OK, so it has been a few days since QE to infinity became official Fed policy. There is certainly an abundance of swirling news and discussion out there that dances around the real significance. Today, we cut to the chase.

Let's go back and hit on the main FED points:

• The Fed will keep rates "extraordinarily low" through 2015
• The Fed will continue $45B/month in Operation Twist through year end
• The Fed will begin buying $40B/month in mortgage-backed securities (MBS) with no end date or target purchase amount given

So many of us have been seemingly immunized against the jolting effect of these headlines. Not just here at TFMR but nearly everywhere that "awakened" citizens congregate on the internet. We take the headlines at face-value but rarely stop to consider things on the next level. But we need to go there today because without a full understanding of what the true meaning and implications are, you're likely to delay actions that you should be immediately taking.

So, let's go back to the three bullet points above and take them, one-by-one. First,

• The Fed will keep rates "extraordinarily low" through 2015

What is The Fed telling you here? Well, a couple of things. First of all, 2015?? That's three freaking years from now! It's one thing to say that rates will stay low for the next 6-12 months. It's something entirely different to say three freaking years! The negative implications of this are dramatic as institutions such as pension funds and insurance companies will be ravaged by the continuance of ZIRP. Additionally, however, what is The Fed telling you about their expectations of economic "recovery"? Despite all of their official forecasts of growth and jobs, it sure doesn't seem that they believe it. Like the old adage says: Watch what they do, not what they say. We talk here incessantly about the miserable economy and the dim prospects for recovery. It is now clear that The Fed feels this way, too.

• The Fed will continue $45B/month in Operation Twist through year end

First of all, remember what Operation Twist is. The Fed is selling their short-term maturity holdings (where there is actual demand for "safe havens") and using the proceeds to purchase longer-term notes and bonds. This process is considered "sterilized" because, allegedly, The Fed isn't creating any new money. They are simply "re-positioning" some of their "assets". Whatever. I don't care to get sidetracked as to whether or not this is really a "sterile" process. All that matters is that The Fed is currently executing this strategy to the tune of about $45B/month. The problem for them is, they're almost out of short-term bills and notes to sell and, once this inventory of paper is depleted, the $45B/month is going to have to come from other, "non-sterile" sources.

• The Fed will begin buying $40B/month in mortgage-backed securities (MBS) with no end date or target purchase amount given

And now here's where it gets interesting. The key to this bullet point is the "no end date, open-ended" component. In fact, The Fed went so far as to state that they "stand ready" to increase the monthly amount of MBS purchases if "the labor market doesn't improve".  OK, again, watch what they do, not what they say.

ZIRP will continue through 2015 but Operation Twist runs out of funds and ends late this year. Well, then, from where will the $45B/month in Operation Twist be replaced. That's an easy one. The Fed has already told you the answer. Since the labor market won't be improving anytime soon, they will simply increase their monthly purchases of MBS from $40B to $85B.

An here's where almost everyone drops the ball. The mainstream media will tell you that The Fed is "supporting the mortgage market" and "helping to keep homes affordable" with this program. This is complete, unadulterated BS. Sure, The Fed is buying $85B in MBS every month...but...from whom??? Which institutions own these MBS and are obligingly selling them to The Fed??? I'll wait here and let you think about that one for a few moments...

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The Primary Dealers! Goldman, The Morgue, MorganStanley, Citi, BoA...all of them. They own or purchase new the MBS which The Fed buys from them. And here's the very important next step: The Primary Dealers turn around and use the proceeds from these sales to buy U.S. treasuries! To the tune of $85B/month. Let me do the math for you...that's slightly more than one trillion dollars over the next year. And what does the Congressional Budget Office project the U.S. federal deficit to be in fiscal 2013? It will again be north of one trillion dollars, at a minimum. http://www.cbo.gov/publication/43539

At the end of the day...and here's where we get down to brass tacks...last week The U.S. Federal Reserve announced a plan whereby they will be almost completely and directly monetizing the deficit spending of the U.S. government. Though the illusion of legitimate borrowing will be maintained and politicians will continue to claim that "we're borrowing all of this from China", you should not be fooled. We have entered a new paradigm of direct debt monetization. By doing so, The Federal Reserve has begun the process of overt currency debasement and devaluation.

Your only financial protection from this game-ending disaster is the ownership of physical precious metal. Though, in the short-term, dollar-denominated paper assets may perform reasonably well, they offer no long-term protection against your inevitable loss of purchasing power and wealth. Only physical precious metal can protect you in the days ahead. Buy some and add to your stack before it's too late.

TF

p.s. I plan to discuss this post in greater detail later today at http://www.turdtalksmetals.com