U.S. financial markets are exhibiting the classic behavior patterns of an addict.  Just a hint that the Fed may start slowing down the flow of the “juice” was all that it took to cause the financial markets to throw an epic temper tantrum on Wednesday.  In fact, one CNN article stated that the markets “freaked out” when Federal Reserve Chairman Ben Bernanke suggested that the Fed would eventually start tapering the bond buying program if the economy improves.  And please note that Bernanke did not announce that the money printing would actually slow down any time soon.  He just said that it may be “appropriate to moderate the pace of purchases later this year” if the economy is looking good.  For now, the Fed is going to continue wildly printing money and injecting it into the financial markets.  So nothing has actually changed yet.  But just the suggestion that this round of quantitative easing would eventually end if the economy improves was enough to severely rattle Wall Street on Wednesday.  U.S. financial markets have become completely and totally addicted to easy money, and nobody is quite sure what is going to happen when the Fed takes the “smack” away.  When that day comes, will the largest bond bubble in the history of the world burst?  Will interest rates rise dramatically?  Will it throw the U.S. economy into another deep recession?
Judging by what happened on Wednesday, the end of Fed bond buying is not going to go well.  Just check out the carnage that we witnessed…

 

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From The Economic Collapse Blog:

-The Dow dropped by 206 points on Wednesday.

-The yield on 10 year U.S. Treasuries shot up substantially, and it is now the highest that it has been since March 2012.

-On Wednesday we witnessed the largest percentage rise in the yield on 5 year U.S. Treasury bonds ever.  It is now the highest that it has been in nearly two years.

-It was announced that mortgage rates are the highest that they have been in more than a year.

-We also learned that the MBS mortgage refinance applications index has fallen by 38 percent over the past six weeks.

If the markets react like this when the Fed doesn’t even do anything, what are they going to do when the Fed actually starts cutting back the monetary injections?

Posted below is an excerpt from the statement that the Fed released on Wednesday.  Please note that the Fed is saying that the current quantitative easing program is going to continue at the same pace for right now…

To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee decided to continue purchasing additional agency mortgage-backed securities at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion per month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative.

The Committee will closely monitor incoming information on economic and financial developments in coming months. The Committee will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until the outlook for the labor market has improved substantially in a context of price stability. The Committee is prepared to increase or reduce the pace of its purchases to maintain appropriate policy accommodation as the outlook for the labor market or inflation changes. In determining the size, pace, and composition of its asset purchases, the Committee will continue to take appropriate account of the likely efficacy and costs of such purchases as well as the extent of progress toward its economic objectives.

To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the asset purchase program ends and the economic recovery strengthens. In particular, the Committee decided to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that this exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored. In determining how long to maintain a highly accommodative stance of monetary policy, the Committee will also consider other information, including additional measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent.

So why doesn’t the Federal Reserve just stop these emergency measures right now?

After all, we are supposed to be in the midst of an “economic recovery”, right?

What is Bernanke afraid of?

That is a question that Rick Santelli of CNBC asked on Wednesday.  If you have not seen his epic rant yet, you should definitely check it out…

http://www.youtube.com/watch?feature=player_embedded&v=9jhXMB3bXMk

On days like this, it is easy to see who has the most influence over the U.S. economy.  The financial world literally hangs on every word that comes out of the mouth of Federal Reserve Chairman Ben Bernanke.  The same cannot be said about Barack Obama or anyone else.

The central planners over at the Federal Reserve are at the very heart of what is wrong with our economy and our financial system.  If you doubt this, please see this article: “11 Reasons Why The Federal Reserve Should Be Abolished“.  Bernanke knows that the actions that the Fed has taken in recent years have grossly distorted our financial system, and he is concerned about what is going to happen when the Fed starts removing those emergency measures.

Unfortunately, we can’t send the U.S. financial system off to rehab at a clinic somewhere.  The entire world is going to watch as our financial markets go through withdrawal.

The Fed has purposely inflated a massive financial bubble, and now it is trying to figure out what to do about it.  Can the Fed fix this mess without it totally blowing up?

Unfortunately, most severe addictions never end well.  In a recent article, Charles Hugh Smith described the predicament that the Fed is currently facing quite eloquently…

One of the enduring analogies of the Federal Reserve’s quantitative easing (QE) program is that the stock market is now addicted to this constant injection of free money. The aptness of this analogy has never been more apparent than now, as the market plummets on the mere rumor that the Fed will cut back its monthly injection of financial smack. (The analogy typically refers to crack cocaine, due to the state of delusional euphoria QE induces in the stock market. But the zombified state of the heroin addict is arguably the more accurate analogy of the U.S. stock market.)

You know the key self-delusion of all addiction: “I can stop any time I want.” This eerily echoes the language of Fed Chairman Ben Bernanke, who routinely declares he can stop QE any time he chooses.

But Ben, the pusher of QE money, knows his addict–the stock market–will die if the smack is cut back too abruptly. Like all pushers, Ben has his own delusion: that he can actually control the addiction he has nurtured.

You’re dreaming, Ben–your pushing QE has backed you into a corner. The addict (the stock market) is now so dependent and fragile that the slightest decrease in QE smack will send it to the emergency room, and quite possibly the morgue.

We are rapidly approaching a turning point.  We have a massively inflated stock market bubble, a massively inflated bond bubble, and a financial system that is absolutely addicted to easy money.

The Fed is desperately hoping that it can find a way to engineer some sort of a soft landing.

The Fed is desperately hoping to avoid a repeat of the financial crisis of 2008.

Federal Reserve Chairman Ben Bernanke insists that he knows how to handle things this time.

Do you believe him?

 

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  1. TIMBER.. the fact that metals were eviscerated at the start, then at the hint of the end of QE unequivocally proves that the system is a corrupt racket, perpetuated by the bought and paid for government through their central banking and bankster agents in their incestuous fandango while doing nothing less than giving it to every one of us high and hard up the ass.
     
    Happy friday. And bring it on. Let’s let them get the sh1t kicked out of them as we’ve had done to us perpetually.

    • Indeed it was.  I watched it live the other day on TV.  My only thought afterward was, “Wow!  Did they have a cardiac unit standing by, just in case?”!   lol

    • THE perfect time to be stacking is when the PM market is falling.  Like a number of others on here, lower prices mean I can average down quite nicely.  With no need to sell any of my stack, it is good to be able to enlarge it on a monthly basis.  With luck, these sale prices will hold for a while.  :-D
       

      Holy cow! The edit function is BACK! Yeah!! Thx, Doc and team. Appreciate it!

  2. “You know the key self-delusion of all addiction: “I can stop any time I want.” This eerily echoes the language of Fed Chairman Ben Bernanke, who routinely declares he can stop QE any time he chooses.”
     
    While the Fed Chair CAN taper and / or halt QE any time they want, the trick here is whether or not they can deal with the political fallout that results from that action.
     
    “We are rapidly approaching a turning point.  We have a massively inflated stock market bubble, a massively inflated bond bubble, and a financial system that is absolutely addicted to easy money.”
     
    What the market is telling the world is that the current price level is not based on fundamentals but on free money.  Everyone recognizes that this is not a sustainable system.  A sustainable system, unlike the current system, has a high intrinsic value because it is based on a solid economy that is growing and producing profits for the owners, including the shareholders.  When the market drops precipitously, it indicates to me that the current value is not sustainable and therefore not based on company earnings or profits.  That’s one hell of an admission to be making in such a public way!
     
    “The Fed is desperately hoping to avoid a repeat of the financial crisis of 2008.”
     
    No problem.  If this shakes out as many of us expect, the next round of financial collapse will make 2008 look like the good old days.
     
    “Federal Reserve Chairman Ben Bernanke insists that he knows how to handle things this time.  Do you believe him?”
     
    Of course.  Doesn’t everyone believe him?  He is, after all, the smartest guy ever.  I also believe that inflation is 2% and that unemployment is in the mid-7% range.  I have my doubts about the tooth fairy, however.  LOL!
     
     

  3. Lindsey Williams Update:
    I have been using Lamanine and Pro-Argini9 for over a year. His recommendation, good stuff. 
    Email #1 ‘A large Chinese bank just last night ran out of liquidity and was bailed out by the government. Furthermore: “The seven-day repo rate, the benchmark rate for funding costs between banks, surged to 12.33% Thursday afternoon from the 8.26% rate at Wednesday’s close. It had averaged around 3.30% this year before the liquidity crunch began at the end of last month.” This is the same phenomenon that occurred globally in September 2008.’
     
    Email #2 ‘The U.S. market has DECLINED over the past month, the Japanese stock market has recently dropped 20%, the U.S. bond market sold-off, gold (GLD) is down 20% year-to-date (YTD), Chinese stocks (FXI) have fallen 19.69% YTD, emerging markets stocks (EEM) have depreciated 11.3% IN THE LAST MONTH, copper—a premiere asset considered to indicate growth or contraction, has contracted 18% YTD, etc… Investors should not ignore this massive deflation in global markets and assets.’
     
    Telephone conversation last week Pastor Williams also spoke with his elite friend last Thursday 13th June 2013 and said “Some very significant things are happening in the Derivative market and with interest rate and gold, at this time.” After pressing the issue he stated “As for gold – J.P. Morgan announced yesterday that their vault gold has dropped by 28.4 % over night. Nations are demanding physical delivery. Within a month and a half JP Morgan estimates their vault will run out (Be empty) Other vaults are probably running out also. WHAT HAPPENS THEN? Startling when supply dries up. This has many of us very concerned. Be sure that everything you own is in your posession. Crash – I don’t know. Be ready for a public reaction. Interest rates are the greatest factor controling the Derivative market. This could be violent”. Please take warning, Pastor Williams said  he doesn’t know how far this will go, hope for the best but prepare for the worst. 
     
     

  4. right on Thomas   all of what you say is coming to pass, and  as a great reset.  
    The gold owed to German?  Good luck with that.  Fed to Buba and Dbank.  Wait 7 years and we’ll send it to you.  Wimpy had more conjones that that.  At least he said he’d pay you tuesday for a hamburger today. 
    If they had any nads at all, and of course they don’t, they would say MOLON LABE.
      But it takes someone with big balls to say that and mean it.  The wussification of our pussilanimous gommint drones is beyond any type of cowardice I am familiar with.

    • About the gold repatriation… maybe the US Gov is keeping the gold to “repatriate” the WWII debts owed to them by various European countries.  ;-)
       
      “The wussification of our pussilanimous gommint drones is beyond any type of cowardice I am familiar with.”
       
      Yep… and we can consider that a GOOD thing.  lol
       

  5. After watching the Santelli video several thoughts came to mind.
    What’s with Bernanke and before him, what was with Greenspan?  With my head firmly wrapped around the fact that the Fed is a foreign owned private corporate banking entity, I needed to use the template learned while I worked at a real bank to get a handle on the Fed.
    If Bernanke’s board of directors is foreign banks and their owners, the BIS and those vague and dark folks we call the NWO, then the question needed to be asked is what is Bernanke’s true mission.
    If he is operating under the dictates of a foreign board and advisors, then we have to assume that anything he does it for their benefit and their benefit alone. If that is the case Our domestic interests are a somewhat distant second place, maybe with nothing more in mind to that end except that it might serve the foreign masters, even if it’s an accidental service. But servitude is a certain fate, accident or not.
      I never saw our bank’s officers and board EVER concern themselves about other lenders except that they were competitors; adversaries to be dealt with by Sun Tsu’s Art of War tactics; required reading at our bank.  We were ruthless, remorseless and relentless; taking no prisoners. We suborned any outside influencers that we could find, using any lever of government to aid and augment our mission, using our two lobby groups; one in Sacramento and one in DC, to great effect.  We had well paid flacks and an officer dedicated to that end.
    If the state or federal government weighed in on our tactics, accounting (questionable at times), expansion plans and loan methodology, our CFO was charged with the responsibility to defuse and delay their actions at all times and at all cost.
    If the Fed sees all outside actors that might want to influence its action as adversaries and competitors to be dealt with, it must operate in a way similar to our for-profit bank. They must act accordingly because if they did not, their multi-generational charter would amount to nothing.  They’d have to suborn any politician with any means at their disposal.
    Presidents could come and go; useful idiots or compromisers who walked the line to benefit the POTUS mission, but covertly guided by the vast resources of the Fed. Whatever the POTUS mission, they must always be made aware that to not toe the line would result in their demise or downfall.
    Most flacks and drones are easy to compromise. Their self interests are small minded, easily managed and involved in small scale thinking.  The FED could use force, FIAT, debt and other means to influence the political winds of change to their advantage. They could even use the Ace in the hole, crying wolf that the world was about to end, scaring the politicians into complete and total compliance. Bush and Obama were completely in their thrall. Trillions of dollars of debt were placed on the American people through this tactic.
    Their time horizon has involved a century-long plan of attack, appearance of compromise, harsh influence and a steady,  grinding wearing down of the Americas to the point that we find ourselves nearly enslaved to this debt spewing monstrosity; debt slaves in the country our fathers founded. How does $200 trillion in GAAP-based costs sound to everyone. The modern day Fed is a recent iteration of a centuries-old attempt to corral the USA by the powers that be that have ruled Europe through its various evolutions of the last millenium.

    I won’t say Mission Accomplished re the Fed since that means there’s no way out of this mess; the game is over.  Andrew Jackson never gave up in his fight against the First National Bank. His greatest legacy was that he killed that evil bank. His face on the $20 bill is an vile insult to his memory. It’s probably a means by the minions of the Fed to offer up an insult to his actions of a century before the foundation of this new evil empire.
    But I wonder if the Fed, its board and owners are truly winning, or are they finding that after many attempts to take us down, they’ve not accomplishing their goal. The 2008 financial debacle and $30 trillion shipped back to the Old World in the last 5 years was massively damaging and yes, they have done some serious harm to the US. Yet it appears that they cannot break our national will. 
    This does not mean that we will have an easy time to break the horrible addiction to their debt based FIAT crack hell. Just because they have been at this for 100 years does not mean they are omniscient and omnipotent.
    There are other factors that appear to be standing in their way, like sand in the gears; very large speed bumps along their road to world wide domination.
    The east seems to be waging their own form of war against the old world elites.  China and Japan as taking some serious hits, some from self inflicted seppuku and some from outside influences that have been in operation for 400 years. I would never sell the Asians short anymore than I would sell our spirit and ethos short.
    There is the internet and the World Wide Web of alternate medias that are spreading the word. Brave souls are risking and sacrificing their lives to see that we have another pathway to counter those evil men who would dominate us. I remember the scene from The Patriot when Mel Gibson’s character was melting down his son’s leaden toy soldiers to make shot. Maybe we’ll be melting down our gold and silver to make shot some day in the future. It would be a good use of these metals precious content in that they may protect us from harm.
    Maybe it will take a dozen years to see this through but evil does have a way of laying the pathway to their own demise. Their hubris always defeats them in the end. The more that we talk about these subjects; the more we can use our non-violent force of will and action to stop these evil people; the more we will succeed in pushing back on this tide, turning it away.
    It’s my hope that we present a danger to these people; cause them fear us; feel some trepidation as they work their plans and schemes. When they see our will and feel fear, they will make mistakes.
    We must stay ever aware and vigilant and be prepared to launch whatever countermeasures at our disposal. Removing ourselves from the debt and FIAT paradigm, stacking real money, understanding how the Hegelian Dialect is more of a self-inflicted wound created by sloppy thinking; seeing it is not our friend, answer or salvation, but a form of external deception designed to deceive all viewers, we will be able to see a clear course and steer in that direction.
    This is the Matrix-like wake up clarion call to action we all now need to heed.

    Central governments are good at two things
    Waging war
    Debasing the currency
    Central Banks finance both.
     

    • “We were ruthless, remorseless and relentless; taking no prisoners. We suborned any outside influencers that we could find, using any lever of government to aid and augment our mission, using our two lobby groups; one in Sacramento and one in DC, to great effect.  We had well paid flacks and an officer dedicated to that end.”
       
      So, in other words, your bank was a typical bank.
       
      “But I wonder if the Fed, its board and owners are truly winning, or are they finding that after many attempts to take us down, they’ve not accomplishing their goal. The 2008 financial debacle and $30 trillion shipped back to the Old World in the last 5 years was massively damaging and yes, they have done some serious harm to the US. Yet it appears that they cannot break our national will.”
       
      No, they cannot but not for lack of trying.  One day, perhaps sooner than we think, they will discover that those who engage in no-holds-barred warfare had better win.  Because if they do not, they WILL be hunted to the ends of the Earth and justice WILL be done upon them… probably with automatic weapons.
       
       “Maybe we’ll be melting down our gold and silver to make shot some day in the future. It would be a good use of these metals precious content in that they may protect us from harm.”
       
      Oh, hell no!  I am not gonna deposit ANY of my stack in anyone who NEEDS shootin’.  Lead is cheap and plentiful.  If it gets to the point where I need more bullets, I will roll my own from that and never from The Stack!  I would rather use arrows first.  ;-)
       
       “Central governments are good at two things
      Waging war
      Debasing the currency
      Central Banks finance both”
       
      The operative term here is the word “central”.  As soon as anything is centralized, multiple cluster****s always follow.  This applies to governments and banks.  The evidence for this is right in front of our eyes and seems to be increasing on a weekly basis.

  6. I am relatively new to PM’s (2010) but I have read the literature and took it all in. I understand the fundamentals and I know the system is being interfered with. But I liken the economic collapse to the Titanic, this ship could have survived if bulkhead No:5 could have been secured. The engineers (bankers) did everything they could to shore up the steel plate against the pressure. The bilge pumps were working full throw, auxiliary pumps were brought in as insurance. But the bulkhead failed in a place that was a surprise. Stress always finds the weakest spot, and the weakest spot is not always known.
    When this system fails it will be from an unexpected source, and it will be explosive.

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