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

Just sayin'...

Submitted by ClinkinKY on May 17, 2012 - 8:29am.

Narcissism update: Obama now inserts himself into online bios of past presidents

It was probably to be expected from a monstrous political ego that considers himself among the top two presidents of the 21st century. 9JpgQn6y_dAG2wbyFMq3UrU7hI254BFKJUzcr8ju

http://www.examiner.com/article/obama-inserts-himself-into-past-president-s-bios-on-white-house-website

More photos released by WH:
yjZdU6iTxndnKnyiarv6mqKSYXzhBlnOCdVMtRBZ SxTjZxBpea2mW2J0F98KscB6Mb56LRy44BBBhdnz BteEHJhUD0Fz9Pzj6flbQSv8TMVhP7pL75hDwTT5 H-G3rs4PNTtkLLhWqZsJ4250whKlE5s_gawlqL8D

True

Submitted by Groaner on May 17, 2012 - 8:29am.

However how often do we see this kind of move to the upside.. Just look at a 2 year chart of gold and check out the red candles..

She is in good hands

Submitted by leeson_was_framed on May 17, 2012 - 8:36am.

The fact you have insight into what is happening in the world is a great asset for your daughter.

Music and Art are skills that always have value. An understanding of science is also precious too. Not just in School, but in real life.

If I could offer one piece of advice. Encourage here to acquire skills in the practical aspects of these disciplines, things that have both academic and every day value. As an artist she could paint portraits or make sculptures.

As a scientist, building electronic devices or making practical things like soaps ointments and oil extracts. I taught myself this kind of stuff from books when I was young. The subjects were alive and as a result school took care of itself.

These days the demands of public school don't always lead to practical skills. Memorizing stuff from books and reciting the consensus is not the same thing, but is often what gets the marks.

You sound like a good parent, your home is probably already awash with art supplies and chemistry sets, so I will just wish you well.

In closing, actually creating real stuff is worth 10 high school diplomas. Art, Maths and Science are powerful tools in the hands of the initiated. Just ask Leonardo Da Vinci.

@truthseeker

Submitted by agrock on May 17, 2012 - 8:41am.

Thanks - I know Louise Yamada tends to be spot on with her charts - even though AG/AU not going in the right direction. It's nice to see what the charts show.

China gold demand..

Submitted by Groaner on May 17, 2012 - 8:43am.

http://www.zerohedge.com/news/gold-demands-trend-q1-2012-enter-dragon

Idiots are selling al the gold to Asia

UPside manipulation

Submitted by Turd Ferguson on May 17, 2012 - 8:52am.

MODERATOR

IF I am proven correct about The Cartel squeezing the spec shorts, upside manipulation is exactly what you will see.

Response to: 6000 contracts $10 move up in 4 minutes

This is the result

Submitted by Turd Ferguson on May 17, 2012 - 8:57am.

MODERATOR

Of the "massive physical orders" we so often mention.
http://www.zerohedge.com/news/gold-demands-trend-q1-2012-enter-dragon

@recaptureamerica

Submitted by DrkPurpleHaze on May 17, 2012 - 8:59am.

Just watch how this eventually evolves into the big banks gravitating closer to China and showing them how it's done (shorting) western style and what they can control (entire market complex/populace) by doing so.

There's an obvious flow to this if you allow yourself to just consider it. The big American banks (multi-nationals actually) will essentially sell America short before it's all said and done.

http://www.tfmetalsreport.com/comment/165540#comment-165540

http://www.tfmetalsreport.com/comment/165603#comment-165603

Finally...

Submitted by Big Buffalo on May 17, 2012 - 8:59am.

looks like a day "they" will let our cuts and bruises heal and scab over, before the next beating.

Lucky for me, I have some gold sewn in my pants to lessen the pain.

"Turdwardization" ! "Backwardization" !

Submitted by Monedas on May 17, 2012 - 9:03am.

It's easy to depress sentiment by offering the mirage of cheaper Gold in the future ! It dampens the urgency of taking delivery ! It's easy to do....since there isn't any Gold to deliver, anyway ? Monedas 1929 Comedy Jihad Cheap Trix Tour

4*44

Submitted by DrkPurpleHaze on May 17, 2012 - 9:09am.

http://www.tfmetalsreport.com/forums/frivolity-forum

His Message is...... wait He's used that one Already!

Submitted by Be Prepared on May 17, 2012 - 9:11am.

It's Coming to America... today! (Neil Diamond lives)

Submitted by Be Prepared on May 17, 2012 - 9:15am.

Will our Real Government.... Please Stand Up!

Submitted by Be Prepared on May 17, 2012 - 9:25am.

If they talk long enough about nothing, then they believe we will forget everything about something which, of course, will provide little to the endless proposition that too much is never enough when the few know that the many merely exist to ensure a limitless amounts of real work to meet the obligations which they created but fail to acknowledge.

Isn't it cute? Jamie walking His Dog....

Submitted by Be Prepared on May 17, 2012 - 9:26am.

Debt

Submitted by Brimstone on May 17, 2012 - 9:30am.

Rocoah,

I do not disagree with your point. But it should be obvious that playing these games is a waste of everyones time. When you owe 100 trillion and make 15 trillion you simply acknowledge the debt is unpayable and reset the system. Of course you also need to have a serious discussion and acknowledge that the fiat game does nothing but enrich those who have 1st access to the money and transfers physical assets to the same group while exchanging those physical assets for worthless fiat.

The Problem is that this seems to be beyond most people current comprehension, for whatever reason.

@Brimstone

Submitted by rocoach on May 16, 2012 - 10:21pm.

Let's say your child has somehow managed to run up a balance of $10 million on your credit card. The two of you earn a combined income of $60,000 per year. You can cut back as much as you possibly can, you can sell all your assets and live in cardboard boxes and eat dog ends for dinner. But if push came to shove, would you? No, because no matter how much you cut back, you'll NEVER be able to pay off that debt.

So, knowing your country will NEVER be able to pay off its debt, why would you consent to paying your government higher taxes? Wouldn't you agree that seems like good money chasing bad?

You are right. The money has to come from somewhere. Luckily the UK and the US have the ability to print money and attempt to inflate their way out of the debt. So eventually you'll be able to pay off that $10 million credit card bill, because your income has inflated to $3 million a year from $60,000.

And that's how it works in the real world. Just keep on stacking...

@ recaptureamerica

Submitted by bam on May 17, 2012 - 9:44am.

RE China Short Selling.

This is actually a good thing. Short Selling (as opposed to 'naked' short selling) is a vital component of market operations. The whole point of markets is price discovery. Short selling allows for more accurate price discovery. A ban on short selling is 'goldilocks' (ie you can only trade on what will go up). It's important in the context of China, as it makes their markets more 'open' (and the price more reflective of the actual value).

Just as critical, it puts floors under the market, as short sellers are obligated to buy back after a certain period of time. Without short sellers, big vacuum holes form in the market and prices dive at near vertical rates on the charts. Everyone sells, but no one buys back. So, by obligatory buyback, short selling effectively decreases volatility in the markets in this fashion.

You see politicians ban short selling in trying market climates; that's one reason you know it's an important part of market operations. The politicians basically don't want real price discovery (down). Even if that's what should be.

Naked short sellers should be flayed.

A brief interruption of sanity

Submitted by Fred Hayek on May 17, 2012 - 9:54am.

A U.S. District court judge issued a 68 page ruling blocking the insane unlimited detention portions of the national defense authorization act (NDAA) recently signed by alleged former professor Barack Obama. Said the judge, "Are you f*cking kidding me?!"

Okay, I made that quote up, but it's there between the lines.

http://www.courthousenews.com/2012/05/16/46550.htm

aapl

Submitted by Number 47 on May 17, 2012 - 9:57am.

Taking a nose dive today. Everyone getting powder for facebook?

False Facebook rally. Gotta

Submitted by Dr G on May 17, 2012 - 9:58am.

False Facebook rally. Gotta love it. Get your puts ready.

ess atch one tee,now i must apologise to DT

Submitted by thurd aye on May 17, 2012 - 10:09am.

Thanks for pointing to the Gold site on DT.I did wonder why it(my posting)disappeared so quickly.

Looks like I must crawl on my belly to the MSM and crave forgiveness.Damn and blast them.I won't ,so sucks to be me.

Everything going up

Submitted by koan on May 17, 2012 - 10:11am.

What's up? (bet my miners haven't budged!)

Turd is looking like a genius

Submitted by truthseeker on May 17, 2012 - 10:22am.

Nice call, TF.

This is a false rally based

Submitted by Dr G on May 17, 2012 - 10:29am.

This is a false rally based on Philly Fed comments. Unfortunately it will likely fade before the day is over.

If it were you (In Response to Turds Initial Post)

Submitted by Wizard on May 17, 2012 - 10:41am.

Would you announce on the board here or in the press if you were going to make a major purchase of Silver or Gold (A few Million Plus oz's) ???? Of course not. I know I do not need to explain why.

Why on earth would they even conceive of making an open announcement of QE3 when all of their intelligence is telling them if they announce it openly announce it, the effects on the stock market and in the metals market would wipe out all of these past months of hard work they have put into pumping the stock market and smashing the metals market. The trotting out of Munger, Gates, Buffet and Masters. Along with the very intense dispatching of internet trolls and news story's to be broadcast from the main stream media outlets to spread the "Good News" The Economy and Housing are coming back,Unemployment is Down and buying Precious Metals is for the Uncivilized.

MOPE on Steroids

Have no doubt they have put a lot of hard work into this selling this fantasy to the public at large. And they do not want to see it all come apart from announcing another round of QE.

Getting the Chinese involved was no surprise at all. They have a Dog in this Hunt by holding Trillions in U.S. Dollars that they do not want to see go down in value before they can purchase more Gold, Silver, Land or anything else of real value. Before The End Of The Great Keynesian Experiment

Also here is one more of Chris's Videos. I have never heard him quite so agitated as in this video, Munger, Gates and Buffet seem to bring it out in him

New Chinese Bank Holding Companies

Submitted by Wallace Hartley on May 17, 2012 - 10:41am.

This wouldn't surprise me at all. Given the fact that the world (in particular, Europe) has a desperate need for quality collateral (and I use that term loosely when referring to US Treasuries), going to the Chinese vault to utilize it's bond holdings is not that out of the question. China is experiencing it's first economic slowdown in a while and is in the process of transferring leadership. They've been spending their soon-to-be worthless US Treasury wealth on tangible goods at an alarming rate in the past few years and with Operation Twist providing cover for them to unload even more US bond holdings (at a fixed, high price I might add), they should be sufficiently depleted by 2014 when the Fed claims they will stop controlling rates.

I would also like to add that the $10.8 trillion estimate of newly created digital FRNs is before using the excessive leverage that is rampant today. Just multiply the $10.8 by 40 and you begin to see the fresh dry powder that this scenario would create. Keeping an eye on the total derivatives exposure (last I checked it was at $710 trillion and had gone up $100 trillion in the first half of 2011) might be a good way to gauge if this was actually done or not. There's no telling what kind of shady deals are going on behind the scenes to keep this house of cards from going down...

nonsensical

Submitted by Number 47 on May 17, 2012 - 10:43am.

Aapl down near 2%, philly fed and consumer confidence miss big. Aapl recovers 1%.

Maybe it will fade...

Submitted by Dr Jerome on May 17, 2012 - 10:44am.

But I am enjoying the green candlesticks today. Perhaps this is some short-covering by the EE. If they really are balancing their position, they have to buy sometime.

28 silver as I type... not done rallying yet.

The metal I've been watching

Submitted by Urban Roman on May 17, 2012 - 10:57am.

... is silver. Looking at the charts on Finviz, and Jesse's charts, and Turd's. It hasn't been this low over the last year, except a couple little intraday spikes down.

The biggest lousy fundamental I see is the deflation-riddled crappy economy and general selloff, with a flight to POSX. The positive fundamental is that there's less refined silver than there has been in recent history, the miners are going bust, and probable shortages going forward.

I'm thinking this has to be at least a local bottom. $27.50 - $28.00. Maybe a brief intraday dip to $24 or $23.