Monday, June 20, 2011

U.S. Government Totalitarian Creep Continues Plus QE3 All But Assured

The big buzz this weekend, away from Greece, centered around the report that apparently retail traders/investors are going to be stopped from trading OTC gold and silver futures products.  But if you do some research on the exact nature of what is being regulated, it ironically in some ways is a very good thing.  The products in question are OTC derivative-based "currency" securities.  The paper indexes gold and silver and allows the trader to take  long position in gold/silver while shorting the dollar, or vice versa.  It is a pure paper derivative with absolutely no connection to physical gold and silver other than to index the dollar-based rate of return in the two products. 

The TRUTH of the matter is that this is exactly the type of product that enables big banks to manipulate the gold/silver markets AND rip-off retail traders.  Wall Street has, and always will, look to the retail investor as its easiest source of easy money.  The less liquid and more "OTC" a product is, the bigger the margins for Wall Street.  Remember, a Wall Street dealer's job is to reach his hand into YOUR pocket and remove as much money as possible.  That's exactly what this type of product is designed to do.  When you look at the headlines on Zerohedge, you think that all gold and silver trading is being eliminated. But Zerohedge's presentation is characteristically sensationalized.  Ironically, the products being eliminated are the stuff that makes Wall St. money at the expense of the little guy.

Where I do have a problem with this kind of regulation is that it is a continuation of the Government totalitarian creep into our everyday lives.  Does anyone REALLY believe that Obama or Bush or Congress has the right to believe that they know what's best for the individual?  Seriously. 

Here is another example of the totalitarian creep of our Government and the elimination of free press:  it turns out that the "little" nuclear plant mishap in Nebraska could be turning into a serious catastrophe. Take a look at this news report:  LINK  The reader has to decide for himself the degree of credibility that report holds.  Upon discussing it with a couple of long-time colleagues, I believe that it has a high degree of credibility.  Before you dismiss this news report, please keep in mind that it is a fact that the airspace over the plant has been closed AND ask yourself how much news coverage you are seeing about this from all sources of media?  I bet if I open up today's Denver Post, I won't see anything on it and Denver is not that far from Omaha...

Central Planning Obama-style moves into rural farming America.  Take a look at this disaster:  LINK That should frighten the crap out of everyone who reads it.  Based on everything you've seen about how well the U.S. Government manages everything else it has annexed control over, does anyone really think that Obama and his band of merry idiots can help stimulate rural economic activity and farming?  It's starting to get beyond the humor of the absurd in our system and become down-right frightening in this country...

As for QE3.  The question is, if there isn't any QE3, how will the Government finance the additional Treasury debt that it will issuing once the debt ceiling limit is inevitably raised by at least $2 trillion?  We learned over the weekend that Russia, one of the largest holders of U.S. Treasuries, has been quickly reducing its holdings and will continue to reduce its holdings:  LINK  So there goes one big historical source of funding.  And China, despite the holdings as reported in the monthly TIC reports, has been quietly reducing its dollar holdings using clandestine methods. This is something I have always suspected, but Standard Chartered Bank lays out a very credible scenario here:  LINK  If you bother to read through that and know anything about the fund flows the way they are reported in the TIC report, then you will have accept that the scheme described by Standard has a very high degree probability.

So if Russia and China are no longer financing the U.S. Government's massive spending addiction, and the Fed has been the primary financier since December, if the Fed were to NOT extend its QE program in some form, who will finance the $2 trillion? 

It's getting very "spooky" out there in the markets and based on the way that gold and silver have been performing recently, I believe that large flows of very smart capital around the world are beginning to view gold and silver as the last port in the face of a very serious in-coming financial tsunami...


  1. Regarding the OTC gold and silver trading stoppage. My thoughts exactly, this is good news for physical inventors as this cuts off one of the paper shenanigans that has been going on.

  2. You think???imagine if these guys had real jobs

    Fed May Be Understating U.S. Economic ‘Soft Patch,’ RBS’s O’Donnell Says

    The Federal Reserve may have understated the staying power of negative effects on U.S. economic growth, according to William O’Donnell, head U.S. government bond strategist at Royal Bank of Scotland Group Plc.

    “Economic growth, or this economic soft patch that we’re in right now, some of the factors that have growth so weak relative to expectations, may not be as transitory as the Fed has hoped,” said O’Donnell in an interview on Bloomberg Radio’s “Bloomberg Surveillance” with Tom Keene and Ken Prewitt.

  3. Tossing this out there for a feel.

    Debt ceiling is raised, and a large dose of QE3 as a side dish. The debt ceiling raise will mask the QE3 insert, just like Ben did the first time around, and the Sheeple will not know what hit them, because the MSM will be screaming DEBT CEILING DEBT I close?

    The bigger question is, how much QE3 will Ben inject.

    Keep up the good works Dave


  4. (Dave)

    Thanks Bill. Your scenario is as likely as any. They have to do something and I doubt they'll call it "QE3"

  5. When does the truth come out and get reflected in the market?

    41% Of Belgian Central Bank Gold Has Been Lent Out

    Some very disturbing revelations from CLSA's Chris Wood who in his latest Greed and Fear note discusses an event that may be all to prevalent within the central banking community: the less than overt lending out of central bank gold to "other entities" in return for picking up nickels in front of a steamroller. In this case, the central bank of governmentless Belgium, which had 41% of its gold out at the end of 2010 on loan. Naturally, the lent out gold is being used by some other key entity, potentially to mask its own inventory deficit, in exchange for the paltry sum of 0.3% on the total loan. Wood's conclusion: "This is a reminder that the paper gold market is significantly larger than the physical market. Just like a run on a bank in a fractional banking system, GREED & fear suspects it will be very hard to settle all the paper claims to gold physically in a real scramble for the metal. This is why in a parabolic spike physical gold is likely to trade at a significant premium to paper claims." We couldn't have said it better ourselves.

  6. This is utterly mind numbing..this is like strawman buyers in the real estate market to pump up comp sales valuations...I can't believe this crap is being chased by so called smart $.
    ...meanwhile miners capped at the knees.

    Crashing the Party in Silicon Valley

    Crashing the Party in Silicon Valley In late 2009, Felix Investments had a plan: buy as many shares of the largest private Internet companies as quickly as possible, and keep buying. That meant buying into Facebook at a $15 billion valuation - and now the company is planning an I.P.O. of more than $100 billion.

    The firm is part of a flood of new money into Silicon Valley, which some investors and technology executives say is inflating valuations and disrupting the way new Web start-ups have long been nurtured.

    And if valuations go up, just buy, buy, buy.

  7. Greg said...

    Nice, so now The Wall Street Journal is lobbying for some more money printing...

    "...Inflation cures a debt hangover. It may be the only known cure."

  8. Are they setting the stage to get away with everything legally?...think etf's

    A License to Lie, Backdated

    The Supreme Court held is that, even though employees of Janus Capital Management company actually wrote any misleading statements, even though they managed nearly every substantive aspect of the operation of the fund, they cannot be held responsible because they did not “make” the statements. The “person” under law who made the statements was the entity on whose behalf the offending prospectus was issued, the investment fund, which has no capital other than the money it invests for shareholders. Under Janus, the management company is beyond the reach of aggrieved investors.

    The really high-stakes fraud lately has been in the securitization business. The Janus decision gives CDO arrangers a huge get-out-of-lawsuits-free card. Each asset-backed security or CDOs is its own little investment company, a “special purpose vehicle” with its own notional directors or trustees, often incorporated in the Cayman Islands. Under the reasoning of Janus, any misleading statements in the offering documents for a securitization were made by the SPV, not the investment bank that put together the documents or arranged the deal. The SEC relied in part on Rule 10b-5 in prosecuting Goldman Sachs for its failure to disclose material facts regarding the ABACUS deal. Under Janus, that would no longer be possible.

  9. I believe the BIGGEST buyer of US debt was in the category called "other"LOL Supposed to be US households(sure they were).The next BIGGEST buyer was supposed to be the UK(sure).There almost broke but last year supposeably there US debt buying was up 10fold. I do not believe "any" $tats put out by the US Government or there agencies.Its all make believe,like there banks accounting rules .LOL!

  10. Now a days platinum has captured the market. It is more precious than gold and silver.

  11. And if valuations go up, just buy, buy, buy.

  12. Thats right platinum is growing up in the market , does anybody knows if how this going on ?