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Nadeem Walayat Financial Markets Analysiis and Trend Forecasts

ECB in Secret Seeks Infinite Power

Politics / Central Banks Jun 01, 2012 - 12:39 PM GMT

By: DeepCaster_LLC


Best Financial Markets Analysis Article“The Financial Times reports that the European Central Bank has secretly distributed E100 billion to Greek banks and billions more in secret to other European banks and, in doing so, has gained great "sway over eurozone politicians" -- you know, the people actually elected to run their countries.

“Infinite secret money is infinite secret power, and it's great that the FT is interested in this aspect of central bank secrecy. Is it too much to hope that the FT someday will show similar interest in the secrecy imposed by central banks on their interventions in the gold market, interventions detailed by GATA here?”

           “European Central Bank secretly distributes infinite money”

           Chris Powell, Secretary/Treasurer Gold Anti-Trust Action Committee Inc, 5/22/12

No surprise that The Cartel (Note 1) of Central Bankers continues to pump more Q.E. into the Financial System to preserve the Mega-Banks’ Power and Profits. Once The Cartel Bankers begin QE (i.e., Fiat Money Printing) they can’t stop. The problem is, Infinite Q.E. – The Biggest One – is ultimately a Recipe for Disaster for Citizens and Investor-Citizens alike since it eventually creates Dangerous Price Inflation.

“It's going to happen – as surely as we'll see QE4, QE5, and on and on and on.

“That's the problem with reckless money printing. It's like jumping into a swimming pool. You can't ever "un-jump."

“So now it's just a question of timing the announcement for maximum impact.”

           “Traders: Prepare for More Money Printing,” Jeff Clark, 5/15/12

QE can not be stopped any time soon, but it can be Profitably Corralled as we explain.

But first a bit more context is needed. Consider that a Covert (albeit de facto) QE3 has already been implemented in the last 6 months via The Fed’s Operation Twist and the ECB’s LTRO program.

Moreover, consider that the potentially Toxic (because highly leveraged) Derivatives Positions at the Mega-Banks are of the same Order of Magnitude that they were before the 2007-2009 Financial Crisis.

Specifically, consider the Multi-Trillion Dollar Derivatives Positions at the Four largest Banks (Sept 30, 2011) and compare it with their Total Assets.






























Compare the approximate $4.7 Trillion combined Assets of these four largest Banks with their approximate $232 Trillion Notional Derivatives Exposure (as of September 30, 2011.

Stress Test Anyone?

Consider in addition, for example, the Best Estimates of the Capital Injection needed to “save” the Spanish Banks – around One Trillion Euros.

No wonder yields on 10 year Spanish Government Notes are approaching the Hyper-Toxic 7%.

A major problem in that each additional Injection of QE creates less and less Markets Boosting effect. Just as a Drug Addict needs more and more, with increasingly less effect.

Jeff Clark is correct, additional QE Tranches are coming “surely … we’ll see QE4, QE5 and on and on and on”.

But unlimited QE (i.e., unlimited Monetary Inflation) inevitably brings Price Inflation, which we are already seeing round the World. In the U.S., for example, 9.94%, annualized per, already Threshold Hyperinflationary. Food Prices, e.g., are off their highs, but they have not really dropped that much, have they?!

So Neither Monetary nor Intensifying Price Inflation can be stopped, any time soon (though ultimately, the QE-Paper-Edifice is likely to collapse).

But the effects of Hyperinflation can be profitably corralled.

The following excerpt from Sharps Pixley gives us a clue as to how.

“Central banks gold purchase data in April cheered the gold market on Thursday, however. Mexico, Kazakhstan and Ukraine added about 204,000 ounces in April. The Philippines added a whopping 1.033 million ounces in March with gold now at 13.6% of its total reserves. UBS highlighted the Philippines’ gold purchase is significant as this is the second largest monthly Central Bank’s purchase after Mexico’s purchase of 2.5 million ounces in March 2011.World Gold Council (WGC) reported that central bank purchases were 80.8 tonnes in Q1 2012 or around 7% of global gold demand. What is more interesting is that WGC is now confident that central banks will continue to buy gold and has added official sector purchases as a new element of gold demand while eliminating official sector sales as a negative supply factor.”

“Central Bankers Bought More Gold while European Leaders Kept Talking”

Austin Kiddle, Sharps Pixley, 5/25/12

If there is any group that should know the effect of, and remedies for, infinite Fiat Money Creation, it is the Central Bankers.

And what are they doing? They are buying Gold.

And notice that in the recent Equities Market Downdraft, Gold is acting as a Safe Haven Asset, stubbornly refusing to move lower than the $1550s to $1560s range. Buying Timing is Key.

Notice also that recently the Mining Shares have performed better than Equities-in-General. The aforementioned are why Deepcaster has added Mining Shares Recommendations and other Monetary Inflation Surmounting Recos, including High Yield Recommendations (See Notes 2 and 3) aimed at achieving a Total Return (Gain + Yield) in excess of Real Inflation, to his Portfolios.

Thus, Guidelines for building a “Corrall” with both Wealth Protection and Profit Potential are

  1. Buy Physical Gold and Silver at the right time.
  2. Buy Quality Mining Shares whose Fundamentals and Key Technicals are quite Bullish now.
  3. Do not be satisfied with Achieving anything less than a Total annualized Return in excess of the Real Inflation level of 10% otherwise, you will Surely lose Purchasing Power.
  4. Aim to shift investments into Sectors which are resistant to and Profit from Monetary, and thus Price, Inflation.

“Q.E. to Infinity” as Jim Sinclair puts it, is here, now. And Deepcaster will be forecasting the timing of the next QE Tranche, implemented “for maximum impact” as Jeff Clark correctly notes.

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.


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