Whatever. Sterilize This!

Thu, Mar 8, 2012 - 10:28am

Before we begin, I would like to thank everyone who participated in the lively discussion thread of the previous post. Solid, thought provoking stuff the kind of which makes this site special. I agree with most of the discussion, particularly that gold is your ultimate, certain store of wealth. I believe, though, that silver has a place, too. I've consistently maintained that gold protects your wealth while silver protects your purchasing power and the simple ability to even purchase things, in the first place. Let's hope we don't reach a point where it takes ounces of gold to fund a trip to the grocery store or gas station. Silver should fill that role.

Let's get to the charts first today before we move on to the news. First of all, the metals are trying to base and rally. Though I'm still concerned about drops to 1625 in gold and 31 in silver, we could very well have seen the bottoms on Tuesday. Why? Well look where the prices stopped. If I'd told you 10 days ago that the metals were about to be slammed into a brief "correction", where would you have thought they would bottom? Go back and look at the charts from late January and early February and you'd clearly have your answer. $32.80-33.00 in silver and 1680 in gold would seem to be obvious. Well, looky here:

If the metals are going to bottom here, they're going to need some help from The Pig. The nonsense rally from The Bernank's speech last week looks to have run its course. Could the POSX be ready to roll over and play dead again? This chart seems to suggest so:

And at the same time, you've got to figure that The Bernank would give his right arm to get the S&P back into the uptrend channel that he and his buddies at 33 Liberty Street worked so hard to build and maintain.

And crude looks to have found a floor just south of $105. Of course, having Bibi and Leon do their best Tommy Lee impression certainly helps.

OK, onto the news and there's really only one thing that I wish to discuss. It's this:


Now, I'm going to warn you. If you are easily offended and do not like the use of profanity, please look away from your screen for a moment.


For the sake of clarity, I'm going to rely again upon my old friend, Mr. Black Dot Chronology:

  • All of this...all of the QE, all of the ZIRP, all of the LTRO...it's all about funding government debt.
  • The only way The Great Ponzi can now be maintained is through low interest rates. Simple economic growth cannot and will not produce the tax revenue necessary to "grow our way out of it".
  • If rates move higher, the economy will slow even further, exacerbating this problem.
  • More importantly, if rates move higher, the interest on the accumulated debt will take up an accelerating portion of the U.S. federal budget.
  • QE1 and QE2 was the method through which The Fed purchased U.S. bonds outright, thereby creating an artificial demand for U.S. government paper and keeping rates low.
  • ZIRP and Operation Twist is the method through which the Fed continues to suppress long-term rates. It's been estimated that the Fed is currently soaking up as much as 90% of the 10-30 year auctions.
  • ZIRP and Operation Twist require regular, "traditional" demand for short-term U.S. debt. This demand is managed through the creation of uncertainty regarding Europe, Iran, etc.
  • So, now, here we sit. Three years of this centrally-planned fiasco and The Fed is pressed back against the wall again. Their Primary Dealers have balance sheets that are completely chock-full of treasuries and a PD cannot raise funds to continue buying even more without a) selling some of their current holdings, OR, b) getting some fresh, new cash from The Fed to use. Option "A" is off the table because selling holdings will push down price and, as you know, lower prices means higher rates and, as you know, higher rates cannot be allowed. But Option "B" doesn't look too good, either. Calling something overt Quantitative Easing isn't going to fly in an election year and, additionally, much time and energy has been spent convincing The Sheep that the U.S. banks are completely healthy and recovered. Giving them billions of dollars to spend on treasuries might dispel that myth.

    So, The Fed rolls out this idea yesterday. In this new program, The Fed is going to buy bonds directly from the PDs. In return, the PDs will get "digital credits"...CASH. The PDs will then use this CASH to buy more U.S. government bonds and we are supposed to believe that because these are "digital credits" and not CASH, none of this NEWLY-CREATED MONEY will ever make it into the system. WHAT?!?!?!?!?!?!?!? Let me see if I've got this straight. The PDs will take this new money and loan it to the U.S. government which will, in turn, use the funds to cover their deficit spending on items like transfer payments, social programs and military hardware. This NEW MONEY will move directly into the U.S. economy, further devaluing the U.S. dollar and create even more cost-push inflation. Period. End of story. Done deal.

    But that's not what The Wall Street Journal and CNBS would have you believe. The Fed told them that this was a "sterile" process, a zero-sum event. The Fed will exchange "digital credits" for existing bonds and that's it. Move along, please. Nothing else to see here. Again, and I apologize for the profanity:


    But don't just take my word for it. I've searched for other opinions on this. Let's try these two:



    Anyway, it's quite clear that the lies, obfuscation, manipulation and MOPE will never, ever end. You must continue to buy and hold physical precious metal. It is your only financial protection and against the certain, impending disaster that your "leaders" have created.

    Lastly, you should be sure to read the latest two entries from Eric King's mysterious "London Trader". Whoever this person is, he/she has a track record of being pretty accurate so it would be worth your time to check it out.



    That's all for now. Have a fun day! TF

    About the Author

    turd [at] tfmetalsreport [dot] com ()


    Mar 8, 2012 - 10:34am


    "sterilized" QE would not be inflationary according to the Fed. Are you buying that?

    No, not buying. Inflation has little to do w/ quantity of money & everything to do with velocity. M can be a partial function of V

    Hide conversation
    Mar 8, 2012 - 10:36am

    Called the bottom...well so far...

    hopefully $1665 holds... :)

    Mar 8, 2012 - 10:36am

    Don't forget

    Plosser did some BS'ing of his own after bernanke last week when he said interest rates might go up later this year--this was what--a couple of weeks after the Fed said low rates till 2014 and the dissenting votes were 2016.

    The amazing thing is they are getting away with MOPE since most of the folks do not pay attention and do not think.

    But as Ralph Kramden said, (give or take) . "One Day Alice, to the moon"

    Mar 8, 2012 - 10:36am

    Rickards again

    It wil be "sterilized" for exactly so long as banks don't want the money and then it will instantaneously become unsterilized

    Another way to describe "sterilization" is highly leveraged borrowing short & lending long. Recipe for bank failure since Renaissance

    Mar 8, 2012 - 10:36am

    Life of fiat

    Last year my history colleague and I began talking about PMs and fiat. I suggested to him that our currency was dying and that he ought to invest in PMs. He looked up , said out loud, "Hmmm, decoupled from gold in '71...hmmm... 40 years is about as long as any pure fiat currency lasts... hmmm, where should I buy silver?"

    He was converted in 10 seconds, knowing history as well as he does. Our main difficulty is educating our friends and family. Even then it can be difficult. As a wise man once said: "Truth is no always seen when shown, and is not always loved when seen."

    Mar 8, 2012 - 10:37am


    Interesting that silver is going down now around 33.56 and slw and pslv are both up .34 and .10

    A First! physical pulling away form Paper.

    Haole Guy
    Mar 8, 2012 - 10:41am



    Mar 8, 2012 - 10:42am

    Don't forget

    BTW--there are so many good opinions on PM that are shades of differences enuf to confuse us all. This is not a precise science by any stretch of the imagination.

    But where do people think we are getting the fiat to support the regular deficit of over 1 trillion and everything else?

    Its the printing stupid! The other side of equation is who's buying our junk bonds? Is it the 67% or so we hear from data or is it the higher number Turd just mentioned. Whom can we trust, not the govt.

    Mar 8, 2012 - 10:42am

    Conversation between Ben and Plosser

    Ben B: hey plosser, can you do me a favor, can you go out and talk up increasing rates and no more QE. I'm getting fcuked with this gold shit going up. I know you don't vote, but if you do me this favor ill get you a couple of girls to hang out with.

    Plosser: Ben, Gold can't be stopped long term, but ill do you this favor, ill be the shit head that goes out and disagree with your approach in the press. Just hoping we can stop gold a little longer before you announce the next QE

    Ben b: Thanks P man..we are buying up some gold too so we can back up the next US dollar when we are out of ammunition.

    Plosser: Ben, can i get two blondes this time, the brunetts you sent last time ran out of steam.

    Ben B. Ok, but not pictures this time P man

    Mar 8, 2012 - 10:44am

    Pap? anyone Pap?

    CNBC's Michelle Caruso Caberra reporting from Athens that deadline on private equity acceptance of the 75% shave in payment is tonight. Announcement on CDS situation is 3AM EST tomorrow morning.

    Greek Fin Min claims that 60% of the holders have agreed to the shave (seems more like the deal they can't refuse) but I have also heard that they need 80% of the holders to agree (dunno if others have more specific info).

    I'd like more specific info because the dominoes will fall.

    Santa's 3-15-2012 date is important.

    Key Economic Events Week of 10/14

    10/15 8:30 ET Empire State Fed MI
    10/16 8:30 ET Retail Sales
    10/16 10:00 ET Business Inventories
    10/17 8:30 ET Housing Starts and Bldg Perms
    10/17 8:30 ET Philly Fed MI
    10/17 9:15 ET Cap Ute and Ind Prod
    10/18 10:00 ET LEIII
    10/18 Speeches from Goons Kaplan, George and Chlamydia

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    Key Economic Events Week of 10/14

    10/15 8:30 ET Empire State Fed MI
    10/16 8:30 ET Retail Sales
    10/16 10:00 ET Business Inventories
    10/17 8:30 ET Housing Starts and Bldg Perms
    10/17 8:30 ET Philly Fed MI
    10/17 9:15 ET Cap Ute and Ind Prod
    10/18 10:00 ET LEIII
    10/18 Speeches from Goons Kaplan, George and Chlamydia

    Key Economic Events Week of 10/7

    10/8 8:30 ET Producer Price Index
    10/9 10:00 ET Job Openings
    10/9 10:00 ET Wholesale Inventories
    10/9 2:00 ET September FOMC minutes
    10/10 8:30 ET Consumer Price Index
    10/11 10:00 ET Consumer Sentiment

    Key Economic Events Week of 9/30

    9/30 9:45 ET Chicago PMI
    10/1 9:45 ET Markit Manu PMI
    10/1 10:00 ET ISM Manu PMI
    10/1 10:00 ET Construction Spending
    10/2 China Golden Week Begins
    10/2 8:15 ET ADP jobs report
    10/3 9:45 ET Markit Service PMI
    10/3 10:00 ET ISM Service PMI
    10/3 10:00 ET Factory Orders
    10/4 8:30 ET BLSBS
    10/4 8:30 ET US Trade Deficit

    Key Economic Events Week of 9/23

    9/23 9:45 ET Markit flash PMIs
    9/24 10:00 ET Consumer Confidence
    9/26 8:30 ET Q2 GDP third guess
    9/27 8:30 ET Durable Goods
    9/27 8:30 ET Pers Inc and Cons Spend
    9/27 8:30 ET Core Inflation

    Key Economic Events Week of 9/16

    9/17 9:15 ET Cap Ute & Ind Prod
    9/18 8:30 ET Housing Starts & Bldg Perm.
    9/18 2:00 ET Fedlines
    9/18 2:30 ET CGP presser
    9/19 8:30 ET Philly Fed
    9/19 10:00 ET Existing Home Sales

    Key Economic Events Week of 9/9

    9/10 10:00 ET Job openings
    9/11 8:30 ET PPI
    9/11 10:00 ET Wholesale Inv.
    9/12 8:30 ET CPI
    9/13 8:30 ET Retail Sales
    9/13 10:00 ET Consumer Sentiment
    9/13 10:00 ET Business Inv.

    Key Economic Events Week of 9/3

    9/3 9:45 ET Markit Manu PMI
    9/3 10:00 ET ISM Manu PMI
    9/3 10:00 ET Construction Spending
    9/4 8:30 ET Foreign Trade Deficit
    9/5 9:45 ET Markit Svc PMI
    9/5 10:00 ET ISM Svc PMI
    9/5 10:00 ET Factory Orders
    9/6 8:30 ET BLSBS

    Key Economic Events Week of 8/26

    8/26 8:30 ET Durable Goods
    8/27 9:00 ET Case-Shiller Home Price Idx
    8/27 10:00 ET Consumer Confidence
    8/29 8:30 ET Q2 GDP 2nd guess
    8/29 8:30 ET Advance Trade in Goods
    8/30 8:30 ET Pers. Inc. and Cons. Spend.
    8/30 8:30 ET Core Inflation
    8/30 9:45 ET Chicago PMI

    Key Economic Events Week of 8/19

    8/21 10:00 ET Existing home sales
    8/21 2:00 ET July FOMC minutes
    8/22 9:45 ET Markit Manu and Svc PMIs
    8/22 Jackson Holedown begins
    8/23 10:00 ET Chief Goon Powell speaks

    Key Economic Events Week of 8/12

    8/13 8:30 ET Consumer Price Index
    8/14 8:30 ET Retail Sales
    8/14 8:30 ET Productivity & Labor Costs
    8/14 8:30 ET Philly Fed
    8/14 9:15 ET Ind Prod and Cap Ute
    8/14 10:00 ET Business Inventories
    8/15 8:30 ET Housing Starts & Bldg Permits

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