“As always, the Federal Reserve remains prepared to take action
as needed to protect the U.S. financial system and economy in the event that
financial stresses escalate…”
“Bernanke: Fed Could Act If
Economy Weakens,” 6/7/2012
AP Economics Writer, Associated Press
Fed Vice-Chairman Janet Yellen’s “hint” of possible further QE
on Wednesday, June 6, 2012 was followed by Ben Bernanke’s much weaker
mere openness to the possibility, expressed on Thursday.
It is thus no surprise that the Equities
Markets Massively Rallied Wednesday. And also no surprise that the
“Rally” petered out late Thursday.
This raises the question: how Durable
are Rallies juiced by QE? Just consider the Quite Temporary Effect of QE1,
then QE2, then Operation Twist, then (or in conjunction with) LTRO1 and
The answer is: increasingly Less
Like another dose to a Drug User, the
effects of QE (however it is disguised) are increasingly fleeting, and less
effective, and more damaging in the long run. And China’s similar
Stimulus has created a Property Bubble (now deflating) and a loan bubble, and
considerable Civil Unrest.
More significantly, what does it say
about the underlying strength of the Equities Markets that it takes QE or the
prospect thereof, to Rally them. It says that the Fundamentals are very weak.
So it is very important to stay focused
on the Fundamentals in order to Profit and Protect, and to screen out the
Noise, and Disinformation.
Indeed, one Fundamental Reality is that
QE in whatever form has considerable downsides. For example, U.S. QE has
created considerable net Real Inflation in the U.S. (and
notwithstanding real Deflation in certain Sectors and MSM Reports which
indicate an overall Deflation, a False Indication) and elsewhere,
especially in Food and Energy (9.93% Annualized per Shadowstats
– Note 1). That is why our High Yield Portfolio is aimed at generating
Total Return in Excess of this Real Inflation (Note 2).
Another Fundamental Reality is that
Liquidity Injections do not solve Solvency Problems. Taking on more Debt does
not solve the problems caused by Debt Saturation, but only worsens them. The
Eurozone is an object lesson in how Bank and Sovereign Bailouts harm, not
Even so, yet another Fundamental Reality
is that the Central Bankers will continue to implement repeated QE to Prop up
the Financial System which is designed to Operate for their benefit.
“More than six months have passed since Frances Weaver and I
published our pamphlet, Guilty Men, identifying those financiers, politicians
and propagandists who advocated the creation of the European single currency
15 years ago, and exposing the dishonest or even brutal methods they used.
“It must be acknowledged this week that the main reason for the
depth and longevity of the economic and financial catastrophe striking Europe
is that all the policy-makers who are dealing with the crisis were advocates
of the euro right from the beginning. In other words, the very people who
caused the conflagration in the first place are in charge of putting it out.
“This is a disaster. For them, the logical step of abandoning
the failed policies of the past decade is unthinkable. …Far from being
driven out of public life, which is what they deserve, the creators of the eurozone crisis remain very much in charge of events.
“Such is the sensibility of the European political class as they
confront one of the largest financial crises in our history. … as this week’s call for eurobonds
shows. … They would have to be underwritten in common by all European countries, … The introduction of eurobonds
would therefore lead immediately to the full economic and political
integration of Europe, which has been the objective of the European political
class from the very start. …
“The only lasting solution to the crisis is a total reversal of
the policies being pursued by the European elite. …
“Hence the importance of a paper published this week by Jonathan
Compton of Bedlam Asset Management, a heretical investment company which
(almost alone among City firms) predicted the banking crash of four years
“Mr Compton expertly makes the case
for the weaker eurozone countries to default on
their debt and to pull out of the single currency. He argues that such a
move, far from leading to the chaos and devastation predicted by an
out-of-touch Euro elite, would very quickly cause the return of economic
“Inside the eurozone, a number of
countries – among them Greece, Spain, Portugal, Ireland and Italy
– are facing intolerable levels of distress. Bank depositors are
withdrawing their money, the banks are in collapse, capital
investment has stalled, while foreign investors are pulling out as fast as
“Mr. Compton argues that the moment that these countries quit
the eurozone and default on their debt this process
will go speedily into reverse. The bank depositors, no longer having anything
to fear, will return. New owners will buy the failed banks and foreign
investors will flood back in, while a surge in inflation will stimulate a
revival of economic activity. …
“Already in Greece, Spain and the Netherlands, the voters are
rejecting austerity – and once they start to link that austerity to eurozone membership, monetary union will collapse quite
quickly. This partly explains the warnings of economic Armageddon that would
follow from euro collapse emanating from Brussels and Frankfurt. In fact, the
opposite is the truth.”
“The euro’s ‘guilty men’ are now steering
Europe to catastrophe”
Peter Osborne, www.telegraph.co.ul, 6/6/2012
Another Fundamental Reality is that The
Fed-led Banker Cartel (Note 3) will continue to work very hard to Suppress
Gold and Silver Prices, because increasing recognition of Gold and Silver as
Real Money tends to delegitimize their Fiat Currencies and Treasury
securities. (Thus the $50, as we write on June 7, Takedown of the Gold Price
is no surprise either.) Of course, ongoing Price Suppression attempts do not
change the fact that these Precious Metals have been the best performing
Asset class in the past decade and will continue to be.
Another Fundamental Reality is that the
Major over-indebted Sovereign Nations’ Debts can not
under any Reasonable Economic Scenario ever be paid.
But rather than facing the Default Issue
Head-On, the Central Banks elect to buy back, as an “Extend and
Pretend” stop-gap, as it were, the Toxic Debt, and put it on their
Balance Sheets. But that chicanery too has its limits.
Indeed, the Combined Balance Sheet
“Assets” of these seven Major Central Banks – U.S., U.K.,
China, ECB, Germany, Japan, Switzerland – rose from just over $5
Trillion in mid-2006 to about $15 Trillion at the end of 2011.
This is Debt Monetization (i.e., via
Monetary Inflation) with a Vengeance and can lead only, and is leading
already, to Price Hyperinflation (see Note 1).
This Price Hyperinflation is not widely
recognized, yet, because the Official Statistics of Major Economies (the U.S.
& China, to name two) are Bogus.
Fortunately, a Profit Opportunity arises
from the foregoing provided one buys Inflation Assets at the Right Time. We
have recommended Gold and Agricultural Plays recently and thus were
subsequently able to recommend Subscribers Take ‘Considerable
The Bottom-line Reality, as it were, is
that QE to Infinity can not continue, because,
Major Sovereign Nations and Banks are Debt Saturated.
And there are other challenges, as former Assistant Secretary of the U.S. Treasury
Dr. Paul Craig Roberts describes, and one action which could help achieving a
“Ever since the beginning of the financial
crisis and quantitative easing, the question has been before us: How can the
Federal Reserve maintain zero interest rates for banks and negative real
interest rates for savers and bond holders when the US government is adding
$1.5 trillion to the national debt every year via its budget deficits?
… Without the artificially low interest rates, the debt service on the
national debt would be so large that it would raise questions about the US
Treasury’s credit rating and the viability of the dollar, and the
trillions of dollars in Interest Rate Swaps and other derivatives would come
“In other words, financial deregulation
leading to Wall Street’s gambles, the US government’s decision to
bail out the banks and to keep them afloat, and the Federal Reserve’s
zero interest rate policy have put the economic future of the US and its
currency in an untenable and dangerous position. It will not be possible to
continue to flood the bond markets with $1.5 trillion in new issues each year
when the interest rate on the bonds is less than the rate of inflation.
… A rise in interest rates, which must come sooner or later, will
collapse the price of the bonds and inflict capital losses on bond holders,
both domestic and foreign.
“The question is: when is sooner or later?
financial media tells us that flight from European sovereign debt, from the
doomed euro, and from the continuing real estate disaster into US Treasuries
provides funding for Washington’s $1.5 trillion annual deficits.
…Another explanation for the stability of the Fed’s untenable
policy is collusion between Washington, the Fed, and Wall Street.
“Unlike the US financial press, the foreigners
who hold dollar assets look at the annual US budget and trade deficits, look
at the sinking US economy, look at Wall Street’s uncovered gambling
bets, look at the war plans of the delusional hegemon and conclude:
“I’ve got to carefully get out of this.”
“US banks also have a strong interest in
preserving the status quo. …The banks can borrow dollars from the Fed
for free and leverage them in derivative transactions.
“…even actors in the process who could
terminate it have themselves a big stake in not rocking the boat and prefer
to quietly and slowly sneak out of dollars before the crisis hits.
“The very process of slowly getting out can
bring the American house down. The BRICS … are in the process of
forming a new bank. The new bank will permit the five large economies to
conduct their trade without use of the US dollar.
“In addition, Japan, an American puppet state
since WWII, is on the verge of entering into an agreement with China in which
the Japanese yen and the Chinese yuan will be
“Now we have arrived at the nitty and gritty. The small percentage of Americans who
are aware and informed are puzzled why the banksters
have escaped with their financial crimes without prosecution. The answer
might be that the banks “too big to fail” are adjuncts of
Washington and the Federal Reserve in maintaining the stability of the dollar
and Treasury bond markets in the face of an untenable Fed policy.
“Here are some of the catalysts waiting to ignite the conflagration
that burns up the Treasury bond market and the US dollar:
“A war, demanded by the Israeli government, with Iran, beginning
with Syria, that disrupts the oil flow and thereby the stability of the
“An unfavorable economic
statistic that wakes up investors as to the true state of the US
“An affront to China, whose government decides
that knocking the US down a few pegs into third world status
is worth a trillion dollars.
“More derivate mistakes, such as JPMorgan
Chase’s recent one, that send the US financial system again reeling…
“Financial deregulation converted the
financial system, which formerly served businesses and consumers, into a
gambling casino where bets are not covered. These uncovered bets, together
with the Fed’s zero interest rate policy, have exposed Americans’
living standard and wealth to large declines.
“As a result of jobs offshoring, the US has
become an import-dependent country, dependent on foreign made manufactured
goods, clothing, and shoes. When the dollar exchange rate falls, domestic US
prices will rise, and US real consumption will take a big hit. Americans will
consume less, and their standard of living will fall dramatically.
“However, the $230,000,000,000,000 in
derivative bets by US banks might bring its own surprises. JPMorgan Chase has
had to admit that its recently announced derivative
loss of $2 billion is more than that.
“It is difficult to imagine a more reckless
and unstable position for a bank to place itself in, but Goldman Sachs takes
the cake. That bank’s $44 trillion in derivative bets is covered by
only $19 billion in risk-based capital, resulting in bets 2,295 times larger
than the capital that covers them.
“Bets on interest rates comprise 81% of all
derivatives. These are the derivatives that support high US Treasury bond
prices despite massive increases in US debt and its monetization.
“US banks’ derivative bets of $230
trillion, concentrated in five banks, are 15.3 times larger than the US GDP.
A failed political system that allows unregulated banks to place uncovered
bets 15 times larger than the US economy is a system that is headed for catastrophic
“Everyone wants a solution, so I will provide
one. The US government should simply cancel the $230 trillion in derivative
bets, declaring them null and void. As no real assets are involved …
the only major effect of closing out or netting all the swaps (mostly
over-the-counter contracts between counter-parties) would be to take $230
trillion of leveraged risk out of the financial system. … And most
certainly … purging the financial system of the gambling derivatives
would vastly improve national security.”
“Collapse At Hand,” prisonplanet.com,
Dr. Paul Craig Roberts, Former Asst
Secretary of Treasury
However, while derivatives cancellation
would help stabilize the financial situation, it would not by itself suffice
to solve all the aforementioned problems. Considering all those problems, are
there not eventually and ultimately only two choices?
The two “choices” are the
Intensifying current monetary, and thus price, Inflation (itself eventually
unsustainable) or Partial Debt Repudiation.
The Late Johan Joubert
provides an example of a Successful Implantation of the latter by Iceland,
whose Economy is now recovering nicely.
“In Iceland, the people have made the government resign, the
primary banks have been nationalized and it was decided not to pay the debt
that these created with Great Britain and Holland due to their bad financial
politics, and a public assembly has been created to rewrite the
“In March (2010) the referendum and the denial of payment is
voted in by 93%. Meanwhile the government has initiated an investigation to
bring to justice those responsible for the crisis, and many high level
executives and bankers are arrested….
“And all of this has been done in a peaceful way. A whole
revolution against the powers that have created the current crisis.
“This is why there hasn’t been any publicity during the last two
years: What would happen if the rest of the EU citizens took this as an
example? What would happen if the US citizens took this as an example?”
Must Learn from Iceland”, Johan Joubert,
Johan Joubert Community, Truth & Justice Global
Focusing on Fundamental Realities and
tuning out the Noise and Disinformation, is the key to Profit and Protection
in Turbulent Times.
June 09, 2012
*Shadowstats.com calculates Key Statistics the way they were calculated in
the 1980s and 1990s before Official Data Manipulation began in earnest.
Bogus Official Numbers vs. Real
Numbers (per Shadowstats.com)
Annual U.S. Consumer Price Inflation reported January 19, 2012
2.96% / 10.57% (annualized December, 2011 Rate)
U.S. Unemployment reported February 3, 2012
8.3% / 22.5%
U.S. GDP Annual Growth/Decline reported January 27, 2012
1.56% / -2.70%
U.S. M3 reported February 13, 2012 (Month of December, Y.O.Y.)
No Official Report / 3.87%
And Official Source Disinformation
continues, consider Shadowstats comments on the
January 6, 2012 release of U.S. Employment data:
reported seasonally-adjusted 200,000 jobs surge in December 2011 payrolls
included a false, seasonally-adjusted gain of roughly 42,000 in the
“Couriers and Messengers” category. That gain was an artifact of
the seasonal-adjustment process and will remove itself in the January 2012
problem is that this 42,000 gain is part of a seasonal pattern that fully
reverses itself each January…”
Payroll Seasonal-Adjustment Problem”
John Williams, 1/6/12
Note 2: Deepcaster addresses the questions of Profit and
Protection in light of Fiat Currency Purchasing Power Destruction and
provides Guidelines in his article – “Essentials for Wealth
Acquisition Acceleration” found in ‘Articles by Deepcaster’ Cache.
Using such Guidelines facilitated Deepcaster’s
making buy and sell recommendations resulting in remarkable profits recently
if acquired and liquidated when we recommended, approximately*:
45% Profit on
Platinum ETF on February 8, 2012 after just 42 days (i.e., about 390% annualized!)
40% Profit on March 2012 $55 Dollar GDX
Calls on January 27, 2012 after just 23 days (i.e., about 635% annualized!)
34% Profit on Gold Royalty Streaming Company on December 5, 2011 after just
166 days (i.e., about 74% annualized!)
42% Profit on Volatility Index Futures ETN on October 3, 2011 after just 292
days (i.e. about 52% annualized!)
36% Profit on Double Short Euro ETF on September 7, 2011 after just 43 days
(i.e. about 300% annualized!)
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
150% Profit on Gold Stock Calls on July 13, 2011 after just 56 days (i.e.
about 975% annualized!)
*Past Profitable Performance is no assurance of future Profitable
Great Opportunity and A Dangerous Trap; Forecasts: Gold, Silver, Equities,
Crude Oil, U.S. Dollar, U.S. T-Notes, T- Bonds, & Interest Rates”
– February Letter
Fed doesn’t have a clue about markets or economics. They are dangerous
Printing money is not good for the world and will lead to more problems for
“What the Federal Reserve is doing now is ruining an entire class of
Jim Rogers, Bloomberg Interview, 6/29/11
We are not so Negative about the Near-Term Prospects for Nominal
Asset Price Growth in Certain Sectors as we were six months or
a year ago.
That is mainly because the E.U., Mega-Banks, and the Fed, have already de
facto launched a Massive Quantitative Easing 3, with more likely to come.
This QE will serve as a Major Force impelling (but not necessarily
successfully) Nominal Asset Prices UP in certain Sectors, for example,
But before one becomes too enthusiastic about the Prospects one should
consider the implications of our Forecast for Nominal Assets Prices Strength
in certain Sectors.
The practice of issuing Bogus (U.S. and other Key official) Inflation figures
obscures the Fact that Monetary Inflation (generated mainly by reckless Q.E.)
is very rapidly depreciating the purchasing Power of most Fiat Currencies
– by about 11% per year in the U.S. e.g. (per shadowstats.com).
Yield Portfolio is aimed at achieving Total Return in excess of Real Inflation.
Stocks in that Portfolio with Recent Yields of 18.5%, 8.6%, 10.6%, 26%, 6.7%,
8%, 10.6%, 10% and 15.6% when they were added to the Portfolio.
important to note is that, while massive Q.E. is a Major Inflationary Force
tending to pump up Prices in certain sectors, there are Powerful Deflationary
forces operating as well – the depreciating Housing Markets in the U.S.
and China come to mind. Real Estate in some areas in China is down over 25%,
but Food prices are up 9% year over year.
The key to identifying The Great Opportunities (and Great Potential Losses) is knowing which Sectors will likely have Inflating
Asset Prices and which will have Deflating ones.
Investors failing to Evaluate Inflation/Deflation Prospects on a Sector by
Sector Basis will have missed Great Opportunities and fallen into a
Deepcaster’s Letter --“A Great
Opportunity and A Dangerous Trap; Forecasts: Gold, Silver, Equities, Crude
Oil, U.S. Dollar, U.S. T-Notes, T- Bonds, & Interest Rates; February
Letter” -- posted in the ‘Latest Letter & Archives’
Cache at www.deepcaster.com, identifies
which Sectors will likely be helped (albeit temporarily) by this Massive QE3 and
which will likely be hurt, and provides Forecasts for all. And in his March
Letter, “The Pause Before The Great Bull; 3 Buy Recos!
Forecasts: Gold, Silver, Equities, Crude Oil, U.S. Dollar/Euro, U.S. T-Notes,
T- Bonds, & Interest Rates, March Letter”, Deepcaster
makes 3 Buy Recommendations designed for Protection and Profit.