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

About the Author

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turd [at] tfmetalsreport [dot] com ()

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redwood
Sep 18, 2011 - 1:42pm

Job crisis "may" spark riots

https://money.cnn.com/2011/09/16/news/economy/bloomberg_jobs_riots/index.htm

"may"?? For the elite it's a foregone conclusion and prearranged. Now they are just preparing the masses for the inevitable.

redwood
Sep 18, 2011 - 1:37pm
Mudsharkbytes
Sep 18, 2011 - 1:26pm

Try this video instead

For some reason I'm not being allowed to edit my post. The video I posted doesn't play very well - this one does.

Video unavailable
cpnscarletMudsharkbytes
Sep 18, 2011 - 1:23pm

@Mud  - thanks for helping me

@Mud - thanks for helping me prove my point. Did you note an operative phrase - "no STEEL levers". The ancients know about levers (made of wood), and like the man said - Give me a lever long enough and I can move the world. Over a lifetime, humans can produce a great deal of mechanical energy (directed by intelligence in most cases), but it's power where we are extremely limited (energy/time). Give me a lever, and I start to solve that problem.

Haolecpnscarlet
Sep 18, 2011 - 1:20pm

Thanks cpn and Mudshark!

...for entertaining the discussion and the video respectively. ;)

cpnscarletHaole
Sep 18, 2011 - 1:17pm

@Haole - well that is the

@Haole - well that is the next question, isn't it. I take nothing for granted, especially a belief that some "machine" is in place directing everything that I perceive. And I certainly trust no man. I, like most people here, base my beliefs on what I have experienced with a reasoned mind, based on logic (an ordered examination of facts) and experience (my own personal knowledge base). Some may say I trust presented history far too easily. Well that may well may be my mistake. That's OK. I say the same thing about people who read a plaque in a museum display and conclude "Of course, evolution must be a fact because someone with a fancy title says it's true."

Pluto and Uranus? We are "sure" that they knew those bodies? A reference please. I'll bet it's full of holes.

MudsharkbytesHaole
Sep 18, 2011 - 1:17pm

@Haole - moving large objects

Maybe they used something like this guy but on a larger scale.

Building Stonehenge - This Man can Move Anything
Haolecpnscarlet
Sep 18, 2011 - 1:15pm

So...

...you're saying that you have complete confidence that our true history, ancient and otherwise, has been portrayed accurately by "the machine" and it's upon this basis that you opine? Sorry, you were correct and my figure on the Stone of the Pregnant Woman was completely inaccurate, my memory can't be trusted apparently... ;)

"...but all ancient cultures modeled the celestial bodies and the fact that some had better models than others before Copernicus is no evidence of technology, and not that amazing."

Really? That ancient civilizations dating back thousands of years even knew about Pluto, Uranus, etc. isn't amazing somehow and would elude to either knowledge passed-on or "technology being available? When were polished glass lenses of any kind first present in historical record? the things some people don't find amazing is amazing in itself. ;)

cpnscarletHaole
Sep 18, 2011 - 12:53pm

@Haole - I'm not sure about

@Haole - I'm not sure about what you are referring to in Sumerian astronomy as to "how many" bodies there are, but all ancient cultures modeled the celestial bodies and the fact that some had better models than others before Copernicus is no evidence of technology, and not that amazing.

As to the great ancient structures, this is no proof - there's many things that can be done with a large work force and a long time frame. I think your 80000+ ton figure is apocryphal, and if not, where is the ancient machine that allowed it to be moved? Perhaps the ancient astronauts loaded it back on the ship before they left. How convenient. No, I need to see something much better than that to prove to me that human technological skills have been cyclical rather than secular. If it was truly cyclical, then show me the ancient motors, ancient integrated circuits, ancient oil well. The Anitkythera Mechanism is mesmerizing on the surface, but still just a bunch of hand-spun gears produced by a culture that was well versed in math - really no big deal.

Haole
Sep 18, 2011 - 12:51pm

@cpn

"Show me the ancient engineering drawings, and you might have my interest."

How did the Sumerians know how many celestial bodies were (are) in, and the configuration of, our solar system 6000 years ago? How did the massive (now underwater) temples/structures off Japan, Chile, etc. come to be tens of thousands of years ago? How did 80000+ ton stones come to be moved and placed in Balbek when we couldn't lift/move things like that today, with modern "technology", even if we wanted to? Just a few of thousands of questions regarding "ancient technology" that cannot be answered with dismissal due to lack of "proof". ;)

BTW, Einstein may be held in high regard by many but he was wrong/remiss on many counts. E=mc² is nothing but speculation/conjecture in the form of five analog characters and has since been proven mathematically "flawed" to say the least diplomatically. The speed of light is not a constant in the universe. There, a complete imbecile like myself can prove Einstein wrong. Amazing times of enlightenment we live in on many levels... ;)

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