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 - 12:25pm

AC/DC video

OK, that's enough shorts for the day.

Nov 30, 2012 - 12:29pm

MS Survival

TPTB did the same thing with MS that they did with Citibank and with FaceBook. Both of these cartel darlings were marked for death by the blogosphere, but when your actual owner is TPTB through interlocking directorates and hidden trusts, then you have access to the market movers info and probably low/no cost money, and you can do okay. The small miners and small business that would produce actual wealth, goods, services, and jobs--not so much. These shares get naked shorted into oblivion, and financing, well, we have a loan office you can use on the back side of the moon.


Nov 30, 2012 - 12:30pm

Coins at Mickey D's

I have a retired friend who-many years ago got himself a gig at an Indian Casino working in the back room. His deal was that he would sort coins incl silver dollars. He would take the real ones and throw in cash. His stash/stack from what I can tell is huge.

with machine gambling now (and inflation caused higher limits) its not too often you see coins.

I remember when a $2 table could end up your losing a whole lot of real money in relation to earnings (my first vist toi Vegas was 1970 when I was earning 10k a year) --2 bucks is now mostly chump change.

Nov 30, 2012 - 12:32pm


regarding your dimes . . . chances are they've been gone through several times already, and the rarer ones pulled.

However, because of the melts that still occur, all those old dimes, especially Mercury heads, are becoming rarer on a daily basis.

A good way to check is to go on Ebay and see what others are selling them for, based on similar condition, date, mint marks etc. to yours. Mercs were minted from 1916 to sometime in 1940s so you can check a lot of their values, by year, in a short time.

Nov 30, 2012 - 12:33pm

Nice chart Grublux

What a great chart Grublux. Same thing I'm looking at on my screen, and it's giving meaning to the lows of the day (hopefully). Also, note that the silver miners are NOT confirming the drop in the metal. EXK for example is only down a bit, and showing a bullish inside candle on its daily chart.

Nov 30, 2012 - 12:34pm


Thanks AM

Yeah, I figured as much. Maybe some day I'm bored or snowed-in I'll start going through them ;)

I found a decent Website though for anyone else interested:


Nick Elwayancientmoney
Nov 30, 2012 - 12:35pm

@CaptainO Thanks for Bron

Thanks for the Bron article and the summary.

"I would therefore suggest that if one is looking for price suppression mechanics, COMEX and the OTC London market is still where the action is. "

Bron's article states that in order to sell GLD shares short they must be borrowed. I believe the "must" means that in order to legally sell GLD shares short they must be borrowed.

With NO major player(Corzine for example) being indicted for theft from customer accounts, there is no enforced rule that GLD shares sold must be borrowed. If the DTCC and AP's know they will not be prosecuted then they can sell as many GLD shares as they want whenever they want. This is sort of "fractional banking comes to GLD shares".

Surely there could be MORE (also possibly illegal) suppression in COMEX and OTC, but a few million vapor-GLD shares at the margin could make a difference.

Nov 30, 2012 - 12:36pm

@ Terp

This is a real good website for anything coin related:


Nov 30, 2012 - 12:37pm


is that double-o zero? Lol!

Nov 30, 2012 - 12:40pm

@ Groaner

I never ever sell on ebay, this is actually the first time. I just did it to switch my graded rounds out with something else that will keep up with premiums as prices increase and my generic for rounds more recognizable (and to pay off a little debt)

Ebay reports any seller who sells over 200 items to the IRS so I don't plan to ever pass that number. I am a stacker so I only sell rarely.

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