Additional Covert QE On The Way?

295
Wed, May 16, 2012 - 3:59pm

An alert Turdite sent me an email last evening where he connected some dots about additional quantitative easing. I've been thinking about it off and on today and I've concluded that it deserves a discussion here.

Before we get started and, as background, please take a few minutes to watch this video:

Video unavailable

"IMHO, QE3 is presently being implemented via the Chartering of NEW Bank Holding Companies in the United States which will utilize Chinese held U.S. Treasuries as their BASE Capital.
-The Chinese held US Treasuries will be utilized as BASE CAPITAL upon which to create TRILLIONS of digital FRN via fractional reserve.
While these Treasuries were held outside of the U.S. Banking System FRN could not be created via fractional reserve; -but, now these Treasuries WILL be used as a basis to generate digital FRN out of thin air.
IF China holds $1.2 Trillion of U.S. Treasuries....
...THEN $1.2 Trillion in U.S. Treasuries = the possible creation of $10.8 Trillion new digital FRN via fractional reserve banking.
Sounds kinda like a money printing scheme doesn't it?
-NO 'Dollar of Capital' rule as Our Host would say...
Sounds a tad inflationary doesn't it?
THIS is exactly how the U.S. Banks Counterfeited FRN and ramped up inflation during the housing bubble.
-It is going to be done again with the help of the Chinese.
The Chinese ARE NOT going to 'dump' their Treasuries: the Chinese are going to print Trillions of digital FRN and go on an unprecedented .GOV/FED sponsored Leveraged Domestic Buying Binge!"

This rather interesting idea seems to have been generated by this little-noticed story from last week.

https://www.thedeal.com/content/regulatory/fed-allows-china-wealth-fund-to-buy-us-bank.php

The banks in question are: (from the article)

  • China Investment Corp., or CIC, and other Chinese entities were permitted to acquire an 80% stake in New York's Bank of East Asia (U.S.A.) NA. CIC manages a portion of China's huge foreign exchange reserves.
  • Separately Wednesday, the Fed also allowed the Agricultural Bank of China Ltd. to establish a branch in New York and the Bank of China Ltd. to have a branch in Chicago.

Now, for those of you unfamiliar with fractional reserve banking, I suggest you watch this:

Fractional Reserve Banking

Whether it's overt or covert QE, growth of the money supply equals growth of debt and vice versa. And, as you can plainly see on this chart, rising debt causes equally rising gold prices.

Put it all together and what do ya do? BTFD and keep stacking.

TF

About the Author

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turd [at] tfmetalsreport [dot] com ()

  295 Comments

¤ · May 16, 2012 - 10:09pm

Dr G

You're in good company. No labels from me for being honest.

 I don't see a true gold standard either because it would have to be audited and very public/above board in it's transparency that I don't think it'll ever happen that way. Unless something really radical happened and the entire worlds FRN system collapsed completely that required something that drastic. The various Govt's could report their gold holdings and they could be bloated and fictitious but who would know the truth? Just like they manage price now they could manage the inventory numbers. I see a GLD/FRN system that they'll bloat the inventory to accommodate the difference between the real inventory amount and a price level they're comfortable with.

I don't see a period where we go to a balanced budget type of gold standard where the only money supply available is what the value of gold is dollar for dollar unless it's revalued extremely high and set to a sliding rule and not a fixed standard. That's what they should do but they won't for some reason. Greed/power control, simply put. Expanding credit needs to happen or stagnation I believe can't be avoided to some degree unless a bad deflation has happened prior to it. Either way, it would take something pretty shocking to the system for it to get to that point. 

I could be way off on that assumption of course. This is all historical stuff that's slowly happening. No one knows what happens for sure at this point I think because we seem to have some large variables at play. Crashing banks in the Western world would throw a wrench into everything. I think they'll figure it out and something that the majority of people can't or won't question will be instituted country by country or a global currency, maybe. It remains to be seen. 

At some point I also hope to flip some gold for a piece of property. There will be a time to get out of gold somewhat and cash out to some extent. I'm not advocating selling one's entire stack (small amount) at some point but if it gets super high in price and redeeming a portion of it for land or whatever cash system their using seems like it's going to benefit a person then I'm all for it at that point. A large property near or on a lakeshore is my goal someday. 

Roark · May 16, 2012 - 10:13pm

@BobbyJaan

"... managed to even beat MY "best ever" price for buying gold (which was a swap of 640k of RAM-Chips [18x256k chips + 18x64k chips] for an Ultra-Rare Proof Krugerrand back in the mid 1980's) ..."

Wow. Someone who remembers the golden days of the computer boom! 

I once swapped a tube of 16Kx1 chips and an S100-bus ExpandoRam II board for similar. The guy walked away whistling and came back later looking to score an 8087 coprocessor. Same deal. Today you'd have to pay to dispose of that kind of hardware, but I still have the PMs. At current value I could buy a pair of serious gamer laptops and still have some left over. 

Times never seem to change :)

Bobbejaan Number 47 · May 16, 2012 - 10:18pm

@Number47

Thank you kindly for that ... My lad's over the moon as it's the first time he's ever managed to get any gold to add to his meagre stash, and the circumstances are one of those "once in a lifetime" type events that I'm sure he'll NEVER forget no matter what gold or silver he may get in the future.

I even made the little bugger go out earlier to buy me a couple of lottery tickets for Wed. night hoping his luck would infect the tickets .... Bloody typical, I still didn't win. laugh

.

As for me, I sent him the auction link in the first place instead of buying it myself, as it's the sort of "smutter" that allows him to generally pick up a couple of ounces here and a couple more there in order to build up his stash bit-by-bit.

I LOVE that he did so well, but I HATE that the annoying little brat wink has managed to even beat MY "best ever" price for buying gold (which was a swap of 640k of RAM-Chips [18x256k chips + 18x64k chips] for an Ultra-Rare Proof Krugerrand during a RAM-Shortage back in the mid 1980's) 

..... I already KNOW the egotistical bugger will probably NEVER let me hear the end of it or stop gloating laugh, and my ONLY protection will be the feeble excuses that (A) "Don't forget that it was Super-Daddy who gave you the deal in the first place" crying ... and (B) "Son, I bought you into this world, so don't tempt me to take you back out of it" wink

.

PS ... BTW, I haven't forgotten the research I promised you ... I've just been a bit tied up recently, and will get it done ASAP.

rocoach Brimstone · May 16, 2012 - 10:21pm

@Brimstone

Let's say your child has somehow managed to run up a balance of $10 million on your credit card. The two of you earn a combined income of $60,000 per year. You can cut back as much as you possibly can, you can sell all your assets and live in cardboard boxes and eat dog ends for dinner. But if push came to shove, would you? No, because no matter how much you cut back, you'll NEVER be able to pay off that debt.

So, knowing your country will NEVER be able to pay off its debt, why would you consent to paying your government higher taxes? Wouldn't you agree that seems like good money chasing bad? 

You are right. The money has to come from somewhere. Luckily the UK and the US have the ability to print money and attempt to inflate their way out of the debt. So eventually you'll be able to pay off that $10 million credit card bill, because your income has inflated to $3 million a year from $60,000.

And that's how it works in the real world. Just keep on stacking...

Lumpy · May 16, 2012 - 10:32pm
Bohemian Lanikai · May 16, 2012 - 10:43pm

@Historiography

"when you made your purchase of precious metal you actually "front ran" the coming bank run. Think about it, YOU have already panicked out of the Dollar and did so before the rest of the herd."

That's interesting, and it didn't cross my mind? I was just helping the U.S. economy; spending money, helping a coin dealer to stay in business. He has employees (Maria is a cute girl, a college grad, she didn't find better job yet), and he pays salaries, health insurance, and taxes... No, I wasn't front-running Maria. cool

redwood · May 16, 2012 - 10:47pm

Every time we get  major

Every time we get major headlines churning over relentlessly about a major political event you know it ain't happening. Good journalistic past time while other pertinent economic matters are attended to. But the element of surprise, after much has been set in motion for month if not years, is the sine qua non of important news. Greece will be tolerated, disciplined, massaged and left in its proper place in Europe.

Then there are arguments like the following that argue against Greece leaving the EU. 

https://www.usnews.com/debate-club/should-greece-leave-the-eurozone/gree...

Victory · May 16, 2012 - 10:51pm

Covert QE3

It's my understanding that treasuries and bank reserves are not one and the same, and thus a bank cannot use treasuries as a base (reserves) from which to leverage new loans. It's true that under our current 'capital adequacy ratio requirements' that treasuries have a zero risk weighting, which allows banks to purchase treasuries basically infinitum without adding strain to their reserve requirement ratio. But the scenario that 'throxx' is proposing I do not believe to be possible under our current banking systems' regulatory framework.

Anyone else have any opinion here, VtC?

Bobbejaan Roark · May 16, 2012 - 10:53pm

@Roark

Yup, those were GOOD days !!

IIRC, I had accidentally over-stocked & bought a shedload of RAM-Chips from a bankrupt competitor for my PC-business at below the then going price of around £1 per 64k-chip and £4 per 256k, and a couple of months later the prices went sky-high overnight & became almost as rare as hen's teeth when there was worldwide shortage caused by a fire (or similar catastrophe) at one of the few factories producing RAM-chips in those days.

.

I made one HELL of a bundle out of that time, and could almost "name my price" for what I had in stock as I was (IIRC) one of only half-a-dozen people in the whole of Southern Africa that had substantial "in-hand" RAM-Chip stocks .... That lucky episode of my life taught me one hell of a practical lesson in the Laws of Supply & Demand.

A year or two later, there was a similar shortage of Hard Drives, and I was also lucky enough to make a killing then selling my spare stocks of Seagate 20 Megabyte (yup = Mega ... NOT Giga) HDD's at something like £400 each and 80 Meg. HDD's at over £900 each ... and (IIRC) Gold was only something like $250-$300 per Troy Ounce at the time ... In hindsight, I just wish that I had ploughed more of my profits into Gold & Silver back then instead of living such a "flash git" lifestyle, but I have absolutely NO grounds to complain, as the cash "served me well" & helped me setup nicely for the future of my family & myself.

.

Big Buffalo · May 16, 2012 - 10:53pm

Purchases

@ Roark: I assume you didn't pull the trigger on the monster box?

@ IndigoStar7: You and me, we got the same problems. We just like buying. Nice 1/2 purchases.

I'm looking at a China Panda right now. Think it'll have to wait a couple days though (nice check coming in). Also, the wife's not happy with all the purchases recently.

Wife thinks this one is cute though. (it's also more moolah)

croc987 · May 16, 2012 - 10:55pm

Nice ones Big Buffalo

Damn I wish I had some dry powder!

Kuchek · May 16, 2012 - 10:59pm

Bank Run

Would that 1.2 Trill cover a world wide run on the banks? Greece? Spain? etc? Sorry if this was brought up already.

Fred Hayek · May 16, 2012 - 11:01pm

@Dracula . . it's not only in america

Hollande famously remarked that he hates the rich. 

Apparently he's the self loathing type. He's got three homes on the riviera and I don't mean double wides towed by a Buick!

Big Buffalo · May 16, 2012 - 11:08pm

Trade

Anyone in the Philly area interested in trading an American Gold Eagle for a Gold Buffalo, straight up?

Meaning I want a buffalo. Will trade an eagle.

silvermedusa · May 16, 2012 - 11:28pm

@rocoach QE and inflation

QE prolongs the torture. You will still be living in cardboard boxes and eating dog ends. Your 3 million dollar salary will not pay off the 10 M, because you will still be living in a cardboard box and on top of it, a loaf of bread and a pound of dog ends will cost you 1 M.

Without QE, system resets, everyone feels pain for a short while, then goods and services will be provided by new/surviving businesses, producing new jobs. I would rather suffer for a short while, than slowly drowning in poverty for a long time. Look at Japan. Decades of pain and it will still blow up anyway.

Magpie · May 16, 2012 - 11:44pm

Oops!

https://www.washingtontimes.com/blog/inside-politics/2012/may/16/obama-b...

President Obama's budget suffered a second embarrassing defeat Wednesday, when senators voted 99-0 to reject it.

Coupled with the House's rejection in March, 414-0, that means Mr. Obama's budget has failed to win a single vote in support this year.

I can't believe Dirty Harry didn't even vote for it. 

ClinkinKY · May 17, 2012 - 12:11am

Just returned from a damn good concert (JJ Grey & Mofro)...

...and ran across this post while catching up. (Keep in mind that they they serve cocktails at these concerts:)

Turd you continue to amaze

Submitted by Pokersensei on May 16, 2012 - 12:58pm.

One day where PMs are not getting their teeth kicked in and you are ready to proclaim the bottom is in. Will this be like every other one of your useless bottom calls? Are the "massive physical orders" sitting right at $1,520 now?

You don't know a damn thing about what direction gold prices will take and the sooner your bloated ego realizes this, the more likely you will have a few dollars left at the end of this when gold really does bottom.

-----------------------------------------------------------------------------------------------------------------------------

I also ran across this post while checking weather.com...

Weatherman you continue to amaze

Submitted by Pokersensei on May 16, 2012-12:59 pm.

On the day that I plan to have a picnic you proclaim that the temperature is going to be 72 degrees. Will this be like every other one of your useless predictions of the temperature? I packed a nice lunch for today and went to the park. Imagine my surprise when the temperature only reached 69 degrees. I damn near near froze my nuts off. You don't know a damn thing about the weather and the sooner your bloated ego realizes this, the more likely you will bring a sweater the next time you plan a picnic.

--------------------------------------------------------------------------------------------------

WTF?

Magpie · May 17, 2012 - 12:26am

This article was posted at ZH,

but the link is to the original site. 

Thucydides was probably born about 460BC and was for a time a General on the side of democratic Athens against aristocratic Sparta in what is known as the Peloponnesian War in which most of Greece took a side. After being exiled he wrote his famous history. The passage that I’ve quoted in full below is, in my opinion, one of the finest passages of classical antiquity. I was somewhat surprise not to be able to find it elsewhere quoted online. It descibes the breakdown of civil society and in doing so it perfectly describes every civil war and revolution that has taken place in the almost two and half thousands years since it was written including the English Civil War, French Revolution, American Civil War, Russian Revolution, and Spanish Civil War. Human nature, it seems is immutable.

The best is here:

https://theneedleblog.wordpress.com/2012/05/09/the-wisdom-of-thucydides/

agNau · May 17, 2012 - 12:36am

@turd

Regards the Martensen article. With bank runs full tilt in Greece, and common sense reasoning for removing those money's. All one needs to throw into the picture is the interconnectedness of banks across the globe(counter party risk)to come to the logical conclusion. The Greeks are to that point where they are about to say "screw you!" just like Iceland. Then, as CM points out, it's on to the next weakest on the list......only I believe once Greece fails, and the runs begin in earnest in Spain, there will be the moment that is most feared......Confidence will be lost in all fiat. (Other countries will not wait their turn as they see others fleeing the burning house.) It falls in my thoughts of first Contagion, then Confidence, and after confidence fails the end game plays out. A total breakdown in systems of credit both large and small. I believe there are negotiations underway to delay once again, that will soon fail. After all, what more can be lost By the Greeks and maintain any semblance of normalcy. Rickards stated once a certain point is reached the avalanch is unleashed. Tipping point. When Contagion meets Confidence is when the "Pedal hits the Metal"! Just plain human nature.

Lumpy · May 17, 2012 - 1:24am

Being perfect.

Sometimes a golfer gets lucky and he hits a hole-in-one. For that moment he or she was perfect.

The other day I was watching my favorite baseball team and we won with a walk off Grand Slam. In that moment the hitter was perfect. The pitcher fell way short of perfect.

I've read probably thousands of predictions over the years regarding precious metals. I've made several of my own. Haven't seen a perfect one yet.

My point is this. If the EE was absolutely PERFECT is all aspects of the current CON GAME they are playing. If they are as flawless as that hole-in-one golf swing, or Grand Slam Homer. If they are perfect the debt level still crushes it all.

Game Over.

So, in my mind, the latest stories of corruption don't mean anything. The huge numbers of debts owed don't mean anything. The next spineless, weak suck President doesn't mean anything.

ONE of the things that will matter the most the minute after "GAME OVER" is........ WHO HAS PRECIOUS METALS, and WHO NEEDS PRECIOUS METALS.

This latest beat down in metals is just the EE trying to be perfect in getting to your precious metals. You be perfect in not letting them get it.

ivars · May 17, 2012 - 1:51am

GSR spike may be signalling the top in GSR

And at least "temporary" bottom in silver.

Of course, in late history GSR has moved in such way up about 6-10 as well, steep almost vertical line, but that happened during May 2011 and Septemnber 2011 silver crashes when silver price was starting to move down sharply, and continued to do so.

This time, its happening after long long silver price decline. So this top has very little chances to go up, and its turn would help silver prices to start growing faster then gold, or, if decline still continues, drop slower than gold.

Here is yesterdays close- superexponential shape characteristic for being near the top. Intraday, when that Globex start selloff hit yesterday, GSR even went over 57. So its lower a bit already, but its the shape that says more than intraday fluctuations:

Two "arguments" for why it could be so important to silver bottom:

https://www.tfmetalsreport.com/comment/521034#comment-521034

By the way, right now GSR is 55,93.

Mariposa de Oro · May 17, 2012 - 1:56am

Off Topic BUT....

Hey All,

I know this is off topic but I think this is really interesting. Is anyone familiar with the Free Lokata Bank and Sovereign Lakota People??

The sovereign Lakota people declare their monetary freedom, institute silver-based currency

https://kali-yuga.org/?p=1437

https://www.freelakotabank.com/index.asp

Welcome to the Free Lakota Bank The Free Lakota Bank is the world's only non-reserve, non-fractional bank that issues, accepts for deposit, and circulates REAL money: .999 fine silver. All of our transactional deposits are liquid, meaning they can be withdrawn at any time in minted rounds.

In 2008, the Free Lakota Bank became the first bank to offer what has now come to be known as Commodity Banking. In this new banking system, value is stored in easy to monetize commodities as opposed to government-issued, controlled, inflated and deflated fiat currencie

Magpie · May 17, 2012 - 2:54am

$1400 "all in" to produce 1 oz. of gold

May 17 - The CEO of the world's fourth largest gold producer Gold Fields, says the price of bullion will need to get close to $2,000 for the industry to remain profitable.

https://www.reuters.com/video/2012/05/17/economy-2012-gold-fields-ceo-sa...

ivars · May 17, 2012 - 3:11am

GSR previous top was during previous silver price bottom

Note, GSR previous top was spot on during previous silver price bottom at December 29 2011- similarly also a silver price bottom after a quite long slide, a bit faster than current one, though.

But from the current chart, even if its growing faster and faster, it is still possible for GSR to grow 1-2 days....At these points max amplitude is impossible to call, only that its very near.

Excalibur · May 17, 2012 - 3:38am

Rickards and Greece

In his interview with Leggy Lauren, he talks in a logical analytical way about deflating Greek labour costs and inflating them in Germany as a way to balance the economies and keep Greece and the others in the Euro. Also there is huge political desire to keep the Euro Project together from the political classes.

But Rickards seems to underestimate the amount of generational mistrust and bad feeling between Greeks and Germans. Now there is utter contempt of the Greeks by the Germans and outright hatred of the Germans by the Greeks. People are not just economic units that logically respond to the market. Try telling the Greeks to just eat baklava. 

Yes, the elites will hold their noses to do business with each other, but when the Greek people lose it they will rather go down in flames themselves, than see the Germans and the EU overlords walk all over them. The economists need to study Game Theory in this complicated mess. Already the Germans are sensing this and may be pulling back from total humiliation of the Greeks. We shall see.

newsbie · May 17, 2012 - 4:02am

The Fed Wouldn't Want It to Be Quiet

Consider this passage from James Rickards' "Currency Wars:"

"Here was Bernanke’s entire playbook—keep interest rates at zero, devalue the dollar by quantitative easing and manipulate opinion to create fear of inflation. Bernanke’s policies of zero interest rates and quantitative easing provided the fuel for inflation. Ironically, Bernanke’s fiercest critics were helping his plan by incessantly sounding the inflation alarm; they were stoking inflation fears with language no Fed chairman could ever use himself."

Rickards, James (2011-11-10). Currency Wars: The Making of the Next Global Crisis (Portfolio) (Kindle Locations 2891-2894). Penguin Group. Kindle Edition.

Rickards says Bernanke wants people to be afraid of inflation to increase the velocity of money. In other words, to get people to spend their money. If this is true, they wouldn't want QE3 to be hush hush.

worldend666 ivars · May 17, 2012 - 4:12am

Yes I switched all my gold at

Yes I switched all my gold at Goldmoney into silver yesterday. I think the time is right for a switch.

pbfurn ClinkinKY · May 17, 2012 - 4:50am

Thanks!

@ Santa's Elf

Thanks for synopsis of Martenson part II.

@ ClinkinKY

Thanks for the weather update. Sounds like our "friend" needs his medical prescriptions re-evaluated.

achmachat · May 17, 2012 - 5:03am

@Magpie

I think you missed an entire series in your collection.

Before the moose, there was the puma :-)

(right now at 10-15 eurocents higher premium than the moose)

thurd aye · May 17, 2012 - 5:04am

MSM censorship at Daily Telegraph

I posted the lines below (gist) to the DT,then went to wash up.Ten minutes later my posted comment is deleted.Nothing rude,contentious ,a contrary viewpoint,information really from local eyes.

................................................................................

" I went to the mother city,CT,yesterday,to do some au business(I was buying KR ounces).The streets were full of young pamphleteers with "We Buy Gold" handouts.Why would dealers pay all these people when gold is a declining asset (subject of the article in DT)? Also in Moscow ,the dealers are clammering to buy your gold at R(ubles )900 per gram.This from a friend via video chat last night.

Make your own decisions based on research. The PTB and the MSM affect your thinking and have not got your best interests at heart.

Disclosure 80% all-in Au (5% ag)."

...................................................................................

.......................THIS WAS ALL WIPED IN TEN MINUTES.

That is proof to my own eyes of their intent.

TAye.

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