Is the gold price being manipulated? There are those who say no, while others say yes—notably The Gold Anti Trust Association (GATA)—and on balance it looks to an impartial observer (relatively) that the answer is probably in the affirmative. But perhaps no more so than any other commodities and some stock prices. There is a whole mammoth industry out there—the big banks, hedge funds etc.—whose whole purpose is to make money from money and the more you have in the first place the easier it is to do. Not by producing anything useful, but through manipulation of prices through short selling in huge volumes to drive prices down, buying on the turn, allowing prices to rise back up, taking profits, then more short selling to drive prices down again and the cycle continues. This works better in a bull market, which gold has been in for the past ten years or so.
The amount of money that can be devoted to such exercises is almost beyond belief—and the regulators turn a blind eye to such blatant manipulation that works strongly against the small or even medium-sized investor in favour of the really big ones. If there is anything that may bring the capitalist system crashing down it is, perhaps, the power of big money to rule all our lives…
Sometimes they get it wrong… as happened with the subprime mortgage fiasco (basically another financial institutions' manipulation affair). But do the people who caused the problem in the first place suffer—for the most part no.
—"Opinion: Gold price manipulation—probably. Conspiracy—a matter of semantics!," Lawrence Williams, Mineweb.com, 6/29/10
We have had a Fed engineered serial bubble, that has created the appearance of wealth, that has caused people to consume beyond their means through borrowing, and that has flushed the income and wealth of our society up to the top, as a result of the Fed turning the financial markets into a casino. These are pure casinos, they are not capital markets, they are not adding to the productive capacity of our economy, they simply are a bunch of robots trading with each other by the millisecond as a result of the Fed giving them zero cost overnight money, and giving them all kinds of hand signals on what to front-run.
The Fed is destroying prosperity by funding demand that we can't support with earnings and productions causing massive current accounts deficits and the flow of funds overseas and the build up in China, OPEC and Korea of massive dollar reserves which is a totally unsustainable, unsupportable system, and we are coming near the edge of where that can continue to remain stable.
—David Stockman, Former Reagan OMB Director, December, 2010
This report (Q1 2010 Bank Derivatives report%mdash;ed.) contains more evidence that a flood of paper gold and silver instruments are being used to divert investor capital away from the purchase of the actual physical metals in order to suppress prices…
Two bullion banks, JPM and HSBC, continue to dominate the precious metals derivatives market with positions that are outrageously oversized compared to the underlying metals markets…"
—"Manipulative Gold & Silver Derivative Positions Continue to Grow!," Adrian Douglas, Marketforceanalysis.com, 6/26/10
Going through recent bullion bank shorting information, Adrian Douglas has stumbled across a nugget that may explain the sudden willingness of JPM to admit to the FT, via proxies as obviously the bank would never expose itself to even remote market manipulation claims, that it has collapsed its silver short. The reason: even as US bank silver (and gold) shorts by US banks have been gradually declining, those positions established by non-US bank, and thus entities not under the CFTC's control, have seen their silver shorts surge, increasing by orders of magnitude over the past several months. Is there a stealthy transfer of precious metals market manipulation taking place, one that exonerates the domestic, and therefore regulatable, suspects, while making foreign banks carry the burden of suppressing silver and gold prices? The reason: hand over the silver shorts to entities that would not be subject to the CFTC's upcoming size limit rules. Per Douglas:
"The sudden and massive increase in their short positions in both metals is conspicuous when compared with historical trading patterns. The fact that it occurs at a time when the US banks that are mega-short appear to be covering makes it doubly intriguing. It looks like a strategy to shift suppression and manipulation of the market to banks that are not under the direct supervision of the CFTC. Will these non-US banks be expecting to receive an exemption to position limits where US banks might not be successful?" We hope to get an answer to all these questions soon - Douglas has sent out the following letter to the only honest man at the CFTC, Bart Chilton, which explains Douglas' findings, and demands an inquiry into just who these foreign banks are that are suddenly shorting silver and gold on the margin at alarming rates."
—"Is JP Morgan Shifting Its Silver And Gold Shorts To Non-US Domiciled, And Thus Unregulatable, Banks?," Tyler Durden, Zerohedge.com, 12/20/10
Banana Ben, like his equally pernicious predecessor, Easy Al, is trying to paper over declining US living standards by orchestrating asset bubbles. Ironically, Ben has driven the public into bonds and his QE 2.0 is now bursting the mother of all bubbles, the bond market.
Soon Ben will be at his Rubicon. He must then either monetize everything or allow short rates to explode higher. This of course would precipitate the dreaded debt deflation that solons have tried to avert.
—Bob Chapman, International Forecaster, 12/18/10
Charlie and I are of one mind in how we feel about derivatives and the trading activities that go with them: we view them as time bombs, both for the parties that deal in them and the economic system.
—Warren Buffet, February 21, 2003
…All told, the Fed has bought $20 billion worth of Treasuries in this fashion, $11.15 of which it purchased last week alone. With this kind of weekly money pumping in place, Bernanke and pals don’t need to continue their "behind the scenes" games (like the options expiration week money pumps).
Or do they?
Unbeknownst to most investors, last week Ben Bernanke pumped an additional $11.05 BILLION into the system ON TOP of the $11.15 pumped via the POMOs. In plain terms, the Fed juiced the system by $20+ billion in a single week, bringing its liquidity pumps RIGHT BACK to QE 1 LEVELS.
If you want to know why stocks have rallied in the last month (September, 2010—ed.) this is THE reason. The economy isn’t improving and the European Crisis isn’t over. Nothing has improved. All that has happened is the Fed funneled money into the Primary Dealers who ramped the market.
This is also the reason why the latest rally has almost entirely consisted of gap ups: the Primary Dealers ramp the market and then the computer trading programs take care of the rest.
In plain terms, the market is being juiced higher, plain and simple. There is no fundamental reason for stocks to be rallying. Moreover, we have numerous signs of a top forming (mutual fund cash levels, insider selling to buying ratios, negative divergence, etc). Those who choose to buy into the farce of a rally are going to get what’s coming to them. And when they do, it won’t be pretty.
—"The Only Reason Stocks Have Rallied This Month," Graham Summers, Seeking Alpha, 9/28/10
Today's POMO has closed, with Brian Sack monetizing $6.8 billion of bond. This is a 3.5x Submitted to Accepted ratio as PDs realize various blogs are on their POMO funding needs and thus moderate their Submission amount. Yet what is simply surreal is that the second most monetized bond was PJ3, due 11/30/2015 [1]. This is the same issue that was just auctioned off by the Treasury last week! There is no longer even a pretense of avoiding direct monetization. It is time for Bernanke to go out and just buy bonds at auction. A one week turnaround is nothing less than criminal fraud which if anything is unnecessary and pads the PDs pockets. The result was so stunning it was not even included in last week's frontrunning guide [2]as nobody had a clue that the Fed could be so brazen in its flaunting of direct monetization. For just holding the bond a whopping 168 hours, PDs made a few million dollars. This is criminal. But who cares. Eric Holder has still to prove that he is anything besides an organ donor. (Ed. Note—PD=Primary Dealer) (Ed Note #2—Which of these Primary Dealers are also Shareholders of the private for-profit Fed?)
—"6.8 Billion POMO Closes: Brian Sack Monetizes $1.1 Billion Of Bonds Issued Last Week," Tyler Durden, zerohedge.com, 11/30/10
Near the end of the Fall, 2008 Equities Market Crash (i.e. as of December 2008) there were about U.S. $548 Trillion in Notional OTC (i.e. Dark, Not Exchange Traded; thus traded mainly by Mega-Banks) Derivatives still outstanding worldwide.
Yet one and one-half years later (as of June 2010 – the most recently reported figures) that total was at about $582 Trillion which approaches the all-time pre-Crash (June, 2008) High of $684 Trillion, according to the Central Banker’s Bank, the Bank for International Settlements (www.bis.org, path: Statistics>Derivatives>Table 19).
Clearly, a Conclusion that Systemic Risk (generated by Derivatives Exposure which existed, e.g., at AIG) has somehow been substantially lessened by the actions of the private for-profit Fed, the European Central Bank, the U.S. Congress, or any other source, is wrongheaded.
Given the Massive Size and Impact of the $600+ Trillion in Dark OTC Derivatives, Investing or Trading without addressing the issue of likely Cartel* Market Interventions is a recipe for disaster.
Thus, we offer the following Overview and Update regarding The Interventional Universe to provide a Springboard for the Profits and Protection Strategy which we describe below. And in our January, 2011 Letter, we also offer a Buy Recommendation designed to profit from one of our Forecast Mega-Moves.
As our regular readers know there is clear and convincing evidence that The Fed leads a Cartel* of key Central Bankers and favored Mega-Financial Institutions in an ongoing Regime of Overt and Covert Manipulation of the Precious Metals, Equities, Strategic Commodities and other Markets, as we demonstrate below.
*We encourage those who doubt the scope and power of Overt and Covert Interventions by a Fed-led Cartel of Key Central Bankers and Favored Financial Institutions to read Deepcaster’s December, 2009, Special Alert containing a summary overview of Intervention entitled "Forecasts and December, 2009 Special Alert: Profiting From The Cartel’s Dark Interventions - III" and Deepcaster’s July, 2010 Letter entitled "Profit from a Weakening Cartel; Buy Reco; Forecasts: Gold, Silver, Equities, Crude Oil, U.S. Dollar & U.S. T-Notes & T-Bonds" in the ‘Alerts Cache’ and ‘Latest Letter’ Cache at Deepcaster’s website. Also consider the substantial evidence collected by the Gold AntiTrust Action Committee at www.gata.org, including testimony before the CFTC, for information on precious metals price manipulation. Virtually all of the evidence for Intervention has been gleaned from publicly available records. Deepcaster’s profitable recommendations displayed at Deepcaster’s website have been facilitated by attention to these "Interventionals." Attention to The Interventionals facilitated Deepcaster’s recommending five short positions prior to the Fall, 2008 Market Crash all of which were subsequently liquidated profitably.
This December 22, 2010 Article is the eleventh in a series of Deepcaster's work originally entitled "Juiced Numbers". It provides an Updated Overview and Summary of Market Intervention and Data Manipulation. It reflects Analysis of key recent Releases from (and actions of) the BIS (Bank for International Settlements – The Central Banker’s Bank), BLS (Bureau of Labor Statistics) and The U.S. Federal Reserve, as well as Highlights of recent Interventions, and updates regarding The Cartel* "End Game." For the sake of Brevity, we refer to our earlier articles in this series.
Bailouts and Stimuli have afforded The Cartel a whole panoply of additional tools for Market Intervention which they did not possess three years ago. These tools make tracking "The Interventionals" ever more challenging. In sum, this report provides even more evidence of continuing Risk of Systemic Collapse, and of the beginning of the attempted implementation of The Cartel’s Nefarious "End Game."
Moreover, it provides evidence that the private for-profit Fed’s and its allied Mega-Banks’ Policies and Actions are the Primary Cause of the Economic and Financial Crises from which we suffer today.
Indeed, the OTC Derivatives figures through June, 2010 released recently by the BIS indicate that even greater Markets Turmoil and Systemic Risk are likely in 2011 as Deepcaster earlier Forecast. They also indicate that The Cartel* and its Favored Financial Institutions showed nearly $15 Trillion in Gains while Investors lost Trillions in the Fall, 2008 Market Crash. (See BIS data referenced below.)
Therefore, Deepcaster suggests below a Systemic Solution and a Strategy for profiting and protecting from the Interventional Regime’s actions and policies, and coping with its ‘End Game’ Strategy.
The Covert Interventional Context -- Overview
Deepcaster is periodically asked to explain, and provide evidence for, our view that a U.S. Federal Reserve-led Cartel* (apparently composed of the U.S. Federal Reserve, Major Central Bankers and key Primary Dealers manipulates a wide variety of markets. [Apparently one "Operational Vehicle" through which The Cartel works is called "The Working Group on Financial Markets" established after the 1987 crash, and which is often informally and widely referred to as "The Plunge Protection Team" or PPT.]
Essential to maximizing profits and to avoiding losses is to recognize that the Fed-led Cartel* manages two complementary Interventional Regimes - - one quite public, and the other dark one, at least as powerful, covert. Thus, a critical key to profit and loss is tracking the "Dark Interventionals" (which leave "Tracks" so to speak) as best one can, as well as the public ones.
Moreover, whether an Intervention is Overt or Covert is often a matter of degree. Overt Intervention often has a Covert aspect (e.g. how was that TARP Bailout Money used and who received it?), and Covert ones are often difficult to detect, but nonetheless can often be tracked using publicly available information. Consider for example, the Graham Summers Quote above.
It is important to note also that by "Cartel Intervention" we do not (usually) mean that the Cartel totally controls prices in any particular market, at all times. Various markets are affected in varying degrees, at varying times, by Cartel manipulation attempts.
In markets such as the (relatively) Small Cap markets for Gold and Silver Bullion and especially Securities, Cartel manipulation attempts can have much more impact and are, at times, and for certain time periods, tantamount to control. But the Cartel’s ability to manipulate certain of these Markets has been significantly weakened in recent months for reasons we explain in our Spring, 2010 and later, Letters, Articles and Alerts (e.g. "Profit from a Weakening Cartel, July, 2010 Letter"). Here we do not focus on the Overt Interventions since they are described at length in various mainstream financial publications.
COVERT DIRECT INTERVENTION
Covert Direct Intervention to manipulate a variety of markets appears to be accomplished primarily via three categories of vehicles:
1)"Repo" Injections from The Fed (TOMO’s & POMO’s though POMO injection have become more widely reported recently)
2)Over The Counter (OTC) Derivatives (reported at www.bis.org, see below)
3)"Bailout" monies and Authorizations which Congress unwisely gave the Fed without requiring full disclosure or Oversight and, in particular, the TARP and TSLF (Term Securities Lending Facility) injections by The Fed, and other Vehicles such as the Primary Dealer Credit Facility (PDCF).
[For fuller Explanation, see Deepcaster’s Article "PROFIT & PROTECTION FROM CARTEL INTERVENTION -- Including New Interventional Tools Description " (12/23/09) in the ‘Articles by Deepcaster’ Cache at www.deepcaster.com and for details regarding Cartel use of Repos, Derivatives, Bailout Monies and other Vehicles see the July, 2009 Letter.]
The Challenge: Determining the Impact of The Interventionals
The challenge for Investors and Forecasters is to determine where (i.e. in what Sector/s) and how (immediately, in increments, etc.) the Repo-backed funds and/or TARP/TSLF/Bailout Funds and/or OTC Derivatives ("Interventional Funds") etc. will be employed. Deepcaster and those very few others, who monitor the Interventional Funding (and related Cartel and Allies’ actions) to the extent that is feasible, make educated Forecasts of where and how such funds are likely to be used based on patterns, tendencies, and judgments virtually all of which can be gleaned or inferred from publically reported information. But no outsider can know for sure.
Those who doubt whether the Cartel has the capacity to manipulate the markets (and especially the larger markets like the multi-trillion dollar currency and bond markets) are invited to inform themselves about the U.S. $70 Trillion plus of OTC Derivatives at Fed Primary Dealer J.P. Morgan Chase, or U.S. $40 Trillion plus (each!) at Fed Primary Dealer Goldman Sachs and Fed Primary Dealer Citibank.
Indeed both Opportunities for and Threats to Investors are generated by Cartel Policies and the Massive OTC Derivatives positions. Consider:
"With Key Mega-Financial Institutions around the World claiming in 2008 that they risked collapse if they were not bailed out, one must ask which ones benefited from the $15 Trillion plus Increase in Gross Market Value of their OTC Derivatives in the six months between June, 2008 and December, 2008 when the Equities Markets were crashing and Investors around the world were losing trillions? A logical Conclusion: Key Central Bankers and Favored Financial Institutions of The Fed-led Cartel*, quite possibly including the shareholders of the private for-profit U.S. Federal Reserve" (cf. BIS Table 19 cited above)
Deepcaster, May 29, 2009
For further details see our July, 2009, Letter.
[For fuller Explanation, see Deepcaster’s Article "PROFIT & PROTECTION FROM CARTEL INTERVENTION -- Including New Interventional Tools Description " (12/23/09) in the ‘Articles by Deepcaster’ Cache at www.deepcaster.com.]
INDIRECT MANIPULATION
Key Statistics continue to be gimmicked by Official Sources much to the detriment of American Citizens and Investors Worldwide. One result of this is that the extent to which Mega-Bank Policies result in the confiscation or devaluation of Investor Wealth, is hidden.
Investors and citizens-at-large are misled by Official Statistics which have been gimmicked, as shadowstats.com demonstrates. All of the following Genuine Numbers are calculated by shadowstats.com, which calculates them according to traditional methods used in the 1980s, and early 1990s, before The Political Adjustments currently being utilized began in earnest.
As the Real Numbers mentioned below demonstrate, our ongoing economic and financial crisis is not merely a "normal" business cycle Recession, but a System-Threatening Crisis. Indeed, we are entering into a Hyperinflationary Depression. (see below)
Bogus Official Numbers vs.Real Numbers (per Shadowstats.com)
Annual U.S. Consumer Price Inflation reported December 15, 2010
1.14%8.54% (annualized November, 2010 Rate)
U.S. Unemployment reported December 3, 2010
9.8%22.6%
U.S. GDP Annual Growth/Decline reported November 23, 2010
3.24%-1.44%
U.S. M3 reported December 18, 2010 (Month of November, Y.O.Y.)
No Official Report- 2.90%
Knowing these Real Numbers facilitated Deepcaster’s recommending "Opportunities in the Impending Perfect Storm" - - the title of his early September, 2008 (pre-Crash) Article warning of the impending Crash (available in the Articles Cache at www.deepcaster.com) and his making five short (and subsequently quite profitable) recommendations to subscribers at about that time.
To understand the motives for Fed and Cartel Policies and actions consider:
A Brief Anatomy of the "U.S." Federal Reserve
Indeed, the Profit Motive lies behind Fed Actions. Even the most causal student of Economic History knows that the United States’ Federal Reserve system, or "The Fed" as it is called, is not a U.S. government owned or controlled entity.
Various international private banks, several of which are headquartered in Europe, own "shares" in the "United States" Fed. Moreover, this "United States" Fed leads a Cartel of Central and Private Banks* who collectively intervene in a wide variety of markets, as Deepcaster demonstrates here. All this is obviously quite financially incestuous.
These International Bankers, acting through their "U.S." Fed, profit both by creating money out of "thin air" and by collecting "interest" from U.S. Taxpayers on the Treasury Securities it has bought with U.S. Dollars (Federal Reserve Notes) it has created out of thin air. The Dean of the Newsletter Writers, Richard Russell, eloquently describes all this:
"I still can’t get over the whole Federal Reserve racket…
The damnable result is that the Fed effectively controls the U.S. money supply. The Fed is …not even a branch of the U.S. government. The Fed is not mentioned in the Constitution of the United States. No Constitutional amendment was ever created or voted on to accept the Fed. The Constitutionality of the Federal Reserve has never come before the Supreme Court. The Fed is a private bank that keeps the U.S. forever in debt - - or I should say in increasing debt along with ever rising interest payments."
Richard Russell, "Richards Remarks," dowtheoryletters.com, March 27 2007
[Historical note: recall that President Kennedy was unhappy with Fed policy and therefore caused U.S. Notes to be printed by the U.S. Treasury as Constitutionally Authorized and as a substitute for Federal Reserve Notes. The issuance of these Notes ceased shortly after President Kennedy's Assassination.]
The one conclusion that one can make from the foregoing is that the failure to take account of the power, force and pervasiveness of Fed-led Cartel Manipulations (i.e. The Interventionals) is an invitation to financial and investment suicide.
[For Further Details, see Deepcaster’s Article: "PROFIT & PROTECTION FROM CARTEL INTERVENTION -- Including New Interventional Tools Description" (12/23/09) in the ‘Articles by Deepcaster’ cache at www.deepcaster.com.]
The Interventional Regime – Motive, Causes and Consequences
Clearly, The Cartel has created a Financial System subject to ever-greater Systemic Risk. Why?
Harry Schultz, the Eminence Grise of the Financial Newsletter writing fraternity, puts the question in this way - - "what is the reason for this seemingly random monetary mess that multiplies its momentum every day? The answer, in one word, control. The elite/insiders already have control of the financial system, but they wanted more, much more…and it was not random, it was planned." (emphasis added)
[For Further Details, see Deepcaster’s Article: "PROFIT & PROTECTION FROM CARTEL INTERVENTION -- Including New Interventional Tools Description" (12/23/09) in the ‘Articles by Deepcaster’ cache at www.deepcaster.com.]
Since the cornerstone of The Cartel’s power lies in maintaining the legitimacy of their Fiat Currencies and Treasury Securities, the last thing they want is to have Gold, Silver and Tangible Assets held by investors to increasingly be seen as the Ultimate Stores and Measures of Value. Thus they will continue attempts at Takedowns of Gold and Silver prices.
Cautions for Investors and Traders Regarding Interventions
We issue a word of caution to our readers. So long as The Cartel is in a very active interventional mode (e.g. as in taking down the price of Gold and Silver) one should not be lured into thinking that the periodic up spikes in the prices of Gold and Silver necessarily present a "breakout" or a buying opportunity. As a practical matter, technical breakouts are sometimes a lure designed to suck in more "longs" prior to a subsequent deeper Takedown.
However, the Cartel has been recently considerably weakened recently so deep prolonged Takedowns are less likely – See Below.
Nonetheless, it is essential to study the Fundamentals and Technicals even though the Interventionals can temporarily override the Fundamentals and Technicals. One must study the Fundamentals not only for all the usual reasons but also because Fundamentals somewhat constrain the timing and effectiveness of Interventions by The Cartel.
Similarly, one should study the Technicals for all the usual reasons and, in addition, because it is in The Cartel’s interest to make its actions seem technically plausible in order to continue to "run mainly under the radar." It is not in The Cartel’s interest to make its Interventions any more visible than they already are. Indeed, there is powerful evidence that The Cartel often uses and/or helps create technical patterns (aka "Painting the Charts") which lure certain investors (such as hard asset investors) into getting "off sides" before Cartel actions such as taking down the price of Gold or Silver.
Interest Rate Manipulation & The Bond Market
Clearly, the fact that Intervention occurs is amply documented, but Intervention appears not to be limited to the Gold and Silver Markets nor to the Equities Markets, as the Graham Summers Quote above indicates.
Fed Chairman Bernanke’s statement in his academic paper "Zero Rate Bound Economies" can reasonably be taken as a justification for the Fed purchasing the government own paper, otherwise known as monetizing the debt. Specifically, regarding long bond purchases, the purpose of this would be to boost the 10 and 30-year bonds, and, therefore, reduce long-term interest rates.
Consider that in light of increasing Real Consumer Price Inflation now at over 8.54% annually (per shadowstats.com - - see "Indirect Manipulation" above) one can reasonably ask: So why haven’t the storied "Bond Vigilantes" pushed interest rates (and especially long-term interest rates) up to account for the massively expansionary monetary inflation of recent years?
That is because the Fed-led Cartel* of Central Bankers and Allies has quite apparently been using "interest rate swaps" and other Derivatives (via their Chosen Primary Dealers) to suppress what would otherwise be dramatically rising interest rates, both short and long term, according to Rob Kirby. Consider that there were over $450 trillion in Outstanding Dark OTC Interest Rate Contracts as of June, 2010 according to the BIS, up from $262 trillion in June, 2006.
Kirby’s excellent paper, "The Elephant in the Room," demonstrating how interest rates (which would, if there were no suppression, be dramatically rising) have been suppressed by The Cartel, was presented at the Spring 2008 Washington, D.C., GATA (Gold Anti-Trust Action Committee, www.gata.org) Conference.
Cartel Intervention is the only explanation, is it not, that while the Credit Default Swaps Market attributes (via its premiums) a record-high risk-of-loss to U.S. Treasuries, the actual interest rates on U.S. Treasury Notes and Bonds dropped to record lows in early and mid-2010. See our 12/23/09 Article for details.
Specific Interventions
For a full discussion of the following Interventions and Tools, see Deepcaster’s July, 2008, December, 2008, July, 2009, December, 2009, and July, 2010 Letters posted in the ‘Letters’ Archive at www.deepcaster.com:
The Spring 2006 Interventional Takedown
The August through October, 2006 Interventions
The August and September, 2007 Market Interventions
The March 2008 Crisis-Induced Takedown of Gold & Silver
A New Interventional Tool: Fed Intervention in the Equity Markets Via the Primary Dealer Credit Facility
Equities Markets Boosting: March, 2009 – June, 2010
In particular it appears that The Private for-Profit Fed has used the Primary Dealer Credit Facility (PDCF) as a Prime Tool for manipulating Equities Markets as Tyler Durden of Zerohedge.com describes:
"Recently, Zero Hedge presented a snapshot analysis [1] of the various securities that made up the triparty repo agreement involving JPM, Lehman and the Fed. We uncovered numerous bankrupt companies' equities that were being pledged as collateral for what ultimately was taxpayer exposure." (emphasis added)
"An Overview Of The Fed's Intervention In Equity Markets Via The Primary Dealer Credit Facility"
Tyler Durden, Zerohedge.com, October 25, 2009
[For fuller Explanation, see Deepcaster’s Article "PROFIT & PROTECTION FROM CARTEL INTERVENTION -- Including New Interventional Tools Description " (12/23/09) in the ‘Articles by Deepcaster’ Cache at www.deepcaster.com.]
Thus, the net-result of Fed/Treasury actions have been to increase long-term Systemic Risk rather than diminish it.
Increased Systemic Risk and "Earned" Liquidity versus "Borrowed" Liquidity
A key point is that the Fed/Treasury Actions of 2008, 2009 and 2010 are not long-term fixes. One reason they are not long-term fixes is that they "fix" a liquidity problem in a way that allows insolvent or nearly insolvent financial institutions to have liquidity that would allow certain normal but often deleterious operations (i.e. the continuation of even more lending based on borrowed liquidity) to continue temporarily. Deepcaster has previously demonstrated the perils inherent in an economy increasingly relying on "borrowed liquidity" (i.e. debt) as a result of Fed policies rather than the traditional "earned liquidity" (i.e. savings) – see Deepcaster’s January, 2008 Letter.
Thus, the "borrowed liquidity cure" is worse than the disease. Thus, what The Fed has given us is a flawed Financial Band-Aid, and only a Taxpayer guaranteed Band-Aid for the Big Boys (and profit for The Fed and its Shareholders which make more money as borrowing increases) at that. The FASB is complicit in this Deception because it continues to allow Mark to Myth rather than requiring Mark to Market accounting.
We must not forget another fundamental factor which demonstrates that The Fed Actions are neither a long-term, nor an adequate, remedy.
"This Fed injection does nothing for households. And it is households that will determine if we avert depression or not. Consumer spending is 70 percent of GDP…Somebody ought to be arrested. What a heist. Of course Spitzer can’t do anything. He’s preoccupied." (emphasis added)
Robert McHugh, Tuesday, March 11, 2008 Briefing
A Systemic Solution
Allowing the International Economy to be based on a Fiat Reserve Currency managed by a Private For-Profit Central Bank, The Fed, is unsustainable. No Fiat Currency Regime in history has ever survived indefinitely. Many have ended in Disaster.
So The Systemic Solution is apparent. We outline it as follows:
1) Re-link the world’s Reserve Currency (the U.S. Dollar) to Gold and Silver, the Monetary Metals which are both stores and measures of value, tangible value.
Failure to re-link currencies to Gold and Silver will allow a continuing massive and unsustainable inflation of the money supply and debt by the Fed-led Cartel* of Central Bankers. Unless such re-linking to Gold and Silver is accomplished, the U.S. Dollar is likely doomed in the long-run, with severely negative consequences, including a de facto confiscation of the Wealth of Savers, Investors, and Retirees.
Excessive Money supply inflation ultimately leads to price inflation and until recently, the continuing extraordinary rate of increase in the money supply, (as a number of commentators have pointed out) is leading us down the path to a Hyperinflationary Depression. (c.f. shadowstats.com). And, more ominously, it is leading us to an attempt to implement The Cartel "End Game" (see June 2007 Letter "Profiting From the Push to Denationalize Currencies and Deconstruct Nations" at www.deepcaster.com.).
But the private for-profit U.S. Federal Reserve and its Cartel Allies are not likely to give up their Fiat Currency and "un-backed" Treasury Securities that easily - - they are the source of its power. The Fed and associated International Financial Allies will strenuously resist. See "Antidote to Globalists’ Threat to U.S. Dollar-Gold Investments (11/18/10)" in the ‘Articles by Deepaster’ Cache at www.deepcaster.com. Thus,
2) Legendary investor Jim Rogers recently neatly expressed The Solution to the problem of The Fed: "The Fed should be abolished and Chairman Bernanke should resign." (March, 2008, CNBC)
An excellent idea. Indeed, The Fed is a private for-profit group of International Banks, whose main motivation is in providing profits for, and protecting the interests of, The International Bankers Cartel and favored institutions and parasites, not in serving the needs of U.S. citizens (or most citizens of other countries for that matter). The nonprofit group Carrying Capacity Network (www.carryingcapacity.org) advocates Auditing and Abolishing The Fed.
3)To replace The Fed, and in order to protect ordinary citizens interests, the U.S. Congress should create a genuinely National Bank under the auspices of the U.S. Treasury Department as authorized by the U.S. Constitution. That truly National Bank should be the money issuer for the United States, not the private for-profit Cartel of International Bankers known as The Fed.
This is not such a radical idea. President Kennedy caused U.S. Notes to be issued late in his presidency as a replacement for Federal Reserve Notes. [He was killed a few months after the issuance was started and the U.S. Notes disappeared from the market.]
The Cartel End Game
Thus if The Cartel leaders know what they are doing what is their ‘End Game’? For details regarding The Cartel ‘End Game’ see "Investor Advantage: Revisiting the Cartel's 'End Game'" (3/6/09) and "Gold-Freedom versus The Cartel ‘End-Game’ & A Strategy for Surmounting It (09/23/10)" in the ‘Articles by Deepcaster’ cache at www.deepcaster.com.
A Strategy for Investors & Traders
Fortunately, the following considerations and guidelines help enable Investors to Profit and Protect in spite of Cartel Intervention, and particularly Intervention in the Precious Metals Markets.
1.Although The Cartel is still Potent, it is significantly less potent than it was even a few months ago due primarily to:
a)The years-long efforts of the leaders and members of GATA in exposing Precious Metals Price Suppression
b)The stunning Allegations that Major Gold Repositories do not have nearly as much Physical Gold they say they do. See the allegations regarding GLD and the London Bullion Market Association in Deepcaster’s April 9, 2010 article ("Climacteric for The Cartel; Opportunity for Investors (04/09/10)" in the ‘Articles by Deepcaster’ Cache at www.deepcaster.com).
These reports are doubtless leading Major Gold Investors to demand Delivery and possession of Physical Gold – a wise decision. But The Cartel is still the Biggest Player in many markets and, if the timing and market context are propitious, the Biggest Player makes Market Price. In addition, The Cartel has the advantage of de facto controlling the structure and regulation of various marketplaces and that is a tremendous advantage; just as the Hunt Brothers years ago discovered much to their dismay and misfortune, when they tried to corner the Silver Market.
2.Thus we recommend that Investors follow their lead with a significant portion of the funds allocated to Precious Metals purchases committed to purchasing, and taking Personal Delivery of, Physical Gold and Silver.
Indeed, because Physical held in one’s personal possession is so precious, some forms of it trade at as much as a 20% premium to the spot price of "paper" Gold.
But not all forms of Physical are Equal, as it were. Some forms are much more liquid than others, and some are much more susceptible to counterfeiting, as e.g. by Tungsten-lacing.
Deepcaster has recently recommended Purchase of One Form of Physical Gold (and Silver), that is quite liquid, not easily susceptible to counterfeiting, and commands a considerable premium over the spot price of Paper Gold (and Paper Silver). See Deepcaster’s December, 2010 Letter "Gold with Income; Muni Bonds ALERT! Investor Protection via Dollar Salvation; Forecast: Gold, Silver, Equities, Crude Oil, U.S. Dollar, and U.S. T-Notes & T-Bonds" and "Cartel Failing? Precious Metal Buy Reco! Forecasts: Gold, Silver, Equities, Crude Oil, U.S. Dollar & U.S. T-Notes & Bonds" (week ending April 16, 2010) in the ‘Alerts Cache’ at www.deepcaster.com.
3.Do not give Short Shrift to Gold and Silver Miners.
But purchasing shares of these should be done with particular care, because, being "paper" (or, usually, electronic entries on some remote server) Miners shares are especially vulnerable to periodic Cartel attacks and Price Takedowns.
Thus, they are most profitably accumulated near Interim Lows resulting from Cartel Interventions.
In order to estimate these Interim Lows one needs not only to consider Fundamentals and Technicals, but also Interventionals.
Note: A major premise of The Strategy is that one can certainly remain a Hard Assets Partisan while at the same time insulating oneself from future Cartel Takedowns. The following points provide an outline of The Strategy (particularly as applied to the Gold and Silver Markets) and are designed to help avoid such unpleasantness, or even possible financial ruin, in the future, as well as to profit along the way:
4.Accumulate Hard Assets near the Interim Bottoms of Cartel- induced Takedowns.
5.In order to know when one is near the bottom of a Cartel-generated takedown, it is essential to take account of the Interventionals as well as the Technicals and Fundamentals.
6.For example, regarding Gold & Silver, near such Interim Bottoms, accumulate a combination of the Physical Commodity (Deepcaster prefers "low premium to melt" bullion coins) and well-managed Juniors with large reserves. The "Physical" and "Juniors" are for holding for the long-term as a Core Position.
7.Then, to the extent one wishes to speculate on the next "long" move, one should buy the major producers or long-term options on them. These latter positions are for ultimate liquidation at the next Interim Top and are not for holding for the long-term.
8.Indeed, there will be a time when The Cartel price capping is ineffective and Gold & Silver make record moves upward. The benefit of this Strategy is that one will likely be long in one’s speculative positions when this happens.
9.Near the next Interim Top, liquidate the long options and majors. Again, in order to know when we are close to the next Interim Top, it is essential to monitor the Interventionals, as well as Fundamentals and Technicals.
10.For Speculators, at that Interim Top, sell short or buy puts on Majors. We re-emphasize the Majors as preferred vehicles for trading positions because such positions are more liquid and tend to be quite responsive to Cartel moves.
11.At the next Interim Bottom, cover your shorts and liquidate your puts and go long again to begin the process all over again. We emphasize that it is essential to consider the Interventionals as well as the Fundamentals and Technicals in order to determine the approximate Interim Tops and Bottoms.
12.Finally, Hard Assets Partisans have the opportunity to become involved in Political Action to diminish the power of the Central Banker Cartel. It is truly outrageous that the average unsuspecting citizen, and prospective retiree, can and does put his hard won assets in Tangible Assets only to have those assets effectively de-valued by Cartel Takedowns and Fiat Currency Purchasing Power Degradation. This is extremely injurious to many average citizens in many countries who are saving for the rainy day or retirement and have their retirement and/or reserves effectively taken from them.
