Additional Covert QE On The Way?

Wednesday, May 16, 2012 at 3:59 pm

An alert Turdite sent me an email last evening where he connected some dots about additional quantitative easing. I've been thinking about it off and on today and I've concluded that it deserves a discussion here.

Before we get started and, as background, please take a few minutes to watch this video:

The email that Turdite "David" sent me last night included this post from a message board at market-ticker.org. A poster named "throxx" said this:

"IMHO, QE3 is presently being implemented via the Chartering of NEW Bank Holding Companies in the United States which will utilize Chinese held U.S. Treasuries as their BASE Capital.
-The Chinese held US Treasuries will be utilized as BASE CAPITAL upon which to create TRILLIONS of digital FRN via fractional reserve.
While these Treasuries were held outside of the U.S. Banking System FRN could not be created via fractional reserve; -but, now these Treasuries WILL be used as a basis to generate digital FRN out of thin air.
IF China holds $1.2 Trillion of U.S. Treasuries....
...THEN $1.2 Trillion in U.S. Treasuries = the possible creation of $10.8 Trillion new digital FRN via fractional reserve banking.
Sounds kinda like a money printing scheme doesn't it?
-NO 'Dollar of Capital' rule as Our Host would say...
Sounds a tad inflationary doesn't it?
THIS is exactly how the U.S. Banks Counterfeited FRN and ramped up inflation during the housing bubble.
-It is going to be done again with the help of the Chinese.
The Chinese ARE NOT going to 'dump' their Treasuries: the Chinese are going to print Trillions of digital FRN and go on an unprecedented .GOV/FED sponsored Leveraged Domestic Buying Binge!"

This rather interesting idea seems to have been generated by this little-noticed story from last week.

http://www.thedeal.com/content/regulatory/fed-allows-china-wealth-fund-to-buy-us-bank.php

The banks in question are: (from the article)

China Investment Corp., or CIC, and other Chinese entities were permitted to acquire an 80% stake in New York's Bank of East Asia (U.S.A.) NA. CIC manages a portion of China's huge foreign exchange reserves.
Separately Wednesday, the Fed also allowed the Agricultural Bank of China Ltd. to establish a branch in New York and the Bank of China Ltd. to have a branch in Chicago.

Now, for those of you unfamiliar with fractional reserve banking, I suggest you watch this:

So here's the question for you to ponder: With everyone expecting/hoping for overt QE3 by June or July or November, what if the more politically palpable covert QE continues, instead? And if covert QE continues, will the price of paper metal continue to decline through the balance of this year and maybe even beyond?

Having answered those questions, now ask yourself: Does it even matter? If the "market" chooses to ignore covert QE, will you? Are you going to convert your metal back into fiat or will you simply buy more at "sale" prices? Does this chart help?

Whether it's overt or covert QE, growth of the money supply equals growth of debt and vice versa. And, as you can plainly see on this chart, rising debt causes equally rising gold prices.

Put it all together and what do ya do? BTFD and keep stacking.

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Comments

best laugh of my day.............so far (marge s)

Submitted by thurd aye on May 17, 2012 - 5:33am.

"and I don't mean double wides towed by a Buick!"

thanks.

TAye.

Morning Toons

Submitted by ClinkinKY on May 17, 2012 - 6:02am.

Silver has bottomed

Submitted by Eric King on May 17, 2012 - 6:06am.

Check out the intra day test of support at 26.68, the channel holds and should resolve by early October.

Yeah, That's The Ticket

Submitted by ClinkinKY on May 17, 2012 - 6:07am.

Heads Up

Submitted by ClinkinKY on May 17, 2012 - 6:08am.

And finally...

Submitted by ClinkinKY on May 17, 2012 - 6:09am.

Top DOW stock YTD....Bank of America up 27.88%

Submitted by Lumpy on May 17, 2012 - 6:28am.

Too big to fail. It won't last.

So whats it going to be today kids?

Submitted by Groaner on May 17, 2012 - 6:39am.

Europe stocks tanking,, gold and silver still up? nice. For how long? Very soon they will see the light.

No one could write a better soap opera.. As the stomach churns..

Now in Spain there is a run on the banks!

Submitted by Groaner on May 17, 2012 - 7:13am.

http://www.zerohedge.com/news/nationalized-spanish-bank-plummets-news-ba...

I hope all you fine citizens dont have too much fiat in your local banks here.. keep on stacking

well we did get

Submitted by boatman on May 17, 2012 - 7:20am.

a double-or-triple bounce off of our old buddy 1530+- yesterday.......n some QEy leanings from the FOMC minutes from last meeting.

is QE bad????

answer, yes......... buts its their only weapon...........such as it is......face the music, swedish-ize-per-1990 the banks and return to sound money on their own, without being forced to by the BIGBADABUST coming?....get real....if they had the balz to do that we wouldn't be screwed.

owning PMs next 6-8 years?....pricelesssss.

EUR tanking

Submitted by Torpedo Fish on May 17, 2012 - 7:23am.

but PMs are holding nice

Hey kids,, special on Maple silver.. great price

Submitted by Groaner on May 17, 2012 - 7:32am.

$1.89 over spot

http://meritfinancial.com/category/promotions

Plus I just noticed new customers get FREE delivery.. in May..

latest from Peter Grandich

Submitted by boatman on May 17, 2012 - 7:34am.

This shall be rather short but directly to the point.

U.S. Stock Market – I’m neither a major bull nor bear but believe by this time next year, I would want to be virtually out of all non-metals related U.S. equities. The secular bear market that began in late 2007 and was correctly perceived to be interrupted by the single greatest bear market rally of all-time, is anticipated to resume no matter who wins in November. Only a Romney win can delay by only a matter of months the inevitable Greece-like scenario to unfold here in America (Read may 9^th commentary).

U.S. Bonds – My patience to await a 10-yr T-Bond yield under 1.75% to short into may finally be rewarded. Stay tuned.

U.S. Dollar – I’ve spoken about shorting the U.S. Dollar Index if it can get to 83-84 and despite most seemingly thinking a major dollar rally is upon us, I’m not certain it can even get to that level barring a total collapse in Europe. But if and when it does, I shall again remind you of the scenario I painted in my May 9 ^th commentary and the rest shall be up to you.

Oil and Natural Gas – If we should get so fortunate to see oil pull back to the mid $80s, I would think that’s a gift for getting long. Natural gas remains an avoid.

the rest at:

http://www.grandich.com/2012/05/update-45/?utm_source=feedburner&utm_med...

USDX

Submitted by proton777 on May 17, 2012 - 7:35am.

Got a substantial spike up. Grrrr

The cartel just showed up at $1550 on gold

Submitted by Groaner on May 17, 2012 - 7:38am.

Big volume to the down side hit.. they dont want it past that number.. See if others are determined..

Today seems to be a different ball game..

Submitted by Groaner on May 17, 2012 - 7:40am.

USD spiked up and gold still holding.. I say screw you USD

Watching the European indexes

Submitted by proton777 on May 17, 2012 - 7:46am.

Watching the European indexes fall pretty hard now and US futures are following them down.

PMs are signaling a deflationary event coming

Submitted by boatman on May 17, 2012 - 7:47am.

in the EU and China/India

from mish:

Real Estate Crash in China Underway: Foreign Funding Down 80%, Land Sales Down 57%, Starts Down 27%; Expect Chinese GDP to Plunge

the rest at:

http://globaleconomicanalysis.blogspot.com/2012/05/real-estate-crash-in-...

GDP growth brought to you by government - baa baa

Submitted by Xty on May 17, 2012 - 7:53am.

Japan's economic growth nearly doubles U.S.

NEW YORK (CNNMoney) -- Japan's gross domestic product grew at nearly double the U.S. rate for the first quarter, an unexpectedly strong sign of recovery in the wake of last year's devastating earthquake and tsunami.

The Japanese government said that its GDP grew 1% in the first quarter, or an annualized rate of 4.1% for 2012. The GDP was driven by strong domestic demand, particularly by government expenditures....

http://money.cnn.com/2012/05/17/news/economy/japan-gdp/?iid=SF_E_Lead

Now maybe this is QE mope, or maybe almost nobody understands basic economics, especially a cnn money 'reporter'.

1400 bottom

Submitted by agrock on May 17, 2012 - 7:53am.

I've heard bits and pieces and been trying to find sources - but who has been calling for a $1400 bottom in Gold?

I'd like to hope that we are here now (at the bottom) - but just out of curiosity which pros have tossed this number out?

Friggin schmucks...GS, JPM must love China

Submitted by recaptureamerica on May 17, 2012 - 7:53am.

China Expands Scope for Short Selling, Securities Journal Says
http://www.bloomberg.com/news/2012-05-17/china-expands-scope-for-short-s...

Medvedev warns of full blown wars

Submitted by recaptureamerica on May 17, 2012 - 7:58am.

http://en.ria.ru/russia/20120517/173506862.html

Europe stocks are tanking.. run on the banks!

Submitted by Groaner on May 17, 2012 - 7:58am.

gold holding great.. silver too. lift off I mean!

Here's one for you, adrock:

Submitted by truthseeker on May 17, 2012 - 8:00am.

Louise Yamada, today at KWN, mentions $1400 as a possibility:

"It’s also broken the cusp of the 2011/2012 low. So, I suspect, given the profile of the momentum, which is negative, that it could go lower, notwithstanding interim rallies. If gold were to break the $1,487 level, you would probably see gold move to $1,400. However, there is a decent amount of support (at $1,487), almost six months support between the latter part of 2010 and later. We’ll take it step by step, Eric."

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2012/5/17_Louise_Yamada_-_We_Now_Have_Massive_Tops_on_Global_Markets.html

6000 contracts $10 move up in 4 minutes

Submitted by Groaner on May 17, 2012 - 8:01am.

wow.

New contest

Submitted by murphy on May 17, 2012 - 8:11am.

post thread

Spouting the obvious as they jump ship

Submitted by Xty on May 17, 2012 - 8:14am.

Outgoing World Bank chief: Fix eurozone

WASHINGTON (CNNMoney) -- Outgoing World Bank President Robert Zoellick said Wednesday he's concerned about the "ripple effects" on the rest of the eurozone if Greece leaves.

"The core question will actually not be Greece, it's Spain and Italy," Zoellick said during a forum sponsored by the Economic Club in Washington. "If Greece does leave, frankly, there has to be a lot of care taken to how that's done."

Zoellick said the situation was comparable to Lehman Brothers' collapse in 2008 and the unanticipated global repercussions on the financial markets. In Greece's case, the problem is the inter-connectiveness of economies, especially in Europe.

"Where the danger comes in is when events come, they start to affect confidence and you get illiqudity moments," said Zoellick, whose term running the World Bank ends next month....

http://money.cnn.com/2012/05/16/news/economy/world-bank-zoellick/index.htm?iid=HP_LN

Does the President of the World Bank really feel no responsibility for the financial situation we are in? It is amazing to me how they can all talk in the abstract. I realize the world bank isn't the imf or the ecb or the fed or any other organization with a catchy three letter acronym, but the damage the world bank has done is immense.