How QE3 will save the World

July will be a rotten month for bonds and precious metals, so that everyone gets the message that we need more QE. Once that is agreed, precious metals will rally strongly. In 2009, after the summer doldrums where the gold price fell over June/July, the price rose 15.7% between 1st August and 31st December. Exactly the same pattern occurred in 2010, with an Aug-Dec rise of 15.9%

The silver fraud is approaching the end game. The crooked banks most likely to be the subjects of an Interpol investigation would be the US and Swiss banks JPMorgan Chase, Union Bank of Switzerland (UBS), and Credit Suisse.

The Powers That Be are looking for a calamity situation, where the US Govt will clamour for QE3 (or Operation Twist 2 as it is becoming known) to save them. Likely financial events in July 2011 include stock market drops from June highs, a significant/scary drop in bullion prices, Greek bond meltdown contagion spreading to Europe and possibly USA. Non-financial events include flooding of nuclear power stations, freak tornadoes, earthquakes in active zones and possibly the limited imposition of martial law (for the protection of citizens). Phew! If these things all happened around the same time – what a dreadful coincidence; but surely, that would be disastrous enough to do the trick… however,America’s grain harvest will already be dire, as an enormous swathe of the mid-West is underwater. Food prices will increase to alarming levels, so this could already be bad enough.

Inflation of goods prices will come home to roost in the USA, after a long period when overseas suppliers were content to take US dollars and exchange them for their own currencies, so as to keep their exchange rates constant. They are now revaluing their own currencies so their goods will cost more in US dollars.
Following the legitimisation of the Muslim Brotherhood as political party in Egypt, control of the country will be transferred into their hands in short shrift. The same will soon happen in Libya, Yemen, Oman, Syria and Jordan. US citizens will be able to watch this choreographed political theatre with a sense of detachment until the final domino topples – Saudi Arabia, their main source of oil. Oil prices would probably double; US gasoline would cost $8-10/gallon.

Rumour will start to emerge, very tentatively at first, that there is a small possibility that the US Govt may default on their National Debt. The biggest single holder of US debt is the Federal Reserve Bank, who will act heartily displeased, although this is all going according to plan. The Fed will exercise its right to flex its Balance Sheet, which includes the ultimate rights of ownership over one million homes acquired via their mortgages when the Fed swapped new credit for MBSs held by poorly capitalised banks between 2008 and today. The Fed will become the biggest landlord in the world and would be able to put a large number of US citizens out on the streets, from where it is one short step into a FEMA “emergency” holding camp.

What Can’t Get Fixed – Won’t

The US Powers That Be cannot fix their Dollar system – but then, they are not trying to. Americans get very upset about how “stupid” their government and central bank are, naively assuming that the main objective of these bodies is to fix the system for the benefit of the people. However, turn this on its head and assume instead that the banking Elite are actually planning a controlled crash of the dollar system to benefit themselves: then all their activities suddenly make horrible sense.

Imagine for a moment that, instead of trying to lead America to a new era of prosperity, Obama is the front man for a very well organised campaign to destroy free market capitalism in America and replace it with a banker-engineered form of authoritative socialism (this has NOTHING to do with liberating the proletariat). It would be achieved by means of a series of orchestrated crises, which would lead to the collapse of the state welfare system through an overwhelming burden of new claims upon it by desperate people. This subversive approach was first outlined by two socialist academics in 1966 (click link for Google seach on Cloward-Piven Strategy). It would certainly explain why the USA is utterly failing to address its massive government overspend - there is no intention to.

The purpose of Quantitative Easing (QE) is NOT to monetise the National Debt (i.e.create new dollars and exchange them for government debt). The main purpose is to fend off unscheduled dollar collapse by keeping interest rates low, so that the interest payments due from the US Govt on their bonds can remain as low as possible. In shock news yesterday, it turns out that practically NONE of the $600bn issued under the 7-month QE2 programme which started in November 2010 has gone to help recapitalise US banks - almost every dollar has been spent in propping up European Banks instead! (see Zero Hedge article). But remind yourself that the Fed is a private bank, with very wealthy European shareholders... and, once again, it all makes sense.

And while that continues, the Federal Reserve actually wants an “orderly” rise in the value of gold – say 10% a year – so that the dollar’s value is eroded over time and the US Govt debt commitment is diminished in real terms.

For political reasons, the Fed does not wish to appear weak, so they will not launch QE3 without being forced to by an agitated Congress. Their QE2 campaign officially ends on June 30th, so there will be no more official funds made available to their favoured (apparently non-US) primary dealers. This drying up of cash, coupled with weak second-quarter results for all big corporations which rely upon Japan, will very likely cause an immediate slump in US share prices. If this should coincide with some other non-financial crisis, such as more extreme weather, a nuclear emergency, seismic activity or aggressive foreign overtures, then most Americans will beg for “stimulus” to be restored.

The biggest problem will be if events should accelerate beyond the control of the central planners and the Fed's “orderly” process is derailed from its preferred path. Japan’s recent crisis and their sudden, acute need to sell their US Treasuries (they hold over $800bn worth) to pay for the tsunami recovery work, could well trigger this. Expect an unannounced initiative from the G8 countries to print money and buy US Treasures in a coordinated way, such that no one country drives the dollar over the cliff. There will be no publicity - but the evidence will be there on the accounts of central banks for those who care to look.

This is political dynamite because it's so big. It will dwarf the already enormous scale of what the Fed has done to date, and practically guarantees hyperinflation in most Western countries. You might want to call this Global QE, because despite the fact that this clandestine manoeuvre will not be given a public name, that is effectively what it will be.