if the Fed were to shrink the money supply now, or at least reduce its rate of growth, while GDP rises, and banks start making loans with their “QE booty” at the same time…. is that inflationary?
The answer is yes.

panic crash

The Federal Reserve’s third quantitative-easing campaign is on track to wind down in late October.  At that point the Fed will likely stop printing new money to buy bonds, a sea-change shift with ominous implications for the stock markets.  Their entire surreal levitation during QE3 mirrored the huge growth in the Fed’s balance sheet from QE3’s bond monetizations.  When they cease, another major selloff is likely.
Prudent investors and speculators today don’t have to guess about what the end of QE3 means for the lofty Fed-inflated US stock markets.  We have the precedent of the ends of QE1 and QE2.  This next chart looks at the flagship S&P 500 stock index superimposed over the Fed’s balance sheet.
And out of all the many thousands of charts I’ve created over the years, this probably tops the heap as the scariest.

June’s FMQ components have now been released by the St Louis Fed, and it stands at a record $13.132 trillion. As can be seen in the chart above, it is $5.48 trillion more than an extension of the pre-Lehman crisis exponential growth trend.
The chart confirms that tapering seems to be having little or no effect on money markets and therefore the growth rate of fiat currency.
Still believe the Fed is really tapering QE?

Play

The world’s leading silver expert David Morgan joins The Doc & Eric Dubin this week to discuss: 

  • The Fed tapers official QE another $10 billion- gold & silver whacked the day after the FOMC statement yet again
  • David breaks down gold and silver trading over the first half of 2014:  Gold & Silver still base building a Major Bottom
  • Is the next banking crisis beginning? Banco Espírito Santo’s share price halved on  Thursday
  • Be right and sit tight?  David explains why the PM markets will scare you out or wear you out
  • We ask David how he sees the end-game for the dollar playing out- will we see a deflationary crash, or a hyper-inflation monetary collapse,  and how will PMs protect wealth against both?
  • On the Brink?  Washington driving West towards direct conflict with Russia

The SD Weekly Metals & Markets With The Doc, Eric Dubin, and David Morgan is below:

Jim GrantIn this MUST WATCH interview with CNBC, the Interest Rate Observer’s Jim Grant explains why the 2 greatest opportunities for investors right now are Russia & gold. 
Gold, to me is 
a very sound inoculation against the harebrained doctrine of modern central bankers.  If you harbor doubts about the efficacy as do I of five years of monetary printing via quantitative easing & suppressed interest rates, and wonder how this unprecedented experiment is going to pan out, you can do worse for yourself than to hedge (with gold) from an unscripted monetary outcome.”  

Grant concludes that investors should own gold because:  “
It stands to benefit from the demonstrated, as opposed the theoretically likely, crack up of the current monetary arrangements.”
Grant’s full interview on opportunities in Russia & Gold is below: 

Gold Prices - 20 YearsQE looks like it produced a toxic cloud of dangerous mal-investment, debt and currency bubbles, higher consumer prices, and a weakened economy. 
But there is a golden lining in that toxic cloud. 

The price of gold has increased over the past 15 years, and will, thanks to the good folks who are bringing us more debt and QE, probably increase much more in the next few years. 

FarageThe Federal Reserve, the central bank of the U.S., is nearing the end of its ability to manipulate the U.S. economy without producing consequences worse that those it set out to avoid in 2008.
The Fed has no good exits from seven years of market manipulation.  If it continues its current policy of reducing purchases of assets, the so-called “tapering,” it risks throwing the U.S. into a recession.
If it reverses course and pauses the taper and later increases asset purchases, it risks destroying confidence in the dollar among foreign creditors of the U.S.
Both outcomes are potentially disastrous, but there are no good outcomes on the horizon.   This is the result of manipulating markets to the point where they no longer function as markets providing useful price signals and guiding the efficient allocation of capital. Today markets are a mirage, created by the Federal Reserve, which is caught in a prison of its own device.

goldBack in 2002, I was talking about $1,000 gold. When we hit that mark in ’05 and ’06 I began predicting that gold would rise to $2,000.
Now, I’m saying gold will probably go to $5,000 in the next move up.
Looking at the performance of gold from 1976 to 1980, the metal went up eight times.   If we repeated that performance, gold would be at over $8,000 from today by the end of the decade.   I don’t know if the same thing will happen this time, but it tells you that $5,000 per ounce is not unthinkable.

Bernanke taperYellen continues QE taper down to $35 billion/month:

  • Fed to taper QE an additional $10 billion beginning in July
  • Beginning in July, the Committee will add to its holdings of agency mortgage-backed securities at a pace of $15 billion per month rather than $20 billion per month, and will add to its holdings of longer-term Treasury securities at a pace of $20 billion per month rather than $25 billion per month. 
  • Waiting on the inevitable Gold & silver smash to commence…

Full FOMC Statement is below: 

Play
gold-nanex-feb2014_Dec-6-2013-NFP_smash

Source: Nanex

In this EXCLUSIVE, MUST LISTEN interview with The Doc, Eric Sprott dissects the fundamentals in the gold and silver markets, coverage of manipulation finally reaching the mainstream, and reveals his updated outlook on gold & silver.
Eric discusses why the precious metals options markets always expire at MAX PAIN for the customers, and why he urges all PM investors to STAY OUT of the futures options markets, and simply accumulate physical metal.
Sprott explains how PM manipulation shifted from being conducted solely by the Central banks to the dealers active daily participation that we see now, and discusses how much he personally lost when a Barclays trader manipulated gold down into the London fix.  

Regarding his price outlook for the metals, with silver trading under $20 and gold trading near $1250, is Eric still looking for new highs in 2014?
His answer might shock you.

The Doc’s full Exclusive interview with Eric Sprott of Sprott Asset Management is below:

PutinIn this MUST LISTEN interview with Paul Sandhu, the Hat Trick Letter editor Jim Willie discusses why the yuan is destined to replace the US dollar as reserve currency, and why the quickly growing Russian/Chinese alliance will DESTROY the US dollar.
Willie digs into the recent string of bankster deaths, his thoughts on the implications of the London silver fix ending in August, & the Fed money laundering funds through Belgium in order to prevent a collapse in T-bonds due to Russian liquidation.
Willie states that due Chinese & Russian liquidation, US Treasury bonds have gone NO-BID, and that a dollar-collapse looms!

Grab several cups of coffee as the Golden Jackass is at the top of his game throughout the entire 80 minute interview below:

cashIn response to our account of the mysterious large rise in Belgium’s Treasury purchases , it was suggested that the transaction would show up on the Fed’s balance sheet. However, the Fed is under no obligation to show the transaction.
The $141.2 billion in Treasuries purchased into the Belgium account represents 3.2% of the total current size of the Fed’s balance sheet.   The Fed is a private corporation and is therefore not beholden to GAAP accounting standards.
However even with GAAP standards applied, a corporation does not have to itemize and disclose the details of any event that represents less than 5% of its assets. In other words, the Fed can easily bury a 3% transaction in its financial statements.