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Why 95% of Traders Fail

Perpetual Q.E. Without The Billboard, Hyper Monetary Inflation

Interest-Rates / Quantitative Easing Nov 30, 2011 - 08:15 AM GMT

By: Jim_Willie_CB

Interest-Rates

Diamond Rated - Best Financial Markets Analysis ArticleThe US Federal Reserve has fooled a lot of people into believing that the grand monetary pump and debt monetization project has been put on hold. The only thing that changed was their talking publicly about it. The money press has been working to the limit, never stopped. The discussion has been kept quiet, but the machinery still makes a lot of shrill noise. The proof is not movement of lips by central bankers, but the data from the monetary aggregate. The data is compelling in calling them out. The conclusion to reach is that Quantitative Easing has become the norm, the foundation policy, the emergency action to prevent implosion of the US banking system. Hyper monetary inflation is the New Normal.


The sinkholes are so broad and dispersed that even run of the mill analysts are beginning to see the light. They are concluding more and more than the credit-based system is collapsing. Never does the Jackass rely upon central bankers to inform of events, policies, and actions. They have been dedicated lately to deceptions much like turning off smoke alarms, killing the electricity on fire station monitors, laying off the working firemen, and hoping the public does not notice the raging fires which have been accompanied by grand larceny looting to hide the flames.

 

Always trust Ludwig, our reliable patron saint of money whose epistles combat the evil forces of fiat money. VonMises said that inflation always has been a matter of money growth. It always will be. Notice in the yearly monetary aggregate chart, where ticks are full years, that the 2010 and 2011 years show a steady linear growth. The money supply never stopped growing in summer 2011. The June deadline came and went, and nothing changed, only the words from the increasingly desperate central bankers, led by the hack economist professor Ben Bernanke. If the public were ever to glimpse at what passes for Economics Dept research at universities, they would vomit at its abstruce uselessness. Phony money not only produces phony wealth, but phony faculty research and phony integrity of financial systems. Over one third of all university professors with chaired posts are funded by the USFed, if truth be known. They perpetuate their mental muck. Heck, the Jackass had the pleasure to observe some Statistics Dept research back in the day. Half was as we enlightened students called FLUFF, like new statistical measures that had value only in a strange world where the researcher defined the criterion for good. The fluff merchants stunk as professors too. Two come to mind from my Carnegie Mellon University years. But at CMU the majority of professors were utterly outstanding, brilliant, great teachers, grounded in reality, and having produced reams of highly useful work. Two fine professors remain my friends, being on first name basis since adults. They go along with the notion of the Jackass being adult, wondering the definition of a Jackass in bemused reaction.

The money supply is still growing. The data contradicts the premise that the QE program was terminated. Easily explained. The initiative turned global to produce Global QE. The USFed has been accommodating the Europeans and Wall Street banks, so that the broken insolvent big Euro banks can be propped with more phony money. The Euro Central Bank is printing money heavily or else borrowing in heavy volume from the USFed Dollar Swap Facility. Without bond market buyers, the EuroCB has reluctantly filled the void and has been buying the Italian Govt Bonds. Recall that big Euro banks are huge sellers of sovereign bonds. The USFed never stopped printing money to buy USTreasury Bonds, which ramps up each month as USGovt debt piles up each month. Recall that foreign creditors are net sellers of USTBonds. The USTBond auctions have not failed, and for a reason. The USFed is buyer of last resort. Where the bids came from has been kept quite secretive. It is the USFed, which never stopped QE. In fact, Global QE is the mainline policy nowadays, and it has turned into hyper-inflation under the sleepy eyes of both investors and the financial press. Why the investment community relies upon the central bank liars and the financial press dimwits is proof of national stupidity in my view. Intelligent people are wondering if QE3 will emerge when QE never ended!!

THE ONLY THING THAT CHANGED SINCE JUNE 2011 WAS THE USFED DOES NOT TALK ABOUT THEIR VAST MONEY PRINTING AND DEBT MONETIZATION. THE DULL MENTAL CAPACITY OF THE MASSES IS ASTONISHING.

 

Pretty clever, huh?? The end result is the investment community is dominated by truly moronic questions about when the USFed will print money again. They never stopped. Jim Rogers in a recent interview had to chastise the financial press nitwit in control of the conversation, to urge a quick view of the money supply. He showed patience though. The interviewer seemed not to understand the concept of money supply even after three instances of veiled insults. It is like asking a liar if the weather outside is rainy. TAKE A LOOK. THEY NEVER STOPPED PRINTING MONEY. The Operation Twist was a USTBond redemption plan built around QE3 designed to buy all what foreign central banks sold. They sold it as a pause in the pattern. Dull witless people bought the notion. The Jackass called it for what it was from the start, a smokescreen to cover for foreign bond sales. Foreign creditors were big net sellers of USTBonds. It is right there in the data published by the same liars at the USFed and USDept Treasury. TAKE A LOOK. THEY NEVER STOPPED PRINTING. My respect for the American financial sector has never been lower, and that includes the investment community. For three years, the Jackass has been advising to remove funds from the system, which would be at risk of pilferage. The MFGlobal event has sealed both the reputation of the US financial sector and the outcome of the implosion.

The big Euro banks are selling boatloads of bonds. But on the other side of the table, the Euro Central Bank is buying only truckloads. The net is still an exodus, thus rising bond yields. A few emails from clients came in the last week wondering why sovereign bond yields in Spain, Italy, and even France are still rising if the EuroCB has entered the arena with both hands buying the bonds, however reluctantly. Remember the initial pronouncements by the new Head Draghi (aka Euro Dragon), that he did not want to buy government bonds. The European Govt Bond market is in freefall. The only way to stop it is vast recapitalization of the entire US & London and European banks at a cost of $4 to $5 trillion. When the Powerz and Technocrat generals flip the switch and make the decisions, Gold will then go to $3000 then rest, then go to $5000 later on. Similar for silver, going to $80 then rest, then go to $150. In the interim, the objective is to beat down Gold & Silver by whatever deception.

DERIVATIVE SPURT HIDES INSTABILITY

The tremendous growth of derivatives has in the last six months helped to prevent a rise in USTreasury Bond yields. Actually, it has prevented a collapse in the Western banking system. Recall back in the spring and summer months, when the USGovt debt was downgraded, the ballyhoo was all about the contradiction by the bond market. It rallied in the face of the debt downgrade. Yields went down, not up. But they did so with the strong tide of $9 trillion in Morgan Stanley derivative notional value. Curious that the financial press did not notice, or never reads the Comptroller of the Currency reports. Really simple math, too simple for hack US economists. Notice the surge in outstanding derivatives in the last six months. Regard it as skotch tape and bailing wire holding together the US financial structure.

BAD ECONOMIC POLICY PERPETUATES RUIN

Ever since the Jackass articles in 2004 about ass-backwards economic policy and principles, my work has been detailed and critical. Most feedback from out there has been extremely positive, in appreciation of plain talk and common sense backed by firm arguments. In the summer, two doctrines were mentioned in pure derogatory tone. The Parasite Doctrine promotes the banker welfare, based upon sustenance of their bonus rewards for producing ruin, ample channeled funds to alleviate (not cure) their insolvency, and cooperative slush funds to hide the black holes they produce. The Panhandle Doctrine promotes the consumer welfare, based upon putting money in their pockets by whatever means, expecting them to consume the economy into a healthy state, even if it means eating their children and furniture. What corrupt thought on the former doctrine and empty thought on the latter. These two pillars are the basis of official economic policy, sadly enough.

Bad economic policy perpetuates the Panhandle Doctrine, which is actively pursued by really bad economists running the White House and USCongress. To think they occupy Stanford University and the University of Chicago and Harvard University is a national tragedy and travesty. Look at what their policies encourage and work towards. The centerpiece of USGovt policy on the economy is laughable. It calls for jobless insurance extension. That is a patch job, rather than job creation. It calls for programs to put money in consumer pockets, in futility to follow up the gems like clunker car incentives, and home buyer incentives. Talk of job creation without comprehension or effective action is like a mental sink hole but without the opportunity to see it. The holiday shopping displayed more futility, even desperation. Ramped up holiday shopping, even if online using webpages, cannot lift the USEconomy. Credit card extensions to fund consumer purchases seem celebrated, although empty. A payroll tax cut extension makes sense, as any tax cut is a very positive event for the USEconomy. It is seen as a sacrifice rather than a necessity. Few chaired Economics professors have stepped forward to declare that lower tax rates produce more tax revenue, the opposite to the widely accepted backward notion.

The holiday shopping inspection fully ignores the source of funds, like credit cards. The home equity ATM went away, replaced by the credit card, which never went away. The only change is the banks, whose credit card business is shattered. They engage in restraint of trade to limit the automatic transactions, with impunity. Then there is the supposed falsely named stimulus projects that stimulates foreign exporters. See the California high speed rail project and the Chinese participation. The solar projects reveal even more lunacy, or rather direct nepotism. Few realize that President Obama has huge personal investments in green energy, not fully disclosed. It is hard to stimulate the USEconomy when it lacks a critical industrial mass. Unless and until the USGovt with a powerful initiative set forth by the USCongress works to return a significant portion of its forfeited factory and industrial base, this recovery is forever doomed and a bit of a rancid joke. The lower USDollar is supposed to encourage exports. The chief US exports however are bond fraud, unwanted packaged debt, fast food fat globules, movies, music, and arrogance, but not the protected computer technology, and protected military weapons. Most stimulus programs merely push sales to the present, and rob the future. The abject eyesores are the Food Stamp program that flourishes, and the labor skill mismatch from a generation of poor public edumacation.

The USEconomy depended upon the housing and mortgage bubbles too much several years ago. It bears repeating until blue in the face. The dumkopf US economists called it the Macro Asset Economy, which sounds better than an accurate description of an inflated asset dependent economy without industry. They gave it blessing. The housing market still has a gigantic hidden inventory held by banks, from the foreclosures. It continues to grow if truth be known. Very few US economist acknowledge that bank held (REO) home inventory prevents the home prices from falling more than already seen. Maybe they expect Fannie Mae to acquire the entire toxic kit & kaboodle. Release the bank inventory and watch home prices decline another 15% to 20%, but it would start the bottoming process. The Case Shiller housing index came out yesterday, again telling a wretched story. Metro home prices are down by 1.0% in the last two months. The home ATM machine is gone. Without a cleared housing market, expect no bottom in home prices. This is basic. Without a housing market in recovery, the USEconomy will languish, falter, and continue its deterioration. The dullard economic analysts still point to new home sales as a barometer, when it is a reverse indicator. The new constructions must halt for five straight years, so as to alleviate the over-supply. This is all utterly basic economics.

UNINTENDED CONSEQUENCES

Focus on suppressed long-term interest rates and their consequences. They are broad and horrendous. The US captains of the insolvent leaking ship traveling in icy waters filled with icebergs boast that the USEconomy benefits from ultra-low interest rates. They believe that Americans are better off than the Europeans who are in shock from rising rates, a flash of reality during a debt crisis. Take the time to review some powerful consequences of interest rates kept low for years, in violation of permitting them to rise at least to the prevailing price inflation rate. Suppressing the 10-year bond yield has dire consequences. Some but not all of them appear unintended. The Powerz and their henchmen want unlimited easy money for sure. But in doing so, they permit some horrendous developments like feeding a cancer.

1) Savers are given nothing in interest yield, no reward

             which actually slows the economy since more savings than consumer debt

             while at the same time causes asset erosion from the higher inflation.

2) Banks are encouraged to continue holding their home inventory

             which means the housing market decline will continue for at least 2 to 3 years

             since banks have no incentive to clear their inventory and enable healing.

3) Big banks will continue their USTreasury Bond carry trade schemes to replenish capital

             which results in emphasis on speculation instead of business capital formation

             as the largest banks are no longer true partners to the business sector.

4) Investment banks are encouraged to continue their reckless speculation

             as they only know speculation, and invest heavily in machinations, not machinery

             which inhibit actual business investment that produces jobs.

5) The USFed believes it can expand its balance sheet to buy toxic assets with cheap money

             which further cripples the central bank and renders impossible some regular functions

             and prevents it from revealing its own dead condition.

6) The USGovt is not discouraged from deficit reduction

since it believes it has much more time to fix its condition, but daudles instead

             which will lead eventually to massive inflation, debt default, and systemic failure.

An anonymous quote came by the other day. “Can there be any more drastic attempt at a free lunch than suppressing the market interest rate for 10-years in order to build a more perfect union?” My apologies to the rightful author, unknown by me.

DECEPTION IN REPORTING

Move on to the grand deceptions in reporting by the dullard devoted financial press and the USGovt lackeys. They would make Orwell proud, even Goebbels. Consider the many transformations in definition. Insolvency, intervention, and decay are called instability, lack of confidence, and volatility. Fraud is called the misfortune of the crisis. Theft is called missing money. The amounts are greatly exaggerated on the low side. The Madoff Fund stole $150 billion, triple the officially stated amount. The systemic failure is called the global financial crisis. The crumbling monetary system is called the sovereign debt crisis. The omnipresent Goldman Sachs lieutenants, none elected, are called the banking commissioner technocrats. The dead banks are called the distressed banks. The bank welfare is called bank aid. An observer truly requires a game program, a playbill stage flyer, in order to read through the deception and correctly see the destruction. It is total. They even went so far as to claim gold investments aid the terrorists. Next we could see a major financial firm go bust and 100 thousand brokerage accounts will go missing.

MFGlobal is just the start of the final grand theft chapter, whose deception is as great as its theft. Two weeks ago, the Jackass mentioned that the true theft by JPMorgan of MFGlobal client funds was more like $2 billion, hardly the lesser $650 million intended to deceive the half brain-dead fully shell-shocked public. Word has come that the amount missing is actually at least $3 billion. The usual suspects hold the supposedly missing money. No arrests yet. It seems the deceptive reporting methods, not by the press, but by the government and regulatory authorities is designed to minimize the volume of the fraud, and to gradually reveal the true multiples later on in stages, when most of the public has already formulated firm perceptions. The financial press refuses to call the incident a theft or fraud, but rather missing client funds. Some class action lawsuits should clear up matters, unless JPMorgan wins relief by citing national security. After all, the national banking system security depends upon money laundering funds, with a doubled down dependence upon basic theft of segregated client funds. The press seems unwilling to fully paint billboards with JPMorgan Theft as marquee messages. The public will not awaken until 100 thousand stock brokerage accounts or 100 thousand mutual funds or 100 thousand pension funds are missing. Not stolen, only missing from the hands of sophisticated thieves specializing in grand larceny, wearing suits, well coifed, and bearing USGovt community club badges. The world is catching on to the image of the Syndicate laying waste to the American Homeland. Its certainty is assured by the security agencies that work so hard to hone their targets.

Other minor deceptions are hard at work. One can hear that selling bank stocks is like buying tech/telecom stocks in 1999. The latter were simply over-valued after a powerful surge of true sales that could not be sustained. The big banks are dead, insolvent, beset by bond investor lawsuits, as they must contend with inadequate reserves from tighter Basel requirements, exposed as thin brittle reeds while they are de-leveraging. The big banks also received TARP Funds to cover the ailing preferred bank stocks, and to pay for executive bonuses. They received parcels of the $16 trillion in USFed slush fund dispensations, done in secrecy, never approved by the USCongress, which stands as proof positive of Syndicate activity. The TARP Funds open actions served as successful smokescreen for the real deal. Yet another dispersal of precious USFed funds, this one $7.7 trillion was just discovered. The people should be very clear about the nature of these GRANTS. They are at 0%, thus gifts never to be repaid. They are intended to enable vast asset purchases that exploit the reduced prices made possible from the extreme financial market duress. The grants are to enable more critical control in the next chapter, related to bonds, assets used as collateral, and commodities. The motive and theme are beyond the scope of a financial newsletter. The defiance shown is impressive.

FINAL IMAGES WITH MESSAGES

The USFed shoots itself in the face every time it attempts to fix the problem. Monetary inflation can in no way repair a system that suffers from asset busts brought on by excessive debt, refusal to liquidate the big banks, harlot regulatory agencies, and central bank collusion. Each QE action, especially the constant current action, assures higher costs and persistent price inflation in the annual 10% range. Gold is the hedge against not only a broken monetary system, but high inflation.

The USCongress cannot seem to do anything except to enrich the financial sector led by Wall Street. Not shortage of teats. The Occupy Wall Street movement would do well to observe the pervasive lobbyist activity on K Street in WashingtonDC.

Not all liquidity channels lead to high water quality. Mix toxic barrels of sovereign debt and mortgage debt, and the results are still toxic, although more diluted. The badly polluted credit system has propagated poison throughout the USEconomy. That has been the case since the 1970 decade, but it is in full view nowadays. Water is the basis of life, and liquidity is the basis of financial life. Witness the incredible destruction to capital and savings.

Drowning in liquidity, the masters of the American chapter of the Fascist Business Model have created a black hole in the form of a gigantic sinkhole. These natural wonders off Belize and in South Africa are incredible anomalies. After the liquidity is drained off during the counter-productive de-leveraging process, the hole will be more visible. However, the more accurate picture can be seen with money juxtaposed as it circles the monetary toilet located in New York City, the plunge lever in South Manhattan.

Always keep in mind the true value of the USDollar. It will revert to the innate value of every fiat currency in history, even if a once strong military defends it. Some maintain shallow beliefs that the Dollar Empire will never fade or endure a sunset. They are delusional and poor students of history. It is not like the Midnight Sun in an hourly sequence to the North, which is introduced for some true natural beauty in contrast to a grand tragedy in progress. It is difficult to tell which is more beautiful, the sun that does not set or the timeless resilient brilliant enduring beauty of gold bars.

  

GRAND DIVERGENCE PERSISTS

The grand divergence is moving along apace. The physical gold market price lies 10% to 15% above the corrupted paper gold market dominated by futures contracts. The MFGlobal event concealed a default failure, whose details will come to light gradually. The physical silver market price lies 25% to 35% above the corrupted paper silver market dominated by futures contracts. One can only wonder what the prices would be without the permitted pilferage that has recently occurred. Watch how much premium the Sprott Fund must pay in order to locate and cart off the new silver allotments. Better yet, watch the battle to win approval of the expanded purchase, since sure to stress the physical market to the extreme. Remember that JPMorgan is the operational arm of the US central bank itself. The media and regulators are doing their level best to keep JPMorgan out of the direct involvement in the investigation, but their fingerprints and footsteps are all over the crime scene. The price divergence will continue to grow and widen until the COMEX is shut down, from lack of inventory and a swamp of client lawsuits. To stay open, the exchange will require another event before long. Only the most extreme of measures can prevent Gold & Silver from reaching their proper value, all in time. The extreme events have an obvious motive to conceal the exchange failure unfolding. Many have openly wondered what it would look like. It looks like this.

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Comments

William
14 Dec 11, 11:23
Hyperinflation

All this talk about Hyperinflation and QE into infinity shows that Jim Willie doesn't understand the first thing about how moneymarkets works and credit is created. And why ""prinitng"" a lot of money won't create hyper-inflation as well. Once he starts to use the word Deflation then and only then we could be on the cusp of Hyper-inflation.


Nadeem_Walayat
14 Dec 11, 12:15
Hyperinflation, how it will happen.

I will tell you what i am watching for hyperinflation -

The total amount of notes and coins in circulation.

Why ?

Because defaults destroy credit created money, but notes and coins are not destroyed by default.

We will have plenty of advance warning for hyperinflation because the amount of notes and coins in circulaton will go supernova, which could happen during a banking crisis i.e. a month long bank holiday when the BOE will pump out extra bank notes resulting in very high inflation.

In the UK the notes and coins are increasing by a about 3% per year which is the floor for UK inflation.

Best

NW


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