Additional Covert QE On The Way?

295
Wed, May 16, 2012 - 3:59pm

An alert Turdite sent me an email last evening where he connected some dots about additional quantitative easing. I've been thinking about it off and on today and I've concluded that it deserves a discussion here.

Before we get started and, as background, please take a few minutes to watch this video:

Video unavailable

"IMHO, QE3 is presently being implemented via the Chartering of NEW Bank Holding Companies in the United States which will utilize Chinese held U.S. Treasuries as their BASE Capital.
-The Chinese held US Treasuries will be utilized as BASE CAPITAL upon which to create TRILLIONS of digital FRN via fractional reserve.
While these Treasuries were held outside of the U.S. Banking System FRN could not be created via fractional reserve; -but, now these Treasuries WILL be used as a basis to generate digital FRN out of thin air.
IF China holds $1.2 Trillion of U.S. Treasuries....
...THEN $1.2 Trillion in U.S. Treasuries = the possible creation of $10.8 Trillion new digital FRN via fractional reserve banking.
Sounds kinda like a money printing scheme doesn't it?
-NO 'Dollar of Capital' rule as Our Host would say...
Sounds a tad inflationary doesn't it?
THIS is exactly how the U.S. Banks Counterfeited FRN and ramped up inflation during the housing bubble.
-It is going to be done again with the help of the Chinese.
The Chinese ARE NOT going to 'dump' their Treasuries: the Chinese are going to print Trillions of digital FRN and go on an unprecedented .GOV/FED sponsored Leveraged Domestic Buying Binge!"

This rather interesting idea seems to have been generated by this little-noticed story from last week.

https://www.thedeal.com/content/regulatory/fed-allows-china-wealth-fund-to-buy-us-bank.php

The banks in question are: (from the article)

  • China Investment Corp., or CIC, and other Chinese entities were permitted to acquire an 80% stake in New York's Bank of East Asia (U.S.A.) NA. CIC manages a portion of China's huge foreign exchange reserves.
  • Separately Wednesday, the Fed also allowed the Agricultural Bank of China Ltd. to establish a branch in New York and the Bank of China Ltd. to have a branch in Chicago.

Now, for those of you unfamiliar with fractional reserve banking, I suggest you watch this:

Fractional Reserve Banking

Whether it's overt or covert QE, growth of the money supply equals growth of debt and vice versa. And, as you can plainly see on this chart, rising debt causes equally rising gold prices.

Put it all together and what do ya do? BTFD and keep stacking.

TF

About the Author

Founder
turd [at] tfmetalsreport [dot] com ()

  295 Comments

bellyacre
May 16, 2012 - 4:00pm

FIRST AGAIN

FIRST

Halo
May 16, 2012 - 4:05pm

Jim and hedging

Video unavailable
Silver Danny
May 16, 2012 - 4:07pm

Backwardation in Gold And Silver

Backwardation in Gold And Silver

See Link For More:

https://www.silverseek.com/article/backwardation-gold-and-silver

On Monday, May 14, something happened that hasn’t happened since Dec of 2008.Two successive near-month precious metals futures contracts were in backwardation at the same time. To oversimplify, backwardation is when the price of a futures contract is lower than the price in the spot market. It should not be possible for it to happen in gold and silver (see my piecehttp://keithweiner.posterous.com/when-gold-backwardation-becomes-permanent).

But ever since Dec 2008, it has been recurring intermittently, and recently it has become the “new normal” for each futures contract to head into backwardation before expiring (see https://keithweiner.posterous.com/temporary-backwardation-the-path-forward-from).

Big L
May 16, 2012 - 4:10pm

Was there ever any doubt?

I mean really? It's the ONLY option.

and.....

GIRLS RULE!

StevenBHorse
May 16, 2012 - 4:14pm

Interesting

I believe that the treasuries held by China are held in custody by the Fed. Rickards detailed this fact in his recent book. For those of you unfamiliar with the book, Rickards participated in a DoD exercise wherein they ran a simulated financial war games. One option was China liquidating their treasury stack, but since they are held in custody at the Fed, they (Fed) would simply not allow the Chinese to do this.

So how exactly would that work in practice. The whole premise falls apart if the banks don't physically or digitally in this case hold the treasuries in their own balance sheet.

Glad to see you are contributing BellyAcre......my fatwah against the 1st's started with you, but has now grown to 50 people on my ignore list.

recaptureamerica
May 16, 2012 - 4:20pm

Stevenbhorse

Lol. 50 people on ignore? It's going to get lonely in Turdville. A town of one doesn't a Turdville, make. Maybe you won't read this. I was first once.

StevenBHorse recaptureamerica
May 16, 2012 - 4:25pm

You are on my list ...but since you addressed me personally

I did read your response. I was hoping to get a thought about the content of my post, not my poking at bellyacre. But alas, you didn't disappoint.

My being a supreme dickhead should not be open for discussion, it's just something that you have to live with.

Exergy
May 16, 2012 - 4:27pm

Genius

Nice Chess move ...

Take your crappy US paper (sorry... Tier 1 assets) and create banks inside the offending economy and use the very fractional reserve system to INSTANTLY let you leverage the value of those assets 10 times so you can instantly BUY hard assets including PM's, Land and companies...and anything you like ...the whole while laughing as the very process of buying these assets drives UP these hard asset's prices further increasing the value of the assets you are leveraging...which allows u to buy more. It also leaves you OWNING hard assets at 10 cents on the dollar. So long as you don't ask to be a primary dealer...you end up being one of largest banks in the world based on capitol that you own....and all that is before you leverage those FRN's ...so you basically can buy US paper for free to seem like nice guys offering a helping hand. If you are smart enough to do this...me thinks they are not going to just buy whatever the US fed "suggests".

End game...the servant is now the master

The East is going to BUY the west.

Genius

(stack baby stack!!!...this is from a country that WANTS it's citizens to own PM's and they are only just starting to buy!)

boatman
May 16, 2012 - 4:30pm

KEGGER

take your IRA move it to TDAmeritrade or Schwab or somebody.

then buy what paper[sprott?] u want if/til things get shakier.

then/if cash it in, pay the tax, buy phys.

course u can just cash it in, tax it, n buy the phys.

i'm not there yet on the total collapse deal, tho its highly possible.

BUT THATS JUST MHO.

tyberious
May 16, 2012 - 4:41pm

Repost

Our SLV Option Puts that we suggested are now UP 270% in the past 10 Trading Days!!!

We rarely do 'Put Option' suggestions, but when we do our record is one of the best. However, always keep in mind that options are a bet and should be treated as such. With silver now holding at $27 per ounce, we are completely closed out of our SLV Puts and just purchased several hundred physical ounces of silver this morning. Now we are NOT suggesting trading silver in the short term, silver can easily fall through the floor from these levels especially if we go below $26. $26 is silver's last line of defense. IF we have a sharp move down, then all bets are off because silver's next stop would likely be $22 and after that $17 if we enter some type of deflationary shock. WE ARE NOT saying this is what is going to happen, but we want to be brutally honest with you and give you the heads up that if we see some type of 'black swan' event that puts fear into the market, then we could see things get a lot worse for silver in 2012. Why we are buying physical? Because we save in silver, we believe silver will absolutely be the best investment of the decade, so for the long term, this price level is nothing. When silver is trading near the $1,000 per ounce range, if not higher, people will regret fretting about an $8 swing in the silver market at the mid $20 level. When it comes to getting physical metal at these prices, you just never know when it is going to end, silver shortages loom as the price declines. The recent mines have a higher cost of production, many of them over $20 per ounce, and we are on the edge of a dollar crisis. What we are doing right now? Researching. We are looking for strong companies that are good for both short term traders and long term investors. With commodities down, we are looking for some buying ideas to present to our members. We hope everyone is ready because we have some potentially big winners coming soon. The downturn of the last few weeks has shaken out the weak hands, so those looking for good deals, NOW may be the time! Just an FYI, one of the companies we are looking at looks like it could be a big mover once resource investors discover it. We are watching it closely and hope to bring it to you as soon as we can. Mike Krieger's Post on silver, great read for those looking for more on silver's recent move. Click here to read, "Silver Plunges Below Marginal Cost: Commentary from a Retired Geologist."

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