Sequester Silliness

Time to discuss this "sequester" nonsense.

What a two-bit, vaudeville charade U.S. politics have become. Let me see if I've got this straight...

  1. The U.S. breaches the "debt ceiling" back in August of 2011. The dollar nosedives and Standard&Poor's downgrades the country's debt rating while gold surges to $1920.
  2. As part of the deal to extend the debt ceiling by $1,600,000,000,000, Congress punts any responsibility for cutting spending. They create an extra-constitutional "Super Committee" to do the heavy lifting and make recommendations with the caveat that, IF the Super Committee also punts, automatic spending cuts will kick in at about the time the debt ceiling is reached again. The target date was 3/1/13.
  3. Of course, in true Washington fashion, even the Super Committee can't come to an agreement and they...not surprisingly....punt.
  4. Because spending is out of control, the debt ceiling is actually reached ahead of schedule, back in January. Once again, rather than deal with it, Congress waives the debt ceiling LAW and extends it without limitations, to August.
  5. But now we have those nasty "sequester cuts" that are described in point #2 above.
  6. What to do? What to do?
  7. God forbid that the rate of growth of spending will be slowed. Good heavens we can't have that! Children and old people will die in the streets without the constant growing intervention of the Federal Leviathan.
  8. But we can't have a "deal", either, so the sequester kicks in and now the discussion is about this supposed "U.S. austerity".

Let's stop there. What a freaking joke this is! If nothing is done, all the "sequester" means is that federal spending will increase by $8T instead of $9T over the next 10 years. Brutal, huh? And because of this, gold is....falling? Seriously?? The U.S. has added another $1.6T to its national debt and the fiscal 2013 deficit is already about 20% above fiscal 2012. Entitlement spending will likely never be addressed and more credit downgrades loom and yet gold falls from $1920 to $1550? Nah. Move along. All of us tinfoil-hatters are simply crazy. Just a free and fair market reaction. That's all.

Even more silly is this notion of "austerity", the debt, the economy and QE∞.

  1. Allegedly, gold is falling because of this forced U.S. austerity.
  2. Allegedly, gold is falling because assorted Fed Goons have claimed that QE will soon end.
  3. Allegedly, gold is falling because the all-knowing and prescient speculators are flowing their funds into the short side of the trade.
  4. And this is all a crock of excrement.
  5. Please explain to me how #1 and #2 go together when there is seemingly universal agreement that a drop in U.S. government spending will force a dramatic slowdown in the already anemic growth of the U.S. economy.
  6. Slowing/stalling/non-existent economic growth will reduce tax revenues.
  7. Larger deficits require larger QE intervention to soak up bond issuance and keep rates low.
  8. Federal layoffs will increase lines at unemployment offices.
  9. The Bernank has consistently maintained that QE∞ will continue until unemployment drops below 6.5%.
  10. All the while, since 1/1/13, The Fed has simply created from whole cloth $170,000,000,000 brand new dollars. Since 1/1/13, the dollar price of gold has fallen from $1691 to $1581.
  11. The Fed will create from whole cloth a minimum of $85,000,000,000 new dollars in March.
  12. The Fed will create from whole cloth a minimum of $85,000,000,000 new dollars in April.
  13. The Fed will create from whole cloth a minimum of $85,000,000,000 new dollars in May and so on...

Now, before you say something like, "following this path, Turd, gold will be around $1400 by June 1", let me just emphatically state: No, it wont. Games are played in the short term and that will always be the case. But the Laws of Economics are just as strong and just as consequential as the Laws of Physics. Yes, it is possible to, by using tremendous amounts of energy, suspend and even break the laws of gravity. However, once that energy slows or dissipates, gravity reasserts itself. The same can be said in economics. Yes, it is possible for The Fed, their Goons and their Agents to suspend and seemingly break the Laws of Economics. However, in the end, their efforts will fail just as all previous attempts to inflate and prosper through currency devaluation have failed.

Stay the course. Add to your stack. Prepare accordingly.

TF

p.s. Late Friday, this was posted at ZH. Why worry about $85B in sequestration "cuts" when the U.S. government borrows $80B in one day? http://www.zerohedge.com/news/2013-03-01/there-goes-sequester

218 Comments

Turd Ferguson's picture

Rahul had The Doc and I on

MODERATOR

Rahul had The Doc and I on again the other night. You might find it interesting.

(Funny how I mention not being DOS attacked and then the site crashes this morning...)

Turd Ferguson's picture

Helpful article

MODERATOR

This guy sends me articles from time to time. They're different because they usually deal with taxation and exchange issues. Here's his latest:

http://www.atlas1031.com/blog/1031-exchange/bid/82394/Three-Reasons-to-1031-Exchange-Gold-and-Silver

And sort of on the same topic is this:

http://www.oftwominds.com/blogmar13/retirement3-13.html

Turd Ferguson's picture

Soon

MODERATOR
ancientmoney's picture

1st?

Me?

Try as we might, there is no "making money" in the current PM "market."  Those days ended, essentially, back in May 2011.

It is now, and has been, preparing for the day the dollar dies.  Bernanke, Geithner, JPM, the Fed, Treasury, all the kings' men have been working overtime to extend the day of the dollar.  They still do.  And they have succeeded thus far.

But they won't succeed forever.  The dollar as we know it is toast.  The system can ONLY be salvaged by replacing this pure fiat system to one with backbone.  And, physical gold is that backbone.

Ten_of_Swords's picture

from 30 years ago

The Doc's picture

need to be careful what you

need to be careful what you wish for regarding site attacks and crashes TF!   lol

-Doc

That_1_Guy's picture

Top 10?

Ill take it...

I will be continuing to stack and average till all the silver is gone. Then ill work on stacking wenches....dont tell my chick. ;)

Turd Ferguson's picture

Remarkable, huh Doc?

MODERATOR

Note, too, that GATA picked up the AM podcast this morning, too. DOS attacks often follow his appearances here.

dgstage's picture

Turd FYI

You have had some attacks the last couple of days.

¤'s picture

market turbulence

Wow! Every meaningful index is bouncy and seemingly disconnected on sequestration Friday. The DXY is way up and none of it mattered to the Dow or S&P or gold, oil etc. because of the POMO today. 

If it weren't a POMO day today what might've happened? Monday looks a bit ominous at this point. Lots of time left in the day for more craziness.

I see another sell off as likely into todays close.

Grublux's picture

Yeah

Site goes down alot!  Must be pissing someone off

The Springbok's picture

miners

is it worth even holding mining companies anymore?

seems they cannot catch a bid from anyone

Strongsidejedi's picture

irony - US Navy minesweeper is stuck on reef in Phillippines

A minesweeper from the US Navy is stuck on a reef in the Phillippines.

They're trying to figure out if they can refloat the ship off the reef.

The main point is that if the USN ship has all these radar and gear to detect subs and mines, how come they couldn't detect the reef?

http://worldnews.nbcnews.com/_news/2013/01/17/16561758-us-navy-ship-stuck-on-reef-nearly-a-day-after-running-aground-off-philippines?lite

agNau's picture

A market cannot be manipulated....

against trend.
Rising gold price.
Rising fiat supply.
Rising awareness.

Trends.

Strongsidejedi's picture

@TF - site and DOS

@TF - regarding the site and DOS

I concur with the posters above... I have been kicked to back up versions of the site several times a day for the past few days. 

Thanks for posting that discussion on backwardation.

The site continues to have high demand and commands alot of attention.

admin's picture

Site "Attacks" & YouTube Videos

Most likely, these are garden-variety spambots hitting the site, though they were looking for system files on the server last night, so some of them could possibly be malicious. Some of these bots have figured out how to bypass Cloudflare, so we're going to adjust that.

Also, FYI, when you post a whole lot of YouTube videos to your comments, and then we have a bunch of comments in a row with lots of YouTube videos, it takes up server memory. We'll be patching the software today so this should be less of a problem. Still, it's good to remember that everytime you post a long comment with tons of big graphics and embedded videos, that creates a performance hit on the site.

tonyw's picture

US Navy minesweeper

You can have all the gear but if nobody is listening it won't do you any good at all. Applies to lots of things.

achmachat's picture

this is important:

new all-time (!!!) records for silver according to netdania:

this February 26th was the highest ever volume in contracts traded for one day.

this week is already the highest ever volume in contracts traded for one week!

the best part: during this massive volume, prices basically stayed flat! I want to see them try another real smack-down!

Turd Ferguson's picture

Textbook example

MODERATOR

This is how you game the stops for profit. Quite simple to do if you have the size. The ability to sneak a peek at the order book helps, too.

Groaner's picture

Pumping up the markets, nuts.

dow will close up 100 and gold down $10

tonyw's picture

it's up it's down so what

i don't trade (it's too stressful and time consuming) but just hold as insurance for the long term. Bought lots of silver around $10 and gold < $800 many years ago and don't look at the price from day to day. Just look at a ten year chart or price of gold to government debt.

Now that i have more $$$$$$ i might buy some more, or not but will not sweat the dramatic price changes since any money i invest will be water under the bridge/sunk costs and not change my lifestyle, same as any investment i make.

JailBank's picture

Well F it

I got tired of looking at charts and wondering if we are going up/down/sideways. I just decided to buy today and say F it. Turd is right, the spending will not stop, and the FED will keep the money coming. So what to do? If gold goes down another $50 even $100 I don't care any more.

opticsguy's picture

fearmongerer in chief on TV

He's just making  stuff up now, like how military base schools will be closed and children put out on the street.  Lies.  This has gone on for half an hour already.

gold slut's picture

Devaluing PMs

TPTB are using the $ to squeeze down the gold (and silver) price.  By printing more to keep the battle against gold going, they are weakening the $ which means that they need more $s next time to get the same job done, and so it goes on and on with a constantly weaker $.  Gold and silver meanwhile, never stop trying to rise to their true price. It's what they do, its all they do and they never, EVER stop.

Don't give in to the TPTB, keep on stacking and simply see this time as a great gift to grow your stack at the lowest price TPTB can give it to you!

robov's picture

'Checkmate' for gold against the dollar

Apologize if this has already been posted

http://fofoa.blogspot.ca/2013/02/checkmate.html

phanophite's picture

Gold at 1400?

We should be so lucky!

BTFD

JohnH's picture

What will happen to Gold if their is a big market correction?

I recently read an article from Chris Martenson, predicting something like a 40 - 60% correction in the stock markets between may and september 2013. If that happens, wouldn't gold go down with it, just like in 2009? Even if we have hit a short term bottom, do you expect a much lower bottom too come in tandem with a big market correction?

Turd Ferguson's picture

It depends

MODERATOR

In a global liquidity crisis, where everything not nailed down is haphazardly sold, of course paper gold would be sold, too.

But 2013 IS NOT 2008. Back then there was still hope. Back then, many still had faith in the current system. Back then, global central banks hadn't already printed trillions.

This time, I firmly believe that physical demand would trump paper selling and buoy price.

the_circle's picture

Keep your eyes on the prize

Thanks Turd for the Sandeep and Andy Maguire podcasts this week- brilliant stuff! Great post today- funny too! This crap would drive you crazy.

Reading your blog helps me to keep my chin up when all the MOPE makes the outlook seem bleak. Thanks man.

Turd Ferguson's picture

MUST READ

MODERATOR

Again, Tom Fitzpatrick and Louise Yamada are the only two TA specialists I follow. Read/study this carefully:

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/3/1_KWN_-_Special_Friday_Gold_Chart_Mania.html
 

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