Lots of Choices. All of Them Bad.

Wed, Sep 21, 2011 - 7:19pm

 You know, in a way, I kind of feel sorry for The Bernank. As a central-planning plutocrat, the poor guy has put himself into a very tough position. He chairs the Federal Reserve as we stand at the end of the Great Keynesian Experiment. Bummer for him. Lots of choices. All of them bad.

Since everyone-and-their-brother is going to try to analyze the Fed's actions, I figured I'd take a stab at it, too. My challenge is: How do I convey all of this in a format that is understandable? I mean, I could verbalize it to you like I did for Hyde earlier today but this format is about the written word, not me talking. So, I'm going to fall back upon the technique that I've defaulted to in the past...chronology, sort of.

1) The Bernank knows that the gluttonous blob that is the U.S. federal government needs money.

2) At this moment, it is politically untenable to launch another overt QE program.

3) Even within his own "board of governors" there is dissent against additional QE.

4) However, see #1.

5) The Bernank is a smart guy and a historian, though, so he pulls from the history books a program by which The Fed will sell some of its short-term government bonds and use the proceeds to buy long-term bonds.

6) The problem with this is that it will flatten, or even invert, the yield curve.


7) Uh-oh. Dat no good. If you invert the yield curve, you will only accelerate the economic collapse. Tax revenues will plummet further and you will exacerbate your primary issue #1.

8) A flat yield curve will also crush the earnings of banks who profit from the "carry trade" of borrowing short and lending long. Concern over future bank earnings will only serve to frighten even more global investors to abandon equities in search of "safe havens".

9) But you're The Bernank, you have a solution.

10) The safe haven of U.S. government debt. Not long-term. Who, in their right mind (besides The Fed) would want to buy long-term U.S. government debt? No, if you can create enough panic, buyers will emerge for short-term U.S. government debt.

11) In fact, if you can create enough panic, you might even find buyers for the entire $400B in short-term U.S. government bills and notes that you are trying to sell.

12) If you can create this artificial demand, you can sell your $400B without causing a substantial rise in short-term rates. You won't even come close to inverting the yield curve. You'll just simply flatten it out a little.

13) With a flat yield curve, maybe those rascally banks will be persuaded into more commercial and residential lending instead of sitting on their fat behinds and buying treasuries.

14) Regardless, by early 2012, with the Dow below 10,000, those good-for-nothing, back-stabbing politicians will be screaming and begging for more QE. 

15) Even your buddies like the goon, KosherDakota, will sign on to your next QE program.

16) This might work, you think to yourself. It just might work.

Don't count on it, Ben. You're not that smart. You just choked out whatever life was left in the U.S. economy. The only chance you Keynesians had at survival was by getting economic growth to explode and produce the tax revenues needed to fund The Beast. By flattening the yield curve, you just out-smarted yourself and accelerated your demise.

Do not despair, my Turdites. Though the PMs will continue to fluctuate in price, the trend will continue higher. Much higher. Physical metal is your only protection from the calamity that is now much closer than it was 24 hours ago.

In the meantime, the short-term charts have certainly not improved. As discussed last evening, unless gold could convincingly move through 1815, the trend was still lower. At some point it will break above that nasty downtrend line but we're going to have to be patient.


OK, that's all for today. Let's see what tomorrow brings. TF

About the Author

turd [at] tfmetalsreport [dot] com ()


Sep 21, 2011 - 7:24pm



Sep 21, 2011 - 7:24pm

So do we think shorting the

So do we think shorting the major index's is smart I mean the nasdaq isn't really that far off it's top.....

Sep 21, 2011 - 7:33pm
Sep 21, 2011 - 7:34pm

all you procrastinators and doubters, take heed!

OK, all you procrastinators, you've got one more chance to get on this incredible opportunistic point. The fed just sealed our fate to a systemic inflationary collapse by announcing TWIST.... WTF?. So use it to your advantage and do the research later. I have been recommending silver since around $12po now $39.5 and gold $900po now $1780....WTF?!? yes.. please get in on this now!!! Just about the best opportunity considering the current scenario and imminent end game unfolding.

please accept my humble RP.

R man J
Sep 21, 2011 - 7:36pm

Yep, they bought a little time...

it's pitiful how little time $400B will buy...it'll keep metals from exploding for a little while and allow pigatha to be strong for a month or three...but then what? Inspiring analysis Turd...and much needed perspective. And under turgid, uninspiring conditions yet! No doubt that patient holding and aquiring is the most profitable work PM investors can do.

Dr G
Sep 21, 2011 - 7:37pm

That Dragon from Gainsville

That Dragon from Gainsville is $118! How is that cheaper than $100 from APMEX? GVille is sold out anyway.

Sep 21, 2011 - 7:48pm

It's simple ...

Revalue AU! Either the manipulated market will or the Fed will. It's that simple and that painful for all. The question is at what worthless fiat price? It will happen and I firmly believe it will happen much sooner than anyone here believes. 

cpnscarlet CauseChange
Sep 21, 2011 - 7:48pm

@CauseChange - I'll repeat

@CauseChange - I'll repeat from last thread - the 200 day MA is still below the channel. If JPM thinks they still have some spec longs to shake out, I think they'll make a stab at it. They are so soaked in shorts (probably FED- guaranteed against loss) why wouldn't they just bet the last stack of chips?

It's never a bad day to buy and hold silver for the coming collapse, but the fun and games are far from over.

RuNuts Dr G
Sep 21, 2011 - 7:57pm

That Dragon from Gainsville not out of stock

and it's cheaper for those who pay tax.

Sep 21, 2011 - 7:59pm

Ok, can we start predicting

Ok, can we start predicting what the DOW will be before they bring out QEIII? I'll go with $8561.

Sep 21, 2011 - 7:59pm
Sep 21, 2011 - 8:01pm
Sep 21, 2011 - 8:03pm

I am closing out my SLV

I am closing out my SLV January 54 calls, at a loss, and buying some Amazon October 180 puts.

What y'all think?!

Sep 21, 2011 - 8:03pm
Sep 21, 2011 - 8:04pm

GD, but if the Dow goes to

GD, but if the Dow goes to 8561, for most here, the big question is where will the PM stocks be? I think we may get another hint of it tomorrow, as the banks' downgrading will not be good for the Dow either.

Sep 21, 2011 - 8:04pm

Turd - Gotta Ask -

I'm at a loss here, help me. Who is KosherDakota??

Your flow chart is depressing. But maybe, just maybe, enough others will follow that flow in the next few days and see the only out - PMs.

Sep 21, 2011 - 8:05pm

Tightwad turdites

Before this comment gets buried under a blizzard of other comments, be a sport and feed the Turd a buck or two. Really, is a buck or two gonna bust you? Are you that much of a cheapskate? You easily shell out that kind of chump change on a lousy coffee or some other useless crap (I know I do), so why not a bit of coin for the Turdmeister and what has arguably become a go-to site on a daily basis? Would it make you feel any better if this site vanished forever and you saved your lousy buck? Cough up, you cheap bass turds.

Sep 21, 2011 - 8:06pm

Gold SuperCycle.... Thoughts Continued

Hello Turdville, Just wanted to run this by for thoughts. Most have heard me rant about Gold moving as a single currency against all fiat currencies. Well, today is no different, with a slight variation to the thesis.

You can see that gold moved in the same direction for most currencies, with the jolt right at the meeting's announcement. If you still take the thesis that gold prices are moving as one, then why are their slight variations in the volatility that is being displayed during the directional movements?

The oddball currencies that over-exaggerated moves compared to other gold prices were the US Dollar (which had a rush into it today, possibly explaining the increased downward volatility after the meeting), The Japanese Yen (which is apart of a carry-trade, interesting), and the Aussie Dollar (also part of the carry trade, or used to be at least). Could we be see unwinding of trades going on evident in the price of gold? If you look at the other currencies price of gold, if you "white out" that volatility spike up and then down, it looks like a pretty solid day of holding support. However, not the case in US Gold, Yen Gold, and Aussie Gold.

While I do not know the details, I find this highly intriguing. There is surely something more to this.... which may prove to give us deeper understanding in what is really taking place instead of just crying manipulation (which there probably is a tad of too, no doubt).

Take a look at gold priced in our favorite currencies once again, with respect to the fact that gold is tied in all currencies now. Gold is definitely moving as its own currency.... but the market makers (the central banks) seem like they are moving/swapping positions around for the upcoming explosion (devaluation of fiat) in gold. This will follow to silver, no worries.

The super-cycle part is because all of these currencies are setting nominal highs together.

The US Dollar:

The Euro:

The Swiss Franc:

The Great Britain Pound:

The Canadian Dollar:

The Australian Dollar:

And the Japanese Yen:

Cheers Turdites, remember not to be US Centric only.... this is a global thing.... we just happen to be in the country with the reserve currency so we are head ponzi in the current system. It is not all about blythe masters and busting jp morgan.... it is about protecting fiat while they can/preparing for the next stage of their new global monetary system. They aren't fighting gold, they know what it is about to do.... don't fool yourselves. TPTB are sitting on the largest physical pile of precious metals that you could imagine... for they have known it is the only sound money for many centuries... it is only us as people who have forgotten.... I wonder why...

Sep 21, 2011 - 8:06pm
Sep 21, 2011 - 8:06pm

The greatest and longest

The greatest and longest running bull market in bonds in US history, one that began in 1984 is now entering its grand finale. The 10 year should bottom @1.5% at best, and @1.00% if the wheels fly off--50/50 at this point. Some may scoff at such paltry yields, but compared to likely losing as much as 60% on US equities over the coming decade, it doesn't seem too shabby. As I noted many times on this forum, if you play your cards correct you will come out on top a very very wealthy individual.

Sep 21, 2011 - 8:08pm

I'm glad Santa is thinking what I'm thinking..

...it's very reassuring and he's always right. So far he isyes

Dear CIGAs,

The key element in this statement is “significant downside risk to the economic outlook” followed by “introduction of operation Twist, an ineffective strategy that will lead back to QE.” This is basically pro-gold, anti-dollar regardless of how the market has reacted. That is an undeniable reality as the accordion shaped chop in the price of gold continues.

The third skier illustration is the final result of the “significant downside risk to the economic outlook” contained in today’s Fed statement.



edit...I'm definitely not always right. Didn't mean to imply that or sound smarmy.

There is more then meets the eye with that announcement today. The MBS thing will show the breadth of itself when they choose to unveil the Obama re-election re-fi gimmick.

Sep 21, 2011 - 8:10pm


After watching the after hour talking bears, it will be very interesting on the amount of short the market stocks that will be bought in the A.M. tomorrow. It sounds like dump all equities quick, hold your cash, wait for a different season of investing, and just give up. Did we look at our stack of P.M.'s today?? Are the jr. miners being thrown out the windows and are we there to grab a few? Did we save some moldy fiat to make some great buys of metals??

What was it that we were looking for from the government today. A speech on how to restore the country to it's former glory? What did we expect? I thought we were awake and realized that "it is to late to fix this mess". 

The middle class is being forced into downsizing and many on this board have assets set for the future but have not embraced "downsizing". Somehow, we just want to believe that this will all turn out o.k. in the near future. Time to wake up. 

I was thinking about the first house we rented when the wife and I were first married. We did not have anything and we found a furnished home that was 588 sq. ft., one bedroom so small that one could only get into bed from one side. It had a wringer washer on the back porch and we used it and hung up the clothes on a line in the back yard. We did not have a t.v. or anything of value but lots of love. We were downsized. This coming economy and market will force many on this board into the way it was in the past. He that can sit within his can house, in the worst of times, and see the bounty stored (even canned hams) will have some measure of peace . Do not allow the systems of this world to rob us of peace. jmo

Bay of Pigs
Sep 21, 2011 - 8:10pm

RE: KosherDakota

Federal Reserve Bank of Minneapolis President Narayana Kocherlakota

Sep 21, 2011 - 8:12pm

Dragon coins are becoming ridiculous

Focus is back on Maples and ASEs. The cure of high price is high price itself.

Bay of Pigs
Sep 21, 2011 - 8:15pm


Gold up 6% against the Rand today. Over 4% for the Brazilian Real. Big moves. Not even reported.

Dyna mo hum NW VIEW
Sep 21, 2011 - 8:16pm

NW View

Amen brother .......... Well said!!

Sep 21, 2011 - 8:20pm

Playing cards right?

ok SHILL, what cards are we to play?

KarlDenningerererere is saying it is too late to prepare.

Sep 21, 2011 - 8:21pm
Sep 21, 2011 - 8:24pm

I find solace.......

when I look at the above German And Zimbabwean hyperinflation stats and when I look at the 5 and 10 yr G & S charts. Relax everyone. Everything is still FUBAR and gold has millenniums of credibility. Worldwide. BTFD, keep stacking. Hope for the best, prepare for the worst. Now go and hug your loved ones! 

Turdle GG
Sep 21, 2011 - 8:25pm


It's not complicated.

Gold is priced in USD.

Its price in any other currency is a pure mathematical function of its USD price and the exchange rate between USD and the foreign currency. It's called the "law of one price". Arbitrage ensures that it holds true.

For example: AUD gold price = USD gold price divided by AUD/USD exchange rate.

The ONLY reason for the rise in the AUD price of gold today was that the AUD fell in value against the USD from around 1.02 to near 1.00; while USD gold price did not fall more in percentage terms than AUD did against USD.

I have explained this many times here but no-one listens... so I officially give up! I will mention it no more. Good luck.

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