Tuesday, June 26, 2012

The Golden Truth About Operation Twist

People are always very quick at giving others advice...Mr. Obama should first of all take care of reducing the American deficit, which is higher than in the eurozone - Wolfgang Schauble, German Finance Minister  LINK
Last week I suggested that the Operation Twist extension by the Fed of $268 billion would be enough to fund the U.S. Government financing needs until the election in November, when the Fed can then crank up the printing press without being accused of supporting Obama's re-election efforts.  At that point in time, the Fed will likely roll out an enormous stimulus/printing package to make sure the winner of the election gets off to a good start, just like occurred in 2008...

I also suggested that the funding needs would be at least $400 billion between now then, of which the Fed would be able to fund at least 50% with the OT extension.  Well, there's nothing like seeing proof in the numbers.  Today the Treasury auctioned $35 billion in 2yr Notes, of which Wall Street banks bought $20 billion, or 57%.  This week the Treasury is selling a total of $99 billion in 2,5 and 7 year paper.  We'll see how the rest of the auctions play out in terms of how much Wall Street takes down, on behalf of the Fed, but so far my run-rate estimate for additional funding plus the rate of the Fed financing that funding looks pretty good.  Here's a link for today's Treasury auction results:  LINK

Regarding the quote above, it is going to be interesting from here on out to see the degree to which finger pointing between Europe and the U.S. escalates.  I can't think of anything that would irritate me more than to have that little moronic runt tax evader Tim Geithner in my face telling me how to fix my problems.  It would be like a meth addict telling a heavy drinker to stop drinking.   Of course, by now it's well known that both Geithner and Obama spent a considerable amount of their teenage years "up in smoke."

Here is what eastern hemisphere Central Banks are doing as a mechanism to dodge the escalating fiat currency devaluation war between the U.S., Japan and Europe:
Turkey raised its reported gold holdings by another 2% in the month of May. Turkey’s gold holding rose by 5.7 tonnes in May to total 245 tonnes, International Monetary Fund data showed, making it the latest in a string of countries to increase gold bullion reserves this year.
Russia expanded its gold reserves by 15.5 metric tons in May as Ukraine and Kazakhstan increased their holdings of the metal, International Monetary Fund data shows according to Bloomberg.

Russia’s bullion reserves climbed to 911.3 tons last month when gold averaged $1,587.68 an ounce, data on the IMF’s website showed. Ukraine’s climbed 2.1 tons to 32.7 tons and Kazakhstan boosted reserves by 1.8 tons to 100 tons, the data show.

Central banks are expanding reserves due to the Eurozone debt crisis and concerns about fiat currency debasement.  Central banks are on course to buy more bullion this year than the purchases of about 456 tons in 2011 as countries diversify their reserves.
Here's the LINK

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