Losing Control

Do you ever dance with the devil in the pale moonlight?

Helicopter Ben Bernanke made the decision to dance with the devil in March of 2009. After four years of false prosperity and stability, The House That Ben Built is shaking at its foundations.

Simply put...When you intervene in a market...any market...you are playing with fire. All markets are made up with equal parts buyers and sellers. An equilibrium is reached at a point we call "price". For decades, Western Central Banks and the Bank of International Settlements have played the dangerous game of attempting to "centrally plan" nearly every market in the world. They've attempted to manage currency markets, fixed income markets and equity markets, and, of course, the currency crosses of gold and silver.

After The Great Financial Crisis of 2008, the Federal Reserve Bank of The United States made the disastrous mistake of embarking on a policy of Quantitative Easing. This of course, regardless of what The Bernank wants to call it, is the direct monetization of the ongoing debt and deficit of the U.S. federal government. The market for treasuries has since been distorted by this near-constant Fed intervention. The buying of treasuries and treasury futures was encouraged by creating the appearance of a riskless trade. The mindset was this: "Why worry about falling prices and rising rates? The Fed has your back. They will not allow bond prices to fall."

How and why anyone expected this to end any differently than what we are currently seeing is beyond me. The Fed has so completely distorted the risk dynamic of the treasury market that the trade is left without any connection to reality and that "equilibrium" stated above. Hence, when suddenly The Fed suggests that sometime in the near future they will NOT have your back, everyone heads to the exits at once.

We saw this play out in Japan over the past 6 weeks. Prime Minister Abe had promised unlimited Yen, devaluing the currency in an attempt to spur growth through inflation. This drove the Nikkei to nearly double in six months from November to May. However, all of this BOJ intervention crushed the value of the Yen. This led to a complete breakdown of the Japanese bond market which, in turn, led to a very sharp correction in the Nikkei which continues to this day. In short, by messing with the equilibrium, the BOJ so distorted the markets in Japan that they subsequently lost control. Instead of orchestrating and centrally planning their markets, the BOJ is now forced to react and play a game of financial whack-a-mole, desperately trying to regain control.

In what should not be a surprise, The Fed is now in the exact same position. Years of direct debt monetization and money-printing have driven the S&P 500 from 666 to 1666 while interest rates plunged to historic lows. The yield on the U.S. treasury note traded all the way down to just 1.40% late last summer. Ahhh but look at what has happened since.

Faced with no option but to continue direct debt monetization, The Fed announce QE∞ last September and, instead of seeing rates drop and stay down, rates have risen. Not much at first...eight weeks ago, the yield on the 10-year note was still just 1.60%. But then what happened? The arrogant Fed, which for years had thought they were the "maestros", planning and playing the markets like a Stradivarius, was shown to NOT be in control. Take a look at this chart below:

You may think: "What's the big deal, Turd. Rates have moved up 1%. So what?" If so, you're looking at it all wrong. Rates have actually moved 61%...from 1.63% to 2.63%. That's a lot. And, so, the question really is, what's going to happen next?

Frankly, that's impossible to say with any certainty. However, the most likely scenario is that the idea of a Fed "taper" will soon be dismissed in the same manner as the "green shoots of economic recovery". If The Fed does nothing and actually goes forward with a plan to "taper", the direct consequence will be a further acceleration of treasury selling and even higher interest rates. As detailed last week, not only do higher rates exacerbate the ongoing deficit and debt, they're like Round-Up to those green shoots of economic growth. (http://www.tfmetalsreport.com/blog/4786/terminal). Ultimately, this implies that the next step for the Fed is not to taper. Not only will QE∞ continue, it will most likely have to be increased. Why? Because the central planners must regain control and to do so, they are going to have to try to drive rates back down.

But here's the rub: It may not work. It looks increasingly like "the cat is out of the bag" or "the genie is out of the bottle". Just as in Japan, the world may have come to realize that The Fed has lost control and that there is no going back. In this scenario, rates may not be controlled and driven lower outside of The Fed completely taking over and monopolizing the treasury market. It's where this was all headed eventually but "eventually" is a long time. Instead, we may be headed there NOW. Not like next Thursday "now" but sometime in the next 3-12 months "now".

This is, of course, the hyperinflation endgame we've all been expecting. Those who have taken the time to read up on The Weimar Republic will soon find that this was time well spent.

TF

269 Comments

Istack's picture

I think Ben is the one getting manipulated

i talk with friends and they actually believe that they will cut back on QE.  I am convinced otherwise. It is hard to break a lifetime of conditioning but it is possible.  With the truth.  Thanks for continuing to deal with the doubts Turd!

tyberious's picture

#2

Today!

philly's picture

Another Top Five...Starting

Another Top Five...the coveted THURD...Starting the week on a good note!!!

Mr. Smith's picture

Interest Rates

Good analysis, TF. Interest rates rising is just what the Fed and Treasury cannot permit to happen!

gatortrader's picture

Top 5

Nice. On another note. Couldn't all out war take the FED out of the buy side of the treasury equation and transfer it to worldwide demand from other countries. Indeed, if we go to war, boots on the ground type, I am pretty sure you see rates under 1.5 and the pig at 90+. Makes you wonder

tmosley's picture

One still must wonder which

One still must wonder which will manifest first, hyperinflation or the great silver shortage?

Dis gun be guuud.

Turd Ferguson's picture

Btw

MODERATOR

We may see our $18 silver before to long, too. But keep the faith and remember The Big Picture.

dgstage's picture

We Need that Song

Bad Moon Rising

are should it be 

Dancing in The Moonlight

Turd Ferguson's picture

And if you missed this back on Friday...

MODERATOR
Mudsharkbytes's picture

Ate…

lunch...

firstsilver's picture

6's and missing profits

Two thoughts:

One, lot of 666 showing in those S&P reference points. Perhaps the Dark One has a sense of humor.

Two, when do holders of physical gold and silver start making profit on this long-anticipated collapse? I was thinking the profit-making might have started by now. But, obviously, I've been wrong.

J.P. Cubish's picture

Creepy

Top ten. The clock on the wall that didn't work for decades just chimed out 12. I'm really enjoying this. Very educational. Oh and the moon....

ancientmoney's picture

Bad moon rising . . .

"The bursting of the bond bubble has the potential to plunge our financial system into a crisis that would be even worse than we experienced back in 2008.  Unfortunately, as Ambrose Evans-Pritchard recently noted, the bond market is dominated by just a few major players...

The Fed, the ECB, the Bank of England, the Bank of Japan, et al, own $10 trillion in bonds. China, the petro-powers, et al, own another $10 trillion. Between them they have locked up $20 trillion, equal to roughly 25pc of global GDP. They are the market. That is why Fed taper talk has become so neuralgic, and why we all watch Chinese regulators for every clue on policy.

This is one of the reasons why I write about China so much.  China has a tremendous amount of leverage over the global financial system.  If China starts selling bonds at about the same time that the Fed stops buying bonds we could see a shift of unprecedented proportions.

Sadly, most Americans have absolutely no idea how vulnerable the financial system is.

Most Americans have absolutely no idea that our system of finance is a house of cards built on a foundation of risk, debt and leverage.

Most Americans have complete and total faith that our leaders know what they are doing and are fully capable of keeping our financial system from collapsing.

In the end, most Americans are going to be bitterly, bitterly disappointed."

http://www.silverbearcafe.com/private/06.13/freakout2.html

-----------------------------------------------------------------------------

If China starts selling USTs, then hyperinflation of the dollar will happen.  We will have a reset sooner than later.

RationalMind's picture

Continue to prepare

I am wrestling with my fiat stack. Should I still keep the 6+ months expenses in dry powder? Should I pre-pay my 2nd half property taxes (before bail-ins)? Should I covert some into phyzz? The key is whatever will give me a good night's rest, and where I can handle any contingency.

A thought occurred to me that I should probably try and keep a daily journal here on in, to record the key news but most importantly, my emotional state and the mental positioning I have adopted for that day. Might be interesting to review in the future.

J.P. Cubish's picture

@firstsilver

The profit of the silver is the having of the physical silver in a safe hiding place.  If you want more profit, buy more, and hide it in a different spot.  Good Luck.

Turd Ferguson's picture

Profits

MODERATOR

The next move UP is not about "profits". That word implies that you'll be converting your metal back in to paper money. Though, certainly some will mistakenly do just that, it would be a monumental error.

Turd Ferguson's picture

Good idea

MODERATOR

Start your own forum. Maybe put it here: http://www.tfmetalsreport.com/forums/preparing-accordingly

Keep it there so others can learn, too.

Response to: Continue to prepare
Cleburne61's picture

I don't normally do this...

But I'm reposting something I read, which encouraged me at the year's beginning.

Look, we're all in a war, because that's what the gold and silver markets are: a war.  A war for honesty, a war for truth, and a war against powerful financial criminals, whose very hearts represent the darkest place humanity can possibly offer.  And the scary part is that the continued revelations of whistleblowers proves that the darkness we think we know about governments of the world is only the tip of the iceberg.

So, I'd like to repost this underneath....apply our stacking scenario to the situation described.  We know in our hearts and minds, that this is the place to be.  It's the only game in town, even if the banksters are busy "machine-gunning" the lifeboats....this won't and can't last, just as it didn't in 2008/2009.

So, until this ship turns around, and the sun comes out....I hope you find encouragement and inspiration in the true story beneath from Tyler Perry.

______________________________________________

A few years ago I was getting these really insane water bills. I mean HIGH! So I decided to dig some wells in my yard to have water for my landscape. I live alone, so I know it had to be from watering the grass. So I hired a company to come out and dig these wells. The foreman and I walked all around my yard and as we were walking he was putting down flags. I asked what the flags were for. He said, "The flags represent good places to dig for water." I asked, "Why do you have so many flags?" He said, "I'm not sure if any of these places will produce water." I said, "Hold up, you mean if you dig all these spots and don't hit water I still have to pay you?" He said, "Yes, that's how it goes." I said, "Ok, fine." Needless to say, he dug three wells and never hit water. I said, "Just stop."

I got a few more extreme water bills and called him back. He said, "Are you sure?" I said, "Yes, keep drilling until you hit water." The next well he dug he was down 500 feet and still didn't hit any water. He asked if I wanted him to stop. I said, "Go deeper." He dug down another 200 feet and still nothing. I said, "Go deeper." He drilled another 200 feet and he hit rock. I said, "Blast it, cut it, do whatever you have to do but keep digging." After fighting the rock and breaking his drill and getting a new one we got a little deeper. He said, "We are at 1,200 feet, why do you want me to keep going?" I said, "Cause I'm tired of these water bills and I'm going to do something about it." He said, "But this is really deep." I asked him if he had hit water yet. He said "no," so I told him to go deeper. "But you don't understand," he said. "We don't usually drill this deep, this is going to be expensive." I told him that, "Sometimes you have to go deeper to get what you are after, no matter what the cost." He started the machine and went down another four inches and hit a river of water. Just a few inches separated me from getting my breakthrough. That was five years ago and that well has never run dry.

In 2013 I want you to apply that to your life in all ways. Sometimes you will spend time on a thing and it will produce no water. Don't be afraid to move on to another spot. YOU CAN'T HAVE FEAR. I don't care how much time you put into it. If the well is dry MOVE ON! Nothing lives where there is no living water. Be it a relationship, a job, a business, don't be afraid to move to another spot.

Now, on the other hand, if you are digging your well and you are sure that it is not only where you want to be but where God wants you to be, then keep digging in that same spot. Don't stop digging until you hit a river of blessings. Don't stop praying until you live in the change you've been waiting for. Don't stop pushing until you deliver your breakthrough. Yes, it will get difficult. Yes, you may hit rock. Yes, there will be a cost. But when you get to what God is trying to get you to, YOU WILL RECOVER IT ALL! One of my favorite scriptures says that. "PURSUE AND YOU SHALL RECOVER IT ALL!"

Some people give up when they are only inches away!!

achmachat's picture

Profits...

I see profits as such:

buy gold with silver as gold gets cheaper when paid in silver.

and don't forget the old Chinese saying:

如果你不能触到它,你不拥有它。

ancientmoney's picture

Controlled burn by world's bankers--so far . . .

"Gold and silver are wealth preservers and  wealth creators, from out perspective, and that is the sole purpose for accumulating the physical, at any price, as we have been stating. Why recommend buying the physical when its price has been dropping steadily?   At some point, you either will not e able to buy it at prices under $1,900 and $50, respectively, or the government may [likely] intervene and make it near impossible to buy without having to submit to close scrutiny/registration, maybe even make it illegal.

The United States becomes more and more financially isolated by the rest of the world. China, Russia, India, and many other countries are waiting for the US to crumble from within, as it has been for decades, by design, [Rothschilds, New World Order, illuminati, Bilderbergers, etc, take your choice.  It has happened].

Those still in power will do everything they can to maintain it.  In the process, they will destroy the economy [already in process], civil liberties, [just control remains as a major obstacle], the means of earning a living, [yet an other one, food stamp recipients at all time highs, Medicare usage through the roof].  It will get ugly, especially for those less prepared, like those who chose not to buy gold or silver at any price when they could.

Here are a few other considerations:

Government confiscation – Not very likely.  A replay of the 1933 Roosevelt Executive Order scam makes little sense.  Back in the 1930s,  much of the public owned gold and silver as a form of money, which it was, then.  Today, how many households actually own and hold gold and/or silver?  1%?  2%?  Whatever the number, it is small.  People since have been “dumbed down” about owning gold and silver, for it is no longer a part of currency, fiat or otherwise.   Even if there were some attempted form of confiscation, those who do own and hold PMs are not [as] susceptible to government-sanctioned theft.

Devaluation – This one could catch a lot of people off guard.  Most Americans think it only happens in poor, or debt-ridden  countries, [Hello!] Welcome to the Third World America. The illuminati have long had plans to enslave this country, and it is almost a fait accompli. 20%? 50%?  Again, no one knows, but odds are heavily in favor of devaluation.  A huge reason for accumulating PMs, [at any price].

Government Bail-ins, and/or confiscation of a different kind.  Was Cyprus a template? Absolutely, and not by accident.  Nothing, absolutely nothing happens in the banking world that has not been sanctioned, not by just the central banks, but by the controller of ALL central banks, the Bank of International Settlement, [BIS].  This is where the head of the illuminati rule, unseen, unaccounted for, but they measure every “dollar” they deem you should be “earning” for your slave labor.  The BIS is  the Rothschild formula in action.  Lend out fiat, demand actual assets in return payment.

M F Global was a form of [uncontested] confiscation.  Printing fit-to-infinity is one of the most insidious forms of confiscation, via inflation, [since 1913 when the Federal Reserve Act came into being, and the NWO took power of this country's money supply.

"Give me control over a nation's money supply and I care not who makes the laws." Mayer Amschel Rothschild.

Give the man credit, he did warn everyone in advance.

Another potential form of government confiscation will be forcing public pensions, for sure, and eventually all forms of retirement accounts to buy [worthless] government bonds.

Civil war, [government induced], social upheaval, revolution.  These are the more extreme forms of what can happen that will impact the [worthless] “value” of fiat.

Whatever the reason[s], it does not matter.  What does matter is that you have PMs and that you continue to buy them because the end is near.  What no one knows is when or how it all will end.  What seems to  be truer than not is what we expressed in the opening, whatever your expectations, they will probably fall short."

http://www.silverbearcafe.com/private/06.13/pmrise.html

dgstage's picture

Ancientmoney

It is sad so many are asleep. 

Regarding profits I am not selling!

tyberious's picture

It seems..

that we currently have a Nazis Stasi government with a future Weimar Republic economy.  This just get uglier and uglier, but we will be around for the rebirth of this once great nation.

Chef's picture

Gold Bail in

Gold shitting the bed while Bond Rates rise  anyone care to explain why? We seem to be on the sled down to 800 gold.

22tlane's picture

Good one for Mr.Fix and dgstage

Friday my daughter gets on my office pc to do a google search for movie reviews. I am standing behind her watching. I see the typical movie review sites. See clicks on moviefone.com. Within 15 seconds I get a text on my phone that rottentomatoes.com has a new movie review app. My phone is not a smart phone, I have never put in my cell number in google and she never clicked on the rottentomatoes.com search link. WTH? The bright side is that these things are waking up my wife. She said, "wow a simple movie review search....can't imagine the technology the NSA must have".

Silver_investor's picture

Well said

A little over three years ago, when I made my first (large) purchase of silver at about $20/oz., I never thought that the price of silver would ever be lower than what I paid then. Back then I thought for sure that we were close to complete economic collapse, especially as I watched the prices of gold and silver continue to rise. I'll admit that I got into silver not only to preserve some of my savings but I was also hoping to profit. If only I had been smart enough to sell some when the price hit $49! Yet, here we are with silver below $20, and it's likely that silver will go lower still. That's okay. I understand that there is no way out of the situation that the Federal Reserve is in. I don't know how long they'll be able to keep things together. But I do know that they can't keep this going forever. My silver still has value and always will.  

dgstage's picture

22tlane

Just for you, in case you do not follow dots.

BIG BROTHER’S THREE HUNDRED MILLION MAN ARMY
 

http://www.newswithviews.com/McGuire/paul177.htm

TJeffson's picture

Repost this here... 10 yr rates

So how does Bermonkey get rates under control again?    it's my understanding that he can't just blindly print... because the dollar is backed by debt.   Thus he must have debt to buy up as he prints dollars.    And we aren't due for a debt ceiling debate for a while yet that I know of... so the USG isn't necessarily going to be his go to anymore...  so where does he get the debt to keep QE going?    Will he be buying up anything he can get his hands on from the banks , beyond MBS?   Or will he be buying Treasuries from China et al?    Or am I completely wrong on the dollar being backed by debt and thus he cannot just print at will?

achmachat's picture

wow!

Just imagine what you can get at the mall or supermarket for 17,71€ 

You can actually get a beautiful .999 one troy ounce silver coin for that price today. Including VAT!

https://www.geiger-edelmetalle.de/edelmetalle_info.php/info/p538_Arche-Noah-Armenien-1-oz-Feinsilber-999--2013.html

Urban Roman's picture

I thought Ben controlled the

I thought Ben controlled the rates through a financial circle-jerk between the Fed and Treasury. 

How can the MOTU not be in control?

tread_w_care's picture

They're panicking out there right now, I can feel it.

http://www.minneapolisfed.org/publications_papers/pub_display.cfm?id=5128

12:16 PM Priced in. Stocks and bonds see no bounce from the uber-dovishness of Minneapolis Fed chief Kocherlakota. In an unusual move, the former hawk, but now a dove with near-religious zeal, issues a statement calling on the FOMC to say it will continue with QE until the unemployment rate falls to at least 7% as long as inflation remains below 2.5%. Additionally, ZIRP should remain in place until unemployment falls below 5.5% (again assuming inflation remains contained). 1 Comment [U.S. Economy, Breaking News]

HT to SeekingAlpha.com;

And HT to Billy Ray Valentine for nailing it. 

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