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“Prior to the 2008 financial crisis, the eight
central bank balance sheets were less than 15% the size of world stock
markets and falling. In the immediate aftermath of Lehman Brothers’
failure, these eight central bank balances swelled to 37% the capitalization
of the world stock market. But keep in mind that the late 2008/early 2009
peak was due to collapsing stock market values combines with balance sheet
expansion via ‘lender of last resort’ loans.
“Recently, the eight central banks balance sheets have spiked to 33% of world stock
market capitalization. This has come about not by lender of last resort
loans, but rather by QE expansion…
“Central banks are ruling markets to a degree
this generation has not seen. Collectively they are printing money to a
degree never seen in human history.”
Bianco Research 01/25/2012
Indeed the Central Banks are now “printing money to a
degree never seen in human history” Massive (Covert and Overt)
QE it is.
And Bernanke confirmed earlier this week that Massive QE would
continue by stating that QE3 was “on the table”, thus supporting
a continuing “Risk-On” Rally.
But this QE will have Profoundly Damaging and Risk-Creating and Wealth
Destroying Effects. President Reagan’s Budget Director, David Stockman,
correctly called it “Monetary Heroin”.
Nevertheless, it will also provide Great Opportunities for Wealth
Acquisition, as we explain.
Consider first Bob Chapman on the Magnitude of the Impact of QE.
“We announced our belief a few weeks ago that
the Fed loan to the ECB could with fractional banking be $10 trillion. This
past week we found that Credit Suisse shares our ideas as well. We believe
that what this move by the Fed and the ECB is telling us that this is
probably it. We also ask again how can the banks in the LTRP repay the funds
in a timely manner? No plan has been presented
before or since, there is no plan. Again, just throw money at the problem.
The only player really capable of saving Europe is Germany and they would
destroy themselves in the process. Everyone should have seen this coming but
no one did except a handful of insiders. The resultant use of funds in the
ECB distribution is hardly even mentioned in the media. It is a big dark
secret.”
We don’t know who coined the phrase “Q.E. to
Infinity” but, unfortunately, they were Prescient.
And, alas, Billionaire Jim Rogers was right when he said, “What
the Federal Reserve is doing now is ruining an entire class of investors.”
And he could justifiably have said “classes of investors”
because not only does this QE destroy the Wealth of Savers (through dramatic
deflation of the Purchasing Power of their Fiat Currencies) but also the
Wealth of Pension Funds (and thus Pensioners) unless their funds are
extremely well managed.
And even well Managed Funds find it tough to beat Real (as opposed to
Bogus official) Inflation Levels – 11% already in the USA, a
Hyperinflationary Threshold level per shadowstats.com (Note 1).
Indeed, given the Constrained Budgets imposed by the Sovereigns’
Necessity for Austerity, Economic Growth is and will be insufficient to ever
repay the PIIGS (plus France, the U.K. and the U.S.) loans. Consider that the
U.S. Debt, which increased from $10 Trillion to over $15 Trillion under
Barack Obama, is now 100% of U.S. GDP and can never be repaid given any
reasonably probable Economic Growth and Tax Revenue Prospects.
But consider also the opportunities from Massive QE.
”The world’s farmers produced
more grain in 2011 than ever before. Estimates from the U.S. Department of
Agriculture show the global grain harvest coming in at 2,295 million tons, up
53 million tons from the previous record in 2009. Consumption grew by 90
million tons over the same period to 2,280 million tons. Yet with global
grain production actually falling short of consumption in 7 of the past 12
years, stocks remain worryingly low, leaving the world vulnerable to food
price shocks.
”Nearly half the
calories consumed around the world come directly from grain, with grain-fed
animal products making up part of the remainder. Three grains dominate the
world harvest: wheat and rice, which are primarily eaten directly as food,
and corn, which is largely used as a feedgrain for
livestock. Wheat was the largest of the world’s grain harvests until
the mid-1990s. Then corn production surged ahead in response to growing
demand for grain-fed animal products and, more recently, for fuel ethanol.
Despite a drop in the important U.S. harvest due mostly to high summer
temperatures, global corn production hit 868 million tons in 2011, an all-time
high. The harvests of wheat (689 million tons) and rice (461 million tons)
were also records. (See data
.)
”Carryover grain
stocks—the amount left in the world’s grain elevators when the
new harvest begins—now stand at 469 million tons, enough to cover 75
days of consumption at current levels. Between 1984 and 2001 grain stocks
hovered around the more comfortable level of 100 days. In 2002, however,
grain production fell 88 million tons short of demand, and since then annual
carryover stocks have averaged 72 days of use, close to the bare minimum for
basic food security. In 2006, stocks bottomed out at 62 days, setting the
stage for the 2007–08 food
price spike when international grain
prices doubled or tripled in a short amount of time. For poor families in developing
countries who spend half or more of their incomes on food, often grain
staples, this led to empty plates and frustration. Protests erupted in some
35 countries as the number of hungry people in the world climbed above 1
billion.”
Emphasis added.
”Bumper 2011 Grain Harvest Fails
to Rebuild Global Stocks”
Janet Larsen,
http://www.earth-policy.org/indicators/C54/grain_2012
Notwithstanding Cartel (Note 2)
Price Suppression, Gold and Silver have unquestionably been the best
performing Asset Class in the last decade assuming wealth protection and
Profit are the Goals. And they will continue to be.
But there is another Asset
Class which will almost certainly Outperform as we enter into the Hyperstagflationary Era. (See Deepcaster’s
“Gaining From The Inflation/Deflation Conundrum” –
12/15/2011 in ‘Articles by Deepcaster
Cache’ at deepcaster.com).
That class is Agricultural
Products.
Why?
The bulk of the 80 Million /
Year World Population Increase Occurs in Emerging Market Countries such as
the BRICS.
Generally these Emerging
Markets have an emerging Middle Class with the economic wherewithal to buy
more and better food.
Clearly, Food is the first
Priority of all People.
But as the excerpt above shows,
even though Supply is increasing, the Demand generated by the 80 Million /
Year population increase, is outstripping supplies.
In sum, demand is exceeding
supply and given Demographic and Agricultural Production Realities, will
continue to do so. Much of the world’s best arable land is already in
production, and modern Agriculture is very energy intensive and especially
Reliant on Portable fuels like Crude Oil.
Regarding the USA’s Oil-Food Future
Probable Crises
consider the following Excerpts from “Eating Fossil Fuels” by
Dale Allen Pfeiffer and distributed by Carrying Capacity Network (www.carryingcapacity.org).
“Today, virtually all of the productive
land on this planet is being exploited by agriculture.
· At
present, nearly 40% of all land-based photosynthetic capability has been
appropriated by human beings.
· The
energy for the Green Revolution was provided by fossil fuels in the form of fertilizers
(natural gas), pesticides (oil), and hydrocarbon fueled irrigation.
· The
Green Revolution increased the energy flow to agriculture by an average of 50
times the energy input of traditional agriculture.
· In
the United States, 400 gallons of oil equivalents are expended annually to
feed each American.
· Production
of one kilogram of nitrogen for fertilizer requires the energy equivalent of
from 1.4 to 1.8 liters of diesel fuel.
· Energy
input has continued to increase without a corresponding increase in crop
yield
· modern agriculture must continue
increasing its energy expenditures simply to maintain current crop yields.
· Fossil
fuels are nonrenewable.
· Total
fossil fuel use in the United States has increased 20-fold in the last 4
decades.
· The
U.S. food system consumes ten times more energy than it produces in food
energy. This disparity is made possible by nonrenewable fossil fuel
stocks….
· It
takes 500 years to replace 1 inch of topsoil.…Former prairie lands,
which constitute the bread basket of the United States, have lost one half of
their topsoil after farming for about 100 years. This soil is eroding 30
times faster than the natural formation rate.
· The
expanding human population is putting increasing pressure on land
availability….
· Agriculture
consumes fully 85% of all U.S. freshwater resources….
· Presently,
only two nations on the planet are major exporters
of grain: the United States and Canada. By 2025, it is expected that the U.S.
will cease to be a food exporter due to domestic demand. The impact on the
U.S. economy could be devastating, as food exports earn $40 billion for the
U.S. annually.”
Given
the aforementioned, it is no mystery what will happen to Food Commodities
Prices.
In
sum, two Great Wealth Protection and Profit Opportunities arise from the
Central Banks Dangerous Q.E.
One
is in the Precious Monetary Metals Gold and Silver and the other is in
Agricultural Commodities Prices (See Note 3 below) both of which will likely
be impelled ever higher by Dangerous Q.E.
Best regards,
Deepcaster
January
27, 2011
**Note 1: Shadowstats.com calculates Key
Statistics the way they were calculated in the 1980s and 1990s before
Official Data Manipulation began in earnest. Consider
Bogus
Official Numbers vs. Real Numbers (per Shadowstats.com)
Annual U.S. Consumer
Price Inflation
reported August 18, 2011
3.63% 11.21%
(annualized July, 2011 Rate)
U.S. Unemployment reported September 2, 2011
9.1% 22.8%
U.S. GDP Annual Growth/Decline reported August
26, 2011
1.55% -2.83%
U.S. M3 reported August 14, 2011
(Month of July, Y.O.Y.)
No Official Report 2.44%
***Note 2: Using the above Guidelines
allowed Deepcaster to make buy and sell
recommendations resulting in remarkable profits recently if acquired and
liquidated when we recommended*, approximately:
35%
Profit on Double Long Gold ETN on August 23, 2011 after just 41 days (i.e.
about 280% annualized!)
26%
Profit on Double Long Gold ETN on August 17, 2011 after just 35 days (i.e.
about 260% annualized!)
25%
Profit on Gold Stock on August 8, 2011 after just 201 days (i.e. about 45%
annualized!)
38%
Profit on Silver on July 18, 2011 after just 201 days (i.e. about 68%
annualized!)
150%
Profit on Gold Stock Calls on July 13, 2011 after just 56 days (i.e. about
975% annualized!)
40%
Profit on leveraged Short Treasuries ETF Puts on April 15, 2011 after just 3
days (i.e. about 4800% annualized!)
30%
Profit on Silver on April 6, 2011 after just 98 days (i.e. about 111%
annualized!)
To
read our recent article -- “Essentials for Wealth Acquisition
Acceleration”, go to www.deepcaster.com and click on the
‘Articles by Deepcaster’ Cache.
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Profitable Performance is no assurance of future Profitable Performance.
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