Quantitative
Easing. Jim Sinclair has argued for "QE to infinity".
I've argued that's not possible, because the size of the blown
OTC derivatives garbage dump dwarfs all the assets in the
world.
Even
if the central banks fulfilled the Gman's ultimate fantasy,
and went to full communism mode, buying every asset from every
entity, including all issued govt bonds, the printed money
used to buy all the assets would not cover all the OTCD debts.
Price
would rise, temporarily, but as the banksters marked more
OTCDs to market, deflation would inevitably return to asset
prices. C'est La Leveraged Vie....
Government
balance sheet debt is tiny compared to OTCD debts, but it is
growing fast, and the unfunded liabilities bonfire will rival
the OTCD blowout in time, but
not now.
QE
will totally fail to reverse the overall downtrend in asset
prices, including house prices, by the time all the OTCDs are
marked to market, and they will be.
I've
argued that only gold revaluation via
massive central bank buy programs (either paying up for
gold in price, or buying in size, or both) or money
printing as official US Treasury policy can overcome
the massive OTCD debts.
Ben
Bernanke has acknowledged "bond prices to infinity"
(QE to infinitity) is a limited tool, in a
practical world, while money printing has no limits,
in terms of the ability to reverse deflation. The US govt is
not going to issue bonds way beyond its borrowing
requirements, or institutions would panic out of the currency,
and hyperinflation would occur immediately.
Jim
Rickards may have the middle ground. He speaks of a QE to
growth ratio idea. If it happens, it could send
institutional money managers into Dow buying mode, which could
become a frenzy. Obviously, that's very
gold-friendly, and even more gold-stocks friendly.
Most gold stock investors think the game is done or limited,
when it is barely starting.
At
minimum, the QE ratio scam is the ultimate election year pill
to feed the public in this crisis. "Take this QE ratio
pill and all your problems will go away, we
promise!" Inflation is made secondary to growth,
with the story being that higher USA growth is good for the
world, and China has inflation but higher growth, and that's
the new way to rock and roll. Higher growth will let the world
grow its way out of the crisis. Supposedly.
While
the QE ratio play will fail to fix anything, the bankster game
for 2012 will likely be to order the central banks to bid up
for gold, and give credit for the rise in prices and
inflation of the GDP numbers to the QE ratio scam. That
will keep institutional money managers in a Dow buying mood,
while the banksters prepare for the next asset price holocaust
play, probably scheduled for 2013.
2011
was the first year that you saw central banks move to being
net buyers of gold. I think 2012 is the year they bid
more aggressively for limited amounts of gold, on all big
price declines. A little inflation with more growth will be
the story repeated over and over, by the banksters.
If
the central banksters drop their gold bids, and I think they
will from time to time, gold would
wildly careen in price, especially if the central
banksters asked out loud if the QE-growth scam was working.
Terrified
institutional mangers would sense something is suddenly
"wrong", and panic-sell "risk on" assets.
Jim Rogers sees markets possibly imploding in 2013-2014, after
a very good beating on the dollar bugs in 2012. That is pretty
much the opposite of the primal urges being displayed by most
investors now.
The
bottom line: gold reval is in
play, and everything else is a smokescreen.
Why
am I not much afraid of a falling gold price from the $1900
area? A big part of it relates to what gold is, as an asset.
Another big part of it is the central bank buy programs; gold
revaluation. It's in play, but few believe.
No
group of traders shorting gold can beat a group of central
banks that are printing money and using that to buy gold, if
the goal is to build dollars of wealth. Question:
Were most of the world's gold flip traders suicidal bombers in
a past life?
The
spin story will go on that central
banksters are stupid, but "finally saw the light of
holding gold as a modest reserve asset".
The
reality is that gold is their tool to devalue Fudd to
the breadline. Instead of letting you celebrate big profits in
gold at thousands of dollars an ounce, the banksters will have
you 100 times more terrified than you were at the tick lows of
2008. You WILL believe that the dollar is going right off the
board, by the time the banksters get deep into the reval game.
I've
never been so scared in any market as when I bought the Dow at
6500, and I expect to be 100 times more afraid when I
have to sell gold in size for dollars.
You
will have stopped trying to "educate people to buy gold"
long before gold tops out, because they will mostly be totally
broke, and you'll be terrified that all that is in their mind
is coming to rob you of ALL YOUR GOLD. Friends will
turn extremely mean, bitter, and depressed.
When
I tell you the gold game is coming to an end, getting you to
release even an ounce of gold for dollars will be like me
being a dentist trying to pull your teeth with no freezing. It
will be the hardest thing you've ever done financially or
economically. [This is almost
word-for-word a Jim Sinclair quote.]
Take
a hard look at the pictures of the 1930s breadlines. Those are
your "greedy public that will buy your gold"
heroes. The difference between 1929 and now? In this crisis,
they will be even poorer, and there will be more of them.
Those
who think the public will be panic-buying gold to make
"super-beeg pwofits", in this
vastly-bigger-than-1929-crisis, need to check into the loonie
bin, asap. The only way the public will get any
gold is to get a knife and steal it from YOU or beg you to
give them some for free, and you do.
Most
of you were shorting the Dow and selling gold stocks at Dow
6500. Think about how hard it was to buy them. Most of you
have moved forwards, bigtime. It will take another great
emotional strength step forwards, like that, to be able to
sell some gold, but not all by any means, for dollars, when
the time comes.