Front-running The Bernank

Wed, Sep 21, 2011 - 8:48am

It's going to be a wild and wooly day. Expect lots of volatility ahead of the Fed "announcement" at 2:15 EDT. The day of the QE2 announcement last November was wildly volatile as The EE tried to force price down before the expected surge higher. Do not be surprised by similar action today.

In fact, we're already seeing this play out. After reaching $1819 just a few hours ago, the criminals on the LBMA have succeeded in clipping $30 off of gold. They'd better keep it up otherwise gold will consolidate here and surge later today.

But they're fighting a losing battle. Physical demand only increases the more they drop the price. Read the article below but know that The Turd has a "London source", too, who confirms this information.

At any rate, BTFD! Risk appears minimal while potential reward is great!

While we wait for this afternoon, please take time to read this very well written and informative piece from Casey Research. Their site is full of good info so I would encourage you to check it regularly:

Since this was publicly posted to ZH, I'm reprinting the entire article below. I've asked their permission to do this and not heard back from them. Assuming it's OK, here you go. My suggestion is to read it thoroughly. Maybe even print it off from the Casey site and pass it around to your friends. The scenario the author describes is, most assuredly, coming. It is "the end of the Great Keynesian Experiment" for which we are all preparing.

By David Galland, Casey Research

Tune into CNBC or click onto any of the dozens of mainstream financial news sites, and you’ll find an endless array of opinions on the latest wiggle in equity, bond and commodities markets. As often as not, you'll find those opinions nestled side by side with authoritative analysis on the outlook for the economy, complete with the author’s carefully studied judgment on the best way forward.

Lost in all the noise, however, is any recognition that the US monetary system – and by extension, that of much of the developed world – may very well be on the verge of collapse. Falling back on metaphor, while the world’s many financial experts and economists sit around arguing about the direction of the ship of state, most are missing the point that the ship has already hit an iceberg and is taking on water fast.

Yet if you were to raise your hand to ask 99% of the financial intelligentsia whether we might be on the verge of a failure of the dollar-based world monetary system, the response would be thinly veiled derision. Because, as we all know, such a thing is unimaginable!

Think again.

Monetary Madness
Honestly describing the current monetary system of the United States in just a few words, you could do far worse than stating that it is “money from nothing, cash ex nihilo.”

That’s because for the last 40 years – since Nixon canceled the dollar’s gold convertibility in 1971 – the global monetary system has been based on nothing more tangible than politicians' promises not to print too much.

Unconstrained, the politicians used the gift of being able to create money out of nothing to launch a parade of politically popular programs, each employing fresh brigades of bureaucrats, with no regard to affordability.

Such programs invariably surged during political campaigns and on downward slopes in the business cycle when politicians hearing the cries of the constituency to “do something” tossed any concern about balancing budgets out the window of expediency. After all, the power to print up the funds for debt service whenever needed makes moot any concern over deficit spending.

Former VP Cheney, who fashions himself a fiscal conservative, let the mask drop when, in 2002, he stated that “Reagan proved deficits don’t matter.”

Those words were echoed just a few weeks ago, when both former Fed Chairman Alan Greenspan and Obama economic advisor Larry Summers, in separate interviews, said almost the same, paraphrased as, “There is no chance of the US defaulting on its bonds, not when our government can borrow dollars and print new dollars to meet any future obligations.”

Of course, Greenspan and Summers were referring to an overt default – of just not paying – and not to a covert default engineered by inflation. Unfortunately, like virtually all of the power elite, both miss the point that the mountain of debt that has been heaped up since 1971 is fast reaching the point of collapsing like a too-big tailings pile and taking the monetary system down with it.

Importantly, the debt shown in this chart whistles past the government's unfunded liabilities, in particular for the Social Security and Medicare systems. Adding those would more than triple the US government’s acknowledged obligations – to over $60 trillion.

Given the role the US dollar plays as the world’s de facto reserve currency – with all major commodities priced in dollars, and dollars forming the bulk of reserves held by foreign central banks – the dismal shape of the US monetary system spells trouble for the global monetary system.

Making matters worse, following the lead of the United States, governments around the world long ago adopted similar fiat monetary systems. You can see the deficit contagion in this next chart. It is worth noting that the dire condition of the United States now leaves it in the same muddy wallow as Europe’s desperate PIIGS.

In a recent article in The Telegraph, Ambrose Evans-Pritchard referenced a paper out of the BIS that paints the picture using appropriately stark terms.

Stephen Cecchetti and his team at the Bank for International Settlements have written the definitive paper rebutting the pied pipers of ever-escalating credit.

“The debt problems facing advanced economies are even worse than we thought.”

The basic facts are that combined debt in the rich club has risen from 165pc of GDP thirty years ago to 310pc today, led by Japan at 456pc and Portugal at 363pc.

“Debt is rising to points that are above anything we have seen, except during major wars. Public debt ratios are currently on an explosive path in a number of countries. These countries will need to implement drastic policy changes. Stabilization might not be enough.”

Viewing the situation from another perspective, we turn to the work of Carmen Reinhart and Ken Rogoff, who studied the factors contributing to 29 past sovereign defaults. They found that default or debt restructuring occurred, on average, when external debt reached 73% of gross national product (GNP) and 239% of exports. Using the Reinhart/Rogoff findings, Casey Research Chief Economist Bud Conrad prepared the following chart showing that the US government is already far along on the path to bankruptcy.

It’s hard to argue against the contention that the situation is, to be polite, precarious. Given that the obligations of the US government, as well as most of the world’s other large economies, are now impossible to repay and that their reserves are just IOUs backed by nothing, the stage is set for a highly disruptive but entirely necessary do-over of the fiat monetary system.

“Preposterous!” say the lords of finance and masters of all.

Is it?

Of course, these very same mavens completely missed the looming housing crash and the depth and duration of the subsequent crisis – a crisis that is still far from over. In other words, listen to them at your peril, because in our view it’s essential in calibrating your financial affairs to understand that, if history is any guide, we are now well down the road to a collapse in the monetary system.

In fact, over its relatively short history, the US monetary system has come unglued time and time again thanks to politically expedient attempts to interfere with the workings of a free market in order to reward constituents or kick the can on the economic problems of the day down the road.

Thus it is our contention that while the mainstream media focus on the daily gyrations of equity markets or the futile political charade that is Washington, they overlook powerful tectonic rumblings indicating the world’s prevailing monetary system is about to fracture.

A Brief Timeline of US Monetary System Failures
Here’s a brief history of past disruptions here in the United States. Importantly, with the US dollar now the de facto reserve currency of the world, this time around it’s global.

1861 – When the Civil War begins, the dollar is convertible into gold and silver.

1862 – Congress passes the Legal Tender Act and authorizes the issuance of non-redeemable "Greenback" currency. Convertibility into gold and silver is suspended for all US currency.

1863 – National Banking Act authorizes the chartering of banks by the federal government.

1865 – A 10% tax is levied on the issuance of bank notes by state-chartered banks, effectively ending that practice.

1879 – The US Treasury resumes redeeming dollars for gold and silver.

1900 – Passage of the Gold Standard Act, adopting the gold standard by the United States and demonetizing silver.

Specifically, the act provided for "...the dollar consisting of twenty-five and eight-tenths grains (1.67 g) of gold nine-tenths fine, as established by section thirty-five hundred and eleven of the Revised Statutes of the United States, shall be the standard unit of value, and all forms of money issued or coined by the United States shall be maintained at a parity of value with this standard..."

But 33 years later, to gain the power to inflate the currency and collect the profit from doing so…

1933 – By executive order, Franklin Roosevelt prohibits the private ownership of gold. Congress passes the Gold Reserve Act, which enacts Roosevelt's executive order, abrogates all gold clauses in all contracts public or private, past or future (which cancels the convertibility of Federal Reserve notes into gold), though it confirms the convertibility of US Treasury notes held by foreigners into gold. Eleven years later, the US government takes its show on the road…

1944 – Bretton Woods system adopted with signature countries agreeing to tie the exchange rates of their currencies to the US dollar, which itself is linked to a fixed price of gold. Foreign trading partners retained the right to swap dollars for gold, imposing a de facto restraint on printing more dollars. For all intents and purposes, the US dollar becomes the world’s reserve currency. But 27 years later…

1971 – Nixon abruptly closes the “gold window,” unilaterally reneging on the Treasury's promise to allow foreign governments to redeem dollars for gold. Bretton Woods collapses. With no remaining tie to a tangible, the dollar is reduced to a paper token. The transition to a global fiat monetary system is complete.

Until 40 years go by and the inevitable consequences of giving politicians free rein over money creation become untenable…

Present day – Sovereign debt crisis. Desperate, debt-laden governments around the globe – the bulk of their reserves composed of fiat US dollars and euros at risk of going up in smoke – turn to the only thing they know, printing more money and issuing yet more debt. The global monetary system cracks and heads toward failure with no workable alternative on the horizon.

Governments, corporations and investors alike are caught unprepared in the downward spiral of failing fiat currencies and are wiped out by a combination of frantic currency debasements, higher taxation, exchange controls and worse. Social unrest spreads, with the public paradoxically demanding that governments do more, not less.

That’s because all the world’s major currencies are at risk, simultaneously, as the issuers engage in a dangerous race to the bottom. As the monetary system moves inexorably toward terminal debasement and collapse, the results will be catastrophic for the unprepared.

Importantly, while the list of historical attempts to re-jigger the US monetary system have, to this point, more or less succeeded in kicking the can a bit further down the road, the sheer scale of today’s government obligations has driven us into a box canyon, with no way out. As the government’s debt and spending obligations are mathematically impossible to resolve, it is now a certainty that a lot of people are going to wake up one morning to the reality that they are a lot poorer than they thought.

Fortunately for those now paying attention, the collapse of a monetary system doesn't happen in a flash. It is a progression, like the spiral of water down a drain. Thus, while no one can predict exactly when the downward spiral will accelerate out of control, there is still time to prepare.

Have a fun day. More later. TF

About the Author

turd [at] tfmetalsreport [dot] com ()


argent rampant
Sep 21, 2011 - 11:41am

Gun questions

always get the biggest response, LOL. I have no problem with any I have seen, although I think we could have stopped with shill's "Get a shotgun". However, folks, this is potentially a big day in the markets and I would suggest we stay focused. There's a forum for preps and home defense.

BTW, @shill & ScottJ: Your visuals made me laugh and we all need that. Thanks!

Sep 21, 2011 - 11:42am

@Shill - am I on your IU list man?

Just kidding... but seriously:

Was hoping for your help/advice on those guns man? The rifles are almost all bolt action and available in all calibers manufactured up until 1991 (non bolt action are single shot) Theres even a heavy barrel sniper but its not something I think I want to haul around and use. Hand guns are available in semi and revolver from .22 to 500 s&w

Original question:

Thanks again man!

Sep 21, 2011 - 11:42am

gold miners - undervalued

excellent opportunity in gold miners - way undervalued in terms of gold price.

cpnscarlet SilverDog
Sep 21, 2011 - 11:46am

Corporate Engineering Victims?

@SilverDog -

Can you imagine the cheek of corporations now trying to socially engineer us into being victims and slaves?

Imagine it? I lived it. That was what the entire political goal was in NYC during the 60s and 70s. Thanks to the likes of Lindsey and Beam. But a corporate plot? Only if you equate corporations with governments and municipal unions (I'm not saying you're wrong if you do). All weapon bans in the city started in the city council and were pushed by the police union. They had to make the city "safe", and you know what the result was. All anti-gun and anti-drug laws IMHO are full-police employment programs.

Sep 21, 2011 - 11:49am

Arming Yourself (Unconventionally)

"By all means arm yourself."

There's no substitute for being prepared, however we don't have to look at protection as simply having a full gun case. Sometimes it helps to think out of the box...

If you are looking for ways to protect yourself, here is one option. Go to Lowes or Home Depot and get a few cans of wasp spray. You can hit a target from 20-30 feet away, and if you aim for their face you can seriously f**k them up. Very painful and causes temporary to long term blindness. It's generally not lethal, but guaranteed to put them out of commission for a while.

My first option is to hide my valuables well. Second option is wasp spray. And then if I still need to, I'll bring out the guns.

Sep 21, 2011 - 11:50am

Market is eerily quiet

Buyers and sellers in gold are mostly just staring at each other. Sort of how horses look at each other before a race. Sometimes I think I should just tune out everything and just buy gold blindly without the angst.

I know the fed has to do something more than just Operation Twist. But they are sneeky bastards.

Mikey Dr G
Sep 21, 2011 - 11:50am

Got the 80, 85, and 90 as

@Doc G

Got the 80, 85, and 90 as well. Way too overloaded, taking a chance. SLW try to b/o.

tmosley HB
Sep 21, 2011 - 11:50am

@HB Beat me to it.  I'll just


Beat me to it. I'll just post the FPS Russia video. For those who don't know, FPSRussia does weekly videos with awesome weapons of all descriptions.

AA-12 Fully Automatic Shotgun!!!
Sep 21, 2011 - 11:53am


I have a mossberg shotgun and a glock 9 mm

the mossberg is kind of a sawed off one so its usable in the house. they call it the "home defender" . Intruders will scatter as the pattern scatters.

The glock is the smallest but I feel comfortable with it. Also easy to hide. make sure you buy enuf ammo and take NRA courses.

Disclosure: I was an MP while I served in the military. Fired everything from handhelds to 60MM machine guns to tank artillery. But normal daily carry was a 45: never used it in real action. Thankfully. But I had it.

No kids around house to be concerned about.

Wife thought I was crazy, but she thought I was crazy to buy bullion starting 2003 and food and provisions starting 2 years ago.

The more I buy, the more I like.

Sep 21, 2011 - 11:55am


Gold goes up and silver goes down, this is quite interesting.

Sep 21, 2011 - 11:57am

Just kidding... but

Just kidding... but seriously:

Was hoping for your help/advice on those guns man? The rifles are almost all bolt action and available in all calibers manufactured up until 1991 (non bolt action are single shot) Theres even a heavy barrel sniper but its not something I think I want to haul around and use. Hand guns are available in semi and revolver from .22 to 500 s&w

Original question:

Thanks again man!

Tesla Sorry I missed this question, I am on 4 forums lol so bouncing around. Nice for him to leave you those fire arms. 1911 is a large gun ( colt is beautifully to say the least ) so hope you have large hands especially if its a .45, and if you plan on carrying it consider a shoulder holster as IWB carry will be somewhat uncomfortable ( for me at least ). I carry a SIG 232 in .380, large enough caliber for the bad guys, as far as rifles go, well again I am partial to my SKS very accurate . Again its all up to the individual and try them all before you make your purchase.

Sep 21, 2011 - 11:58am

We have every right to be angry.

Further, it is our duty to be angry and disgusted with all the crimes we see our leaders, and above all the bankers, commit every day. Anger is a very healthy emotion, when it is constructively directed at evil and evil doers. It should motivate you to do something about it, even if it’s only speaking up, or writing a comment like this one. Yes, I am writing this very moment out of anger. It helps me to focus my energies. It compels me to do even more due diligence when it comes to trying to understand the market manipulations and machinations of the “EVIL EMPIRE”. It motivates me to expose these bastards in precise, but simple terms, anyone can understand. If I can impress upon you how evil and dangerous they are, just maybe you will do something, like protect yourself by buying PMs.

Because of the gold and silver manipulations, we have no idea what the dollar is worth. We know fiat isn’t worth anything, but the average fool, who is losing his wealth slowly over time to this criminal enterprise, has no clue. It’s impossible to know precisely what anything is worth, when there is no standard measure of value. We are being cheated everyday in every way by this false system of monetary measurement. What silver and gold should be purchasing is many times its present power to buy things in the market place. But, who really knows exactly how much?

All prices are distorted beyond anything we can imagine. We have no idea how much we are worth, or will be in the future, because we don’t know what either paper money, or gold and silver, are worth. So, we are being robbed right now, because we don’t know how much we need to save to guarantee that, what we save, in whatever the form, will support us in times of economic hardships, or in our retirement. We have no way of knowing what we might need to save in order to start a business. We have no way of knowing what it might cost in the future to put our children through school or college. We have no idea how much we should save to put down on a house we want to buy at some time in the future. You are being robbed of the financial security and stability, that you are entitled to, right now as we speak.

These monetary distortions wreaks havoc upon all our financial decisions. Chaos and confusion actually reigns, but we are so accustomed to this aberration that we scarcely give it notice. Well, those who are economic illiterates, at least, are completely unawares. They really don’t understand what is happening to them. How many people have you experienced this with, as you try to explain why they need to buy PMs to protect their savings, their future, and their wealth? They look at you like you are some kind of nut. But you know better. Your mind is not controlled nor manipulated by the fiat scam. Count yourself extremely lucky, because you have vision. You are guided by reason and can think for yourselves. But, make no mistake, your loved ones and friends are going to be devastated, hurt, and perhaps destroyed by this criminal monetary system. You should get angry now. You should be so enraged that you you can’t sleep until you do something. So what, if they think you are a nut? At least you tried. You can say, “in the end you did your best”. You can say, “you at least protected yourself”.

With that in mind, keep stacking and keep attacking the monetary mind control that has taken over your society, your friends, your family.

Blight Master
Sep 21, 2011 - 11:59am

Quit teasing me with the

Quit teasing me with the AA-12 vid. No way they'll ever let a serf like me have access to one of those bad boys. The recoil (or lack thereof) puts it leagues above a saiga IMO but I'll just have to make do with what I have.

Dr G
Sep 21, 2011 - 11:59am

@OC15, indeed. I have no idea

@OC15, indeed. I have no idea what this portends. Not much stimulus from Bernank? Why would they allow silver to run up this morning? Is it because gold is the target of their manipulation right now? Maybe we don't even get Operation Twist? Maybe the surprise is nothing--but more words that something might happen in the future--kind of like Bernank foreplay? Geez, I see a big sell-off in metals if that occurs.

Sep 21, 2011 - 12:00pm

2:15 liquidity move

I think the only thing you will see come out of the Fed today is a move to get people and businesses to borrow. They will make it happen with VERY low interest loans for everyone who has a job......Need a house- 2.5 to 3.5 will be the car will be lower, my CU is now running 2.75 % @ 60 months.

This will be the FED's # 1 objective..........they must get people to go into debt at any cost. We are already starting to see lower loan money standards easing in, and they will once again take it a step further..........We may not get liar loans again but the Fed will get as close as they can. Without debt slaves the banking system and the ponzi fiat collapses.

Sep 21, 2011 - 12:02pm

Cheney Quote

Produce the video clip where he says "deficits don't matter". You can't because he never said it.

The "quote" is an accusation written in a book from Paul O'Neill. Cheney denies saying it. People make up stories abolut what people say to sell books. It's garbage.

cpnscarlet SuperManny
Sep 21, 2011 - 12:02pm

@SuperManny - Oh man, I like

@SuperManny - Oh man, I like the way you think. When I was a kid, my weapon of choice in the subway (and anytime I go back to nyc) was a carpet knife. At least under Guilianni, it was OK to carry pepper spray. But you're so right on about range - that way, the angry wasps don't getcha.

Dr G SilverFocker
Sep 21, 2011 - 12:03pm

@SilverFocker, setting

@SilverFocker, setting precise targets for rates like that would be very bullish for the metals, IMO.

Sep 21, 2011 - 12:04pm

Is WynterB at work?

I'm looking at the silver chart wondering why it's stronger today than gold

Sep 21, 2011 - 12:06pm

@ Silver Flocker: Surprise Central Banking?

Central Banking only works when it is a surprise.....

OperationTwist/QEIII are not a surprise... but this would be... and it seems to be lining up no?

The upcoming expansion of US bank credit

Since the FOMC meeting, there has been a noticeable silence over the Fed’s monetary policy following QE2. But there is some evidence that the funding of government debt at low interest rates will shift to the repo market, rather than a new round of quantitative easing.

The silence on this subject may be partly explained by the monetary focus shifting to Europe. However, it is likely that the Fed has no intention of introducing QE3, given that the expansion of narrow money so far has led only to a degree of price inflation, without much benefit to asset prices. And with the ECB still reluctant to print euros, QE3 would probably collapse the dollar/euro rate and propel gold considerably higher, putting unwelcome strains on the financial system. The Fed also finds itself having dramatically expanded the monetary base for little economic benefit: against all its expectations, the economy is sliding into recession again. Perhaps it is a case of all the people being no longer fooled all of the time with respect to what QE actually is. No, another approach is called for.
Sep 21, 2011 - 12:07pm

Ivanhoe mines (ivn)  Has

Ivanhoe mines (ivn) Has possibly retested it's August 22nd low of $17.18. It could be ready for a run up??? If not, stop would be $17.18

Sep 21, 2011 - 12:10pm

$0.02 on guns

Never owned a gun until 2 years ago, and guns still aren't my hobby - I just have three. I chose my handgun and shotgun from a dealer with a good reputation (he didn't sell junk). Neither were American made, and he recommended I pick a handgun that "felt good in my hand". This was a Brazilian Taurus PT 24/7 9mm. The shotgun was a Hawk 982 12 Ga. I recently add a Colt AR-15 "for kicks", but the dealer believed it was just as good as the shotgun for home defense (he's a bit too gung-ho for me). A handgun, shotgun, and rifle - I'm done. Well, I might get a higher caliber upper receiver on the 0.01% chance that I'll ever go hunting.

dmanson Blight Master
Sep 21, 2011 - 12:10pm

Keeping it real

A little old-school ZH for the new guys. Love it!

Sep 21, 2011 - 12:11pm
Sep 21, 2011 - 12:16pm

@ cpnscarlet

An AR-15 is a horrible home defense weapon unless you have many acres and someone is in the yard or something. The reason why is because the bullets wont stop after hitting your victim. You want a gun that is the most safe considering your family. You don't want a bullet going through the criminal and into your daughter's or wife's bedroom. A shotgun is by far the best home defense weapon. Shotguns spray father than many think and they will stop any criminal.

After a shotgun I'd recommend a revolver.

dmanson tmosley
Sep 21, 2011 - 12:17pm

Holy Crap!

Do I have to move to Russia to get one of those? ;D

Tom L
Sep 21, 2011 - 12:17pm

HUI Double Top?$HUI&p=60&yr=0&mn=1&dy=0&id=p63768875909&a=243610011

At 630? With the move back up there timed with yet another assault on the big 5 hour Downtrend line (see above posts by me and Turd) is this a setup for a double top takedown?


Sep 21, 2011 - 12:20pm

@Shill - Thanks man!

Yeah that's a big hand gun. Probably get it anyway for sentimental reasons and buy something smaller and more modern for carry then. I suppose I've already made up my mind about the shotty and the rifle. That 7mm Mag was always one of my 2nd favs to shoot (kicks a little) but my 6mm is first choice for velocity and accuracy. (and you can shoot for hours without getting sore)

Thanks again man!

Sep 21, 2011 - 12:25pm



Anytime Friend, anything I can help with along the way just ask m8ty. Have fun with that 7mm. But for sure consider a larger rifle of sorts, especially if you have to hunt.

Above all be SAFE!

rock collector
Sep 21, 2011 - 12:26pm

SLW and Silver switch positions

SLW current price $42.09
Current Spot Silver $40.29

IMHO We are seeing a flip-flop of significant importance.
For much of 2011, SLW has ranged from $1 to $5 below the spot price of silver.

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