Graceland Updates
April 12, 2012
1. Please click here now. What's the most important aspect of the natural gas chart, here and now?
2. It is the fact that more contestants in the natural gas turn call contest were eliminated from the competition. Contestants $2.02, $2.01, $2.00, and $1.99 were all eliminated from the turn call show last night.
3. Will Miss $1.98 win the turn call prize? More importantly, will your buy orders and short-covering kachingo orders below the $1.98 price area get filled? I wish I had the answer, but I bow before King Market, and await to see whether he has ordainedthis price area as the turn call point in price and time. All hail... not the turn callers! All hail: The bottom price ultimately ordained by the KING.
4. Three key US economic reports will be released today, unknown to 99% of gold community investors. Few people understand the critical importance of these reports. Almost everyone makes up their own liquidity flows cause & effect scenarios, and then wonders why their account is vaporized.
5. Institutions are looking to see whether this data backs up the latest jobs report blowout. The banksters are holding the price [of gold] at the $1665 resistance marker to magnify the price impact of the reports when the data is released.
6. Dr. Ben Bernanke. Head of the US Central Bank. Arguably, the king of liquidity flows. Ben's current focus is increasing the power of the bank, so the bank can intervene in markets to a much greater extent than you already see, and transfer your funds to the banksters, and call it "smoothing out the economic bumps" and "crisis prevention".
7. Ben created a new term for himself, CE (credit easing), to describe the transfer of trillions of dollars that he electronically printed and handed to the banksters, in return for worthless OTC derivatives in the real estate market.
8. QE (qualitative easing) refers to changing the portfolio mix of debt bombs held on the Fed's "balance sheet". For example, if the Fed held 80% of a $1 trillion balance sheet in 30 yr t-bonds, and changed that to 70%, but still kept the total at $1 trillion, that's qualitative easing.
9. Quantitative easing, in contrast, involves the expansion of the size of the Fed's "balance sheet". So, quantitative easing would see the total size of the so-called balance sheet rise from $1 trillion to a higher number.
10. Ben decided or was ordered to create the term "credit easing", which describes a powerful combo of qualitative & quantitative easing. [Easing. Credit = Qualitative + Quantitative] So, the Fed prints money electronically, and transfers that money to commercial banks in a transaction that sees the Fed buy various bond and derivative investments from the primary dealers.
11. The focus of "credit easing" is a dual one, both on increasing the size of the balance sheet and on increasing the amount of OTC derivatives held on the balance sheet as a percentage of the NLV (net liquidation value) of the balance sheet.
12. What is the actual purpose of credit easing? There are 2 goals. The first is to lower interest rates, to encourage businesses to borrow and consumers to spend, to grow the economy.
13. The 2nd purpose is to increase the velocity of the money supply. With more cash in the hands of the primary dealers rather than illiquid (and worthless) investments, the dealers will flow that liquidity, supposedly, to businesses and consumer as loans, also to grow the economy. That's why Ben buys US t-bonds from the dealers, not from the govt directly, to increase the velocity of money.
14. Because some of the OTCDs are bought at marked to model prices, there is some reduction of debt. The overall global picture is one of massively rising debt. It was really the implosion of Lehman's OTCDs that created the "2008 situation", and the credit easing policy focused on buying similar OTCDs held by other entities, like AIG.
15. The focus of credit easing not is trying to grow an economy out of a massive debt problem. It is simply trying to grow an economy in recession. I told you QE would totally fail to solve the debt crisis, and it has totally failed, because it was never intended to solve the debt crisis.
16. GME (Global Monetary Easing) is term coined by commercial bank economists to describe not just American central bank CE (credit easing), but global central bank credit easing, and it too has totally failed to solved the OTC derivatives debt problem, and it will totally fail to solve the coming unfunded liabilities debt problem.
17. What the gold community must understand, or they'll be destroyed to an even greater extent than they already are, is that GME & American CE have not failed in their stated goals.
18. Ben Bernanke never claimed that CE would reduce the massive government or private debts. He claimed it would re-start economic growth that was smashed by the implosion of Lehman. He was 100% correct.
19. What do you think happens if the economic reports that almost nobody in the gold community follows, the reports that are mildly deteriorating over the past week, but are at a juncture where it is unclear whether this is a pause in growth or a more significant deterioration....what happens if there is further deterioration [in growth] ?
20. Answer: American CE3. What happens then? Answer: More mild growth, higher Dow, mildly higher gold. Ben has told congress that their projections of debt to GDP percentages are all wrong, and I totally agree with him.
21. We'll never make it to the massive unfunded liability debt levels projected by congressional economists and by many private firms. Ben knows CE can't really go to infinity, because everything will implode long before we get there.
22. It is a fantasy that the gold price could rise on an amount of credit easing designed to produce economic growth, as if that credit easing was being applied to reduce the value of the global debt ball, which it wasn't.
23. Gold and gold stocks will rise to the stratospheric levels demanded by the gold community. Ben hasn't even started to address the issue of the debt. He will.
24. In the meantime, learn to view the gold $0-2000 zone and the GDXJ 0-$50 zone as the peanut play zones that that they are,or you won't be around to enjoy the gold and gold stocks super-party that starts ONLY when Ben's crew turn their attention to the DEBT problem.