The Bernank Giveth

463
Wed, Dec 12, 2012 - 1:44pm

Well, there you have it. The Fed gave us The Full Monty. Beginning in January, The Fed will provide $85B/month in "unsterilized liquidity". For prespective, QE2 was about $70B/month of unsterilzed money printing for a total of eight months and $600B. This latest incarnation of Quantitative Easing represents 20% more QE/month and it's open-ended! New and improved with even more, freshly-printed greenback! What a deal!!

Here are the headlines, from ZH:

*FED BOOSTS QE WITH $45 BILLION IN MONTHLY TREASURY PURCHASES
*FED TO KEEP BUYING MORTGAGE BONDS AT PACE OF $40 BLN PER MONTH
*FED SAYS MONTHLY PURCHASES TO TOTAL $85 BLN
*FED ADOPTS ECONOMIC THRESHOLDS FOR POLICY TIGHTENING
*FED: RATES TO STAY EXCEPTIONALLY LOW WITH JOBLESS ABOVE 6.5%
*FED: RATES TO STAY LOW WITH INFLATION SEEN AT 2.5% OR LESS


As I type, the metals are rallying but not to the degree that many of us would have expected. Gold is $1722 and silver is $33.70. What gives? The answer is in the details and I suspect it will all be cleared up in The Bernank press conference at the top of the hour.

The one, major, heretofore unseen detail is this: The "exceptionally low" Fed Funds rate is now stated to stay low until two economic conditions are met:

  1. Unemployment must tick down under 6.5%. (Not happening anytime soon.)
  2. The CPI exceeds 2.5%. (Also not happening anytime soon as the CPI is about to reconfigured, again, in order to slow the COLAs for Social Security.)

These new conditions have confused the metals markets and slowed the buying. Some are seemingly reluctant to charge into the metals if QE is going to end in April. AHHHH, BUT THAT'S THE RUB!!! If I'm reading this right (and LIESman has said the same), the economic conditions only apply to the Fed Funds rate. They do not apply to QE∞! QE is truly open-ended, potentially to infinity. Expect this to be cleared up during The Bernank's press conference and look for the metals to rally this afternoon.

And again, why is QE∞ open-ended and without conditions?? Because QE∞ is not about economic growth! Oh sure, if it promotes a little growth, The Bernank will take it but QE is about funding the deficit spending of the U.S. and keeping rates low. Period. End of story. And until/unless enough buyers materialize to fully fund the Treasury at auction, The Fed is going to have to continue picking up the slack. Got it? Read this again if you still need help: https://www.tfmetalsreport.com/blog/4202/brass-tacks

Therefore, expect the rallies in the metals to begin in earnest this afternoon or tonight/tomorrow. For perspective, in early November of 2010 the Fed announced the fixed program of QE2, mentioned above at $70B/month for the eight months of November 2010 through June 2011. On 11/5/2010, gold closed at $1397. It then traded as high as $1577 in late April and went on to $1920 in August of 2011.

Silver, as we all recall, was even more dynamic. On 11/5/2010, it closed at $26.75. It ultimately traded to $49 by late April before all that followed. Regardless, it was still trading at $36 when QE2 ended in late June 2011.

For 2013, we must expect more of the same. Not only is QE rolling again but it's for 20% more cash! I am 100% confident that the metals will rally hard in 2013. Why wouldn't they?? The same monetary conditions as 2011 will exist and, this time, the physical metal supply constraints are even tighter as central banks, sovereign and hedge funds, wealthy individuals and even regular blokes like you and I are more keenly aware of the situation and rushing to exchange rapidly-degrading fiat for hard assets.

Please buy more metal today. Now is the time. You can be supremely confident that the fiat-conversion price is only going to be rising in the weeks and months ahead. The madness of the central bankers got more desperate today and physical metal is your only financial protection against them. Buy some more today.

TF

3:05 pm EST UPDATE:

OK, so now we know why the metals aren't rallying sharply. There are conditions for continued QE and they are similar to the Fed Funds conditions.

However, I watched the press conference and personally listened to what The Bernank said. He clearly stated this:

The conditions for curtailing QE and raising the Fed Funds rate are only being offered for the purpose of transparency. There is no change to the actual forecast of "extraordinarily low rates through mid-2015". No change at all. The Fed does not expect a sub 6.5% unemployment rate OR a greater than 2.5% inflation rate through mid-2015 and, therefore, low rates and $85B/month in QE can be expected to continue until then.

YOU MUST UNDERSTAND THIS. The metals are trading this afternoon as if QE will only last through April. This is nonsense and that is NOT what The Fed is saying. The Bernank even went so far as to say that even if the unemployment rate fell to 6.5%, that would not mean a curtailment of QE. They'd still be looking at the labor force participation rate and other factors. He called this ongoing assessment "subjective".

And, again, this is all BS anyway! Economic conditions are only a secondary reason for QE. The primary reason the Fed is compelled to print over $1T in 2013 is deficit funding!! Without The Fed and the PDs buying $1T in treasuries next year, rates would skyrocket to the place where natural, organic buyers would materialize. Given the current state of affairs, at what rate would that be? 8%? 10%? 15%? NO WAY that can be allowed so The Fed is forced to fund almost all of the U.S. federal deficit next year and beyond.

So, the real metric as to when QE might end is this: When can The Fed exit the treasury market without causing rates to violently rise? The answer is, of course, NEVER. Can't do it. Not gonna happen.

Unsterilized QE, at a minimum of $85,000,000,000 per month is here to stay. Permanent and to infinity. BTFD.

TF

About the Author

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

  463 Comments

The Watchman
Dec 12, 2012 - 6:06pm
Katie Rose
Dec 12, 2012 - 6:09pm

I am keeping my eye on...

Winter wheat production.

U.S. drought expands, concerns mount about wheat and rivers

Thu Dec 6, 2012 12:56 pm EST

* Drought expands in Kansas, Oklahoma and Texas * Winter wheat crop devastated * Warm weather worsens drought impact By Carey Gillam Dec 6 (Reuters) - Drought continued to expand through the central United States even as winter weather sets in, wreaking havoc on the nation's new wheat crop and on movement of key commodities as major shipping waterways grow shallow....

more here:

https://www.reuters.com/article/2012/12/06/usa-drought-idUSL1E8N67SP20121206

**********************

As "watchmen on the wall" there is much to keep track of. Much of the winter wheat crop in the USA is in terrible shape. Temperatures are high, and the crops are too dry to flourish.

Last summer I freaked out about alfalfa. It now appears I have too much. My girls are fat and they are giving more milk than at any time previously. And it is winter for goodness sake! So we are making cheese, cheese and more cheese. We simply can't drink it all.

So now I am watching wheat, oats, and barley. I have told three local farmers that I would like to buy 1/2 ton of their crop directly from them. They fill my grain bag during harvest. I unload it and put it in garbage cans in the barn.

I pay them a fair price and they do not have to haul it. Everyone wins, especially my farm animals as I can be assured these are not GMO grains.

The wheat is not for the animals. I just want some extra on hand to help folks out in the event of an emergency.

We need to be watching the farm reports as well as the metals reports. Things are not looking good on the food production side of things.

The USA no longer has grain reserves. Most city folk do not understand what that means.

It means trouble. Serious trouble!

Just a friendly "heads up!" to my friends here.

Istack
Dec 12, 2012 - 6:11pm

I was at the LCS at lunch

and saw this magazine collector's item. very fitting on a day like this. i was just a little youngster in 1971

Bollocks
Dec 12, 2012 - 6:12pm

TOO BIG TO FAIL ... so endless corruption ... no charges EVER.

Excellent 2 min clip from Max Keiser and Stacy Herbert.

Monkeys & Cocaine: HSBC money laundering case
S Roche
Dec 12, 2012 - 6:14pm

Comex Price Action...for traders.

The Market Profile technique of analysis offered by Bell Curve Trading has the balance of the "paper" market pretty well pegged. They were calling for $1,726 as an entry point for shorts going into today. As long as the paper market can out-trade and absorb the physical market their information will be relevant, which at $400 per month, it would want to be. Short term I think they are the best by far. Interestingly, medium and long term they see gold as out of balance, (because they do not look at fundamentals), and silver short term they see as re-balancing, obviously with possible potential to the upside when it is resolved.

@Zoltan I'm officially away but am trying to keep the spread sheet up to date for any correlation of Silver Forwards and price. Fastmarkets.com (an LBMA Data Vendor) are not showing Lease Rates for silver beyond Nov 2 so I don't know how Kitco can.

What I do know is that this quote from the Kitco Lease Rates page: https://www.kitco.com/market/lfrate.html

"Lease rates displayed are an indication only of bank to bank borrowing charges. The degree to which lease rates may be displayed as negative would suggest the degree to which there is a lack of demand to borrow the metal."

Is 180 deg wrong, as negative lease rates are defined by a lower LIBOR minus a higher GOFO which reflects stronger demand to borrow gold, driving up the GOFO rates. Shitco strikes again.

h/t to Slow Loris Larry of Screwtape who pointed this out.

In other news Brother John F used a Netdania chart (OTC) to show Comex silver contracts traded today, I have politely asked him to acknowledge and correct this error, as he is following Silverdoctors who do this but never correct.

Might change my name to S Nopes. I don't mean to hit and run but not many anchorages have wifi.

Mr. Fix pbreed
Dec 12, 2012 - 6:16pm

There might be a few suckers l left,

@pbreed:

But there is absolutely no chance that there are $65 billion worth of suckers.

The only rational conclusion is that Ben is lying.

my father who is an old time can can sailor, got to talk to one of Bernankes boys at a reunion last year.

Although this probably does not go up to the scale of Bollocks “insider source”,

my father did ask him, (after a discussion with me about how our economy is really doing)

“our things as really as bad as people are saying?”

The answer was:

“things are far worse than anybody knows”.

Wish I could give you the name of that source, I was only told that he works directly under Bernanke.

Ben has been printing far more then he admits all long, and he will continue to do so.

Edit:

Wow, that needed a lot of "fixing".

YukonCornelius
Dec 12, 2012 - 6:24pm

The metals will surge higher when the banksters want them to...

Not before. The lunatics are running the asylum. These markets are being policed by the crooked. So they go up when the crooked want them to. Not before. Stop pretending any of this has rhyme or reason - IT DOESN'T - Its all crooked.

Istack
Dec 12, 2012 - 6:27pm

Yes

Impune away!!

This is an absolute joke and a farce. The Bernank even said that QE at $85B/month may have to be increased if no Fiscal Cliff deal is met...and the current InTrade odds are 16%. He also said that the economy is already "slowing" and he mentioned this week's CCI and small business confidence indicators as evidence.

And yet, the metals go down?!?! Because QE at $85B/month is perceived to maybe only last for 24-30 months? WTF?!?!

Buy. Buy with impunity. Buy all dips and buy all rallies. Just buy.

Katie Rose
Dec 12, 2012 - 6:29pm

Thanks, Katie

I have not forgotten about the grains. The drought continues and seems like it may have even gotten worse. Record lows stocks in bins compounds the supply situation as we head into the next growing season.

The old adage is "buy em on Valentine's Day and sell em on Mother's Day". Sounds like a GREAT TRADE in 2013.

Mr. Fix
Dec 12, 2012 - 6:30pm

Turd,What would your thoughts be,

on financing a significant stash.

I have a superduper credit rating, no debt, and can put about 50 grand on a credit card anytime I want to.

The question is, how dumb would that be?

Mr. Fix
Dec 12, 2012 - 6:36pm

It's only dumb if the

It's only dumb if the interest you pay on the borrowed fiat exceeds the return you make on your physical.

Mr. Fix
Dec 12, 2012 - 6:45pm

re, It's only dumb if the

Then that would mean that the timing is everything.

I was well aware of many bloggers on another site who several years ago decided to just charge monster boxes on their credit cards. Although it seemed like a good idea at the time, I was well aware that if the price crashed, or even failed to take off, that that monster box would be a huge liability. I went for leverage and got creamed anyway. It seems to me, that not knowing with any reasonable certainty when this all blows up,

to just play it safe.

I have adopted a strategy of just taking the cash out of my pocket and converting it to silver and gold.

At least I can't lose, I know they can't hold this down forever.

Thanks.

old tradesman
Dec 12, 2012 - 6:45pm

re:I am keeping my eye on...

and you should be 1/3 is export! To keep up gdp, on the global market with trade... What happens? keep exporting as the ratio gets smaller? (less gdp) Or feed our families? (gov. controlled )(whats your guess?)

less money to spend here because of prices rising here. less consumption. gdp stays the same (until?)

Anonymous
Dec 12, 2012 - 6:46pm

Removed comment

Removed comment.

Bollocks
Dec 12, 2012 - 6:49pm

Dec 12, 2012 - 6:50pm

BTW

Several folks, including Uncle Ted, have commented today on the sudden surge in the SLV short position, which has risen by 50% in two weeks, from 13 million shares short to over 19 million. This took place during the period 11/16 - 11/30.

6,000,000 ounces withdrawn. Hmmm. Where have we seen that??? Oh yea...Per Harvey on 11/24/12. 7,000,000 ounces withdrawn from SLV between 11/16 and 11/23.

Nov 23.2012:




Ounces of Silver in Trust 315,658,356.000
Tonnes of Silver in Trust 9,818.07



Nov 21:2012:





Ounces of Silver in Trust 317,642,788.800
Tonnes of Silver in Trust 9,879.80


Nov 20.2012:



Ounces of Silver in Trust 318,126,801.800
Tonnes of Silver in Trust 9,894.85



Nov 19.2012:





Ounces of Silver in Trust 318,126,801.800
Tonnes of Silver in Trust 9,894.85


Nov 16.2012:


Ounces of Silver in Trust 319,578,894.800
Tonnes of Silver in Trust 9,940.01


Nov 15.2012:




Ounces of Silver in Trust 322,483,146.800
Tonnes of Silver in Trust 10,030.35


nov 14.2012



Ounces of Silver in Trust 322,483,146.800
Tonnes of Silver in Trust 10,030.35

we lost 1.984 million oz of silver at the SLV today.
In one week we have lost over 7.648 million oz and yet silver rose $1.62
from $32.50 to $34.11

Understand that Andrew Maguire was 100% correct when he explained to you that SLV and GLD are used as depositories of physical to "flywheel" metal in the face of physical shortages. This latest surge in SLV short interest is nothing but a continuation of this ongoing fraud.

The Watchman
Dec 12, 2012 - 6:54pm
Karankawa
Dec 12, 2012 - 7:01pm

Capital Account is up

Jim Rickards: the Fed is Racing to Create Inflation Before the US Economy Implodes!
Bollocks
Dec 12, 2012 - 7:02pm
The Watchman
Dec 12, 2012 - 7:06pm
ScottJ
Dec 12, 2012 - 7:08pm

Anyone else notice the lull

Anyone else notice the lull that is going on right now in this period of time?
So much ridiculousness and everything "carrying on as normal."

..

Something stinks.

Kcap
Dec 12, 2012 - 7:13pm

It is incumbent upon...

all hedge funds and money managers in the large spec category to go all in long against bullion banks to break the system and fraud and manipulation. If they don't, this manipulation and control lasts longer....and much longer unless tptb plan on their nuclear option of taking it down themselves. Why don't these fools see the opportunity there? They could take it down, expose the fraud and look like superheros. A few billion dollars is all it will take...

Sprott, Sinclair, Hathaway, Embry, Rule, Dalio, Bass, Turk, and the hundreds of other hedge funds and money managers need to get together and make a plan.

Do it. Confidence is ALL it takes.

Kcap

Dyna mo hum
Dec 12, 2012 - 7:15pm

Katie Rose Drought

There will always be grain in these parts to some extent. Whether or not one can afford to purchase the grain is a another question.

Zoltan
Dec 12, 2012 - 7:16pm

@Turd Shorting SLV

I don't think shorting SLV has anything to do with physical. The shorts just sell the shares, no metals required. As this creates a false supply it should be illegal, but we won't hold our breaths on the CFTC doing anything about that, will we. I would think this is in addition to any physical withdrawals that occur and is further evidence of the shortages. I believe Kitco's silver was confiscated by the Canadian government nearly two years ago and they still have millions of dollars in "pool" accounts.

Z

ed
Dec 12, 2012 - 7:21pm

gold 1710

if you are a buyer, be prepared for incessant negative chatter about the longevity of QE and the circumstances in which it will be removed. all the fundos look good but others aren't buying yet. price cant rise unless buyers are more committed than sellers.

WineGuy
Dec 12, 2012 - 7:24pm

Warning - Profanity Post

Today's market action was a complete fucking joke. Our beloved PM's should be on Mars and the FRN should be in the shiter. Nothing will happen until TPTB decide it's TIME. When that is is anyones guess but I am convinced when it's time we will wake up one morning and AU is $7,500 & AG is $500. The sad thing is the majority of people won't even notice or care. What a fucking farce!

tobydaniel
Dec 12, 2012 - 7:31pm

The Cartel Causes Deflation as they Implement QE4

Boy oh boy we are loosing steam from this QE. Probably the worst one yet. lol. Until next QE right? Maybe if we double what we did today we might actually be up a dollar before they smash the crap out of it. I can see right through these guys. They print and print, hold the dollar stable and beat the living crap out of metals. They actually cause deflation while printing! Ingenious. They have a great game here. They own the CME and COMEX and LBMA and rig their own system. Its almost the perfect system.... except the fact that silver is running out.

rocoach
Dec 12, 2012 - 7:36pm

Silver will go up when

Silver will go up when God wants it to. And not one moment before.

Dyna mo hum
Dec 12, 2012 - 7:38pm

Wine Guy Profanity?

Is that the best you can do? I could beat that in kinder garden!

Nigel Black rocoach
Dec 12, 2012 - 7:41pm

@rocoach

"Silver will go up when God wants it to. And not one moment before."

Oh - are you talking about Lloyd Blankfein or Jamie Dimon?

Contribute

Donate Shop

Get Your Subscriber Benefits

Exclusive discount for silver purchases, and a private iTunes feed for TF Metals Report podcasts!

Key Economic Events Week of 4/22

4/22 10:00 ET Existing Home Sales
4/23 10:00 ET New Home Sales
4/25 8:30 ET Durable Goods
4/26 8:30 ET Q1 GDP first guess

Key Economic Events Week of 4/15

4/16 9:15 ET Cap Util and Ind Prod
4/17 8:30 ET Trade Deficit (Feb)
4/17 10:00 ET Wholesale Inventories
4/18 8:30 ET Retail Sales (March)
4/18 8:30 ET Philly Fed
4/18 10:00 ET Business Inventories (Feb)
4/19 8:30 ET Housing Starts and Building Permits

Key Economic Events Week of 4/1

4/1 8:30 ET Retail Sales (Feb)
4/1 9:45 ET Markit & ISM Manu PMIs
4/1 10:00 ET Construction Spending (Feb)
4/1 10:00 ET Business Inventories (Jan)
4/2 8:30 ET Durable Goods (Feb)
4/3 9:45 ET Markit & ISM Services PMIs
4/5 8:30 ET BLSBS

Recent Comments