Some strange guy has decided to print money, like Mickey Bucks at Disney, in order to precipitate inflation, so that poor fuckers pay up at the grocery store and the pump. If you look very closely, this strange man has accomplished his goals of reflating, much to the detriment of the American lower echelon. The unfortunate side effect of his policies is the complete and absolute insolvency of the Federal Reserve.
When the Fed starts selling treasuries, in order to contract money supply, they will realize idiot sized losses. This whole fiasco will end when Congress bails out the Fed. It will be the ultimate bailout. Because of these realities, it is my belief that Bernanke doesn’t have the balls to stop inflating. The higher yields go, the bigger his loss. The bigger his loss, the more he prints. The more he prints, the higher stocks go, and so on and so forth.
Do not confuse the sudden weakness in gold/silver as some sort of sign that the dollar is going to rip higher. That’s ridiculous. The tail doesn’t bite people in the face, the head does. I believe this is nothing more or less than an asset allocation adjustment by the money management community. Like I said in late 2010, people sat on massive profits and opted to realize said profits in 2011, instead of 2010, for tax reasons. Gold and silver will rebound in February.
At the present, I am about 20-25% cash, which is more than double my typical amount. Should stocks sell off, I will buy the dip. I will buy it will great energy and tenacity. I will spit on your triple inverse ETF’s and piss on your heads.
The Fed has my back, pal. Who has yours?
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hold me, i’m scared
Thank you Fly…
“Should” stocks sell off? Gad, my predictions (yesterday) amaze even me!
Well, it’s gonna be a very tough task to create inflation in an economy with spare capacity and steady 9% unemployment.
Jake’s palmreading says different. Will be fun to watch.
Not really, actually. In fact, I only have about 10% more cash than he does, although that’s a shitte tonne for me, as I hate holding the green worthless lettuce.
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sounds like you are saying “don’t fight the fed”… strange simplistic view and quite surprising coming from you
Tell me how fighting the Fed has worked out for you in recent months, years?
never said I was fighting Fed…. however all good things come to an end as they say. If you can not find the sucker at the table its probably you. Look at RUT its sign of things to come. Great play on Born.. well done.
Gold and silver have a little bit more downside to go. But, it is looking a little bit attractive again.
Thoughts on EXK?
Read my blog, for gawd’s sakes!
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Ha, sorry. Subscribing to the RSS now.
Let’s hope you’re right.
Good charts there in your blog, Jake. Thanks.
I got a little EXK. Undoubtedly there is more downside ahead, but I don’t need to catch the exact bottom.
If I can catch 80% of the move I will be satisfied.
If you have none at all at this point, your post is treu (sic).
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As I have commented on before, gold is more influenced by negative real interest rates than inflation (heresy I know).
“detriment of the American lower echelon…”
Those in power to help the poor seem to do the opposite.
That’s what you think.
I think you misdunderstood his post. Unless you think those in power really are helping the poor?
As opposed to helping us all get poor?
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If Bernanke persists in his QE folly, a family of insects will take up residency in his beard…and he may cause the FED to lose money.
Not bad… you know we are looking for a comedic disclaimer writer…
Submit your resume to Jeremy, please.
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Forgot to add ti have inflation you not only need the ED to print money you need increased velocity of same.
The money printing exists but not the velocity.
Cash is being saved- from the consumer to big business.
The market is beginning to lose their trust in Bernanke…England will add to that…concern that this ends in a massive drop in the market as soon as the punch bowl appears empty.
But don’t worry about any of that as long as you run other people’s money – you’ll just lose a year of bonuses.
No evidence.
By the time the evidence is apparent, it will be too late.
what quint said
Brits were stupid. What did they expect after having cut consumption and reducing public deficits? Growth in GDP?? Where would it come from? Of course they have negative growth, and rightfully so. Deflation will follow.
But they will be out of the shitte faster than us.
The Russians fought deflation for 80 years.
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They only cut spending back to 2008 levels. Still running big deficits there.
I guess the Fed made an accounting adjustment a little while ago that amounts to them not having to admit losses when they start selling treasuries.
Why must the Fed start selling treasuries? Clam said he would adjust the “balance sheet” of course, but he could just try China like massing of Treasuries. Print more $, buy more Treasuries. rinse and repeat.
That leaves you with the steadily increasing supply… the opposite of the stated end.
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Can’t the Fed just hold the paper until maturity? That’s an option here that I’m not hearing.
JNJ – that’s an ugly chart to go along with ugly fundamentals.
I’ve always been good at musical chairs.
Is that Buh-wheat?
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Unce, Tice, Fee times a madey!
Who has the FED’s back? And what guarantee do we have that the federal reserve wants our markets to continue upwards? The more the dollar devalues, the more it becomes obvious to everyone that it is a pyramid scheme, the shorter the life expectancy of the FED. Is that the goal of the FED? The bubble gum and duct tape holding the EU together is the only thing holding back the dollar. It is by no means easy to keep these things in perspective, because who knows what gets said behind closed doors, or on secure phone lines. For us to really know what will happen, we must have some idea of the plan of those who OWN the FED. My suspicion is that they want a global currency, and will eventually destroy the dollar to do so, but I’m not sure of the timeline. Longterm, I agree with you, but will there not be a shakeout from the dollar devaluation trade or do you think it is about to go parabolic?
barb
There is no more news that we need as it’s been done to death … That the Fed’s QE is about to destroy the fucking dollar. Since QE the Dollar has basically done nothing to being slightly firmer. And if it was horrendously bad why is gold now taking… I mean QE is supposed to destroy the dollar right, so gold ought to be heading to $5,000 by now.
QE1 added reserves into the banking system in order to (1) prevent it from collapse due to illiquidity, and (2) stimulate creation of loans by banks. As the reserves were created from nil, it meant that the money supply (monetary base) increased. That affected the greenback.
QE2 was a mere asset swap between assets which had already been created before. This time the Fed bought dodgy MBS and paid with reserves it had on it books. It didn’t increase monetary base, but changed asset allocation in the financial system. Banks, which managed to sell with profit their otherwise shady papers, got new liquidity (Fed’s reserves), which they then directed to financial markets, buying commodities and other assets. That drove prices up, but didn’t really affect fundamentals of the USD.
When you pay good money for bad assets at a higher than market price, you are de facto increasing the money supply.
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Fallacy. It is still redistribution. Difference is the shitte is now on the Fed’s books, not banks’.
It’s not a fallacy. It’s a fact. The fed is buying bonds and sending out cash. That’s an add to the money supply. It is not doing asset swaps, as they would mean exchanging one security for another like for instance exchange duration risk and that is not happening. The banks will be able to lend out that money if they can find credit worthy borrowers.
This summarizes the fallacy. http://pragcap.com/mechanics-qe-transaction
Nothing goes straight up, Ozzie Jay, not even real money.
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It’s not an asset swap at all. It’s a direct infusion of money into the system to ratchet up NGDP. How is it an asset swap? The fed buys bonds in the market and exchanges bonds for money. It’s not a swap at all. An asset swap would be one security for another and that’s not happening as money in involved in these transactions.
would you buy EXK here, Jake?
Not t’yet.
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Look I’m going to defend the bearded clam here. Stop believing shit that Lehman made the recession worse or stuff like that. Lehman and those idiots at Bear Sterns failed for one reason only. The Fed lost control by fighting a fight it don’t have to win and ended up sending the economy down the drain. The Fed lost control of nominal GDP when at some stages through the crisis NGDP was fucking -8 points below normalcy.
It started to regain control in the latter part of 09 and it’s been winning ever since.
QE is an attempt to raise NGDP to a target of around 4% and it’s still too fucking low. It’s not to create inflation per se. The fight may still be lost because I don;’t think the Fed understands how critical it is to get NGDP up to 5% and my stall or not continue QE if this round is not enough because of morons like Ron Fucking Paul as the head of the banking committee who wants to close down the Fed.
Silly Bears… the market doesn’t trade down very long in an economic expansion.
The only thing I see expanding is unemployment. The inventory surge is over, and unemployment is heading back into double digit land. Where’s growth coming from? Dot coms?
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Consumers are getting more confident which means they will actually buy things (unheard of I know). I guess that will diminish the inventories, thus restarting the inventory restocking.
Unemployment remains high because we as a business society have learned to produce more with less people. It’s a shame but sooner or later the unemployed do get reemployed.
I know you hate it that Obama is creating jobs but the facts are that we are creating jobs (see last year worth of employment data). He will do a great speech tonight (hold the teleprompter heckling).
For the record, I am not a Democrat, but fully believe Mr. Obama will be reelected due to the rising tide of an economic recovery.
By the way, I wrote that post while bathing in butane. Please don’t light a match.
Just don’t listen to a plugged in radio while in the tub.
By the way plenty of $10.00 an hour customer service jobs are opening up all over.
We need manufacturing and industrial jobs and that what happen until we start putting tariffs on you know who and get tough with Mexico.
TC, those manufacturing jobs are gone to low cost countries. Now this 9% unemployment has become structural. It means the government has to create new jobs “from scratch”. Dunno how, but these are facts.
Tariffs??
Are you smoking ficking weed? Holy shit, get a history book.
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Boehner & McConnell could take the lead on tafiffs … they don’t care about China and Reed is a friend either …. no telling what they are capable of
Do they care about WTO?
They’re not capable of acting as dumb as protectionist Dems. What is your evidence?
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their boycotting the Hu dinner reception … speaks volumes despite the business parties’ relationship with Chino National/Private industry … eh?
Maybe it was because of the insulting ditty they played at the reception.
They will not impose tariffs because they think the Chinese are shitz.
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Lot’s of low-wage farm jobs out there for those interested.
Obama probably will be re-elected, but more likely from a lack of a credible opponent than anything else.
What?
You mean Newt Gingrich and Romney and the usual bunch of losers are not good enough?
Hopefully, the Repubs will wake up and run somebody who can win otherwise just run Bob Dole again.
I am now hearing Ryan.
As long as they don’t Palin him, and they’ll try, he’ll win in a walk.
Even looks a little bit like Reagan.
My guy is Mitch Daniels, but maybe not enough chick appeal, which is the key.
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Yeah, unfortunately Mitch probably isn’t telegenic enough. Too bad.
Ryan and Illeana Ross (woman and Hispanic) from Miami is a winning ticket.
Obama is “creating jobs?” Lol.
For debt counselors, p’rhaps.
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But the pullbacks within the bull market can be sharp.
We are in a short-and-hold market for the forseeable future…and if need be, you can hedge by getting long the indices.
Barack Hussein Obama has my back.
His is my magic negro, pal.
Mubarak in Egypt may be pulling a Shah of Iran soon.
I saw pictures of the riots going on there.
Also in Lebanon the riots are starting against the Hezbollah attempt to take over the government.
If radical Islam takes over Egypt then the border with Gaza will be open and I suspect Israel won’t just sit there.
That could be cool to watch. From very afar.
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My in-laws are there (Ägypten) now.
Light it up!
(kidding)
(?)
Prolly signing up for “White Al Qu’aida”
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Fly,
Pardon my ignorance, but why would the Fed ever need to be bailed out? They have the ability to print money at will do they not? Are they using some kind of leverage to make their purchases?
Because when they are in need of contracting money supply, they will not be able to print. Therefore, they will need to sell treasuries, mark to market and ask Congress for a bailout.
The Fed’s reserves are like score in a game. When Federal Government spends, the money are created. Then the Fed uses t-bonds to drain these reserves back from the financial system to keep the target interest rate. They can do it as long as t-bond yields exceed yield on reserves. The primary dealers are OBLIGED to make market for t-bonds. There can never be a bailout of the Fed, as it is the only issuer of its own currency.
The Fed and the Global Powers in 2009 didn’t “save us”, but just kicked the can down the road, everyone is holding this junk across the world. So sooner or later this Copper Bubble will pop when China and the US stops all of this stuff and the true global demand gets in line with true supply. USA still has the best global natural resources, esp our Agriculture so money will still flow here if we can grow things. We will have our big old ugly depression, made uglier by the Clam, and we will recover and move on..or when it gets bad again and copper is down around 1.00 China will buy like it did before and make another boom/bust cycle.
Excellent post Fly. Honorable mention to Jake and Alpha as well.