Rage Against The Machines

Fri, Nov 30, 2012 - 10:15am

In a world dominated by momo-chasing HFT computers, sometimes you've got to step back and use actual intelligence and not artificial.

As we've been discussing here for months, America is racing toward the dreaded "Fiscal Cliff". Earlier this year, the common term for this event was Taxmageddon but, apparently, Fiscal Cliff sounds more dramatic when accompanying the MSM "BREAKING NEWS" alert at the top of every hour. So, what the heck is this Fiscal Cliff stuff and why do the metals seem to trade up and down based upon whichever way the wind is currently blowing?

In its simplest terms, the Fiscal Cliff is this: If no legislative action is taken before January 1, 2013, a whole host of current tax breaks will expire. The resulting tax increase will dramatically slow the U.S. economy as tax-planning uncertainty will combine with this massive transference of wealth from the private to the public sector, making even 1% GDP growth unlikely in 2013. Additionally, Congress must once again to raise the debt ceiling from its current $16T+ level to something like $18T. Yikes!

So why is it that rumors of a "deal" tend to make gold go UP and rumors of "no deal" make gold go down? It's the WOPRs, silly. Many are programmed to buy and sell off of headlines, and for some reason, these computers are selling on every headline that suggests "no deal". But this is completely, 100% wrong and I need you to use actual, human intelligence for a moment. There are four, possible scenarios here. Let's take them one by one.

  1. No deal at all. America heads over the Fiscal Cliff. Massive tax hikes hit on 1/1/13 and, more importantly, the U.S. reaches the debt ceiling and is unable to borrow any additional funds at auction. This is wildly bullish for gold (and silver). The collapse of the U.S. economy guarantees huge, additional QE and the dollar will decline steeply in value. Lack of funding for government spending ramps up the requirement for even more dollar printing by The Fed. Gold demand also surges as countries, central banks and individuals around the world seek "safe haven" from the storm.
  2. A deal on the debt ceiling but no deal on Taxmageddon. This is also bullish for gold as The Fed will, undoubtedly, be standing by with massive QE liquidity injections in an attempt to blunt the economic slowdown brought forth by the tax hikes. Additionally, no deal on Taxmageddon means that no spending cuts were initiated. This lack of "austerity" combined with the $2T+ debt ceiling hike will almost certainly lead to another round of downgrades to the U.S. credit rating and, as we saw in August of 2011, downgrades of the U.S. are quite bullish for gold.
  3. A deal postponing Taxmageddon and no deal on the debt ceiling. This scenario plays out simply because The Congress decides to "punt" the issue and head home for the holidays, instead. They figure that Tiny Tim will figure out a way to cook the books until March or so, thereby leaving the problem for the new Congress to tackle in January. This complete disregard for the seriousness of the issue leaves S&P et al with no choice but to downgrade the credit rating of the U.S. which, as noted above, is a situation that has proven in the past to be extremely bullish for the metals.
  4. A complete deal where taxes are raised, real spending cuts initiated and the debt ceiling increased. Even this is bullish for the metals. Why, you ask? Once again, raising the debt ceiling by $2T+ is bullish. The link between U.S. debt and the price of gold is indisputable. And, again, from where will this money come? QE∞, of course. The tax increases with spending cuts is also a plan for higher gold prices as this will almost certainly slow the U.S. economy into recession and, as we know, the only monetary policy left to combat economic slowdown is the overt printing of new dollars.

So, do you see where I'm headed here? It doesn't matter! Next month, ignore the headlines and the endless MOPE and SPIN emanating from Washington and New York. Just buy gold (and silver, too). Physical precious metal continues to be your only financial protection from the true Economic Armageddon we are facing.


About the Author

turd [at] tfmetalsreport [dot] com ()


Dec 3, 2012 - 2:49pm

Just for arguments sake...

...Mama, let your babies grow up to be cowboys

Fattened Cats

Cowboy Confessional


Don’t worry about the so-called 1%. They allegedly came by their wealth honestly.

Congress on the other hand …

During the Great Recession, the wealth gap between congress and their constituents grew at a spritely pace. At the high end, congress’s cornucopia continued growing by 14% while you and your neighbors’ prosperity plummeted about 39%. On a good day it is damn difficult to like your average congress critter. Knowing that their holdings grew as the world economy imploded illuminates two well known facts: that being connected is profitable and that pitchforks remain viable corrective implements.

Crony connectivity accounts for part of this growing wealth disparity. So does the fact that the rich (a.k.a. your representatives) know how to get richer even in bad times. Our national bad habit of electing wealthy people skews the numbers a bit. But as demonstrated by Obama’s largess to union bosses via his deceivingly described “stimulus” spending, knowing people who spend your tax money is a fast path to wealth. The price for playing loot the lucre is giving back to those that gave.

Which may explain why Democrat defalcator in congress grew fatter than their Republican reprobates.

This brings to the fore an interesting perspective on the “party of the little man.” Seventy percent of the top ten wealthiest denizens of Capitol Hill are Democrats. Even after removing John Kerry and is wealth-by-marriage, the ship of stolen state still lists left. Interestingly, two shrill succubi from San Francisco – the wraithlike former House Speaker Nancy Pelosi and the increasingly oval Diane Feinstein – occupy the top ten list of the Hill’s sale riche. Pelosi’s plunder makes her 1,513 times richer than the average American, which is wealthy even by congressional standards.

It is no mystery then why candidates spent six billion bucks this year to bribe their way into office. The stakes are big for these bagmen and the people for who they divert dough. The $1.3 trillion in forthcoming discretionary spending (for things like tanks and courts of law) contains enough subsidies, scandalous spending and outright grants that thieves of all flavors are granted grifting gifts. That congress continues to gratify goat farmers to make mohair for long-abandoned warware is only a small example of how your congressman redirects your taxes into your neighbors’ pocket.

Congress is the 1%. Not the wealthiest people, but the pinnacle of pickpockets, the most proficient and productive of pilferers. Perhaps occupying congress is an appropriate protest.


Katie Rose...perhaps another income for you?:)

gratify goat farmers

Dec 1, 2012 - 12:30pm
I Run Bartertown
Dec 1, 2012 - 12:05pm

L/R it's all hazy

I had my time as a Constitutionalist (it is no protection...was a great document, though), and a Libertarian...

In theory (and, if we had the populace of the late eighteenth century), I still would be. I have leanings that could be described as beyond minarchist to anarchist, but 'labelled' anarchists are generally confused Marxists (not you, Puck, but I think you're a rarity), so to hell with them.

I've become flexible. I simply hate the things OUR current .gov does (mostly at Federal level in the judicial and regulatory arenas). I'd prefer they simply lacked the power to do so, but if there rose a movement to tear it down, but it rested on STILL having an overly big and powerful government, I'd still support it. Not out of ideology necessarily, but out of self-defense. Sure, I'd like a smaller .gov, but if the .gov MUST be all up in someones' lives, let them loose on the truly destructive and dysfunctional. rather than creating dysfunctional hordes to keep the productive in check. So, at this stage, I'd settle for a .gov that I thought might be on my side regardless of a label or an ideology. Sad times when the best you can hope to say is "it might be a junta, but it's MY junta" but at least one can attempt to be on the right end of the Jackboot.

Mr. Fixboatman
Dec 1, 2012 - 11:50am

@ boatman

You said:

"interesting to see how your post is treated in an ever increasing Turdville turn to the left."

I find that remark very interesting,
in that I had not noticed a decided turn to the left in "Turdville".

In my opinion, of all of the sites spread across the Internet,

TF metals is a bastion of conservative philosophy.

It seems like exceptions to that rule do not last long here.

Liberalism can not mount a cohesive argument to support its position.
In the end, it is a completely self-destructive philosophy, and any thoughtful, rational analysis will come to this conclusion.

Admittedly, my point of view could be considered just a tad more radical then mainstream conservatism,
but in the end, I agree with
all I want is to be left alone.

I also agree with Puck, that the traditional right versus left, or red versus blue debate is pointless. Conservatism no longer has any political power, or any voice at all in the mainstream arena of ideas.

Admittedly, I am a recovering Republican, with a libertarian philosophy. The Republican Party has also sold out America in a major way.

Simply witnessing their treatment of a true patriot like Ron Paul, or the tea party is enough confirmation.

Both sides seem to believe that using the United States Constitution as a guide towards forming policy is either a antiquated concept, or coming from a fringe kook element of society.

I personally am astounded at the lack of “left versus right” debate on this site.

Sometimes I genuinely feel like there is no one here to debate.

In very many ways, and particularly in the ones that are most important, the residence of "Turdville" are very much all on the same page.

Dec 1, 2012 - 11:48am


Fair enough.

I don't see so much a leftist as a distinct populist trend lately. Populism is OK, in and of itself, but it can become a mob without much prompting. Every time someone post a Max Keiser or Bill Sill video I want to scream. Disclaimer: I start stacking because of Max's "Crash JP Morgan, Buy Silver" campaign, so I try to cut him some slack, but the day he attacked Ludwig von Mises I had to cut him loose. Bill Sill is just another greenbacker so he can go suck an egg as far as I'm concerned.

Dec 1, 2012 - 11:37am

Larry...you said...

Now, finding a good woman will require even more work.

It depends on what you define a "good woman" to be!...I may be too hard for you to handle!!!...

Yes-R - Good Girls Gone Bad (Official Video HD)

Bag Of Gold

Dec 1, 2012 - 11:37am

@ Clinkin - EE vs The World

Yes, you're right, that too is a binary system.

The main difference is this dichotomy came about due to the observance of intelligent, well informed people. It wasn't imposed by a corrupt political system aided by a compliant media.

I know this ruffles some feathers, but I just don't seem to see much difference in outcome between republicans and democrats or the left and the right or conservatives and liberals. They talk a good talk but they all seem to walk the same walk.

However, you cannot say that is the case between the "EE" and the "Free Market".

It's especially bad during the political season, but regardless of the season, we're constantly encouraged by the media, radio personalities, etc… to pick sides because one side is right and one is wrong, so we, as a culture, do. It's not much different than cheering for your city's football team except the stakes are higher.

One thing the media doesn't do, though, is try to get us to pick sides in the "EE Vs The World" debate. They are squarely behind the EE. It is only when groups of well informed people gather, such as here, that intelligent debate occurs.

That, I think is the difference.

Dec 1, 2012 - 11:36am


i enjoy your posts and did not mention you or mean to insinuate anything about you.

i was just agreeing w/fix.

and making a personal observation of turdville, now.

Visit the FAQ page to learn how to track your last read comment, add images, embed videos, tweets, and animated gifs, and more.

Dec 1, 2012 - 11:29am

@ Mudsharkbytes--Sincere question

They're ALL just another version of the classic good cop / bad cop routine.


Isn't this what people do here every day regarding the "EE" vs the "Free Market"?

I'd really like your take on the difference. Thanks.

And just to be clear, I'm on the side that believes the "EE" is winning.

Dec 1, 2012 - 11:28am


Instead of working for larger firms that have HR-CYA-itis, if you're not able to stay on where you are you may best look at the smaller, specialty, privately owned shops or consultancies that hire or subcontract.

The company I work for now has less than fifty employees, that's how I managed to get in. A former colleague was looking for help. He brought me in one day and sat me in front of a telephone (I started in customer support). No muss, no fuss, a 3 month contract then a full time position. I didn't even have to fill out an application. The problem is, partly, they now have aspirations to bigness and I don't fit the model.

I've got a few contacts with some of our customers and the consultants who work for them (not to mention a copy of the customer database). If I lose my job I'll be going to them to try to find some short term gigs. I am not without hope, I just don't want to go through the uncertainty and trauma. I like most of the people I work with and the job is interesting and challenging. Given the choice I'd work there till I couldn't work any more. It simply looks like they don't feel the same way about me. At least not any more.

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