Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
JOHNSON AND JOHNSON - JNJ for Life Extension Pharma Stocks Investing - 17th Aug 19
Negative Bond Market Yields Tell A Story Of Shifting Economic Stock Market Leadership - 17th Aug 19
Is Stock Market About to Crash? Three Charts That Suggest It’s Possible - 17th Aug 19
It’s Time For Colombia To Dump The Peso - 17th Aug 19
Gold & Silver Stand Strong amid Stock Volatility & Falling Rates - 16th Aug 19
Gold Mining Stocks Q2’19 Fundamentals - 16th Aug 19
Silver, Transports, and Dow Jones Index At Targets – What Direct Next? - 16th Aug 19
When the US Bond Market Bubble Blows Up! - 16th Aug 19
Dark days are closing in on Apple - 16th Aug 19
Precious Metals Gone Wild! Reaching Initial Targets – Now What’s Next - 16th Aug 19
US Government Is Beholden To The Fed; And Vice-Versa - 15th Aug 19
GBP vs USD Forex Pair Swings Into Focus Amid Brexit Chaos - 15th Aug 19
US Negative Interest Rates Go Mainstream - With Some Glaring Omissions - 15th Aug 19
US Stock Market Could Fall 12% to 25% - 15th Aug 19
A Level Exam Results School Live Reaction Shock 2019! - 15th Aug 19
It's Time to Get Serious about Silver - 15th Aug 19
The EagleFX Beginners Guide – Financial Markets - 15th Aug 19
Central Banks Move To Keep The Global Markets Party Rolling – Part III - 14th Aug 19
You Have to Buy Bonds Even When Interest Rates Are Low - 14th Aug 19
Gold Near Term Risk is Increasing - 14th Aug 19
Installment Loans vs Personal Bank Loans - 14th Aug 19
ROCHE - RHHBY Life Extension Pharma Stocks Investing - 14th Aug 19
Gold Bulls Must Love the Hong Kong Protests - 14th Aug 19
Gold, Markets and Invasive Species - 14th Aug 19
Cannabis Stocks With Millennial Appeal - 14th Aug 19
August 19 (Crazy Ivan) Stock Market Event Only A Few Days Away - 13th Aug 19
This is the real move in gold and silver… it’s going to be multiyear - 13th Aug 19
Global Central Banks Kick Can Down The Road Again - 13th Aug 19
US Dollar Finally the Achillles Heel - 13th Aug 19
Financial Success Formula Failure - 13th Aug 19
How to Test Your Car Alternator with a Multimeter - 13th Aug 19
London Under Attack! Victoria Embankment Gardens Statues and Monuments - 13th Aug 19
More Stock Market Weakness Ahead - 12th Aug 19
Global Central Banks Move To Keep The Party Rolling Onward - 12th Aug 19
All Eyes On Copper - 12th Aug 19
History of Yield Curve Inversions and Gold - 12th Aug 19
Precious Metals Soar on Falling Yields, Currency Turmoil - 12th Aug 19
Why GraphQL? The Benefits Explained - 12th Aug 19
Is the Stock Market Making a V-shaped Recovery? - 11th Aug 19
Precious Metals and Stocks VIX Are About To Pull A “Crazy Ivan” - 11th Aug 19
Social Media Civil War - 11th Aug 19
Gold and the Bond Yield Continuum - 11th Aug 19
Traders: Which Markets Should You Trade? - 11th Aug 19
US Corporate Debt Is at Risk of a Flash Crash - 10th Aug 19
EURODOLLAR futures above 2016 highs: FED to cut over 100 bps quickly - 10th Aug 19
Market’s flight-to-safety: Should You Buy Stocks Now? - 10th Aug 19
The Cold, Hard Math Tells Netflix Stock Could Crash 70% - 10th Aug 19
Our Custom Index Charts Suggest Stock Markets Are In For A Wild Ride - 9th Aug 19
Bitcoin Price Triggers Ahead - 9th Aug 19
Walmart Is Coming for Amazon - 9th Aug 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

Two Critical Investment Keys Going Forward

Stock-Markets / Financial Markets 2012 Mar 16, 2012 - 11:19 AM GMT

By: DeepCaster_LLC


Best Financial Markets Analysis Article “How about capitalism, Ben Bernanke?”

 Jim Grant, Interest Rate Observer, Bloomberg Interview, 3/13/12


“A difference which makes no difference is no difference.”

William James, Philosopher

Macro-Trend Policies and Events (“Beta” for Investors) almost always dominate Alpha (the returns, but for Beta) that Investors might otherwise expect on any Individual Investment.

Energy and Precious Metals Investors discovered this much to their dismay in the early 1980’s as Paul Volcker’s high interest rate policies began to seriously erode prices of these Assets.

Essential to understand for Investment success going forward (and the Primary Source of the Profit Potential for the Investments we recommended earlier this week) are two Policies (and consequent trends) which will dominate for months to comes, until they self-destruct.

The first Essential to understand is that “Greece” is not mainly (or arguably at all) about Greece, and thus “Greece” is not solved by a long shot.

“…what’s going on Europe has nothing to do with solving a debt crisis and everything to do with preserving a corrupt system based on limitless debt and growing government power. The sooner you understand that fact, the sooner you’ll be able to prepare for what happens next.

“…doesn’t it strike you as strange that all of Europe can be brought to its knees by tiny little Greece? Greek GDP is just 2.4% of Europe’s GDP. In economic terms, Greece doesn’t matter. …Yet, Greece obviously does matter; otherwise the European financial markets wouldn’t be celebrating the latest €130 billion…

“…plan to reduce Greek’s debt to 120% of GDP…EIGHT YEARS FROM NOW…is not a serious plan about debt. Therefore, the plan cannot be about debt reduction.

“Will the plan make Greece more competitive in the long run? Well, probably not.

“Does saving Greece save the euro? Not at all. The euro would be better off without Greece and Greece would be better off without the euro. …With its own currency, Greece could default, devalue, inflate and start over.

“If saving Greece is not about saving the euro, and if it’s not about reducing Greek debt, and if it’s not about making Greece a more competitive economy…then just what IS it about?

“Saving Greece means preventing a technical default…even though Greece has already defaulted in a real-world sense.

“Greece’s creditors could be forced to accept this not-a-default default losses recourse to the credit default insurance they purchased.”

“What the Greek Rescue is Really About”
Dan Denning, The Daily Reckoning, 3/5/2012


As the most recent Eurozone deal (ostensibly regarding Greece) unfolded, it became clear that the deal was about preventing a Technical Default for most of the Creditors so most of the Credit Default Swaps (Insurance “policies” on the Debt) would not be triggered (in defense of Dan Denning’s excellent piece, the latest Greek deal was done after his article was published).

In fact, most CDS were not triggered, according to the lender-controlled ISDA, even though there was an actual Default on 52.5% of the principal value on most Bonds.

That is because allowing a triggering of the CDS on substantially all of the $266 Billion of Bonds would have led to massive losses for the CDS issuers, and possibly would have destroyed the CDS “Insurance” system.

On the other hand, in order that the ISDA’s refusal to allow the triggering of the CDS on most of the Bonds not lead to a destruction of the CDS Industry (due to a consequent distrust that any CDS would ever serve as Genuine Protection) CDS covering about $3 billion of the debt (of the total $266 billion of restructured debt) were deemed Triggered, according to offered sources. That is called “Trying to have it both ways.”

Thus Denning’s Fundamental Analysis is sound.

“It gets even murkier here. The ISDA essentially represents the global banking system. In Europe, the banking system is full of government bonds. Those bonds are nominally assets. If Greece defaults, it sets a precedent for how other countries might deal with unsustainable debt levels. This imperils the collateral of Europe’s entire banking system.

“When you realize that the ISDA and the ECB and the EU are in league to save their financial skins, you realize that the Greek rescue plans is about preventing other countries from realizing that default is an option. In fact, it’s not even about preventing the realization. It’s about making it impossible for a country to default on its obligations…even if it means erasing the word “default” from the English language.

(The Collective Action Clause – ed.) “This clause allows your securities to be revalued without your consent if a majority of other bondholders agree to it.

“Now we’re coming to the real nuts and bolts of what’s at stake. The technocrats in Europe are at war with private investors. The members of the ISDA are in league with the technocrats to preserve their system. That part is easy to understand.

The technocrats are employed by government and get to spend your money. This system is good for them. It’s good for the members of the ISDA too. Loaning money to the government is good business. Collecting rent off the expansion of credit is easy money. They want the system to last as well. Who is the system not good for? Everybody else who’s on the outside looking in. Investors who want their capital to be productive are out of luck. And taxpayers who question the value of austerity measures and debt reduction plans that don’t really reduce debt are also out of luck. No wonder they are angry.

“We’ve come a long way, then. Greece isn’t about saving Greece. …It’s about the subversion of sovereignty and democratic processes by removing decisions from people and giving them to trans-national financial elites. It’s about preserving a global system that’s based on the accumulation of debt and growing government power because there are two groups of people who benefit tremendously from that system, even if most people don’t.” (emphasis added)

“What the Greek Rescue is Really About”
Dan Denning, The Daily Reckoning, 3/5/2012


Though Denning doesn’t explicitly say it, it is clear that what the “trans-National Financial Elites” (i.e. Mega-Bankers) are mortally afraid of is:


Iceland’s economy is already recovering quite nicely thank you, after Iceland’s having said “no” to the Perpetual Debt Slavery demanded by the Mega-Banks.

In distinction, leading Greek Politicians have, thus far, been capitulating to the Mega-Bankers demands that their terms of Debt Slavery be agreed to.

But Greek elections are later this Spring. We shall see.

So, on one hand, the Mega-Bankers demand ever more loan restructuring, even though given any reasonable set of assumptions, these restructured loans cannot ever be paid – this is Debt Slavery with a Vengeance.


So the First Essential Key to Investing going Forward is the Realization that the Mega-Bankers will always try to Implement Policies in these Bankers’ Interest and not in Investor-Citizens Interest. The Mega-Bankers are “at war with Private Investors” to use Denning’s words.

The second Critical Investment Key is a Related Aspect of Mega-Bank policy which has been reconfirmed in spades.

It is a reconfirmation of a Pattern which the Mega-Bankers have already set: Monetization (QE) to Infinity will continue, QE1, QE2, the ongoing de facto QE3/Operation Twist, and the ECB’s two very recent LTRO Injections totaling One Trillion Euros; are just five of several pieces of Evidence.

It is this phenomenon of QE to Infinity which will likely have the greatest impact on investments.

Before offering guidelines for addressing the QE to Infinity Threat and Opportunities it presents, consider the meaning and implications of QE to Infinity per Jim Willie.

“Keep in mind that whatever happens to Greece will serve as vivid preview of what is to come in Italy, Spain, and perhaps France.

“Few analysts seem to report a basic factor. The USGovt cannot afford a higher rate on borrowing costs than 0%, not now and not ever. So it will become permanent. This is the New Normal with ugly warts. There can be no Exit Strategy, since the government finances dictate no change. A normal borrowing cost would mean the debt finance cost would rival the defense budget in cost, and overshadow the Medicare cost. The USGovt deficit thus locks the 0% rate and puts the USFed in a monetary straitjacket. …Notice the extension into 2014 of the accommodative 0% rate. What a farce! What a tragedy! What a pathetic excuse of a central bank! A vicious cycle is underway where the gargantuan federal deficits require continued 0% costs to finance them, but the 0% cost of money has its own heavy effect and damaging toll.

“The 0% cost of money makes for a grotesque distortion in asset prices, all of them. Nothing is properly priced. The free money results in rising cost of everything. All categories rise inexorably within the cost structure. Wages do not, thanks to the forfeit of industry to Asia, in particular to China. So the squeeze on capital continues unabated and with ferocity. Capital is killed. …businesses …will gradually respond to higher costs (equipment, materials, fuel, shipping) by closing the businesses. Workers are cut… The destructive effect on working capital from 0% money remains the singlemost blind spot of American and Western economists. They call it stimulative, when it is the exact opposite. They are badly educated. They are compromised by their paychecks. They are dead wrong...” (emphasis added)

“Handicapping The Collapse”
Jim Willie,, 3/9/2012


Jim Willie has correctly forecast 0% rates (or near zero, in our view) indefinitely, but he does not here explicitly say how this is achieved.

The answer is The Fed’s and other CB’s QE-to- Infinity (albeit in a variety of forms and disguises mainly involving monetizing (buying) sovereign and other debt) which is The Tool used to maintain zero rates.

It is thus this QE to Infinity (Monetary Inflation) which is responsible for the “rising costs of everything… (except) Wages.” (i.e., Price Inflation) One must only consider recent Food and Energy Price Increases.

And this Price Inflation we are already seeing. John Williams put it succinctly: “Rising prices largely accounted for February Retail Sales Gain.” (, 3/13/12) And, of course, this is why Real Inflation is much higher (10.48% in the U.S., e.g.) than Bogus Official Numbers reflect (per But it is this QE-to- Infinity which also provides the Opportunity to Profit and Protect, and is the basis for our two Buy Recommendations made earlier this week in our April letter.

Recommendations and Observations

  1. Buy Physical Gold and Silver to be held in Personal ( not Bank Vaults) Possession, and Mining Shares with a Caveat.
  2. The Caveat re Mining Shares is that they are “Paper”/Digital Securities. Thus because an eventual Dollar Crash and the “squalls” leading up to it will affect all Paper/Digital Money flows, invest in solid Miners Now, but be prepared to continue to re- evaluate the “Money Flows Risk” before The Great Dollar Crash, likely coming in 2013 or 2014.
  3. That Impending Great Crash will lead to numerous Counter Party Failures. It is thus essential to be out of Assets with Great Counter-Party Failure Risk prior to The Great Crash.
  4. But Prior to that Crash, it is reasonable to Incur Counter Party Risk, provided one plans to be “out” in time (a challenging task!). 
    In making this Critical Timing Determination to evaluate the Financial and Economic Squalls as they come ashore. One of Deepcaster’s Ongoing Primary Goals is to help our readers make such Timing Judgments. Thus we include Forecasts for most Major Sectors in each week’s letter or Alert. Attention to The Interventionals facilitated Deepcaster’s recommending five short positions prior to the Fall, 2008 Market Crash all of which were subsequently liquidated profitably.
  5. Given the aforementioned Real Inflation Reality, it is essential that one Aim for Total Return (Gains plus Yield) in excess of that (10.57% Real Inflation in the U.S., e.g.). Deepcaster has designed its High Yield Portfolio with that Aim. Those selections had recent Yields of 18.5%, 8.6%, 10.6%, 26%, 6.7%, 8%, 10.6%, 10% and 15.6% when added to the Portfolio. (See Notes)
  6. Become familiar with the ongoing Cartel ‘End Game’ which we have described in several articles including “ Gold-Freedom versus The Cartel ‘End- Game’ & A Strategy for Surmounting It (09/23/10)” and “Surmounting The Armageddon Scenario & Cartel ‘End Game’(2/26/10)” in “Articles by Deepcaster” Cache at
  7. As well as investing in Precious Metals, Invest in Tangible Assets in relatively Inelastic Demand. We specifically, for example, have recommended Specific Agricultural investments in recent Alerts. (See Notes)
  8. Consider seriously getting out of variable-rate debt and into fixed rate debt.
  9. Get regular Input from Independent News Sources. Several Financial and other Mainstream Media periodically Manufacture or Censor or Spin Real News.
  10. For the worst case, prepare to Barter. Silver coins and Canned Food are useful barter items.

  In sum, Q.E. to Infinity will eventually bring Price Hyperinflation to many, but certainly not all, Sectors. 

Best regards,
Wealth Preservation         Wealth Enhancement

© 2012 Copyright DeepCaster LLC - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules