Beating The Dead Horse Again

June 12, 2015


1.  a mild or indirect word or expression substituted for one considered to be too harsh or blunt when referring to something unpleasant or embarrassing.

“A good hockey player plays where the puck is. A great hockey player plays where the puck is going to be.”

- Wayne Gretzky

Here we go again. It’s about time for a good intervention. All we need is a little false flag. A 10-20% ‘correction’ in the stock market. A little political cover or capital for ramping up the printers.

Oh how far we’ve come: 

The Fed had to stop QE, mainly because it was competing for collateral; buying up Treasuries which otherwise would provide collateral to the main financial engine, the REPO market.

Deficits dropped because they were frozen in law. So they’ve had cover to the slow the rate of change in the balance sheet. Every central banker knows that you better not fund too much of the deficit with your own bonds.

Each slowing down threatens both the stock market and housing bubble. If they raise rates – those markets could implode very quickly. This is their dance.

The Fed and the entire financial-political landscape ’want’ the market to stay elevated. Someone at Eccles probably wrote a paper outlining a new way to do more and still have the Fed ‘owning’ a massive chunk (at least 35%) of the Treasury market.

Zero percent means they have to go right back into QE when they already own too much of the Treasury market (35%).Oops. 10-20 percent decline in equities would not be an implosion.

If you look closely enough, you can see the writing on the wall. Each time the Fed has slowed the rate of its asset purchases, things start falling apart.

A 13-week rate of change (ROC) of zero in the balance sheet, correlated with a -15% 13wk ROC in the S&P 500.

Correlation may not always imply casualty. But things are unraveling. The wedge that separates lofty asset prices from the actual improvement in the foundation of the economy is enormous.

You can bet they are prepared. Why else would one of the largest banks in the world with the largest concentrated commodity short derivative positions be quietly (desperately?) stacking the physical equivalent?

Of course this time around, it might be different. The purpose of QE was two-fold. One was to recapitalize the banks at the expense of you and me.  The second was to fight deflation. The big threat to profits and Ponzi.

The first goal was accomplished. Now Europe is finally doing it. They’ve stolen trillions from taxpayers and given it directly in the form of bailouts or indirectly in the form of subsidies.

But mainly it was given to the financial industry without so much as a decent outcry from a public without a spirit and too busy to care.

The second was a failure.

Despite rule changes, cosmic tinkering, and massive cash injections, the Fed has been unable to stop the great turning. Yes, they’ve inflated asset prices, the cost of education, food and energy. But qualitatively, and in reality, we are stifled and sinking.

And then QE ended, leaving a bubble of debt in the wake of easy money. A bubble that will collapse under its own weight–no matter the intervention. And deflation will come hard as debtors sell assets in a feeble attempt to tread water.

The sea will inhale and all that will remain is a barren landscape for all to marvel.

You see, debt bubbles cannot be corrected by injecting more debt into an already debt ridden situation. All you can do is buy some time for the wealthy to reposition themselves to take advantage of the evolving situation. And so here they go again.  Ramping up for the next round of intervention. Another euphemism for printing.

If they began asset purchases in response to another crash – we are moving from horrible sentiment and low prices.

They need the correction to justify the next big intervention.

JPM is already prepared. Of those who care, no one has published an argument that effectively counters the assertion (first made public by long time silver analyst Ted Butler) that the massive bank has rigged prices lower as it acquired a massive hoard or physical silver. This is despite the debate over whether this is ultimately bullish or bearish–short or long term. (It would be one thing if it were a 100% bullish action. Bias would then factor in much more deeply.)

Silver is obviously the linchpin. This can be seen using the raw data from the Commitment of Traders report across the commodity futures universe, where the concentration of a selling position for silver is much greater (and had been for years) than any other commodity.

When this begins to unravel, the collateral damage, as a result of panicked buying, could very likely trigger panic across the market continuum and beyond. Think about it. No one will have seen it coming — people are only programmed to see skyrocketing prices after the fact.

JPM not only controls the linchpin, but they have the physical to back it–or at least the confidence.

They could let the price return toward natural levels and reap the rewards enough to shield them from the next bailout or subsidy. They come out looking prudent–and of course consolidating evermore political and financial power.


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US silver mining began on a large scale with the discovery of the Comstock Lode in Nevada in 1858.

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