In the hour following the
statement from the Federal Open Market Committee (FOMC - the US money policy panel of the Federal Reserve Bank) on Thu 13th September, silver went up by 4% and gold by 2%
The Fed have basically announced open-ended money printing to buy highly impaired Mortgage Backed Securities (MBS), starting with $40bn/month and rising to $85bn, with no finish date. Purchases will increase
if when the labour market doesn't improve. The cost of new money lent to the main banks will be zero, so there is no reason for them to avoid stupid investment decisions.
Here is how some of the hard money precious metal crowd reacted:
QE To Infinity
http://www.tfmetalsreport.com/blog/4182/qe-infinity
- FED TO KEEP POLICY STIMULATIVE FOR `CONSIDERABLE TIME'
- FED WILL ADD TO PURCHASES IF LABOR MARKET DOESN'T IMPROVE
- FED DOES NOT SAY WHEN MBS PURCHASE PROGRAM TO END
- FED TO BUY $40B MBS MONTHLY, CONTINUE `OPERATION TWIST'
- FED TO BUY MBS, EXTENDS ZERO-RATE POLICY INTO 2015
Here's the key take-way: This is it. This is open-ended, QE to infinity. I also saw a headline on CNBS that stated that Operation Twist will end at the end of the year. Of course it will. As noted a few weeks ago, The Fed is nearly out of short-term paper to exchange for long-term paper. The end of Twist will surge new printing from this $40B number to the full $85B number. This is QE to infinity. It has begun and it will not end.
The important thing here is patience. Gold and silver will continue surging higher. Maintain and build core positions. The perennial shorts of paper metal are going to be squeezed with ever-increasing intensity even while the "historic" aspects of this rally have still yet to be realized. Cartel banks will be left with no choice but to systematically cover their positions. They will attempt to do this in an orderly fashion but a rush toward physical ownership will likely disrupt their plans. Gold and silver will both soon trade at new all-time highs. Again, this will not be a straight line up as there will most certainly be dips and pauses along the way. However, everyone reading this must realise that today is the first day of new paradigm.
The Fed and the ECB determine to Destroy the Middle Class
http://www.traderdannorcini.blogspot.co.uk/2012/09/the-fed-and-ecb-determine-to-destroy.html
While Wall Street cheers the actions by the Fed to further enlarge its already bloated Balance Sheet, those of us who live on Main Street should get accustomed to further increases in our food and energy costs. What I find rather perverse, is the statement by the FOMC that "longer term inflation expectations remain stable". Yeah, maybe on the salaries and wages front but sure as hell not on the raw materials front.
Take a look at where hedge fund money is now flowing - right back into the hard or tangible assets category again. Get used to higher gasoline and heating oil prices and brace yourself for the food sticker shock you are going to experience in the weeks and months ahead.
I do not know whether to laugh at such utter stupidity or to weep for my nation's future. After the Fed has already conjured into existence the piddly sum of $2.5 Trillion for QE 1 and QE2, we now get another $40 billion/month of agency debt purchases for as far as the eye can see. A lot of good the first $2.5 Trillion did. this latest one will do the same - nothing as far as curing what the real problem is in the US economy.
Fed decides to perpetually bail out banks with new ‘QE to infinity.’
http://maxkeiser.com/2012/09/13/fed-decides-perpetually-bail-banks-new-qe-infinity/
The free market just died. The idea of values and price discovery is no more. We now live in a post-fiat; post-fractional reserve world where banks float virtual money collateralized by off-balance sheet, theoretically present virtual assets and then trade these virtual securities using high speed ‘high frequency trading’ bots; charging fees to each other – the resultant draining of the economy; loss of jobs, etc. – in turn becoming the basis for more QE. The economy is backed by fees generated by trading imaginary assets using an unbacked currency. Net, net, this will NOT add jobs. This will gap the wealth and income wedge wider. This will spike the value of gold and silver to new all time highs. This will stoke more aggravated social unrest.
Ron Paul: "Country Should Panic Over Fed's Decision"
http://www.zerohedge.com/news/ron-paul-country-should-panic-over-feds-decision
What took Ben Bernanke sixty minutes of mumbling about tools, word-twisting, and data-manipulating to kinda-sorta admit - that in fact he is lost; Ron Paul eloquently expresses in 25 seconds in this Bloomberg TV clip. Noting that "we are creating money out of thin air," Paul sums up Bernanke's position perfectly "We've Lost Control!"
From Jim Willie's subscription newsletter
(two months ago on 15th July 2012 -
see main website)
If the US attempts to start a “hot war” before September 21st, in order to create a crisis atmosphere for the Presidential elections, then Eastern gold investors
fully expect the price of Gold & Silver to decline by up to 20% before both rise, very steeply. They see this as a final opportunity to drain the last of the Western inventory and render the bankers bloodless.
The price decline will result in part from combined events of Euro currency collapse from the sovereign bond contagion and US derivative breakdown centred upon Interest Rate Swaps and Credit Default Swaps. They expect the Western banking system to implode on its own without any help from the East, except for the deep damage caused by the gold removal.
