Wednesday, April 4, 2012

Strictly A Rhetorical Question...

...because the answers is obvious.

How will the U.S. Government fund all of the additional budget deficit spending that has already been built into this year's spending plans if the Fed does not print money in some fashion in order to help finance all of the new Treasury debt issuance in 2012? 

Before you answer this, you need to be aware, and you can use google to find the numerous sources of this data, from the time QE2 commenced until it ended the Fed directly or indirectly purchased over 100% of of all new Treasury debt issuance during that time period.  In other words, it also paid for some of the refunding/rollover issuance.

Furthermore, Operation Twist, was nothing more than a attempt a cleverly disguising the Fed's role in funding Treasury issuance since QE2 formally ended.  With this operation, the Fed simply sold down its short term Treasury holdings to a collateral-starved money market and repo-collateral market and used the funds to buy Treasuries in the meat of funding curve - 7 to 10 yrs - which funded the Treasury plus helped keep a lid - sort of - of mortgage rates.  For all of 2011, the Fed purchased a "stunning" 61% of ALL net Treasury issuance:  LINK
I think we all can see what happens if the Fed does not start printing soon.

I thought I'd throw in a little humor after yesterday's post.  I frequent a news aggregator and excellent market monitor website called Finviz (  This morning when I pulled it up to check the list of news items, I found these two headlines posted 1st and 2nd respectively:

"Private sector [adds] 209,000 jobs in March"  LINK
"Yahoo lays off 2,000 employees"  LINK

I just love that.  The 1st metric comes from the monthly ADP payroll report.  This report is commonly understood to be even less reliable than the monthly BLS employment report.  I did some research a while back on how ADP calculates its numbers and discovered that they use similar algorithmic modelling as the BLS.  I think that tells you all you need to know about the ADP monthly report.  Note also that it is clearly stated as an "estimate."

Yahoo, on the other hand, is reporting jobs that have already been chopped.  Now they have to inform the chop-ees.  I suspect we'll see a lot more reports of big companies cutting jobs.  I'm sure Yahoo isn't done yet for the year as well.

I wanted to stop there today, but I came across this revealing blog piece from Felix Salmon.  In terms of systemic liquidity and the question of whether or not the Fed will roll out QE3 (I think we all know the true answer to that), Salmon has a chart you have to look at which shows syndicated bank lending by quarter.  Syndicated bank loans - which is the big corporate loan market - are starting to cliff dive.  This means that corporations are not funding new projects AND that banks are not lending to new projects.  To make this data even uglier, most of the syndicated lending that has occurred - 70% in fact - has been refinancing older, higher interest rate debt.  Not only are the banks NOT providing liquidity to the corporate market, but only a small relative percentage of the lending is "new blood" lending.  Here's the LINK

Batten down the hatches.  It could get really ugly for awhile...


  1. By "batten down the hatches" do you mean regarding
    gold and silver positions?

    1. By that I mean do whatever you think you need to do weather a potential financial/economic/social tsunami/hurricane/tornado. I wouldn't hold much money in banks and I would only keep enough fiat dollars to pay bills. The rest should be in metal.

  2. Unbelievable...

    Advisors Still Can't – and Won't – Recommend Gold and Silver

    Clients want alts in their IRAs — but advisers' hands are tied ... In February, the firm polled 1,000 people nationwide, along with 365 financial advisers with at least $10 million in assets under management. Two out of three advisers polled said that investing in alternative assets can help build wealth for investors, and 80% them said that their clients have expressed interest in using alternative assets. Meanwhile, about three out of four Americans familiar with retirement accounts are interested in adding these investments to their individual retirement accounts. But regulatory scrutiny, as well as tough broker-dealer compliance rules on the use of alts, have largely deterred advisers from adding them to clients' portfolios. Only one in 10 of the polled advisers said they have the capability to add alternatives – Investment News

    The mainstream press, of course, is controlled by the same apparent dynastic families that run the world's central banks and apparently intend to create world government. Wishing to create world government, these families and their enablers and associates have set in motion the boom/bust cycles inherent to manmade currencies.

    The elites have over time removed fiat money entirely from underlying gold and silver and far worse than this, they have made fiat a monopoly creation of mercantilist central banks. These banks derive their authority from the public venue even though they are privately run.

    In fact, the elites have spent nearly a century divorcing economies from gold and silver because gold and silver essentially fetter economies and do not easily allow for the unlimited printing of paper money that the elites so desire.

    Free banking and competitive currencies within a private market environment are preferable to the insanity of current monetary stimulation that takes place today. Any time government has a monopoly anything, but especially money, only ruin can occur.

  3. The Usual Suspects.......

    Jim Sinclair’s Commentary

    Not one pro, not even Yra who is close to the establishment, believes that the action of all markets were a true price interpretation of the FOMC notes yesterday.

    Today and yesterday was the product of five gold banks showing the market who in their opinion is boss. It was aimed directly at the confidence in gold.

    These gold bank traders are legends, who are the present rulers of the universe, owners of Washington and answer to no one, even to a God. Well, in their mind they are at least.

  4. Hey Dave,

    great site, been coming here a while.
    Question: I think we all feel market is overdue for big correction. I had expected something last month. Here we are though only about 6 months before election time. Do you think there is enough time for a crash and then a rebound(reprint) in time to swoon the voters to Obummer's side?

    I firmly believe he will ensure the bankers do their best to provide "happy days are here again" sentiment regarding the market for his reelection.
    I have been wondering lately if this is a head fake and they are going to engineer a "great" market from now till late fall when it would then collapse.
    What do you think?

    1. Thanks for coming to my blog and thanks for the feedback.

      I think Bernanke/the Fed has to create a "crisis" in order to rollout QE3, otherwise the noise from the Republicans about Bernanke using liquidity to support Obama's re-election will be deafening.

      To avoid re-inventing the wheel so to speak, read Sinclairs comments yesterday after the FOMC minutes market slaughter and today. He's 100% right.

      If the Fed doesn't start printing again soon, our system will collapse.

    2. Michael SchumacherThursday, 05 April, 2012


      The system already 2008. We are just pumping in liquidity to mask that fact. I don't think the issue is when they print (because that's all they can do at this point-since they've refused to repudiate that bad debt) it's for how much. Nevertheless it will most certainly be a case of the consequences not being allowed since the entire system is leveraged so much now they just change the rules (if there are any left) if the outcome is not a desirable one. I know that is very simplistic however I've gotten to the point where I can't get any more disgusted about what happens going it crisis fatigue.

      In any case whatever they do will be so far out of the realm of logical thought it will boggle the mind. If I said in 2006 that the system would flush $14 trillion down the drain in order to lower rates (among other things) I would have been hauled off in a straight jacket.

      In simple terms: expect the truly insane going forward.

    3. Michael I totally agree. I used to occassionally reference 2008 in posts as "a de facto banking and systemic collapse."

      It's either print to infinity or we'll see a Depression that will make the 30's Depression look like a period of economic boom in China during the last 5 years...

  5. Hey Anonymous, got news for you the Daily Bell sucks...that story they "cited" doesn't mention gold or silver one time.

    1. numb nuts isn't that the point? how could it be in a bubble? how can it be over owned? Why isn't it an alternative?

    2. No, it's not the point at all, it wasn't even part of the discussion. The story referred to alternative assets such as hedge funds and private notes...those are the investments that the clients don't have access to. Of course they have the ability to invest in gold/silver. In fact, there is an overseas PM storage company that caters to financial advisors. Moreover, any advisor has the ability to buy GLD, CEF, PHYS, etc. Guess you weren't able to deduce that from the article and went with the headline instead.

    3. Four Weeks Of Deja Vu Propaganda

      All of this would be great... if only the March 15th original number of 351,000 wasn't lower than the April 5th pre-revision number of 357,000, and which next week will be revised to 361,000!

      In the meantime, everyone gets that warm and fuzzy feel: after all Bloomberg itself, which prepared the above reports, just told us its consumer comfort index just soard from -34.7 to -31.4, the highest since 2008. And nobody would ever think of manipulating public opinion now would they?

  6. Well, soon they will run out of blackops options to rescue what is left of the dollar and economic recovery (yeah, right).

    Then there will be some fireworks for sure, some even say that 2008 will be a walk in the park and I actually believe that as well.


  7. from daily bell:

    Dominant Social Theme: Just keep investing in stocks and it will all work out.

    Free-Market Analysis: One of the hallmarks of a controlled press is its regular departure from reality. The US press and the Western press generally have been departing from reality for most of the past 100 years and longer.

    But in the past ten years the controlled investment press has truly proved how out-of-contact with the real world it actually is. While gold and silver have made huge gains year after year, the US press especially – the loudest and most aggressive financial press in the world – has never covered the story effectively.

    The mainstream, controlled media has written millions of words about financial scandals such as the Madoff scheme, but it has studiously avoided reporting on the huge bull market in money metals that has been ongoing for more than a decade now.

    This trend continues even though we can see from the article excerpted above that investors – more than the industry itself – are increasingly aware that the nostrums of the past 60 years are woefully inadequate. Here's some more from the article:

    "In recent months, the top five adviser networks in the country have begun to scrutinize the assets clients are holding, such as nontraded assets," said Kelly Rodriques, chief executive of Pensco. "The adviser and the client may want these investments, but the institutions' administrative capabilities limit that."

    We can see from all of the above that gold and silver STILL don't warrant a mention in articles such as this. And the best that the SEC can do is to "warn" about the pitfalls of self-directed IRAs."

    Most advisers own very little precious metals and abhor their trailing fees. Most advisers and their clients don't consider gold/silver as an's not in their lexicon by design as the author, I believe, was trying to point out. Gold has been up how many years? and no mention in the article.

  8. from Krieger's latest...

    Belligerent Act.Org
    A friend of mine recently created this website to help protest the NDAA and get the word out Not only is it a good summary of how TPTB are attempting to put a police state in place ahead of the increased rebellion they know is coming once a critical mass of the citizenry get a handle on just how badly they have been systematically looted by the crony capitalist mafia, but it also allows you to put a “Belligerent Act” banner at the top of your website as a sign of support and means of getting the word out.

  9. Also from Krieger...has some good comments.

    The powers of financial capitalism had another far-reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole. This system was to be controlled in a feudalist fashion by the central banks of the world acting in concert, by secret agreements arrived at in frequent private meetings and conferences. The apex of the system was to be the Bank for International Settlements in Basel, Switzerland, a private bank owned and controlled by the world's central banks which were themselves private corporations. Each central bank... sought to dominate its government by its ability to control Treasury loans, to manipulate foreign exchanges, to influence the level of economic activity in the country, and to influence cooperative politicians by subsequent economic rewards in the business world.
    - Carroll Quigley (Bill Clinton’s mentor at Georgetown) from his 1964 book Tragedy and HopeCrime

    Once Exposed Has no Refuge but in Audacity.- Tacitus

    Dave Janda Interview Recently I recorded another radio interview with Dr. Dave Janda out of Michigan. Dave is one of the most tireless freedom fighters I have ever encountered. He has been doing it all of his adult life and I am very proud to be in the trenches with him during the most important battle of any of our lives. You can hear my interview here.

    Please take a listen.