Additional Covert QE On The Way?

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.

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.


About the Author

turd [at] tfmetalsreport [dot] com ()


ivars · May 17, 2012 - 12:30pm

I guess the battle USDx vs PMs has been won by PMs

Which is essential. USDx will continue to move up, but PMs will move just faster. Normal flight to safety to USD as a reserve currency (=value storing commodity) with double safety found in PMs. No big inflation in the USA, hence. But fear of sovereign debt crisis in the USA will drive metals higher in USD terms, whatever USDx is. And in all (except any?Have no idea) other currencies even more.

So the bottom yesterday it was. How nice that it coincided with GSR peak. Right now GSR is 55,73. Yesterdays close was 56, 54. yesterday intraday maximum at the big end of Nymex selloff was 57.

Everything has worked out smoothly, and this (yesterday) was the last serious bottom. Lets wait a bit and get confirmation on that, and then , if true, these events have confirmed a bunch of prediction charts at once (in some , like USDx- trends). That may be helpful for future.

Charles S. Hamlin Groaner · May 17, 2012 - 12:34pm

Selling of Bullion

The following is from California Numismatic Investments website...

The following is what The Industry Council For Tangible Assets has to offer about what the I.R.S. wants in the way of paper work. They are describing the paper work provided by bullion dealers which relate to what you purchase or sell. These rules are taken from the ICTA newsletter Washington Wire dated December, 2004.

  • First: You can place any size order and pay with a check. No one cares, not even the government. The only time they want to hear from us is if you invest more than $10,000 in cash or money orders. Then you must fill out I.R.S. Form 8300. There is nothing wrong with large cash transactions, but the government wants to know about them. And, by the way, you can't spend $5000 today and $6000 tomorrow, for Uncle Sam does not like to be fooled.

  • Second: There are rules which apply only to bullion and only when you sell. They have nothing to do with your purchases, and do not apply to rare coins. Kilo bars are 32.15 troy ounces of gold and are subject to reporting. We are also required to report any gold bar sale totaling 32.15 ounces are more. Concerning 1 troy oz. gold coin transactions: If you sell 25 coins or more of the Krugerrand, Maple Leaf or Mexican Gold Onza we are required to report them on I.R.S. Form 1099B. Such reporting is not required on transactions involving the U.S. Gold Eagle the Australian Kangaroo or the Austrian Philharmonic. There is also no reporting on any small gold bullion coins.

  • Third: We are required to report $1000 face 90% silver bags and 1000 ounce silver bar transactions only when you sell to us. We are not asked to report the sale of 40% bags or less than $1000 face in 90% silver coin. The 10 and 1 ounce silver bar is exempt as long as the sale does not exceed 1000 ounces.

  • Fourth: Platinum or palladium bars in quantities of 25 ounces or more are reportable. Platinum bullion coins like the Canadian Maple Leaf, the U.S. platinum Eagle, or the Australian Koala are exempt. Palladium bullion coins like the Russian Ballerina are exempt. If these rules seem arbitrary we don't blame you. We believe our government based their decisions on what was traded on the nation's commodity exchanges and had little to do with what was happening in coin stores across America.

¤ · May 17, 2012 - 12:34pm


The Shimmy Sisters ~ Fire, Belly Dance and Snakes devil

Dr G ivars · May 17, 2012 - 12:40pm

Which is essential. USDx will

Which is essential. USDx will continue to move up, but PMs will move just faster. Normal flight to safety to USD as a reserve currency (=value storing commodity) with double safety found in PMs. No big inflation in the USA, hence. But fear of sovereign debt crisis in the USA will drive metals higher in USD terms, whatever USDx is. And in all (except any?Have no idea) other currencies even more.

So the bottom yesterday it was.

​I don't get most of what you do, but I really don't get this. Metals down for a month straight while the USD goes above 81. Still above 81, as you address in your post. But finally a nice green day for metals and we claim that PMs have won the battle? This is still a very bearish chart until some key indicators come to pass.

Please explain that to me. Was this bottom like the bottom at 33? or 31? or 29? or 28?

We've all seen lots of "bottoms" over the past 12 months, and none of them have panned out. Is this bottom mostly based on your gold:silver ratio chart?

Eric Original · May 17, 2012 - 12:44pm

Groaner: It's a set up. Run away from Lear Capital fast!

The post above from Charles S. Hamlin looks correct to me. These rules have been in effect for years and years.

What Lear Capital is trying to scare you with is the proposed new rules from a couple of years ago, which were dumped. And by mentioning mint state coins he is laying the groundwork to set you up as a sheep to the slaughter to buy high mark-up, high premium coins, as in this recent post from a fellow long standing Turdite:

Do yourself a favor. Do not get cute and figure you'll only buy the "smart stuff" from Lear Capital. RUN AWAY FROM LEAR CAPITAL!!! Do not walk, but RUN AWAY from these thieves as fast as you can.

Big Buffalo · May 17, 2012 - 12:46pm

boy oh boy

if gold can just get back to $1555, before it takes another step up....come on cartels, please sell some gold to buy the FB IPO.

didn't pull the trigger on the panda yesterday, but I will this time. I'm liking the triple bottom thing. fits in real nice with the debt to gold chart. everyone's talking about printing money...

Just got notice the AU and XF rolls of Walking Liberties are on their way. Two gold eagle are on their way. I'm so excited....I just can't hide it.

The pointer sisters - I'm so excited
pforth · May 17, 2012 - 12:57pm

Feeling like...

Feeling like a battered wife. The husband's hit me for the last 13/14 days and now he comes home with flowers. Still flinching at every sudden move.

ivars · May 17, 2012 - 1:06pm

@Dr G-USDx, bottom

Thank You for clear questions.

Please explain that to me. Was this bottom like the bottom at 33? or 31? or 29? or 28?

I only said that bottom may have been yesterday at , obviously ( did not mention it ) 26,75. Before that I just said (s0me 2 weeks ago, i guess) that the bottom that is coming might be the last one. I mean, the last serious one. If you buy now, you will never loose even with leverage. (Ok, have a 1 USD stop interval). This is now confirmed by the direction change in relative USDx -PM price movements (see below).

We've all seen lots of "bottoms" over the past 12 months, and none of them have panned out. Is this bottom mostly based on your gold:silver ratio chart?

Both my silver chart which predicted bottom in the beginning of may and GSR chart which predicted the same, but ultimately I made decision on the maximum -peak GSR which happened yesterday as it also happened during last silver bottom in December. I think that was spot on.

Metals down for a month straight while the USD goes above 81. Still above 81, as you address in your post. But finally a nice green day for metals and we claim that PMs have won the battle? This is still a very bearish chart until some key indicators come to pass.

It is the relative movements which are important. Relative to USDx changes metals after the bottom was not anymore reacting the usual way ( going down when USDx goes up) , but both were going up, or metals were going up more than USDx. Since I expected this to happen long ago, prematurely, once I saw this change in behaviour that happened today, I thought metals have won the battle vs, USD as risk off assets of choice. May be not the war, as S Roche pointed out. There will be still deviations from this new rule, perhaps, but the general trend from now on ( or it is in final forming stages to become very clear within few months) will be USDx up, PMs up. Just PMs will move faster, so their price in USD will increase.

EUR is done for this year. Going down to 1,1, perhaps. Hence USDx increase.

Hope this helps.

Swift Boat Vet ivars · May 17, 2012 - 1:11pm

Ivars ---- GSR

I notice you are quite into the GSR, as I am too. Actually, traded my first gold for silver at 52:1, so a bit premature. My question for you is ----- Noticing that you have GSR making very drastic moves in the next two years (~100:1 / ~30:1), do you attribute most of that fluctuation to silver's volatility or what? Do you really believe that we can make such returns swapping back and forth as you predict?


Mickey · May 17, 2012 - 1:15pm

sustainable rally?

a rally is a rally and a correction is a correction

the question is whether this is a sustainable rally, or more important, whether a bottom has been or being put in and we are starting a new trend.

I like to count 2-4 days out and see what happens--not very scientific but I opened probing paper positions today --already sold off some--and might repoen later today, or not.

When I sense a trend I start loading up. Last Thursday I sold the last of my "hedges" (my physical stuff just sits) and was a little worried but did it anyway--thought about reopening some today but rather sold covered calls to hedge.

I think fundamentally with all the euro banking problems coming to fruition and things like Philly Fed report today--even the deaf dumb blind and inept and corrupt will figure out things are amiss. Yeah--might even extend to MSM.

Orange · May 17, 2012 - 1:18pm

Not sure if this was posted from Harvey's site

however, I am reading it slowly, trying to follow it. Turd, if you have a chance to read it and give your insight verses what is happening today, I would appreciate it.

Gold lease rates, on the other hand, are more like a barometer, measuring credit pressures in gold banking. But central bankers, unlike weathermen, can often -- at least for a while -- affect the very pressures they are measuring, and thereby even lower the temperature. But they do so at their peril because in a real gold banking crisis, unlike a modern commercial banking crisis, there is no lender of last resort. The Fed will never run out of dollars; the Bank of Japan will never run out of yen; but both -- and all the central banks together -- can most assuredly run out of gold.

rocoach Wizard · May 17, 2012 - 1:20pm


​One reason to announce QE3 is obviously to spark a buying frenzy in anticipation of future higher prices. In hopes that the rush to stock inventories with product will in turn spike manufacturing production, leading to more jobs, leading to more tax revenues.

Why on earth would they even conceive of making an open announcement of QE3 when all of their intelligence is telling them if they announce it openly announce it, the effects on the stock market and in the metals market would wipe out all of these past months of hard work they have put into pumping the stock market and smashing the metals market. The trotting out of Munger, Gates, Buffet and Masters. Along with the very intense dispatching of internet trolls and news story's to be broadcast from the main stream media outlets to spread the "Good News" The Economy and Housing are coming back,Unemployment is Down and buying Precious Metals is for the Uncivilized.

Wizard · May 17, 2012 - 1:21pm

Whoda Thunk

Just a few trading Days later and Here comes another Billion Jamie Dimon Blew.

ivars · May 17, 2012 - 1:23pm

@Swift Boat Vet -GSR

Basically the GSR charts came out as I divided gold prediction chart with silver prediction chart. The wild swings are nothing that has not happened before. Perhaps its linked to noticed tendency for silver to get oversold/overbought more than gold- may be because its available (perceived as much cheaper wealth storage) to more broad set of less knowledgeable buyers, who have hence more tendency for herding, following fashion trends. That creates bigger volatility, plus perhaps the size of the market.

I think 52:1 is very good and in my books this time today is the time to change. Not very big difference , 52:1 or 56:1. It should not go higher, in my opinion. Since it has gone "parabolic", as superexponential peaks are called I guess in trading community.

proton777 · May 17, 2012 - 1:24pm
rocoach · May 17, 2012 - 1:25pm

According to HRH

It's gin o'clock.

Dr G · May 17, 2012 - 1:27pm

Ivars, thank you for your

Ivars, thank you for your responses!

OC15 · May 17, 2012 - 1:28pm


I am of firm belief that the quickly decreasing interest rate on the 10 year note is indicative that we will be in deep stuff very very soon unless the FED does something.

sprite · May 17, 2012 - 1:35pm

The End?

Look its not rocket science

If you think its the bottom, buy. Use this thing called a stop. Set your stop a few ticks below an obvious support level.

If you think it is a 50:50 call of a dead cat bounce, buy a little as a hedge, and then wait for confirmation

If you think its just a one day rally, then wait for confirmation

Its not hard, is it? All the rest of the speculation is white noise.

As for CGT and bullion, you only have to look at the buy back spreads the brokers offer to realise that your best deal is 1oz gold and 1kg silver, as these are the most marketable items. Bullion brokers have to pay a lot for secure storage. They don't want their goods sitting around ad infinitum. They want them out the door ASAP.

The only good thing with purchasing 1oz, 1/2 oz coins or smaller is their portability. The spreads on these are often so huge that you have to take on board a fair amount of risk that even with a market rally, you might not even make back what you paid for them. I suppose you've always got the private market but it seems prudent to me to not let the world know what you are offering, and what else might be in your possession. To quote Kenny Rogers, you gotta know when to hold 'em, and when to fold 'em.

 You have a certain degree of anonymity protection against the great unwashed by going through a broker.

Caveat emptor.

pourty · May 17, 2012 - 1:51pm

A tinfoil comment

Ok, so I got up a bit late this morning and checked kitco... saw this... Note the London fix prices:

And now this from a moment ago, again, note the London fix prices:

What gives? Fat Finger?

ETA: (cropped pictures for brevity)...

Big Buffalo · May 17, 2012 - 1:52pm


I agree with Eric O on his first point. Don't listen to the sales people. Figure out what you want as far as bullion is concerned, check to see if Lear has the best prices and order from that company. I shop at Lear Capital, Apmex, Provident, Monarch, and Fidelitrade. Bullion is bullion. They're all the same if you don't deal with the reps.

Private message me if you want a a shipping code for Lear. Prices are competitive when you get the free shipping.

As far as the gold taxes and such, the tax laws change all the time and you can bet your ass when/if gold gets to $3000/$5000 oz, the government is going to start talking about changing some tax laws. Since I'm not wealthy, I'm just on a personal mission to find the gold coins I like and buy one of each. There are so many out there. Why not enjoy our investments while trying to protect our purchasing power.

To the others(you know who you are). . . .AND ONE MORE THING: We've taken a beating, a real beating for 14 days. Just for one day, can the bears just sit back and let us enjoy this? Just one day. You can come out tomorrow and tell us how wrong we are and how gold is headed to $900. Let's just enjoy.

Dr G · May 17, 2012 - 2:09pm

I don't know the reason for

I don't know the reason for those London fix changes, but Kitco is reporting strange prices today.

I'm showing a silver high of $28.98 on my Kitco apps, which obviously did not occur.

Direct LBMA numbers here of course: LBMA fixing

Groaner Eric Original · May 17, 2012 - 2:14pm

I made a mistake.. It was Merit financial I talked to about coin

So what about monster boxes of silver maples. They have to be reported when you sell them?

Australian coins dont have to be reported?? Why, what's the difference?

thesandbox · May 17, 2012 - 2:15pm

LCS report...

Just got back from the LCS. Said buyers and sellers have been about equal lately and also commented on some prices to watch which also have been thrown around here. Said to keep an eye on Greece and the EU mentioning that Greece probably will slowly introduce the Drachma while the Eu just happens to what he called "nullify their marriage" and act like they were never part of the EU. Said to watch the 27.20 line in silver and if it closes below that that yes things are going downhill fast and $23 would be what to look for in that case. ohhh....and ASE's were $4 over spot for tubes for 2012's. Just FYI.

recaptureamerica · May 17, 2012 - 2:16pm
thesandbox · May 17, 2012 - 2:17pm

LCS report...

double post deleted

thesandbox · May 17, 2012 - 2:21pm

wow...CNBS really pushing this IPO

taking up the whole top half of the page now when you open it up. Not trying to sucking in some buyers are they???? ;)

recaptureamerica · May 17, 2012 - 2:25pm
Groaner · May 17, 2012 - 2:27pm

I had to work today so what was the fuel under the metals??

Are they sniffing QE? Is it the bank runs going on in Europe?

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