RANTING ANDY – Well, the Fed’s statement is OUT, and it SUCKS!
As discussed in this morning’s RANT, there is NOTHING left in the Fed’s arsenal of MONEY-PRINTING TRICKS, and I mean NOTHING! All that is left is to manipulate markets, which is essentially what “OPERATION TWIST” means.
The Dow tanked on the news that the Fed will do EXACTLY what was expected, to flatten the yield curve into a 0% PANCAKE by buying long-term Treasury Bonds of essentially all maturities. Given that the 10-year T-Bond is now yielding an essentially ALL-TIME LOW rate of 1.8%, and that real estate markets continue to collapse month after month, why on Earth would ANYONE believe pushing rates even LOWER would change ANYTHING? Banks aren’t writing new mortgages AT ALL (pink slips are more like it), and the COLLAPSING economy and real estate markets are certainly not yielding increased mortgage demand!
This announcement will represent a major inflection point in public PERCEPTION about the Fed’s ability to manage the economy, as it represents MANIPULATION SATURATION to the nth degree, and doesn’t even make sense ON PAPER. Last week’s ridiculous Fed/BOE/ECB/BOJ/SNB joint effort to provide UNLIMITED PRINTED DOLLARS to essentially any bank that asks for them hasn’t improved bank stocks, or credit spreads, or ANYTHING! In fact, I see this morning Moody’s downgraded Citibank, Wells Fargo, and Bank of America BEFORE the Fed decision, even more telling in that Warren Buffett is a major shareholder of WFC and, of course, BAC!
Looking at my screen, I see that, as ALWAYS when any Fed decision is made, gold’s INITIAL REACTION was to soar and the Dow to plummet, until the Cartel of course came in minutes later to change that perception, per my forecast this morning. But even now, an hour later minutes later, the Dow is still down 125 points (with the PPT preparing a late afternoon Hail Mary, I’m sure), gold is only down $15, and silver is UP $0.20. Bank stocks are being PUMMELLED to their lows of the day, another telling sign. Not surprisingly, thanks to this de facto QE3 announcement, long-term Treasury bonds are rocketing to ALL-TIME HIGHS, as the American capital allocation system, once and for all, completely cannibalizes itself with Fed monetization.
The ONLY group that will benefit from QE3 are TBTF BANKS, which take free government money (such as the aforementioned joint dollar handout) and invest in Treasury Bonds, which the Fed purchases with more freshly printed money. Think about that, readers – with U.S. interest rates at ALL-TIME LOWS (close to ZERO for the 10-year note), the best the Fed can do is take them LOWER, an action that has PROVEN to have ZERO positive impact on REAL ECONOMIC ACTIVITY for the past three years. To the contrary, the added DEBT has caused a near government shutdown, downgrade of its credit rating, and record high gold prices.
Moreover, I love how this “Twist” monstrosity is characterized as selling short-term bonds to buy long-term, while in the SAME BREATH the Fed reiterated they will maintain Fed Funds at ZERO for the next two years through open market operations. Thus, what the Fed is REALLY doing is buying ALL Treasury bonds (plus selected mortgage securities), in an attempt to bring the entire yield curve to ZERO!
Which is exactly what the Japanese government did in 1990, resulting in essentially ALL-TIME lows in the Japanese economy and stock market in 2011, more than 20 years later. The big difference between Japan and the U.S., of course, is that Japan has SAVINGS, INDUSTRY, and a TRADE SURPLUS, the complete opposite of the United States!
To wrap this up (before the PPT comes in and attempts to take the Dow positive for the day, so the media and Wall Street shills will call the Fed announcement a success), what the Fed did today was announce ALL-OUT DEBT MONETIZATION. The benefit of the bond gains to the TBTF banks will be infinitesimal compared to the COLLAPSE in credit quality resulting from souring corporate and sovereign debts and soaring credit default swaps, no matter how much the Fed prints, or how large the ECB’s bastardized EFSF fund is capitalized at (initial proposals are $4 TRILLION).
I cannot emphasize enough how pathetic this ballyhooed announcement turned out to be, the product of two days of plotting nothing more than how to hold the system together for a few more months. I doubt the banking system will be able to survive that long, as now we have reached DEBT SATURATION, MANIPULATION SATURATION, and frankly, SATURATION of ANYTHING that could possibly be used by TPTB to kick the can down the road any longer.
I am more confident than EVER that the PRECIOUS METALS EXPLOSION is at hand, and once it starts sometime this Fall I would not be surprised to see gold and silver go “no offer” much, much quicker than people can imagine.
And once that point is reached, it will no longer be possible to PROTECT YOURSELF from imminent hyperinflation.