It's All Good

Thu, Jun 12, 2014 - 8:47am

Things couldn't be better in our blissful economic utopia. I mean, for crying out loud, look at the stock market! It goes UP every day!! Things must be better than they've ever been.

Look, I know that this is neither the time nor the place for a treatise on how The Fed and the banks have created massive wealth inequality by constantly creating and devaluing the currency. But understand this...The reason why the rich and get richer and everyone else is stuck in neutral and getting squeezed more every day is Fed policy. Furthermore, since The Fed primarily creates money in order to fund an ever-expanding federal leviathan, the ones primarily responsible for wealth inequality are the politicians, both R and D. And it's these same, despicable politicians who constantly seek to divide and pit us against each other, all in the name of "fixing income/wealth inequality". This is NOT that complicated.

  1. Politicians demand to grow "the government" through military and social spending.
  2. To fund these demands, the central bank creates new money from nothing.
  3. This devalues the existing money stock.
  4. This new money gets continually levered and multiplied, further devaluing the currency.
  5. Money supply expands faster than the supply of goods, services and paper "assets", all of which rise in price accordingly.

Now here's the catch. If you are/were wealthy enough to own paper or real assets before and during the money supply growth, you see the value of these assets increase. If you're lucky enough, perhaps these assets grow faster than the rate of cost increase for material goods and, in the end, you come out ahead and "wealthier" in the process. HOWEVER, if you don't have assets...if you're living paycheck to paycheck as so many tens of millions are...then you don't participate in the "wealth effect". Instead, all you get are the negatives:

  • rising food costs
  • rising energy costs
  • rising education costs
  • rising healthcare costs
  • rising government costs (taxes)

And now, if you're one of the masses, The Great Unwashed, you're really getting pinched. Money creation and Quantitative Easing have benefited the already-wealthy with great gains in nearly every asset class. But for the majority...those with very few, if any, creation has only served to greatly decrease your standard of living. This is why you, my dear friend, feel crushed and are not experiencing the kind of lifestyle your parents and grandparents may have enjoyed.

For example, my father had a regular job and my mother was a school teacher. Between them, in 1975, they brought in $40,000-50,000/year. We lived in a nice home, owned two cars and my dad belonged to the local country club. They also saved for retirement and managed to put all four of their children through college. Today, what level of income would a similar, middle class family need to pull this off? $200,000?? $300,000??? And what is the median income in the U.S.? It's still about $51,000:

So, the politicians spend and spend AND the Fed prints and prints. And who "benefits"? Only those who had money and assets in the first place. Take a look at the two charts below. On the left is the S&P 500 for the past 25 years. Note that from a low of around 300 in 1990, it has now increased more than six-fold. On the right is the the total M2 money stock. Note that from a $3T level in 1990, it has seen a 3.5X increase. THIS IS NOT COINCIDENCE! THIS IS CAUSE AND EFFECT.

And is it any surprise then that all of this has only accelerated since QEI, QE2 and QE∞ began in March of 2009. This direct monetization of debt now appears on "the Fed's balance sheet" and is plotted on the chart below along with the S&P, courtesy of ZH:

So, since direct debt monetization began five years ago, the "stock market" has soared and nearly tripled. IF you had wealth and were able to participate, you're pretty happy and you can at least still afford to drive and eat. IF, on the other hand, you're just a regular guy or gal with a spouse and a family, struggling to make ends meet, here's what you've had to endure, instead:

Protein? A double.

Milk? A double.

Gasoline? A double.

Education and healthcare? Both up by nearly 50%.

So, what's point of this post? The income and wealth disparity cannot be blamed on:

  • War on Women
  • War on White Males
  • Racism
  • Homphobia
  • Gender inequality
  • Illegal immigration
  • Taxes too low
  • Taxes too high
  • Etc, etc, etc

No, wealth and income disparity is, in large part, due to the ever-expanding supply of money...printed by The Central Banks in order to empower the political class.

One day, perhaps soon, this current system will break as it is simply unsustainable. What comes next? I have no idea and I'm not looking forward to finding out. However, in the meantime and in preparation, I will continue to stack and hold physical precious metal. True, sound money and a store of wealth that cannot be debased by central bankers and politicians. 


About the Author

turd [at] tfmetalsreport [dot] com ()


Jun 6, 2014 - 12:20pm

And here, on a micro basis

This is Fed policy in action, benefiting the already-wealthy. Since there is no way that a drop in the S&P can or will be allowed, note the sudden surge away from what had been pretty stiff resistance to new all-time highs:

Look, I don't own any stocks and I don't plan to buy any. However, for most folks that have "wealth", it would be almost irresponsible at this point to NOT have at least some exposure to the "stock market". As they say, "don't fight The Fed". IN the absence of total collapse, it's hard to imagine that the S&P won't just keep on rolling higher as QE and NIRP flush more and more currency out onto the world stage.

Jun 12, 2014 - 8:50am

PM's not S+P

Been stacking not buying the S+P

Makes me look like a chump for the last 24mo.

Jun 12, 2014 - 8:58am

Don't try to loot buildings

Don't try to loot buildings that are burning down.

You might feel rich, but you will lose everything when it all comes crashing down.

Jun 12, 2014 - 9:02am
Jun 12, 2014 - 9:08am

Jesus even Blankenstein is

Jesus even Blankenstein is warning the sheep.

Everything is pointing to something big.

Jun 12, 2014 - 9:10am

The debate always boils down to this

What will the Fed fight to save?




From their point of view they are much more concerned about the bond market than the others. Since they have purchased trillions in treasuries when rates were in a historically low range, any substantial rise in rates will render them ,and the US Gov insolvent (many believe they already are, including me).

I agree that they care to a certain extent about the stock market, and the "wealth" effect. The reality is that the market is extremely over-owned, overbought, and overvalued (read John Hussman).

They will sacrifice the dollar on an alter of their own insolvency. At that point they won't really care where the stock market is trading. It will be a fight for their own survival.

Jun 12, 2014 - 9:24am


a bit higher yet, i guess because the Crimex no longer delivers outside the banker circle jerk

Jun 12, 2014 - 9:34am

This guy


I have written to President Putin & Prime Minister Medvedev, conveying greetings on the occasion of Russia's National Day.

Keep an eye on this guy.

Jun 12, 2014 - 9:44am

SLV just popped back above

SLV just popped back above its 200 MA on the hourly. Third time in the past month.

Jun 12, 2014 - 9:53am

Oil price

Last time oil hit 104 there was a release from the strategic petroleum reserve. That card has already been played and it only bought about a month of stability. With no coalition troops in the Iraqi theater, there are no mopish military jawboning threats that can be used to keep price in check.

I'm not seeing anything that can be used to counter this price action. Is Russia or OPEC going to announce increasing oil production? Naaaah. We've alienated them also.

Obama has his dick in his hand and he thinks its a scepter.

Jun 12, 2014 - 10:01am

Stock markets

It seems like ancient history, but does anyone else remember the case of Sergey Aleynikov? He is the Russian immigrant that was arrested smuggling some of Goldman Sach's software out of the country.

From the wikipedia entry

"On July 3, 2009, he was arrested by FBI agents at Newark Liberty International Airport after Goldman raised the alarm over a suspected security breach. He was accused by the FBI of improperly copying computer source code that performs "sophisticated, high-speed and high-volume trades on various stock and commodity markets", as described by Goldman. According to Assistant United States Attorney Joseph Facciponti, "the bank has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways." "

I don't doubt for a minute that the stock market behavior over the past 5 years and this case are related. Someone is going for the scorched earth policy.

Jun 12, 2014 - 10:09am

Platinum palladium

So, today the monkeys turn these metals huh???

Jun 12, 2014 - 10:36am

Energy and Food prices don't matter :-|

Well if you just remove energy and food from the equation then prices have not increased all that much. You sheeple don’t use those do you? Calm down … it’s “all okay”. HEY HEY HAAYY… look at that guy with the basket/foot/soccer ball he’s pretty good!

Thanks Turd for pointing these out.

Urban Roman
Jun 12, 2014 - 10:38am

Short squeeze on Ag

Looks like it's on. ... how far will it go?

How far back down will they smash it?

Inquiring minds want to know.

Jun 12, 2014 - 10:40am

Pretty decisive move above 19.20

And gold pierces 1270

Jun 12, 2014 - 10:43am

Very encouraging action

Let's watch to see if gold can close above $1272. Very encouraging action, though, as it seems the world is coming apart at the seams. Silver now decisively through $19.20. Let's see where it closes, too. Plat and pallad down on what must be pending news or rumors of solving the miners strikes.

Jun 12, 2014 - 10:45am

GOFO as an indicator

it looks like GOFO is being manipulated. GOFO now positive and gold is up? I guess Turd caused TPTB to change the numbers of GOFO to render it useless as a predictor. Turd posted too many charts showing how negative GOFO resulted in gold price increases. Now GOFO seems to be not behaving the same as it has in the recent past..

Jun 12, 2014 - 10:48am

RE: GOFO as an indicator

That's why I've been asking if there's any way to determine depth of market in gold lending. Like a penny stock, there's 100 shares available at x, but if you want to put major money to work the ask is x + 15% or more.

So is the GOFO rate quoted on 100 ounces of gold or 10 tons? Big difference, but no info to know. If it's very thin then they can post what they want whenever they want.

Jun 12, 2014 - 10:48am
Jun 12, 2014 - 10:50am

Damn that feels good.....

Nice to have an unexplained upwards waterfall on no news for once.

Jun 12, 2014 - 10:50am

Approaching 1% cap

All algos to your stations, all algos to your stations, approaching 1% cap

Jun 12, 2014 - 11:01am

For those tracking the miners..

Looking at 1 year comparisons, the GDX, GDXJ are all down a lot but the YTD comparisons are starting to look quite strong when it comes to outperforming the metal.. and that is very encouraging if this continues.

GLD +2.89%
GDX +6,26%
GDXJ (junior ETF) + 14.56%
GLDX (explorer EFT) + 20.53%

Safety Dan
Jun 12, 2014 - 11:09am

News is war in Iraq &

News is war in Iraq & Russian Rebels cross borders and in fire fight with Ukraine 

Firefight Underway As Russian "Rebels" Cross Border Into Ukraine

Bond Traders Are Taking Iraq's Turmoil Seriously

Iraq Update: Kurds Take Kirkuk, Al Qaeda Surges Toward Baghdad

Remember what gold did back in 2003 on the day war broke out with Iraq? 

Jun 12, 2014 - 11:14am

Krugman must be elated

We are funding al qaeda in Syria and fighting al qaeda in Iraq. It's the mother of all broken windows! Brilliant! GDP will be positive again in no time.

Jun 12, 2014 - 11:19am

That's funny!

That just strikes me as hilarious, erewenguy,

"According to Assistant United States Attorney Joseph Facciponti, "the bank has raised the possibility that there is a danger that somebody who knew how to use this program (Goldman's trading software) could use it to manipulate markets in unfair ways."

Surely Goldman knows how to use this software, Mr. Facciponti, but it is OK for Goldman to develop it and use it as they wish, right?

Jun 12, 2014 - 11:21am

Turd: when you say close, is

that comex or nyse close.

all my are based on nyse--and I know kitco uses 6 PM eastern.

Jun 12, 2014 - 11:28am

What could it be?

Things seem to be compounding themselves and opening the doors for a metals rally. Iraq and Syria, Ukraine, negative interest rates in the EU, poor retail sales numbers at home, increase in the jobless claims, oil pushing toward $110...all seem like a recipe for a hard asset move upward. It might get capped and taken down but the threats all around would indicate that a short bet doesn't have a high enough reward ratio against the risks posed at the present time . The market is complacent, volume is weak, and Main St folks are sitting on their hands. 

What could it be?

Jun 12, 2014 - 11:34am

Lloyd Blankfein said

"I have a lot of bad dreams at night"

You're going to start to have them during the day too, soon, sonny-jim.

But they'll be called reality then.

Jun 12, 2014 - 11:41am

If I could hat tip this post 100 times . . .

I would. Superb, succinct, sermonic. 

Especially this part:

So, what's point of this post? The income and wealth disparity cannot be blamed on:

  • War on Women
  • War on White Males
  • Racism
  • Homphobia
  • Gender inequality
  • Illegal immigration
  • Taxes too low
  • Taxes too high
  • Etc, etc, etc

No, wealth and income disparity is, in large part, due to the ever-expanding supply of money...printed by The Central Banks in order to empower the political class.

Jun 12, 2014 - 11:45am

That's what i call....

...a good post.

How great thau art, my Turd!

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