The Golden Truth: More QE3 Serum

Friday, April 15, 2011

More QE3 Serum

No time to do a big post today, but we are now seeing some Wall Street firms cut their Q2 GDP estimates PLUS a non-Wall Street firm with more credibility just cut its Q2 GDP forecast. I got this from zerohedge:

Will U.S. economic output be affected by the supply disruptions to the Japanese auto manufacturers? The answer is unequivocally yes and the economic impact will be quite severe in April and for Q2 as a whole

Here's the LINK Goldman has also been busy lowering its outlook for Q2 and the full year. You can google to find reference to that, or zerohedge has been chronicalling it. Some people are of the view that the chief economist at Goldman gets "special" insight into what the Fed is thinking, and thus believe that Goldman is prepping the markets for the eventual capitulation on the QE2-extension aka QE3 call from Fed. Also recall that I have averred in my commentaries that the renewed money printing programs would be justified by the economic effects globally of Japan and Libya.

"But what about the great economic reports today and earlier this week that show manufacturing growth and lower than expected inflation?" you might ask. I promise you that nominal growth in these economic indexes are highly skewed by real inflation. And please note that today's CPI report, to begin with, is a highly manipulated Government prepared report and it's widely acknowledged, accepted and proven that the Govt-CPI is recklessly and tragically incorrect. And furthermore the only number that was better than expected was the "core," which excludes food and energy. ROFLMAO. How many of you spend at least 30-50% of your after-tax income on food and energy (gas, heating, a/c, electric)? Most Americans do.

So toss these b.s. economic reports out the window and start looking at what is really going on around you. The total level of Americans actually working as % of the population is in continuous decline - the Govt just changes the definition of what constitutes the "labor force." The number of Americans dependent on food stamps increases every month. Those "robust" auto sales for March? Check again and please note that they were a product of the auto manufacturers "stuffing" dealer inventories. Search zerohedge for that report if you need to see the proof for yourself. Dealer inventories are at record levels, but auto manufacturers book a sale once a vehicle is shipped to a dealer. Oh and the auto maker happily finances that sale with your money (at least GM and Chrysler use your money). And I don't even need to mention the fact that the housing market is absolutely falling off a cliff plus prices are tanking again.

Speaking of housing, Bank of America, one of the BIGGEST homebuyer financiers on the planet, is now saying that homeowners should not look at their home as an asset. What the hell? I'm not making this up, see for yourself: LINK That truly blows my mind. Don't forget that for the past decade, mortgage finance has been the largest part of BAC's revenues, income and bonus pools. ROFLMAO. This is an absolute tragic farce. The number ONE sales pitch used in a housing transaction is that "a house is a great investment!" Bankers all over the country got rich on this battle cry. Now we find out that it was one big lie? I'll give BAC CEO Brian Moynihan the "asshole criminal of the year" award for the one.

Please take time to read or reread "Atlas Shrugged." The movie opens tonight and I'm going to see it. The media that has reviewed it so far, is panning it. That does not surprise me. The Denver Post didn't even review it. The review I saw was posted on the online Denver Post. I'm sure the media, heavily controlled by the Corporate/Government Big Brothership, has been told to dampen its reception of the movie. Why? Because the subject matter as presented by Ayn Rand is exactly what is going down in our country right now. That plus a heavy does of George Orwell.

Before you go get your "Atlas Shrugged" tickets, please read this: Brazil, Russia, India and China, collectively known as "the BRICs," understand what Rand/Orwell understood and they understand what is happening right now in this country. And thus, THIS is why they are systematically and methodically getting the hell OUT of the U.S. dollar. Please read this for reference: Arrivedercie Dollaro!

5 comments:

AnonymousFriday, 15 April, 2011
Re: Atlas Shrugged movie...

Just like 'Inside Job'. Almost nobody saw it until it hit the pirate networks or the DVD was released.
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EconomicDisconnectFriday, 15 April, 2011
Great catch on the BAC line about homes, that takes the cake. Have a good weekend. It will be Steel Keg smoking time when I get back from vacation!
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Dave in DenverFriday, 15 April, 2011
Smoking anything else? Where you going on vaca?
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mabmanFriday, 15 April, 2011
Jim Bianco (realmoney.com) says the Fed can't hike rates
4/15/2011 1:16 PM EDT
Jim Bianco is out with a piece arguing that the Fed can't hike rates, or perhaps more accurately, has to hike to 1% before it matters. This stems from the arbitrage that exists where banks can borrow in Fed Funds (around 0.13%)and deposit the proceeds at the Fed and earn 0.25% IOR. Right now this trade is problematic because the FDIC charges a fee on this type of bank borrowing, making the arb unprofitable.

His argument is that if you hike to 0.50%, the arb is still unprofitable, and therefore short-term interest rates won't rise. Thus no impact. If you hike 0.75% to get out of the FDIC's fee range, the market will over-react, thinking this is a huge hike.

I'm not sure why this is such a problem. If the Fed hikes 0.25% at the outset, the market will price in additional hikes. So maybe over-night LIBOR doesn't rise, but the fact that additional hikes are coming will cause 3 and 6-month LIBOR (which is much more commonly used in lending) to rise quickly.

The Fed can and will hike.
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Dave in DenverSaturday, 16 April, 2011
The interest rate hike issue isn't about arb'ing or helping infuse cash into the banks, it's about what a higher interest rate will do to the cost-structure of the U.S. Govt and to the housing market. Even 1/4% will hammmer both.

I would argue that the Fed will do a gratuitous 1/4% hike to send a head-fake signal to the world that it's serious about it's monetary policy. But, in fact, the Fed can only be serious about keeping the banks AND the U.S. Govt solvent, in that order. The Fed can hike rates and continue printing. They are independent events - ask China lol. It's fait accompli.
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Why Gold?

Gold is the world's oldest currency. You exchange your fiat currency (dollars, euros, yen, yuan) into gold as an insurance policy against catastrophic Central Bank and Government policies which serve to destroy the value of fiat currencies and destroy democracy.

Gold can ONLY be considered an investment to the extent that it remains significantly and historically undervalued in relation to the fiat currencies against which its value is measured. Otherwise it remains the world's oldest currency and is completely free from the counterparty risk associated with currency by Government fiat (i.e. fiat currencies rely on a Government's "full faith and credit.")

Quote Of The Month Courtesy of "Jesse"

Unfortunately for Larry Summers, Ben Bernanke, and their friends at the BIS, they have not yet figured out how to print physical gold, silver, and other essential commodities, and the world is reaching the point where it might simply start ignoring the New York based markets with respect to essential commodities such as basic materials, oil, foodstuffs, and the like, as they become increasingly irrelevant, fraudulent, and Orwellian. And then where will the financial engineers be, except with no more excuses and no place to hide?

Here is the link to his entire commentary, well worth a read:

http://jessescrossroadscafe.blogspot.com/2010/07/gold-daily-chart-shock-and-awe-for.html

Great Quote From Jim Rogers On Govt CPI Reporting

JR: I mean, we have inflation now. If you go to the shop, whether it’s groceries, or education or insurance or health care, prices are going up for everything. The government lies about it in the US. Some countries lie, many countries don’t: Australia, China, India and Norway. Many countries don’t lie about it and acknowledge that we have inflation. Others lie about it, the UK and the US, but if you go shopping you know prices are up.

Q: Are you saying that the American Consumer Price Index (CPI) published by the US Bureau of Labor Statistics is a lie?

JR: In my opinion, yes, of course it is. Have you looked at it? They’ve changed their accounting several times in the past few decades. When housing was 20% to 25% of the CPI and housing was going up, they didn’t count it, saying rents weren’t going up, and then when home prices started going down, they counted it. It’s the same with many things. It’s staggering some of the tortuous reasoning that the BLS has used over the past 25 or 30 years. When the price of gasoline goes up, they say it’s not really going up because it’s better gasoline, better quality, therefore you’re getting more for your money. I mean, it’s endless, the stuff that they say and for some reason people sit there, although more and more people are catching on, and accept what the government says.

source: www.clusterstock.com

Quote of the Week

"The primary function of a Central Bank is to engage in the massive transfer of wealth from the middle class to the wealthy elite. The Federal Reserve was set up to do this with the blessing and support of Congress." - Dave in Denver

If you refuse to believe the above, please read "The Creature From Jekyll Island: A Second Look at the Federal Reserve" by G. Edward Griffin and then explain to me why the Senate voted down the Vitter Amendment and Congress refuses to pass a law requiring a full audit of the Fed, even though the Fed is using taxpayer-backed money to bailout Wall Street and Europe.