No sooner did the Fed and other central banks announce that they were bailing out the world, once again, the price of gold catapulted up in a vertical move. Silver followed right along.
Bill Holter at Lemetropole Cafe:
The world’s central banks announced this morning that they will “provide liquidity” where it is needed. Yes, The Fed is breaking out the old fire hose and going to spray Dollars everywhere to extinguish the deflationary flames. Well duh, who didn’t see this coming? What choice did they have (other than giving up the farce and adding a few zeroes to Gold’s price) other than “The Big Print”? This will last a week or two until they are forced into The Bigger Print and then The Biggest Print.
I wrote back in Aug. or Sept. 2008 that no matter what The Fed did, they could not fix “the problem” with more liquidity because this is not a liquidity problem. It is a SOLVENCY problem. You cannot make bad loans good with liquidity, you can buy some “time” which they have but you just cannot magically make the problems go away. It has already been written – QE to infinity. Yes, they can (and will) destroy the currencies so that the debts become “payable” but what good is that if it will cost $100,000 for a cup of coffee? Again the choice of Richard Russell’s “Inflate or Die” has been offered to the central banks and again they chose to INFLATE, a no brainer.
This, now 3++ years after the global debt bubble has burst is just another episode of The Fed banging their head against the same wall and expecting a different result. There will be no different result, derivatives have expanded another $130 Trillion over the last 6 months as the banks and brokers desperately try to “book profits” even though there is no real cash flow. Hooking a bigger pump with more airflow WILL NOT reflate a balloon that already has gaping holes in it; expect more of the same until the current monetary system is scrapped. The ONLY answer (broken record time again) is to revalue Gold to such a level where the existing reserves are valued high enough to reset the system and refill the existing deflationary black holes of insolvency. In a real system with real money the current scenario could never have occurred, bankruptcy and liquidation would be allowed to cleanse the system. This “print” is further proof that cleansing the system is not allowed.
In truth, today is merely the latest “panic” by central banks. Things behind the scenes must have again been up against the wall and central banks “blinked”, they have panicked before the market was allowed to. They cannot allow a market panic to ensue because they are totally powerless to stop it now. We are too far down the road and the system has gotten too big and leverage too great to allow anything resembling a 15-20% correction to get started now because once started it cannot be stopped. We will now see “interventions” on a much more frequent basis to “prevent” reality from occurring. The credit markets have breathed a small sigh of relief here but this will not last. The fact remains that even sovereign governments are past the point of no return and cannot pay back what they already owe; borrowing more will only make them more insolvent. I would be willing to bet that the credit markets (far superior intelligence here) will again start to seize up before the equity markets do and probably before Christmas.
It’s all about credit. The quality of credit today is bad and the amounts of credit are ludicrous. MORE credit does nothing except dilute existing credit (and thus the currencies), lower the quality of existing credit and make the original cause of the problem …bigger. Do you now see why Gold and Silver were “attacked” and put in a hole? Were this latest round of QE to be launched with Gold at $1,900-2,000 bid we would see $2,500 in a flash and $3,000 within a several weeks. Do you think the powers that be are worried about losing $1 Billion, $10 Billion or even $100 Billion shorting naked contracts to suppress Gold’s price? It’s chump change in relation to anything and everything paper and an absolute MUST to keep Gold under wraps…until it is decided to what is necessary. Revalue Gold to save, reset, restart and retain control of the system and the power.
NIA also voiced their opinion on the intervention: Important Breaking Inflation News
In today’s daily, Bob Chapman discusses the terminal problems facing the European Union. The actions taken by the Fed and other central banks will NOT fix the problems – but will kick the can further down the road. This is a monumental inflation-friendly event. Look at the two preceding charts to see how the markets are reacting to this announcement.
This is why listening to top and bottom callers, like Larry Edelson is a mistake. He is keeping his readers on the sidelines, waiting for a new bottom in the $1,500s. He is not doing them a favor. Technical analysis simply does not work in a market that is as manipulated as the current markets are. The central banks are terrified that deflation will overwhelm the world and are opening the money spigots to stave off the inevitable.
Be sure and check out tomorrow’s daily. There is a lot of great information on silver, quite possibly the best investment you can make this decade.