The Federal Reserve, under the auspices of protecting the financial system, came to the rescue of the 'too big to fail' banks and other institutions deemed more worthy of saving than you and me. Well, that isn't exactly the case, since a few programs, such as extended unemployment, were enacted and extended to sustain the downtrodden and newly unemployed on one hand, and on the other, the big banks and powerbrokers on Wall Street were saved and enriched. Many other programs that were supposed to help those meeting mortgage payment difficulties by reducing and reorganizing the mortgages fizzled because they gave no real advantage to the banks, and yet, at the same time, banks unloaded many troubled loans onto the backs of the taxpayers by selling them at top prices to what are effectively government-sponsored enterprises like Fannie Mae and Freddie Mac, which were subsequently taken over outright by the United States government.
Overall, those at the lower end of the socioeconomic ladder have lost out and the big banks have been left to continue paying the enormous salaries and reaping the fat profits associated with the 1%, despite balance sheets that are contrived and supported by edict of the United States government. The system failed, but not completely. It was 'saved', and don't you forget it. Main Street in the United States is slowly being gutted at the same time that the 'too big to fail' banks are been propped up and protected. I'll be honest though. The economic system is NOW a complete fraud and façade, thrown up to maintain the status quo. One recent example of this that came to light in the mainstream was the publication of the monthly US employment report.
Yet despite hours of reading and trying to piece together what exactly is going on, it is nearly impossible to see the actions of the big movers and shakers that are behind the Federal Reserve and other entities that are really in control of the economic and political system of the United States and beyond. Things are very opaque. Even with the efforts of Ron Paul and others in the House of Representatives to provide a comprehensive audit of the Federal Reserve (that is doomed to fail in the Senate), we are left figuratively blind to exactly what is going to happen and the policies and decisions that are being undertaken in secret in what is supposed to be the "best" democratic, economic and political system in the world.
Read the first ever audit results of the Federal Reserve to see just what they are hiding and have consistently lied about. What we do have, however, is evidence of the past actions of the Federal Reserve and the 'wisdom' of the market place, which in reality is based on greed and control, and which points us in the direction of what happened and can give us some idea of what might be coming in the near future.
I recently read an article by Jim Sinclair (whom I read daily because he has been spot on in predicting the swings of the gold market since he started his website in the early 2000s). At first I wanted to really object to what he says, since the example of the turnaround of Iceland and the prosecuting of bankers is so fresh in my mind. Indeed, Mr. Sinclair posted as much:
QE Is Working And Will Continue To Do SoSinclair has also posted the justification for the action of the Federal Reserve to save the system by saying the following:
October 3, 2012, at 10:49 am
by Jim Sinclair
QE works and It will continue to work if you understand the tool and the target of the tool. All those that so righteously declare that QE does not work are dead wrong and making public jerks of themselves among those that know.
It works alright, but employment and general economic activity are not the primary focus of this tool. The primary focus of QE is to prevent bankruptcy in financial entities and countries so far. It will be used to prevent state and pension fund bankruptcies. That is fact, not conversation.
I am not speculating that this will occur. I am telling you there is no other tool and like QE to infinity, before anyone noticed it arrived, is now focused on countries. I know it, not think it.
Those that converse or write both inside and outside of our community declaring QE failed and will fail again demonstrate zero knowledge of monetary science. QE has worked as it is designed to work, and will continue to do so as it adds new targets to prevent bankruptcy. The impact of QE will be a colossal impact, but it is not what the writers who aim at sensationalism even know about.
There is nothing sensational here. It is as simply a one plus one equals two.
Bernanke has succeeded so far in saving the financial world from bankruptcy. Now Bernanke and Draghi are in the business of saving countries from bankruptcy. It will work and that is why the wild bears on the euro are wrong. It will work. That is why the wild bulls on the dollar are wrong. Even the cartoon below is wrong.
Main Street's economy did not get the QE treatment but rather Western banks and financial entities got it instead. Study history or relive it. It looks right now like we will certainly relive it.
Currency induced cost push inflation will grab the entire Western world. I do not think it. I know it. That is a form of hyperinflation.
Gold is going to $3500 and beyond. $1775 is a game that will eventually be won. $1775 is not a magnet point.
QE3 To Infinity - The Final End GameSo after spending some time digesting this, and other explanations provided by Mr. Sinclair and others, that what we are seeing is unprecedented in modern economics and finance - the coordinated mass-printing of money not only by the Federal Reserve, but also the European Central Bank and even China - I've come to see that he is right, at least in terms of what is going on. I have to state here that after reading his daily posts for a number of years that I think he has an uncanny knack for knowing how things really work in high finance and economics and, as such, it is well worth considering. He does, however, miss the mark widely in his posts on the broader geopolitical stage. Yet after considering how difficult it has been for me to get to the point where I can understand the world at large, which involved reading for hours each day on a very wide range of topics, I think Sinclair can be excused for not seeing the whole picture. With so much information out there, sifting through it all to weed out the disinformation and propaganda can get the best of even the most well-meaning investigator.
September 21, 2012, at 2:30 pm
by Jim Sinclair
My Dear Extended Family,
The final end game of QE3 to infinity, with a month or two off from time to time, will be a product of the long term viability of the Federal Reserve Balance sheet and the impact on the dollar there from.
Let's review what has transpired and begin to look at what will happen:
1. OTC derivative manufacturers and distributors sold fraudulent paper to almost every entity as clients of the Western world financial system. Inherently the OTC derivatives manufacturers and distributors had part of the transaction on their books. No problem as long as the entire scam was a "Daisy Chain," a connected set of transactions that has the appearance of risk but when all netted out equals almost zero.
2. Until Lehman was flushed, and flushed it was, most all OTC derivatives could have been netted to zero in a derivative resurrection bank. Losers would have rejoiced and winners would have declared war. However when Lehman was forced into bankruptcy it broke the "Daisy Chain" (a chain of near risk-less transactions when netted) of the OTC derivatives scam. At this point winners had won huge and losers had lost huge and there was no longer a means of repair to the quadrillion dollar scam. The problem has no practical solution other than transferring all losing paper to the balance sheet of the Federal Reserve where then it was anticipated no non-government "mark to market" audit would ever occur. It was the perfect hole to stick the junk into.
3. The size of the OTC derivative market stood at one quadrillion one hundred and forty four trillion as reported by the Bank of International Settlement, the counter internationally.
4. The Bank of international Settlements, seeing this outrageous number, changed their computer method of valuation to maturity assuming no failures and reduced the size of OTC derivatives of all kinds to a more acceptable but still huge number of $700 trillion notional value.
5. In the first and second round of QE, the Federal reserve purchased OTC derivatives including the variety called securitized mortgage debt to remove them from the balance sheets of the Western world financial system, thereby improving the Western world's financial institutions' balance sheets and preventing an international industry-wide bankruptcy. That means the Federal Reserve has impaired its balance sheet in order to repair some of the balance sheet integrity of the Western world financial system. The amount they have purchased is significant, but not compared to the total outstanding above, more than one quadrillion dollars.
6. The reason for QE to infinity, QE3, is the failure of business activity in the Western world to pick up with early huge monetary stimulation so as to repair the balance sheet of the Western financial world financial system. The unseen crisis is the hidden weakness of the Western world financial system thanks to FASB (the gatekeepers of world accounting) which allows financial institutions internationally to hide their losses by valuing their paper at whatever the bank wants it to be with no reference to seek a market value, primarily because there is none to seek.
7. The crisis not seen by Fed observers is the true balance sheet condition of the loses on the trillions of dollar of worth-less paper fraudulent paper because numbers are given but no independent mark to market audit has been, or is likely to be, performed.
8. As QE3 to infinity moves ahead, the balance sheet of the Federal Reserve continues to acquire worthless paper in exchange for dollars. Junk moved onto the balance sheet of the US Federal Reserve as the common share of the USA, the US dollar, continues to expand exponentially.
9. The end game problem is extended recessionary business conditions going into 2015 to 2017, wherein the supply of dollars continually expands, the US Federal Deficit grows, US state deficit spending continues to grow and the quality of the Federal Reserve balance sheet proceeds to deteriorate further.
Therefore the end game is the perception of the weakness of the lender of last resort, the Federal Reserve's Balance sheet, as it impacts confidence the US dollar and US interest rates.
Now you know what brings about the end game.
In the future I will do small simple articles dealing with the impact on markets of a to-be-bankrupt central bank, the US Federal Reserve. The end game could come sooner, but only if there was an independent "mark to market" audit of the Federal Reserve inventory of worthless paper which remains unlikely no matter who wins the election in November.
Those of you invested in gold and silver vehicles of all kinds (with the exception of ETFs and futures) rest well this weekend. $3500 will easily be a place gold trades. The Canadian dollar and blasphemy to the euro snobs, the Swiss franc, remain go to vehicles for cash positions. Yes, cash, because you do not have to pay to own them as you do with a sovereign paper with negative interest.
But what really starts getting my brain in a muddle when reflecting on what Mr. Sinclair has written above is that, after years of sifting through the world of conspiracies, specifically the claim that a one world government has been in place for some time, if a person such as myself, who is just trying to see and understand the basic underpinnings of finance and economics, could figure out the alleged secret of secrets, what then is it that is actually being hidden?
mechanical mosquito and other Terminator-esque monstrosities) actually been hiding from the rest of us? Are they really in control of an economic system that seems to have gone mad in Europe (and soon in the USA) and are they just feeding and enriching the 1% with a system of control via economic and financial manipulation, while at the same time tightening the screws on the 99% via so-called "austerity measures"? Is that all there is to it?
Are the coordinated efforts of governments such as the United States and China, governments that seem to be at odds with each other, really a window into a one world government that is increasingly less hidden? Are the Powers That Be really just keeping the system going in a controlled manner to forestall a collapse before some cosmic catastrophe wipes most of us out, the possibility of which has been well documented on SOTT.net? Or must we wait on other calamities such as dramatic climate change, most likely via a new ice age, which will eventually overtake and destroy modern civilization and revert us all back to the stone age? Perhaps, at some level, it is a combination of the answers to the above questions that can provide us with the key to seeing the reasons behind the economic shenanigans in the past few years.
Whatever the case, I think that the economic system will just keep on muddling through (aka 'making it up as they go along') but will become increasingly unsustainable over the next six months, particularly for the average, normal person. I think we're going to be seeing a real degradation of the quality of life of Joe Six-Pack, to the point where necessities such as food and other items become scarce, which will likely push Joe and all his buddies to breaking point. I think Mr. Sinclair is correct in saying that the system has been 'saved', or rather, in my mind, kept on track for some greater plan, the precise details of which we will only know once more information and events unfold. What I think a person can do to protect themselves to some extent, besides making basic disaster preparations, is to purchase precious metals. The path ahead is shadowy and unknown, but I think this is one action that can be a form of protection.