Finansiella Insikter

Jim Rickards levererar dagens citat när han via Twitter på följande sätt kommenterar Feds medvetet läckta information till WSJ (via Hilsenrath givetvis) om dess planer på ‘steriliserad QE’:

Fed “sterilization” policy about as sterile as a rusty nail

Spot on är ordet. Han fortsätter sedan med följande kommentar:

It will be “sterilized” for exactly so long as banks don’t want the money and then it will instantaneously become unsterilized

Precis! Nedan är en längre kommentar från Jim Sinclair som är läsvärd:

Today’s statement by the Federal Reserve may be the lowest of the low for anyone who understands the mechanics of what they are speaking about. You cannot drive a car nor run an economy with one foot on the brake and one foot on the gas.

The claim that QE can be controlled by equal stimulation and draining adds up to nothing whatsoever. The idea that the Fed could so perfectly orchestrate pulling and pushing is denied by the fact of where we are right now.

The Western economic world is a leaderless sinking ship that is bouncing from one crisis to the other, attempting to save itself by MOPE, obscuration and downright fabrication. There is no way this type of double talk is going to accomplish anything other than scaring the hell out of those who understand.

It may be time to start bailing out as Harry Schultz has told me repeatedly for 40 years. We can slip no lower than the central bank treating us like ignorant children when they know damn well QE is going to infinity in the entire Western world.

Only gold can protect you from this sinking ship without hope of rescue as there is no captain at the helm. Further to this the well meaning splinter parties are a guarantee that no rational candidate can be proffered to oppose present management; therefore the same people running the USA today will run it tomorrow with a total change of leadership in Euroland.

I am horrified by today’s total distortion of fact of how the monetary mechanism works by the Federal Reserve. We will win the war by jamming the accelerator to the floor and jumping on the brakes simultaneously, therefore stimulating the dead cat bouncing economies of the Western world to prosperity and avoid sovereign debt failure.

My god that is nonsense.

Respectfully,
Jim

De få som envisats med att vägra att inse att Fed på ett eller annat sätt planerar att stimulera det gigantiska finansiella ponzi spelet inom kort kunde på tisdagen ganska snabbt lägga sina ‘tvivel’ åt sidan då inte mindre än två röstande Fed-ledamöter (Evans och Kocherlakota) uttalade mycket positivt om ytterligare stimulanser. 

Chicago-chefen Evans, som visserligen redan tidigare varit positivt inställd verkar nu mer eller mindre kräva stimulanser. Eller vad sägs om följande uttalande:

we need to do much more to increase the level of accomodation

Eller följande:

Running a little bit above 2% is far from a catastrophe,” he said, adding that the 2% goal is what inflation should average over time and it shouldn’t be seen as an absolute ceiling.
 
Without stronger commitments to keep money easy or other efforts by the Fed to boost growth, there is a “tangible risk” the economy won’t be any stronger two years from now than it is today, “and I think that would be a huge problem,” he said.

Man bara skakar på huvudet.

Samtidigt verkar Minneapolis-chefen Kocherlakota, som tidigare hört till de tre sk ‘oliktänkande’ ledamöterna, nu ha vänt kappan efter vinden eller vad sägs om följande uttalande:

..the disinflationary pressures of 2010 should soon reappear in the form of a sharp decline in current and expected core PCE inflation rates. In that eventuality, increasing policy accommodation might well be appropriate.

Med Kocherlakota nu ‘ur vägen’ är det nu bara Plosser och Fisher som behöver ‘omvändas’, även om det inte kommer att behövas för att Ben skall få sin vilja igenom. Att konsumentförväntningarna i USA fullkomligt kollapsade i augusti till den lägsta nivån sedan april 2009 lär inte göra det ett dugg svårare för Ben att få sin villja igenom den 21 september.

Anteckningarna från det senaste FOMC-mötet som släpptes igår visade dessutom att snacket om ytterligare stimulanser inom Fed är i full gång, eller vad sägs om följande utdrag:

A few members felt that recent economic developments justified a more substantial move at this meeting, but they were willing to accept the stronger forward guidance as a step in the direction of additional accommodation.

Som grädde på QE-moset så har inte mindre än två tunga Fed-delägare i form av Goldman Sachs och JP Morgan släppt ‘analyser’ (kravbrev) där man förväntar sig ytterligare stimulanser inom en inte alltför avlägsen framtid. Regelbundna läsare vet vad det innebär – grönt ljus och tillstånd för Ben att börja värma upp sedelpressarna åt husse.

Här är ett utdrag från Goldmans analys (via ZeroHedge):

..our base case for September 20-21 is for the FOMC to state its intention to reinvest MBS paydowns at the longer-end of the Treasury yield curve, but only to signal the possibility of a larger program at a later date.

There are three main ways in which the Fed could be more radical: (1) an extension of the QE program into markets other than Treasuries and agency MBS, e.g., private sector securities, (2) a much bigger QE program, up to the extreme version of a promise to buy as many securities as needed to hit a specific yield target (i.e. a “rate cap” further out on the yield curve as then-Governor Bernanke suggested back in 2002), and (3) an explicit or implicit change in the Fed’s policy targets.

Goldman passar även på att ge oss en definition av QE:

One final note on terminology: for simplicity, we have decided to label as “QE” any program of large-scale asset purchases that removes a significant amount of duration from the market, regardless of whether it is financed by creation of excess reserves or sales of short-duration securities.

Som ZeroHedge påpekar så innebär detta att de som envisas med att påstå att ‘Operation Twist’, som förenklat innebär att Federal Reserve viktar över från korta till långa statspapper för att hålla nere de långa räntorna (de korta är ju redan låga till följd av Feds beslut att hålla räntan vid noll i ytterligare två år), inte kan likställas med QE äntligen kan komma att tystas för gott.

Och avslutningsvis, här är JPMs förväntningar, förlåt krav:

We believe the minutes lend themselves to our view that there is a somewhat better-than-even chance the Fed takes action at the next meeting to increase the average maturity of assets on their balance sheet.

Att guld stigit kraftigt den senaste tiden och tog ett glädjeskutt under gårdagen kommer knappast som någon överraskning. Regelbundna läsare vet vad som gäller – fortsatt köp vid dippar (som kommer bli allt våldsammare) och på med öronproppar när en ‘guldexpert’ talar om en ‘guldbubbla’ på CNBC eller i annan propagandakanal.

Varken FOMC-mötet eller Bernankes patetiska presskonferens bjöd som väntat på några större nyheter eller överraskningar. Räntan lämnas givetvis oförändrad och Fed sänker även tillväxtprognosen för 2011.

I övrigt var det intressant när Ben skulle försöka förklara hur det kommer sig att tillväxten är så låg trots alla gigantiska stimulanser. Det enda han kunde få ur sig var: “We don’t have a precise read on why this slower pace of growth is persisting”. Yeah, right. Ben vet mycket väl att det är alla stimulanser som som ligger bakom den lilla tillväxt som finns. Utan stimulanser skulle ekonomin mer eller mindre falla ihop som ett korthus.

Att Ben på något sätt skulle annonsera nästa QE-program var det ingen som räknade med och så blev heller inte fallet. Den största snackisen i detta heta ämne var i övrigt återigen en tweet från Bill Gross, som förutspår att det ännu en gång blir i samband med Kansas Fed-symposiet i Jackson Hole i augusti som ytterligare QE kommer att börja diskuteras på allvar.

Här är Goldman’s kommentar till presskonferensen (via ZeroHedge):

BOTTOM LINE: Bernanke downplays likelihood of QE3 due to reduced deflation risks.

MAIN POINTS:

1. Fed Chairman Bernanke’s press conference included many details but few major surprises. On activity, he expressed relatively low conviction, saying “We don’t have a precise read on why this slower pace of growth is persisting” (note that quotes come from the real-time transcript, which may be revised slightly). However, consistent with the FOMC’s forecasts (see below), he emphasized that he thought that some factors restraining growth were temporary.

2. On inflation, Chairman Bernanke also cited temporary factors, particularly a pickup in auto prices related to supply chain disruptions in that sector.

3. Guidance on the near-term policy outlook was relatively clear: more quantitative easing is unlikely due to reduced deflation risks. He gave two lengthy responses on this issue, and made clear why conditions last year differed from today. Most importantly: “at that time inflation was low and falling, [and] many objective indicators suggested that deflation was a non trivial risk”. He also noted the pickup in payroll employment over the last few quarters.

4. At the same time, his remarks hinted that the FOMC has in fact discussed easing options. Specifically, he said options could include: 1) securities purchases, which could be structured in various ways; 2) a cut in the interest rate on excess reserves; 3) guidance on how long the Fed will wait to sell securities; and 4) or “a fixed date to define extended period”. With regard to the extended period language, he revised his remarks from the last press conference, in which he said the extended period language meant “there would be a couple of meetings probably before action”. Today he said: “I think the thrust of extended period is that we believe we’re at least two or three meetings away from taking any further action, and I emphasize ‘at least.’”

5. The Fed revised down its central tendency forecasts for GDP growth in 2011 to 2.7-2.9% to from 3.1-3.3%. It also reduced its 2012 GDP forecasts. For 2011, the cut was slightly smaller than we had expected, but for 2012 it was a bit larger. The committee also revised up its forecast for core inflation by 1-2 tenths, a bit more than we had anticipated.

Följande artikel från Reuters är mycket intressant. Notera vad Bernanke hade att säga om att sätta ett räntetak på 2-åriga statspapper 2002 innan han tog över från Greenspan. Detta var något som prövades på 60-talet i vad som kom att kallas ‘Operation Twist‘.

Man får allt mer en känsla av att det är just detta som kommer att vara ursäkten för att kunna fortsätta med QE utan att behöva kalla det för QE3, precis som Gross och Rosenberg talat om nyligen. Nästa onsdag är det presskonferens med Ben och vi får se om han levererar en ‘twist’ redan då (även om det inte är troligt).

Gross tweets Fed will curb Treasury yields

NEW YORK, June 15 (Reuters) – Bill Gross said the Federal Reserve next week could signal that interest rates could be capped if warranted due to soft economic growth.

The world’s largest bond fund manager said on Twitter late Tuesday: “QE3 likely to take form of ‘extended period’ language or interest rate caps on 2-3-year Treasuries.”

Gross, the co-chief investment officer of PIMCO, the world’s top bond manager, also said on Twitter: “Next week’s Fed statement will likely stress ‘extended period of time’ language or even a period of interest rate caps.”

The Fed will hold its next policy meeting on Tuesday and Wednesday, and will issue its policy statement after the close of the meeting.

The recent soft patch of economic data has increased speculation over whether U.S. policymakers will perform a third round of bond purchases, an unconventional monetary measure known as “quantitative easing,” or QE2. The second round of QE2′s $600 billion in purchases will conclude on June 30.

But Gross tweeted that the Fed could signal a cap on interest rates as a form of QE3.

Mark Porterfield, spokesman for PIMCO, confirmed to Reuters the content of the tweets. Pacific Investment Management Co. oversees more than $1.2 trillion in assets.

While the 10-year Treasury bond is one of the most widely watched securities as it sets the benchmark for almost every other interest rate in the U.S. economy, Fed Chairman Ben Bernanke has long considered the two-year Treasury note as an effective tool.

In a November 2002 speech, entitled “Deflation: Making Sure ‘It’ Doesn’t Happen Here,” Bernanke said: “Because long-term interest rates represent averages of current and expected future short-term rates, plus a term premium, a commitment to keep short-term rates at zero for some time–if it were credible–would induce a decline in longer-term rates.”

Bernanke, who at the time was a Federal Reserve governor, went on to say that the two-year Treasury note is a long-term maturity and that 10-year notes are “longer” maturing securities.

Bernanke said: “A more direct method, which I personally prefer, would be for the Fed to begin announcing explicit ceilings for yields on longer-maturity Treasury debt (say, bonds maturing within the next two years).

“The Fed could enforce these interest-rate ceilings by committing to make unlimited purchases of securities up to two years from maturity at prices consistent with the targetedyields. If this program were successful, not only would yields on medium-term Treasury securities fall, but (because of links operating through expectations of future interest rates) yields on longer-term public and private debt (such as mortgages) would likely fall as well.”

Kan rekommendera följande inlägg från Jim Rickards, hämtat från King World News blogg, där han på ett elegant sätt reder ut vad vi troligtvis kan förvänta oss från Federal Reserve angående en fortsättning av QE.

Som Jim visar så kommer Feds balansräkning ha vuxit sig så stor att den i princip inte behöver utökas ytterligare och ändå klara av att finansiera USAs gigantiska budgetunderskott. Detta eftersom man kommer ha en ‘köpkraft’ om drygt 750 miljarder dollar från förfallna obligationer och ränteintäkter som kan användas för att köpa nytryckta statspapper från Timmy Geithner.

På detta vis behöver det i praktiken inte officiellt bli något QE3 program, utan istället en inofficiell oändlig QE. Kanske är det dock detta resonemang med en bibehållen balansräkning som krävs för att Ben skall få tyst på QE-kritikerna. För att inte fortsätta med QE är inget alternativ, och det vet både Ben och Timmy.

Jim påpekar att vi kan vänta oss att Fed läcker ut sina avsikter drygt tre månader innan den sista juni, som med QE2. Nästa FOMC-möte är den 15 mars, så sannolikt kan vi få börja ta del av den läckorna strax därefter. När informationen börjar sippra ut är det alltså viktigt att se upp om ni hör att det inte kommer att bli något QE3, för detta betyder alltså inte nödvändigtvis att Fed kommer sluta med kvantitativa lättnader, bara att man inte tänker utöka sin balansräkning. Det är just denna typ av politiskt spel/propaganda som skulle kunna få guld och silver tillfälligt på fall innan investerare vaknar upp och inser vad det verkligen innebär.

Perpetual QE – The Stock is the Flow

By James G. Rickards

March 11 (King World News) – As a child, I was confused by shouts of “The King is dead, long live the King!” I understood the declaration about the deceased king but didn’t understand why you would then wish long life to a dead King. Only later did I come to understand the distinction between the King who had just passed and the heir who had just ascended to the throne. Then it all made sense.

As we approach the end of the Fed’s quantitative easing program many are prepared to shout, “QE is dead!” Few realize the old royal salute is more appropriate – “QE is dead, long live QE!” Because an heir to the throne is here and will be with us for a long time. QE has now become a permanent part of the financial landscape of the United States.

The reason is that the size of the Fed’s balance sheet is now so vast that the reinvestment of principal payments from the existing assets will be enough to monetize a large portion of the Federal deficit without having to increase the total size of the balance sheet. The Fed’s balance sheet is to the bond market as Thomas Hobbes’ Leviathan was to society – a monarch beyond the capacity of its subjects to change. Apart from the obfuscation of words like “stocks and flows” coming from Brian Sack at the New York Fed and Ben Bernanke, there’s nothing hidden going on, it’s just a matter of math. The key fact is that while the Fed will not expand the balance sheet, they will not let it shrink either. Keeping the balance sheet unchanged means reinvesting the entire maturing principal on the existing assets. And when the assets are big enough, that reinvestment becomes enormous. This is what is behind the talk of “stocks and flows.” When the stock is large enough, it is the flow.

The Fed said last November that QE2 would last until June 30, 2011 but reserved the right to “adjust the program as needed” in light of “incoming information.” So they have laid a foundation to continue QE2 if they wish. The negative impact of rising oil prices on the economy might give the FOMC a reason to continue QE2. However, there is not much time to decide. There are only three FOMC meetings before the end of June. These are March 15th, April 26th and June 21st. The Fed might make a formal announcement on June 21st, however, they will want to make a firm decision and leak it sooner in order to guide the market in advance and avoid surprise. Recall that when QE2 was decided the Fed made a formal announcement in November but began leaking their intentions in August, three months earlier. So it seems likely the Fed will reach a tentative decision on March 15th, begin leaking the announcement immediately and confirm this with a formal announcement in June.

The criticism of QE2 has been intense from Republican circles, Tea Party adherents and international trading partners such as China, South Korea, Brazil and others who are suffering the effects of inflation caused by QE generally. The Fed may have pushed this program to the limit. For political reasons, more so than economic, the Fed will end QE2 in June and will make its intentions known. But is this the end of QE? The answer is no.

Recall that QE2 was not really $600 billion but was $900 billion if you add the $300 billion of reinvested principal payments on the original $1.5 trillion of mortgage-backed securities from QE. Since this $300 billion of principal paid out in a seven-month period from November 2010 to June 2011, it’s reasonable to assign a principal payment run rate of $500 billion per year for the next two years on that portion of the Fed’s portfolio. Treasury securities are different because they don’t amortize the same way mortgages do, but the Fed still has about $1.3 trillion of Treasury notes and bonds on its balance sheet today and will likely have $300 billion more by the end of June as a result of new purchases under QE2. So, $1.6 Trillion seems like a reasonable estimate of the amount of Treasury notes and bonds the Fed will own on June 30, 2011.

It is difficult to know the exact maturity structure of all of the notes and bonds on the Fed’s balance sheet, however, the New York Fed has been transparent about the composition of the $600 billion of purchases under QE2. These have been made in all maturities from 2 years to 30 years, however, the purchases are concentrated in the 2-to-10 year sector with a weighted average maturity of about 6 years. Assuming the Fed’s entire portfolio has the same weighted average maturity, this means that approximately $250 billion of securities mature each year. Combining the $500 billion annual principal payments on QE mortgage backed securities with $250 billion of maturing principal payments on the remainder of the Fed’s portfolio gives the Fed about $750 billion per year of buying power without expanding the balance sheet.

The projected U.S. deficit for fiscal 2011 is $1.645 trillion. This will be funded by new issuance of Treasury securities over and above the amount needed to refinance maturing debt plus interest payments on existing debt. About 60% of outstanding Treasury issuance is in the 2-to-10 year maturity range. If we assign the 60% weight to the $1.645 trillion of new debt, we get $987 billion of new 2-to-10 year maturity Treasury notes issued in fiscal 2011 to finance the deficit. Therefore, the Fed’s buying power of $750 billion per year can monetize over 75% of the new 2-to10 year note issuance needed to fund ongoing U.S. budget deficits for the next two years without expanding the balance sheet.

The Fed is now like a 400-pound man who can eat 5,000 calories per day without gaining weight because his morbidly obese metabolism requires it to function. The discussion of QE, QE2 and QE3 has become irrelevant. What we have is permanent QE until such time as the Fed decides to tighten financial conditions. This is unlikely to happen until mid-2012 at the earliest, perhaps later in view of the housing double-dip and increasing oil prices. In any case, QE will be with us for an “extended period” no matter what the Fed announces.

Rekommenderar att läsa följande inlägg från Jim Willie (The Hat Trick Letter), där han kommenterar de allvarliga konsekvenserna av QE och sammanfattar vad som väntar oss när det Keynianska experimentet till slut faller samman. Han kommenterar även den dramatiska utvecklingen på silvermarknaden och talar om varför guld kommer stiga till minst 5000 dollar när dollarn till slut kollapsar.

För er som inte är bekanta med Jim Willie så hör han till den lilla skaran människor som har förutspått mycket av det som just nu utspelas på världens finansmarknader.

QE2: The Road to a Gold Standard

What an incredible few weeks with global uprisings! It is not all too surprising that social eruptions over food prices come from the Arab world, since they spend up to 75% to 80% of income on food for basic needs. What proof that the global economy is not a closed system! The QE and QE2 initiatives have spread like a powerful virus, leading to global commodity prices heading upward and quickly. Even cotton is up 170% in price. The USFed has suffered even more credibility blows, calling the global food price inflation unrelated to its QE2 policy. It is obviously connected. What we have is the Western Big Banks protected from fraud prosecution, redeemed for their broken toxic balance sheets at government expense, leading to a global price tag in the form of foodstuffs and commodities. Worse, the USGovt and USFed continue to be run by fraud kings, who continue to maintain a tight strangehold on the purse of the state and the Printing Pre$$ itself that produce deficit spending and fresh phony money. Ironically, the punishment for the US banking system is chronic unending insolvency. Despite the largesse to prop them up, fund their channels, redeem their toxic debt, enrich their executive packages, they remain the same Zombie banks from late 2008. Tragically, the USGovt will continue to fund their black holes instead of restructuring like Iceland, which is back on its feet. The battle cry of Too Big To Fail for the Big US Banks is a call to sustain the corruption and to ensure no recovery ever!!

In the meantime, fast rising gasoline prices and higher crude oil price, along with a host of industrial metals like copper, have lifted the entire cost structure of the USEconomy, and the global economy since all are priced in US$ terms. The banking officials act like keeping US wages down it a noble objective with a national purpose. It is indeed a noble purpose, as the nobility remain with money, but the masses will not be capable of effectively dealing with the cost squeeze. Businesses not well placed within the Fascist Business Model will also fare poorly. The list of US companies is long that have complained of an important cost squeeze. Expect many businesses to suffer a vanished profit margin in the next few months. The process has already begun, in fact well along. Across the oceans, the untold story on the geopolitical front is not the billboard message given by the obedient US press. The Arab world does not simply demonstrate on the city streets as a result of higher cost for hummus, bread, and cooking oil. The Arab people sense the demise of the Anglo Empire. They sense the end of the US & UK support for their tyrants and royals, who have enriched themselves and their families. The Arab people sense a weakening of their leaders and their system of government, often harsh and repressive. The food prices only serve as a lightning rod to gather the people together. What is happening is the defacto Petro-Dollar Standard is crumbing ever so slowly. Many eyes are fixed on Saudi Arabia, where the royals are increasingly fearful. All hell breaks loose if the Saudis lose their grip of the Petro-Dollar device, by which the OPEC crude oil is sold in USDollar terms. THE PETRO-DOLLAR IS THE LACE ON THE CORSET THAT SUPPORTS THE THE ANGLO-AMERICAN FRONTISPIECE. Remove the Petro-Dollar practice in global crude oil sales, and the United States becomes isolated, its currency rejected, since it cannot stand on its own. Observe the US trade gap and escalating federal deficit.

SILVER SIGNIFICANCE

Put aside the fundamentals of Silver. It continues to see huge industrial demand, no replacement opportunities, and totally depleted stockpiles. It continues to see skyrocketing investment demand growth, massive shortages for national coin mints, and reports of extreme machinations to relieve the inventory shortages at exchanges. Focus instead on the silver market. The everpresent Big US Banks continue to ply their trade, selling silver contracts without benefit of posting collateral, otherwise known as naked shorting. However, since the autumn months, their game, their modus operandi, has backfired badly in their faces. By means of lowering the paper contract silver price, they enable a cheaper physical silver price. Imagine being a big buyer of silver bullion metal. If the strongarm syndicate forces choose to offer a discount from the corrupted price discovery system, then the outcome is hardly favorable. The physical buyers ramp up their purchases, enjoy the price discount, and thank the absurd connection between the paper silver and physical silver markets. In fact, evidence is growing fast that the two markets are gradually diverging. The Jackass forecast from months ago was for the eventual divergence between the paper silver market, where increasingly contract settlement takes place in cash (with a 25% bribe to keep quiet and walk away) and the physical market, where acute shortages have not stopped the aggressive purchases of those seeking to diversify out of the USDollar.

Aw heck!! Don’t put the shortage aside. Observe it instead and take personal action with the remaining wealth not destroyed. Understand the incredible shortage. Thanks to Nick Laird of Sharelynx for the fine chart. By the way, shortages result in massive price increases to achieve balance between Supply & Demand, a concept totally missed by the clueless cast of economists that litter the USGovt and Wall Street landscape. They believe price is something achieved by JPMorgan market intervention, for the national good. They wrecked the system and markets, yet remain in control of the USGovt and its finance ministry. They should be in prison. They should watch over their shoulders.

In the last week, two significant factors must be mentioned, each important in its own right. Last week, both factors were overrun by the silver market as new highs were established in the silver price. Options expiration for silver futures contracts usually brings about a huge ambush by the usual suspects, the Big US Banks, who sell vast additional futures contracts without posting any collateral. Mere mortals are prohibited from such naked shorts! Usually the imminent options expiration date results in a significant sudden swoon in the silver price, at least in the futures market, the so-called but increasingly absurd price discovery arena. This past week, the silver price zoomed toward $34/oz despite the threat of ambush, in total defiance to the options expiration deadline. Also, the COMEX in their height of wisdom and market rig efforts decided to raise the margin requirements for silver, for the umpteenth time since last summer. Usually such a margin hike results in a significant price drop like a wind sheer to an commercial jet aircraft. This past week, the silver price zoomed toward $34/oz despite the threat of margin ambush, in total defiance to the greater hardship to maintain margin. It is unusual to see a silver price advance in the face of one such factor. But it rose with gusto in the face of two important obstacles. My forecast in the last few months has been steady, that silver would lead the precious metals. That has been confirmed. While silver raced past $30 and $31 with ease, Gold has yet to confirm the breakout beyond the January highs. All in time.

A final comment on price estimates for goals and targets. As preface, consider that despite a powerful USEconomic recession in progress, and despite earnings declines for the major US companies, and despite the profit margin compression to lower levels from rising costs, the S&P500 companies have a collective Price/Earnings Ratio that stands as ridiculously high. The absurdity lies in forward P/E Ratios, since the supposed expert equity analysts do not factor in the rising costs and falling profit margins. Estimates on future earnings are ridiculously low and totally fallacious. The P/E Ratios might be subject to division by zero soon, as profit margins vanish from fast rising costs. Numerous companies from Whirlpool to Kraft have tipped the market off, but the market has so far ignored the warning call about costs. These costs are obvious consequences to the Quantitative Easing initiatives done by the US Federal Reserve. Next consider the estimated price target for Gold if the monetary aggregate is based in gold held by the USGovt in reserves. My argument, and the argument of many informed analysts, is that the USGovt has no possession of gold whatsoever, having leased and sold the entirety of Fort Knox, then sold European gold, then sold Chinese gold. So the recent estimates of $7000/oz gold or $8000/oz gold make little sense if the monetary aggregate is divided by a gold reserves quantity likely to be ZERO, bound by lies at worst and myth at best. Therefore, the potential Gold price is infinite, since division by zero cannot be done. This utterly basic point escapes many conventional analysts, who have yet to benefit from any independent audit of the gold reserves. The claim of national security is given, but the reality is more like national insecurity!

It should always be noted that silver has gained much greater acceptance as a monetary asset. The Chinese Govt in February announced a new objective to put into action, for diversifying their reserve assets to include silver and platinum. This is huge news. Never before has the silver metal been included in national sovereign reserves management, an unprecedented event. Gold awaits confirmation of the silver breakout. The momentum swing move was so quick, so sudden, so breaktaking, so powerful, that it could not be sustained. Just like in the last four months of year 2010, expect the corrections to be brief and not too painful. After three or four such mini-corrections, only later can the silver market expect another consolidation that endures like what was seen in January. Maybe by June the timing will produce a month of consolidation.

Läs hela inlägget från Jim Willie

Först Thomas Hoenig, sedan Elizabeth Duke, nu antyder ingen mindre än storchefen själv, Ben Bernanke, att QE3 är på god väg.

I ett tal på torsdagen sa Bernanke bl a att Federal Reserve förväntar sig att arbetslösheten kommer att vara över och inflationen under det långsiktiga målet under 2011, vilket tolkades av marknaden som att det inte finns några som helst planer på att sluta med QE-programmet. Guld och silver rusade inte oväntat när talet blev känt.

Bernanke försvarade QE2 och skyllde de skenande råvarupriserna på det dåliga vädret. Otroligt att Ben klarar av att ljuga folk rakt i ansiktet på detta sätt.

Bernanke says growth, inflation still missing Fed goals

(Reuters) – The U.S. economic recovery still needs help from the Federal Reserve despite signs of improvement, Chairman Ben Bernanke said on Thursday.

The Fed chairman provided a modestly more rosy outlook for the world’s largest economy than he has done in previous speeches, citing gains in household spending, improved confidence, and stepped up bank lending as signs 2011 may bring stronger growth than 2010.

“Although economic growth will probably increase this year, we expect the unemployment rate to remain stubbornly above, and inflation to remain stubbornly below, the levels that Federal Reserve policymakers have judged to be consistent over the longer term with our mandate,” he said in remarks prepared for delivery to the National Press Club in Washington D.C.

Bernanke’s comments suggest a Fed that believes it has plenty of time to let its policies boost growth and pull down a lofty unemployment rate before it needs to worry about tightening financial conditions to keep any price pressures in check.

Even the hard hit job market shows some grounds for optimism, Bernanke said.

However, modest growth and cautious hiring suggest that it will be several years before the jobless rate returns to a more normal level, he said.

“Until we see a sustained period of stronger job creation, we cannot consider the recovery to be truly established,” he said.

The Fed chairman defended the U.S. central bank’s controversial $600 billion bond buying program, saying its benefits are evident from a range of financial market metrics.

These include higher stock prices and less volatility in equities markets and narrower spreads between riskier and less risky corporate bonds, he said.

U.S. Treasury bond prices extended losses after Bernanke’s comments.

Bernanke played down worries that recent commodity price rises pose an inflation threat.

“Overall inflation remains quite low,” he said.

Här är en kommentar till talet från ZeroHedge:

The lies come hot and heavy:

* Initial claims for unemployment insurance have generally been trending down, and indicators of job openings and firms’ hiring plans have improved
* QE ‘Effective at easing financial conditions’
* Recovery likely to be ‘more rapid’ in 2011 than 2010
* ‘Overall inflation remains quite low’
* Recovery in consumer, business spending may be solid
* Economy seems to have strengthened in recent months

But here’s the only one that matters:

* Unemployment, inflation likely to defy Fed mandate

Which mandate is that Genocide Ben: would that be the mandate to kill off half the world with your revolutionary policies before the Russell hits 36,000?

Häromdagen var det Thomas Hoenig som hintade om att QE3 är att vänta, och Elizabeth Duke gör inga stora försök att förneka att QE3 är på väg i följande intervju från Reuters.

Som alltid när det gäller uttalanden från Fed-ledamöter och press-releaser från Fed så gäller det att ‘läsa mellan raderna’. Att Duke så tydligt lämnar dörren öppen kan enligt min mening bara tolkas som att man förbereder marknaden för QE3.

Fed’s Duke: current easing likely sufficient

Feb 2 (Reuters) – A top Federal Reserve official said on Wednesday she does not think the U.S. central bank will have to extend its $600 billion bond-buying program beyond midyear, but economic weakness could force the Fed’s hand.

“If the economy does, as I expect it to, and continues to, grow at a moderate pace, then I think things will begin to come together,” Fed Governor Elizabeth Duke said in response to a question about extending the bond-buying program after a speech at the University of North Carolina’s Kenan-Flagler business school.

“If we see further weakness in the economy, then we’ll have to decide what seems to be the appropriate action to take at that time,” Duke said.

Duke’s comments are among the first from policymakers after a meeting last week at which the Fed held course on its bond-buying program to help strengthen modest growth and pull down a lofty jobless rate. Her remarks suggest the Fed is open to further action if the recovery disappoints.

U.S. employers are expected to have added 145,000 jobs in January, not enough to make a dent in the jobless rate, which is forecast to creep up to 9.5 percent from 9.4 percent in December.

Another Fed official, Kansas City Fed President Thomas Hoenig, said on Tuesday that extending the bond-buying program beyond June “may get discussed” if economic data is “disappointing,” according to an interview with Market News International.

Duke noted that monthly job gains of around 150,000 would only accommodate new workers entering the labor market, not return the United States to full employment, which policymakers believe comes when the jobless rate is around 5 percent to 6 percent.

Duke played down anxiety about rising commodity prices for the U.S. economic outlook, although climbing prices have spurred fear of inflation in Europe and Asia and contributed to social unrest in some places.

Higher commodity prices take a long time to creep into underlying measures of inflation, she said.

“If you look over the last year or so it’s hard to find any measure that doesn’t show inflation drifting down and drifting down pretty noticeably to really historically low levels,” she said.

While she said she believes the trend of falling inflation has come to an end, she added expectations are that inflation will remain low and stable.

Addressing a criticism that the Fed has failed in its mission of maintaining price stability because the value of the dollar has fallen since the United States left the gold standard, Duke said there is not enough gold in the world to support current levels of commerce.

“You have to have a currency that is flexible enough to accommodate the level of economic activity that is going to occur,” she said.

In her speech Duke said the Federal Reserve’s easy money policies have helped reduce debt service burdens and saved many small businesses from failure.

Short-term interest rates have been near zero since December 2008.

Fed Chairman Ben Bernanke is due to give a speech on Thursday in which he may provide more insight about the Fed’s decision.

Här är en kommentar från Jesse:

Note the extreme volatility in silver. It was actually underperforming gold until the short squeeze breakout began in the second half of 2010. It is quite possible that this short squeeze was triggered, at least in part, by the Fed’s announcement of a second round of quantitative easing and the further debasement of the dollar. That second round was a signal of their monetary policy intentions. The Fed will print to the limit of the bond and the dollar in a de facto default on the debts. And this is what has China angry.

When it becomes clear that the Fed will be doing quantitative easing for quite some time, it will be progressively harder for the bully boys in the bullion banks to keep ‘a lid on things,’ with a wink and a nod from the regulators. And then it gets even more interesting to say the least.