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 ()


Nov 30, 2012 - 12:41pm

I make a living selling on

I make a living selling on ebay. Have sold on ebay for over 12 years. I have very little problem with fraud. The fees are the biggest problem. Its not cheap to sell on ebay. But, then again, you can get crazy prices. So its ok.

Nov 30, 2012 - 12:42pm

2011 Smack Down

I was looking at the weekly charts and saw we had a big smack down in early December of 2011. I wonder if that's were we are headed now, 125 dollar correction.

Nov 30, 2012 - 12:42pm

We in for more?

This bounce looks a little shakey??

Nov 30, 2012 - 12:43pm

Move along, please. Nothing to see here.

Just simple FirstNoticeDay gaming and manipulation.

Nov 30, 2012 - 12:44pm

RE: Have you tried to tell others about whats going on

Groaner, yes, I have tried to tell others about what is going on, and my family has forbidden me to speak of it. My son gets up and leaves the room if I try to talk to him about it, and my wife politely tells me to shut up, because I am scaring her to death! I have a daily article here on TFMR about what is going on, and I invite those that are interested to give it a shot. https://www.tfmetalsreport.com/forum/4132/harvey-organ-should-be-interes...

Yesterday I included a piece from an intelligence brief about the Iranians developing hardware to produce an EMP that can be used to destroy America, so maybe more will leave the room or politely (or not ) tell me to shut up, because I am scaring them to death! That article is definitely bullish for gold (and silver and self-defense and food and water)!


Be Prepared
Nov 30, 2012 - 12:44pm

An Economic Fairy Tale

Keynesian Economics – An Economic Fairy Tale

While there are many idiotic political theories bouncing around DC like unmanned bumper cars the most idiotic is the theory of Keynesian economics. Keynesian economics is the belief that making government bigger will subsequently make the overall economy grow bigger.

If Keynesian economics were true then placing fish in a bigger body of water will automatically make the fish grow bigger.

If Keynesian economics were true then placing a blade of grass in the same soil as a tree will automatically make the grass grow as big as the tree.

If Keynesian economics were true then making our atmosphere bigger will automatically cause all living things that breath the air grow bigger.

If Keynesian economics were true then making one variable common to all others bigger (air, soil, water, government spending, etc,) will cause all other dependent variables (animals, plants, mankind, taxpayers) grow bigger in unison.

Keynesian economics is the most absurd theory ever devised by rational man. It is an economic fairy tale.

posted by ugmug (zerohedge)

Nov 30, 2012 - 12:47pm
Nov 30, 2012 - 12:48pm

Nice to finally see a few pennies finally drop

Nice to finally see a few pennies finally drop. @Groaner, I feel your pain, as we all undoubtedly do (trying to explain to others what is going on). Thought I'd share.

At the beginning of this week 2 family members and 1 buddy of mine (who runs his own financial services firm) freaked out and have been all over me for information ever since. I hadn't broached the subject with any of them in quite a while. Seems they started to see what I'd been trying to explain over the last few years and something finally clicked. Between Wed and today, they all BTFD with large initial positions. Not just gold, silver too. All fizz. My buddy finds it ironic he was chasing me for business all these years only to realize the reasons for my serial rebuffs may actually hold water.

Turd, thanks for all you have done and all you continue to do. Momentum may be in her infancy, but she is on our side.


Nov 30, 2012 - 12:50pm

Is Bollocks contact really Barry the Baptist?

That's all you need to know. You know... because you need to know.

I see. One of them "on a need to know basis" things is it. Like one of them James Bond films.

Careful. Remember who's giving you this job.


Big Buffalo
Nov 30, 2012 - 12:51pm

Move Along?

Heck no man!, I'm busy buying!

Subscribe or login to read all comments.


Donate Shop

Get Your Subscriber Benefits

Private iTunes feed for all TF Metals Report podcasts, and access to Vault member forum discussions!

Key Economic Events Week of 2/24

2/25 9:00 ET Case-Shiller home prices
2/26 10:00 ET New home sales
2/27 8:30 ET Q4 GDP second guess
2/27 8:30 ET Durable Goods
2/27 11:30 ET Goon Evans speech
2/28 8:30 ET Pers Income and Spending
2/28 8:30 ET Core Inflation
2/28 9:45 ET Chicago PMI

Key Economic Events Week of 2/17

2/18 8:30 ET Empire St Manu Idx
2/19 8:30 ET Producer Price Idx
2/19 8:30 ET Housing Starts & Bldg Perms
2/19 2:00 ET January FOMC minutes
2/20 8:30 ET Philly Fed
2/21 Fed Goons all day at Chicago Conf.
2/21 9:45 ET Markit flash Feb PMIs

Key Economic Events Week of 2/10

2/11 10:00 ET Job Openings
2/11 10:00 ET CGP Hump-Hawk House
2/12 10:00 ET CGP Hump-Hawk Senate
2/13 8:30 ET CPI
2/14 8:30 ET Retail Sales
2/14 9:15 ET Cap Ute & Ind Prod
2/14 10:00 ET Business Inventories

Key Economic Events Week of 2/3

2/4 10:00 ET Factory Orders
2/5 8:15 ET ADP Employment
2/5 9:45 ET Markit Service PMI
2/5 10:00 ET ISM Service PMI
2/6 8:30 ET Productivity & Unit Labor Costs
2/7 8:30 ET BLSBS
2/7 10:00 ET Wholesale Inventories

Key Economic Events Week of 1/27

1/28 8:30 ET Durable Goods
1/28 10:00 ET Consumer Confidence
1/29 10:00 ET Pending Home Sales
1/29 2:00 pm ET FOMC Fedlines
1/29 2:30 pm ET Powell presser
1/30 8:30 ET Q4 GDP first guess
1/31 8:30 ET Pers Inc and Spending
1/31 9:45 ET Chicago PMI
2/2 10:00 pm ET Chiefs win SB LIV

Key Economic Events Week of 1/13

1/14 8:30 ET CPI
1/14 9:00 ET Goon Williams
1/15 8:30 ET PPI and Empire Fed
1/16 8:30 ET Retail Sales and Philly Fed
1/17 8:30 ET Housing Starts
1/17 9:15 Et Cap Ute and Ind Prod

Key Economic Events Week of 1/6

1/7 8:30 ET US trade deficit
1/7 10:00 ET ISM Services PMI
1/7 10:00 ET Factory Orders
1/8 8:15 ET ADP employment
1/9 8:00 ET Goon Chlamydia speech
1/9 1:20 ET Goon Evans 2:00 ET Goon Bullard
1/10 8:30 ET BLSBS
1/10 10:00 ET Wholesale Inventories

Key Economic Events Week of 12/16

12/16 8:30 ET Empire State Manu Idx
12/16 9:45 ET Markit flash PMIs Dec
12/17 8:30 ET Housing Starts and Bldg Perms
12/17 9:15 ET Cap Ute and Ind Prod
12/19 8:30 ET Philly Fed
12/20 8:30 ET Final guess Q3 GDP
12/20 10:00 ET Pers Inc and Spending
12/20 10:00 ET Core Inflation

Key Economic Events Week of 12/9

12/10 8:30 ET Productivity and Unit Labor Costs
12/11 8:30 ET CPI
12/11 2:00 pm ET FOMC fedlines
12/11 2:30 pm ET CGP presser
12/12 8:30 ET PPI
12/13 8:30 ET Retail Sales
12/13 10:00 ET Business Inventories
12/13 11:00 ET Goon Williams speech

Key Economic Events Week of 12/2

12/2 9:45 ET Markit Manu PMI
12/2 10:00 ET ISM Manu PMI
12/2 10:00 ET Construction Spending
12/4 9:45 ET Markit Services PMI
12/4 10:00 ET ISM Services PMI
12/5 8:30 ET Trade Deficit
12/5 10:00 ET Factory Orders
12/6 8:30 ET BLSBS
12/6 10:00 ET Wholesale Inventories

Recent Comments

by mavens, 4 min 45 sec ago
by Rushstyx, 24 min 33 sec ago
by PiCo, 37 min 20 sec ago
by RickshawETF, 51 min 8 sec ago

Forum Discussion

by waxybilldupp, 46 min 21 sec ago
by HappyNow, 1 hour 39 min ago
by Green Lantern, 2 hours 54 min ago
by ancientmoney, 5 hours 7 min ago
by Green Lantern, 8 hours 49 min ago