Brass Tacks

426
Tue, Sep 18, 2012 - 10:13am

OK, so it has been a few days since QE to infinity became official Fed policy. There is certainly an abundance of swirling news and discussion out there that dances around the real significance. Today, we cut to the chase.

Let's go back and hit on the main FED points:

  • The Fed will keep rates "extraordinarily low" through 2015
  • The Fed will continue $45B/month in Operation Twist through year end
  • The Fed will begin buying $40B/month in mortgage-backed securities (MBS) with no end date or target purchase amount given
  • So many of us have been seemingly immunized against the jolting effect of these headlines. Not just here at TFMR but nearly everywhere that "awakened" citizens congregate on the internet. We take the headlines at face-value but rarely stop to consider things on the next level. But we need to go there today because without a full understanding of what the true meaning and implications are, you're likely to delay actions that you should be immediately taking.

    So, let's go back to the three bullet points above and take them, one-by-one. First,

    • The Fed will keep rates "extraordinarily low" through 2015

    What is The Fed telling you here? Well, a couple of things. First of all, 2015?? That's three freaking years from now! It's one thing to say that rates will stay low for the next 6-12 months. It's something entirely different to say three freaking years! The negative implications of this are dramatic as institutions such as pension funds and insurance companies will be ravaged by the continuance of ZIRP. Additionally, however, what is The Fed telling you about their expectations of economic "recovery"? Despite all of their official forecasts of growth and jobs, it sure doesn't seem that they believe it. Like the old adage says: Watch what they do, not what they say. We talk here incessantly about the miserable economy and the dim prospects for recovery. It is now clear that The Fed feels this way, too.

    • The Fed will continue $45B/month in Operation Twist through year end

    First of all, remember what Operation Twist is. The Fed is selling their short-term maturity holdings (where there is actual demand for "safe havens") and using the proceeds to purchase longer-term notes and bonds. This process is considered "sterilized" because, allegedly, The Fed isn't creating any new money. They are simply "re-positioning" some of their "assets". Whatever. I don't care to get sidetracked as to whether or not this is really a "sterile" process. All that matters is that The Fed is currently executing this strategy to the tune of about $45B/month. The problem for them is, they're almost out of short-term bills and notes to sell and, once this inventory of paper is depleted, the $45B/month is going to have to come from other, "non-sterile" sources.

    Fed vs. Private Sector Treasury Holdings

    The Primary Dealers! Goldman, The Morgue, MorganStanley, Citi, BoA...all of them. They own or purchase new the MBS which The Fed buys from them. And here's the very important next step: The Primary Dealers turn around and use the proceeds from these sales to buy U.S. treasuries! To the tune of $85B/month. Let me do the math for you...that's slightly more than one trillion dollars over the next year. And what does the Congressional Budget Office project the U.S. federal deficit to be in fiscal 2013? It will again be north of one trillion dollars, at a minimum. https://www.cbo.gov/publication/43539

    At the end of the day...and here's where we get down to brass tacks...last week The U.S. Federal Reserve announced a plan whereby they will be almost completely and directly monetizing the deficit spending of the U.S. government. Though the illusion of legitimate borrowing will be maintained and politicians will continue to claim that "we're borrowing all of this from China", you should not be fooled. We have entered a new paradigm of direct debt monetization. By doing so, The Federal Reserve has begun the process of overt currency debasement and devaluation.

    Your only financial protection from this game-ending disaster is the ownership of physical precious metal. Though, in the short-term, dollar-denominated paper assets may perform reasonably well, they offer no long-term protection against your inevitable loss of purchasing power and wealth. Only physical precious metal can protect you in the days ahead. Buy some and add to your stack before it's too late.

    TF

    p.s. I plan to discuss this post in greater detail later today at https://www.turdtalksmetals.com

    About the Author

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

      426 Comments

    Big L · Sep 18, 2012 - 9:01pm

    Rude and crass

    There are plenty of folks here that have been here from the beginning of Turd's adventure.

    If you weren't here in the beginning, it would be hard to understand how attractive this community was to those of us who cherished it. All voices and opinions were welcome and open to question and debate. It was diverse and intelligent and stimulating. Now we have some folks who are still working out some personal issues, but by and large we've managed to retain much of the original feel. Having said that... rude and crass isn't what we had, it isn't what we enjoy and it isn't what we come here for. Hence the beat downs for rude, nasty and aggressive.

    As for the A-team. Some folks have the time to spend on the internet and some people don't, some people are well versed and some are learning.

    I'm learning. And I have very little time to spend here. I appreciate those who keep the discussions on a weighty level and police the objectionable.

    I don't understand the mediocrity reference, but I know an insult when I see one, and that was an insult on the community.

    145Bluesman · Sep 18, 2012 - 9:02pm

    Cmon 145

    We need some links to your tunes!! Right now I'm listening to this:

    JD McPherson - Full Performance (Live on KEXP)
    JackPutter · Sep 18, 2012 - 9:02pm

    We lost a stacker in NV?

    Nevada Recluse Hoarded $7 Million Worth of Gold Bars and Coins in Home
    Read more: https://newsfeed.time.com/2012/09/18/nevada-recluse-hoarded-7-million-worth-of-gold-bars-and-coins-in-home/#ixzz26sBcm6ly Note the writing at the end of the story. Why would the state have any right to liquidate anything in an estate that will have an heir? Also note how having "stuff sitting around in boxes" is somehow bad. If it's physical wealth who's to say the right or wrong of it?

    https://newsfeed.time.com/2012/09/18/nevada-recluse-hoarded-7-million-wo...

    fertzeltwist · Sep 18, 2012 - 9:06pm

    Big L

    Not intended as an insult- just an observation.

    fertzeltwist · Sep 18, 2012 - 9:07pm

    Mediocrity

    Mediocrity was a reference to myself

    ¤ · Sep 18, 2012 - 9:07pm

    George Orwell’s China?

    George Orwell’s China?

    By William de Tocqueville

    Hu Jintao has been keen to emphasize ‘fairness’ in China. But has the message reached the ears of many of the country’s officials?

    George Orwell’s China?

    The author is a professor of economics at a university in China.

     His real name has been witheld at his request.

    Over the Chinese New Year holiday, a crowd of passengers at the Tianjin Railway Station were held waiting by police, left holding their luggage on the platform in the piercing cold wind while a small group of Communist Party cadres strutted onto a first class carriage. Enraged by the unfairness of it all, a young law student from Beijing University snapped a photo of the scene with her cell phone. Several uniformed and plain-clothes police rushed her, yelling at her to surrender her camera and come with them. When they grabbed her, she screamed ‘like a fishwife’ (in her own words), creating a scene until they let her go. The moment she did board the train, she posted her story on her school’s micro-blog, where it spread like wildfire across the Chinese Internet.

    Ever since President Hu Jintao took office in 2003, he has made fairness a central theme of his agenda. Hu, along with his power base in the Communist Youth League, view China’s widening gap between rich and poor as a significant threat to social and political stability. The country’s latest Five Year Plan, which was unveiled last November, aims to redistribute income more evenly in order to foster ‘inclusive development,’ reflecting a widespread belief among Party leaders that Deng Xiaoping’s maxim—‘let some people get rich first’—has gone too far.

    The incident at the station, however, reveals the disconnect between the government’s fixation with income inequality and what’s really been rubbing the masses the wrong way. What people resent isn’t wealth, it’s privilege. By and large, your average Chinese worker...

    https://thediplomat.com/whats-next-china/george-orwell%e2%80%99s-china/

    Save_America1st · Sep 18, 2012 - 9:09pm

    gotta be quick...

    ...and lucky too if you wanna "scoop" the Turd on a story! lol yes

    Big L · Sep 18, 2012 - 9:20pm

    OK

    Glad to hear it. 

    Congrats to Turd on the Santa ref., you deserve it.

    and holy cow on the tungsten! Scary.

    fertzeltwist · Sep 18, 2012 - 9:23pm

    Santa

    Forgive me i'm new- who is santa?

    tmosley · Sep 18, 2012 - 9:24pm

    Yup, stick with small

    Yup, stick with small denominations in EVERYTHING, people. It's a LOT harder to hollow out a 1/4 oz philharmonic than it is to hollow out a 10oz bar.

    With silver, I now only buy materials straight from the manufacturer, something with a serial number on it, or junk silver. Nothing over 1 oz. Hard to drill and fill a 1oz bar, but it is probably not that hard to make a new bar out of lead and electroplate it.

    El Gordo · Sep 18, 2012 - 9:25pm

    Mediocrity

    I'm still striving to reach that vaulted threshold.

    ReachWest · Sep 18, 2012 - 9:27pm

    Santa is Turdville's moniker

    Santa is Turdville's affectionate moniker for Jim Sinclair of JSMineset.com

    Hobo · Sep 18, 2012 - 9:27pm

    Bearish?

    Sorry to keep annoying you all with these CoT/Spot charts, but they only look bearish to me. All explanations are welcome.

    fertzeltwist · Sep 18, 2012 - 9:29pm

    tmosley

    Good point, I stick with small bits of official bullion- not worth counterfeiting, and are small enough not to need change on standard transactions.

    ¤ · Sep 18, 2012 - 9:29pm

    Down in a Hole

    Video unavailable

    Mount Morgan Gold Mine, ca. 1910

    fertzeltwist · Sep 18, 2012 - 9:31pm

    Thanks

    Thanks gramps and reachwest-

    fertzeltwist · Sep 18, 2012 - 9:34pm

    I like

    I like washington commemeratives- they are proof coins, yet common enough to buy at melt price- small bits of silver guaranteed by "the man"

    TexasStacker I Run Bartertown · Sep 18, 2012 - 9:37pm

    re:Detroit

    I love Detroit, went to college at Wayne State and figured thats where Id spend my adult life. Stories like this make me weep inside.

    Grigeo TF · Sep 18, 2012 - 9:39pm

    Screwtape Files

    I'm sure these Tungsten stories are bogus. Screwtape already proved that all such stories were the figments of the imaginations of deranged gold bugs.

    EXCLUSIVE: Conclusive proof of salted gold

    https://screwtapefiles.blogspot.com/2012/04/exclusive-conclusive-proof-of-salted.html

    gbend · Sep 18, 2012 - 9:39pm

    Oil bourse

    Several months ago I read an article and scratched a note on my calendar on Sept 21:

    "Iranian non-$ oil bourse opens". I haven't seen anything else on this for a while. I know

    these things are frowned upon by those in power positions.

    agNau · Sep 18, 2012 - 9:39pm

    ¥ trouble.

    www.youtube.com/watch?v=yWKnAmBEXsM Work for Jap co. With multiple sites in China(joint ventures some).. Don't know anything at this point about what is going on there. Anyone here have valid news of Japanese companies with sites in China?

    · Sep 18, 2012 - 9:41pm

    Blythe was so pissed off

    Blythe was so pissed off about the salted gold story she saw on TV that she decided to pound the metals again this evening.

    philipat · Sep 18, 2012 - 9:45pm

    For the sake of Clarity

    Just in case anyone has missed the point. The Fed is OWNED by the major Banks (Literally, because the shareholders of the Fed are the major Banks) who happen to have their Balance Sheets burdened with bad mortgage debt (Remember all those CDO's and CDO-Squared etc?), although valued at 100 cents on the dollar since mark to market accounting was abandoned. So the Fed then buys all that crap from the major banks also at 100 cents on the dollar, although it is probably worth only 40 cents. That completes this cycle of rape and pillage of the masses by the few in the new world of crony capitalism and socialising the losses doesn't it??

    Monedas Puck Smith · Sep 18, 2012 - 9:48pm

    Pucker Puss !

    I couldn't sit through Stefan Molyneux .... I unplugged him after about 6 minutes .... talk about long, windy pompous posts .... a link to movies is a better idea ? Monedas 1929 Comedy Jihad Soul Is The Brevity Of Wit devil

    Beastly Stack · Sep 18, 2012 - 9:49pm

    Yen

    12726 with a tight stop @12752

    I may be early here but I am not taking much risk.

    If I get stopped,I will look to resell around 12790 depending on what I see in the market.

    Grigeo TF · Sep 18, 2012 - 9:53pm

    Blythe & Screwtape

    Maybe Blythe will feel better if Screwtape writes another love letter. I'm still waiting for Part two, having enjoyed the first installment so much.

    Screwtape - "The demonisation of Blythe Masters on the silverogosphere is, to me, one of the most distasteful, misogynistic, cruel and infantile aspects of the community. ... Do I respect someone who raises millions of dollars a year for breast cancer charities? Yes, I do. .....Do I like to see a strong, ambitious, woman rise in a notoriously sexist industry through talent and hard work? Yes I do."

    "Do I"? Yes, I do... I do.. I do" Hmmmmmmm. More "I do" vows than a wedding ceremony.

    ReachWest · Sep 18, 2012 - 9:56pm

    Fakes and Tungsten Filled Proxies

    Tungsten filled Gold Bars - Yikes!!

    As the Au and it's little sister Ag become more valuable, the incentive to generate fakes and the shells will only increase. 

    I sure would love to know where this fake bar came from. China? Was it a project undertaken by a bank or somebody in a power position to undermine faith/trust in physical Gold? In my opinion, it's more likely to be a crook - trying to profit from the higher price of Gold.

    But, this does lead to a more important question .. "As Gold continues to appreciate, would there not be further incentive for CB's and their minions to generate this kind of fake to cast doubt in the minds of the public?" I think the answer is - yes. At this point, there is little that would shock me with these folks. Although, I don't believe they are there yet - they still have enough arrogance to believe they can totally control the paper markets and thereby cool physical demand. I could be wrong - maybe we are there. Afterall - we're at QE.open.

    [ASIDE] Also - if the CB's were doing this - they wouldn't be bothering with the 10 oz retail bars IMO - they would be filling the 400 oz London Good Delivery bars and stacking those up in GLD and their own valuts to take photos of and add the numbers into excel spreadsheets so they could claim to have xx tonnes of Gold.

    From the looks of that bar - in the photos and the associated video, there was little remaining of the outer gold shell. (Looked like a thick gold foil wrapper). The story implies that a real bar was hollowed out and filled with Tungsten. But, it kinda looks like a manufactured wrapper to mimic the original was made to surround a tungsten bar. If that's the case, then there could be several fake 'wrapped' tungsten bars bearing the original gold bars serial number. If, it was hollowed out and filled, then that implies only the one bearing that specific serial number. [The photos of drilled out Tungsten filled bars (that circulated around Turdville last fall) were definitely the hollowed out variety - this one may not be.]

    Obviously it is a very, very good counterfeit. The experienced jeweler in the ZH story had to destructively test the bar to confirm it's authenticity. Not something I'm likely to do.

    Notice: If you do not see your new comment immediately, do not be alarmed. We are currently refreshing new comments approximately every 2 minutes to better manage performance while working on other issues. Thank you for your patience.

    Become a gold member and subscribe to Turd's Vault

    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 12/10

    12/11 8:30 ET Producer Price Index
    12/12 8:30 ET Consumer Price Index
    12/13 8:30 ET Import Price Index
    12/14 8:30 ET Retail Sales
    12/14 9:15 ET Industrial Prod. and Cap. Utilization
    12/14 10:00 ET Business Inventories

    Key Economic Events week of 11/26

    11/27 9:00 ET Case-Schiller home prices
    11/27 10:00 ET Consumer Confidence
    11/28 8:30 ET Q3 GDP 2nd guess
    11/28 10:00 ET New home sales
    11/29 8:30 ET Personal Income and Spending
    11/29 10:00 ET Pending home sales
    11/29 2:00 ET November FOMC minutes

    Key Economic Events week of 11/19

    11/20 8:30 ET Housing Starts
    11/21 8:30 ET Durable Goods
    11/21 10:00 ET UMich Sentiment
    11/21 10:00 ET LEIII
    11/21 10:00 ET Existing Home Sales

    Recent Comments

    by atarangi, 1 hour 17 min ago
    by atarangi, 1 hour 43 min ago
    by NW VIEW, Dec 9, 2018 - 11:42pm
    by HappyNow, Dec 9, 2018 - 11:36pm