Macro

520
Fri, Sep 16, 2011 - 9:46am

Gold is recovering today and is actually green on my screen. Wow! How unusual! Let's see if we can rally today and crawl back above 1800 before we call it a week. There's been some very interesting "news" rolling around for the last 24 hours and I wanted to take a minute to give you my non-educated opinion.

The crux of the matter is summarized quite well below:

https://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100011987/china-to-liquidate-us-treasuries-not-dollars/

Between these comments and the wikileaks cables, one can quickly conclude that the Chinese are considering (if not already actively engaging in) further "diversification" of their vast U.S. treasury holdings. In the article above, Mr. Pritchard makes this sound as if there will be some happy and pleasant side effects of these moves. "Don't worry", he seems to say, "those dollars will flow into hard assets like stocks, land and gold". As if it's a zero-sum, no-big-deal event. On this point, he is dreadfully wrong.

As you know, I have long maintained that the real purpose of Quantitative Easing is not to promote economic growth. It is to promote low interest rates. Remember how rates on U.S. treausries are set...through auctions. Simply stated, if you need to borrow $50B and there are no takers at 2%, then you have to try 3%. If no one wants your bonds at 3%, then maybe they'll take them at 4%. Low or no demand means higher interest rates. Period.

With U.S. borrowing needs at all-time high levels, the rest of the world must be induced to buy treasuries. But, rates cannot be allowed to rise. As Mark Steyn points out in his new book, if long-term rates were to return to 5.7% (the average for the period 1990-2010), debt service projections for 2015 would increase from $290B to $850B! Additionally, the only "way out" of our current fiscal disaster is to magically increase tax revenues through economic growth. A return to higher rates would stifle and crush any potential "recovery".

So, what's a Boy Wonder to do? The answer: MORE QE MORE QE MORE QE.

The U.S. has managed to cover its necessary funding needs since June by managing the headlines. Have you noticed that nearly every time a treasury auction arises or the POSX moves down toward critical support, some type of intervention takes place. Whether it's a foreign central bank devaluing their currency or a rash of suddenly scary headlines out of Europe, events seem perfectly timed to keep money flowing into treasuries. This can work in the short-term and it obviously has. The yield on the 10-year note has actually declined since the end of QE2 in June. This won't and can't continue. A recent study from the University of Wisconsin showed that, by 2020, U.S. funding needs will soak up nearly 20% of the total annual global GDP! Do you really think that that is possible? There can be no world GDP when world economic growth is crushed under that type of debt burden.

But, that's in the future. What about the near term? Eventually, rates will rise when buyers (like China) disappear. Faced with an immediate funding crisis, QE will resume with vigor. Left with no other government funding option, the Federal Reserve will be forced into creating trillions of new greenback, simply to keep the social security checks flowing, the doctors paid and the military shooting. The dollar will resume its long-term decline into obscurity.

In the end, all of the central bank intervention in the world will not be able to suppress the global demand for true safe haven financial protection. Gold will rise to heights that even you, my dear reader, may currently think are unattainable. Silver will most certainly come along for the ride. Therefore, do not be fearful. If you use the time left to prepare...mentally, financially and spiritually...you will survive, and even prosper, in the days ahead.

Here are your updated charts. Unfortunately, both have taken on the appearance of range-bound markets. This can be managed as it affords us the clear opportunity to buy at the bottom of the range and sell at the top but it certainly isn't as much fun as runaway efforts to the upside. For today, don't get too excited until/unless either metal is able to firmly trade through the blue trendlines I've drawn inside the ranges.

I'm going to be away and unavailable for most of the day today so, just as John said to Yoko, "looks like you're on your Ono". I will be monitoring things from afar, however, and will attempt to update if conditions warrant. Have a great day and a relaxing weekend! TF

p.s. Another preparatory move for the opening of PAGE:

https://www.reuters.com/article/2011/09/16/cjina-gold-idUSL3E7KG1IG20110916

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  520 Comments

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Sep 18, 2011 - 12:42am
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Sep 18, 2011 - 12:28am

Economic Collapse a Mathematical Certainty

The dollar collapse will be the single largest event in human history. This will be the first event that will touch every single living person in the world. All human activity is controlled by money. Our wealth,our work,our food,our government,even our relationships are affected by money.

No money in human history has had as much reach in both breadth and depth as the dollar. It is the de facto world currency. All other currency collapses will pale in comparison to this big one. All other currency crises have been regional and there were other currencies for people to grasp on to.

This collapse will be global and it will bring down not only the dollar but all other fiat currencies,as they are fundamentally no different. The collapse of currencies will lead to the collapse of ALL paper assets. The repercussions to this will have incredible results worldwide.

Video unavailable
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Sep 18, 2011 - 12:20am
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Sep 18, 2011 - 12:18am
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Sep 18, 2011 - 12:14am
Hammer
Sep 17, 2011 - 11:29pm

http://finance.senate.gov/hea

https://finance.senate.gov/hearings/hearing/?id=ba387157-5056-a032-5252-...

Couple of early points made in the video but I urge people to watch the whole thing (note, 2 hours)

1) Currently retirees receive 14,000 usd a year, not enough to survive by itself

2) In 1980, over 80% of those in The US employed by large or medium sized companies participated in pension plans.

2) In 2007, it is less than 30%

3) Average retiree retires with 60,000 usd between the age of 60-64.

4) Many will be retiring with insufficient funds to last through to the end.

5) Private employer based pension scheme is the greatest wealth creator for the middle class in US history especially through 401K plans or IRAs running into the trillions.

Social security holds 2.6 trillion usd in Treasury Securities (Mandatory Programme since 1935)

Private Employer Based Defined Contribution plan s hold 4.7 trillion usd

IRAs hold 4.9 trillion usd (voluntary program since 1974 and holds almost double the Social Security Government program and that is just in IRAs)

Average American will face 200,000 usd in retirement medical costs alone.

Many recent ideas lead towards limiting the amount people can invest in these defined programs. National Commission on Fiscal Responsibility suggest capping to 20,000 the pre tax amount of contribution.

US Congressional Budget Office proposed reducing annual contributuions to the 401K by some 7,000 usd.

These are examples of proposals to reduce contributuions to private defined contribution systems for retirement funds at a time when you would think they should be encouraging people to save more would you not ?

That takes things up to the 30 minute mark. If this affects you in America, i would recommend a cup of tea, coffee or whatever and a sharp clear mind and listening to the rest of this meeting. I found it interesting and useful to listen in 5 minute bursts and then to go back and make notes, listen again and check my notes.

I can't help but think that there are proposals out there being made to limit what people can put into private pension funds like IRAs and 401Ks in order to push them somewhere else ?

If there is a pensions expert out there, it would be very good to hear from you.

(I am not a US citizen)

beardeus
Sep 17, 2011 - 10:54pm
ScottJ
Sep 17, 2011 - 9:56pm

Latest Post

My latest post. I never noticed that the picture I chose was the icon of SilverTree here. The Ying and the Yang indeed! I think I will post it in the general forums since I have hijacked quite a few threads :).

https://thehardrightedge.com/letter/

A Letter to my Oppressors

You have misled many of my brothers and sisters in an ever-expanding and all-encompassing illusion,

You have poisoned our minds with lies and greed,

You have altered our food with disease inducing products,

You have contaminated our water with damaging chemicals,

You have flooded our souls with the curse of desire,

You have invaded our freedom in the name of our own good,

You have held back technology that could revolutionize the world,

You have labeled truth as if it were treason,

You have gravely mis-allocated human energy, life, and potential for your personal expenditures,

And you have cheated yourselves of what it means to be human.

Yet in the ying and the yang of life, you have provided the tools to see what life could become.

You have taught us that we cannot trust a few to look out for all,

You have taught us that we must unite as a people, or fall as individuals.

You have taught us that understanding must be more powerful than apathy,

You have taught us that war will not solve any problems,

You have taught us that there is more to life than currency,

You have taught us that there is no difference between any man, woman or child,

You have taught us that we must look within before we can change the outside,

You have taught us that man must be aware in order to be alive,

And maybe most invaluably to me, you have taught me that my biggest oppressor has always been myself.

Through your injustices we can see the blueprint of the world, and what never to follow again.

For we the people are the writers of history, and I am certain that the coming days will prove, as always in history, that man will free itself from the grips of oppression, no matter how dark the days may get. And this time, it may just free itself completely.

May you live in interesting times.

-

Respectfully and Humbly,

Scott J

If Not Now, When? - Incubus
Eric Original
Sep 17, 2011 - 9:30pm
redwood
Sep 17, 2011 - 8:44pm

Kenscott, Stormdancer has

Kenscott, Stormdancer has given you a great response. I would just like to expand on the many uses of silver that perhaps many are not aware of. Although I'm using a link to firstmajestic, it offers as a good a description as I've seen anywhere.

https://www.firstmajestic.com/s/SilverUses.asp

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