22 Sep 2011

Back Up The Truck, Gold And Silver Are Set To Explode

Funny how the price of Gold rises in the East as the Chinese and Indians buy, and then drops in the West as the Europeans and Americans sell. Even funnier is that in the EAST they are buying PHYSICAL Gold and Silver, and in the West they are selling PAPER Gold and Silver. In effect, the banks in the West are selling NOTHING, so that banks in the East can buy SOMETHING at a discount. The transfer of wealth from West to East is no laughing matter.

Funny how after last weeks extreme volatility in the Precious Metals, Gold closed down ONLY $26, and Silver closed down ONLY $.07 on the week. Here we are again in the midst of more of the same, all in the name of "investor confidence". CON-fidence...



The Banking Cartel induced volatility in the Precious Metals over the past three weeks merely exposes how dire the western banking situation has become, and how desperate the Fed, the ECB, and their respective governments are to contain the fallout from it's imminent collapse. The Precious Metals must be beaten down to show the world that inflation is "contained" before the Fed can ride to the rescue with more of their monetary stimulus to save the system from collapse following their big pow-wow today and tomorrow.

The Fed Can’t Help What’s Really Ailing the U.S. Economy
By Stacy Curtin, Daily Ticker
"The problem is the goal of the Fed is to use quantitative easing to try to get the economy going. The problem is the economy part is not happening," Lance Roberts tells The Daily Ticker's Aaron Task in the accompanying interview. "Consumers are over-leveraged. You are not going to get businesses to hire because their number one concern isn't the ability to get credit. Their concern is poor sales."

70% of the US economy is based on the consumer. Why are we constantly told by the Fed that we must lower interest rates so that consumers can borrow and spend? One wonders, why must we "borrow to spend"?

Has the Fed even considered that Americans are over leveraged, consumed by their own debt? Has the Fed even considered that Americans do not want to borrow any more money? Interest rates are athistoric lows, and the economy is stagnant! Dropping interest rates another half a percent is not going to get people to run out and borrow money and spend it. Short of just giving people money and telling them to go spend it, what good can come from further lowering interest rates? To date, not much good has come from efforts to lower interest rates as far as they have.

Could it be that lowering interest rates is less about helping the consumer spend money, and more about aiding the government in spending more borrowed money "cheaply"? Exactly...

Just as it is for governments, debt is the burden of the consumer. The only difference is, is that the consumer has stopped borrowing so that he may pay down his debt, and the government remains hell bent on borrowing and spending. Unfortunately it is the consumer that will be hurt the most by being smart about his debt because the government is being dumb about theirs.

The US economy is all about the consumer. Despite being told that the Fed's monetary stimulus is for the consumers benefit, why does all of it end up supporting the banks and the stock markets instead? Has unemployment improved since the Fed began pumping money into the financial system? Has the economy grown? No and no. Why then is the government and the financial markets asking for more monetary stimulus? Because they are addicted to monetary stimulus, and if forced to do without the stimulus fix, the CON-fidence the government seeks to uphold in the system will crumble...along with the system itself.

So in the interest of maintaining CON-fidence, and the status quo, I predict that tomorrow the Fed will announce Operation Twist to lower interest rates and US Government borrowing costs, AND they will "surprise" the markets with a cut in interest paid on Excess Reserves held by banks at the Fed in the hope that this will "force" money into the system [and increase consumer borrowing and spending]. In a nutshell, the Fed is opting for inflation to solve the nation's debt problem. The money they hope to "force" into the system will not end up in the hands of the consumer. No, it will rush into the stock markets [boosting consumer CON-fidence] and commodities [making things cost more for the consumer].

Pictures are worth a thousand words and history is our guide:

Stocks have erased most of their QE lite/ QE 2 gains:



Commodities remain 22% above their pre-QE lite levels and nearly 10% above their QE 2 levels:





Gold speaks for itself:




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