A fantastic summary of the Fed’s QE program, the Fed’s true motive, what it really means for the economy and realistic expectations are revealed here by Peter Schiff of Euro Pacific Capital.
- Tag Archives Quantitative Easing
-
Is More QE Coming, Or Not?
With the Fed purchasing 61% of all the US debt, it’s somewhat confusing why potential precious metals investors want to see more QE before making their move. And as the following chart from the St. Louis Fed shows, the money supply is still at uncharted, nose-bleed levels and showing no signs of decreasing.
Nevertheless, analyzing a derivative of the TIPS Spread to identify when the Fed might reintroduce even more easing is what the economists over at Agora Financial have been doing. As the chart below shows, the Fed may be waiting for the “Breakeven Inflation Rate” to drop below 2.2% prior to accelerating those printing presses.
-
It would be funny, if ….
Here’s Jon Stewart revealing how insane the policies of the Fed have been. Quantitative Easing is simply “imagineering” money out of thin air. Between two 60 Minutes interviews 21 months apart, Ben Bernanke is caught contradicting himself on this concept of “printing money.”
-
5 US Banks Control 97% of CDS Contracts
In this interview with Jim Sinclair, the Credit Default Swap (CDS) market is thoroughly discussed. There are 5 major banks that control almost all of the CDS contracts issued. These 5 banks also heavily influence the International Swaps and Derivatives Association (ISDA), which will decide whether defaults actually occur when the sovereign nations of Europe don’t pay their creditors. For example, when Greece was allowed to free themselves of 50% of their debt recently, the ISDA decided that was NOT a default, hence the CDS contracts the 5 major banks issued were not triggered. Those that bought the CDS contracts were screwed. And now the ISDA is deciding whether or not the current 70% haircut being imposed on Greek bond holders is a default. Obviously, the ‘self-governing’ CDS market is not going to shoot themselves, so the CDS purchasers are going to be screwed again!
Sinclair points out that this credit event is signaling global quantitative easing because if Greece and the other sovereign nations can keep selling bonds without the obligation to pay back creditors, bond buyers will get wise to the scheme and not purchase. QE will therefore be necessary – money will be created out of thin air to buy the bonds no one wants to buy. This will support much higher prices for precious metals and general equities.
March 2, 2012 update: Sure enough, the ISDA has just declared that no Greek ‘credit event’ occurred. So, why the hell would any institution invest in CDS insurance anyway? That’s a good question that many are now asking.
March 9, 2012 update: In a surprising twist of events, the ISDA is now claiming that a credit event has occured and will result in a CDS payout of about $3.5 billion. Although Jim Sinclair suggests that the payout amount is actually going to involve much more than that, given the outstanding number of Greece-based CDS contracts.
©2013 Ounce of Silver Entries (RSS) and Comments (RSS)