Bail-Ins, Bonds Bursting and Hyperinflation… Three MEGAS
Stock-Markets / Financial Markets 2013 Jun 14, 2013 - 12:11 PM GMTBy: DeepCaster_LLC
“The implicit assumption behind that siren call must be that the inflation rate can be manipulated to reach economic objectives. Up today, maybe a little more tomorrow and then pulled back on command. Good luck with that. All experience demonstrates that inflation, when fairly and deliberately started, is hard to control and reverse.”
Paul Volcker, Former Fed Chairman, June, 2013
Indeed! The St. Louis Fed’s adjusted Monetary base shot up from $800 Billion in 2009 to $3.2 Trillion in June 2013.
A Wise Deepcaster Subscriber correctly noted regarding:
“…The St. Louis Federal Reserve Bank estimate of the total Quantity of US dollars in circulation and in banks as reserves…
“This number appears to me to be similar to the old M3, which the Fed stopped publishing in 2005. John Williams at www.shadowstats.com continues to estimate M3.
“The huge and sudden increase of money supply [M] – far in excess of goods and services being produced – in monetary inflation. If the public should catch on to this potential for devaluing the value of their dollars, they will start to spend very fast, while the money is still worth something.
“When the velocity of money changing hands [V] increases, we will see sudden price inflation. M x V = PRICES.”
And as Shadowstats correctly notes, Real Inflation in the USA is Already a Threshold Hyperinflationary 8.7%. Witness MEGA #1.
And if you are in a deeply indebted Country in the Developed or Developing World, there is now a probability that your Bank Deposits will be confiscated. First Cyprus. Now Japan. Tomorrow (Your Country?) Witness MEGA #2
“Japan to adopt ‘bail-ins’ force bank losses on investors if needed, Nikkei says Tue, Jun 11, 2013 2:19 PM EDT
“Japan’s Financial Services Agency will enact new rules that will force failed bank losses on investors, if needed, via a mechanism known as a ‘bail-in’ according to Nikkei. Mitsubishi UFJ (MTU), Mizuho Financial (MFG) and Sumitomo Mitsui (SMFG) are among those proposing amendments to allow them to issue the types of preferred shares or subordinated bonds that would be used in such cases, the report noted.”
“A Mission to Inform the Sleeping,” Jim Sinclair
jsmineset.com, 06/12/2013
Specifically through “Bail-ins” -- a Euphemism for Confiscation.
So what to do?
First do not rely on Official (often Bogus) Statistics. Do rely on the Best Estimates of Deepcaster, Shadowstats and other Independent Analysts. Robert McHugh explains
“On Friday, we got the latest phony Jobs report from the Bureau of Labor Statistics of the Labor Department. The BLS reported without blushing that the U.S. economy created 175,000 new jobs in May. This occurred while the unemployment rate did not change, remaining at 7.6 percent. How is this possible? The truth? According to the BLS’s own CESBD report, where they guess how many jobs were created by new businesses they think may have started that month, and then they add this estimated make believe figure to the count that gets reported to us as the new jobs number, huge fudge numbers were added to their count. In April, 2013, the BLS reported that 149,000 net new U.S. jobs were created. But, they also reported that 193,000 of these were a guess on their part of new jobs they hope were created by new business that probably started up in April. Which means the actual count showed the U.S. lost 44,000 net jobs in April (149,000 minus 193,000 fudged figure). For May, the actual count showed that the U.S. lost 30,000 net jobs (175,000 reported less 205,000 fudged figure). This helps explain why unemployment is not going down. The true new jobs created figures are vastly overstated by the BLS. The numbers they reported the past two months are pure hogwash.
“The U.S. stock market happily bought the lie.”
Robert McHugh’s Market Forecasting & Trading Report, 6/07/2013
The Market Manipulators, Bogus statistics Purveyors, and Mainstream Media Spinners were hard at work last Friday to convince Investors and the public that the (Bogus) Jobs number of 175,000 was “just right” to justify the Equities Rally (200 points per the Dow). “Not so high as to impel The Fed to taper QE and not so low as to signal ongoing Economic Weakness” was the Gist of the Spin.
Given the Intensifying scandals coming out of Washington these days – threatening reporters, using the IRS to target political enemies, surveillance of internet and phone users, hiding the $6.3 Trillion Net loss prospectively caused by the Immigration “Reform” Bill, Benghazi, Fast and Furious – it is a wonder anyone believes anything emanating from Washington, D.C. anymore. Indeed, the recent Equities and Bond Crash resulting from Japan’s (already) counterproductive QE, is Fair Warning.
And how does one explain the seemingly contradictory Sell-Off earlier this week in Stocks, Bonds, and Gold at the same time?!
However, Market and Data Manipulation “Games” can provide the Opportunity for Profit and Wealth Protection for cognoscenti as we indicate in our Forecasts and Notes below.
And important to consider is Another Honest Warning Sign
WTI Crude has chopped in the low to mid-90s for the last month or so. But in spite of adequate above ground supplies it ended last week higher. And as we write, WTI is bouncing around $96/bbl.
Key Point: Crude is telling us the Truth – Price Inflation is intensifying. Generally, one can expect the Crude Direction to track the direction in Equities… thus the Rally last Friday in both. As well, recent strength results in part from increasing Risks to supply in Iraq (possible Civil War) and Iran – possibly focus of an attack.
Recent $US strength (over 80 basis USDX) exists mainly because the $US is the least Dirty Shirt in the Major Fiat Currency laundry. As well, the perceived relative strength of the $US Economy and Markets has been helping to keep the $US above 80 as the US attracts capital flows.
Also WARNING is the recently begun Uptrend in the U.S. Interest Rates. The U.S. 10-year yield has moved up to near 2.25% – a 50ish basis point move in the past few weeks. Any Significant Equities Takedown should temporarily halt or reverse the Uptrend. But inflation is intensifying and the weakening Treasury Securities trend is in place nonetheless. The Bond Bubble is closer to Bursting. Witness MEGA #3.
Legendary Financial Writer, Richard Russell expresses justifiable concern
“Turning to Bernanke, he practically guarantees that the stock market will go up. Join him and make a guaranteed easy killing. Me, it’s all too much for me. I’m watching the show, and frankly, I’ve never seen anything like it. As for Obama – he has no respect for privacy rights, freedom of the press or due process of the law. The country is going a bit crazy, and the stock market reflects it. As my old friend, the late Eliot Janeway, put it, when the president is in trouble, the market is in trouble. And this president has a lot more troubles than he can handle.
“As for the US, I have the feeling that the wheels are coming off the limousine. The IRS turns out to be a political weapon. Our Attorney General is a liar. We’re being spied on via every e-mail and every telephone call we make.”
Richard Russell, Dow Theory Letters,
Dowtheoryletters.com, 06/11/2013”
And the Eurozone is no closer to reviving its Economy. Official Unemployment Rates in Spain and Greece are 26%.
Continuing QE, whether from The Fed, or Bank of Japan or European Central Bank, not only is a long-term negative (because of the Inflation it is already igniting) but also because it cannot last.
John Mauldin explains one of several reasons why:
“If interest rates on Japanese bonds rise to a mere 2.2%, 80% of tax revenues will go just to pay the interest on their debt. At a 245% debt-to-GDP ratio, they are in desperate straits, and they know it.”
John Mauldin, “Banzai! Banzai! Banzai!,” 6/09/2013
With over 100% Debt to GDP and with over $100 Trillion in downstream unfunded liabilities, and with rates increasing, the USA is not in much better shape. So much for the alleged U.S. Economic Recovery. Ditto the Eurozone.
But as our regular readers know the Mega-Banker Cartel continues to Try to suppress Prices of Gold and Silver – the Warning Signs of Impending Inflation and have succeeded in suppressing the Paper price.
Most recently, as JGBJ pointed out this past Monday, last Friday saw another Cartel Bear Raid. Trader Dan Norcini is quite likely right when he says that until Gold can convincingly clear $1420 (and 300 on the HUI), the specs will continue to sell rallies, thus becoming de facto allies of the Price Suppressing Cartel.
But there are catalysts for an Upside reversal. Physical Demand is still intensifying especially from India and China and that is the ultimate Catalyst for a launch. In addition, the dramatic ongoing increase in Treasury Yields may provide just that and in the next few weeks too. And that would be helped along by the Bullion (Cartel) Banks Massive Reduction of their Short Position, which they have already achieved. But the ROT has Spread Well beyond the Economy and Financial Markets.
“Most of you who have read this blog for any length of time are by now familiar with my common refrain that we are witnessing an America in decline. I believe the symptoms cut across the cultural, financial, political and educational aspects of the nation.
“Vice is encouraged, commended or praised by elitists as traditional standards of righteousness or morality are ridiculed or even mocked. The monetary system is hopelessly corrupted as it is addicted to cheap credit. Economic "growth" depends upon various forms of stimulus and the creation of revolving bubbles moving from one sector to the next now seems to be a permanent fixture. The public education system has produced a generation which seems to have little if any understanding of history and practically no ability to deeply think (witness the proliferation of one reality TV show after another where instead of living their own lives, the viewers live the lives of others).
“The thing that really troubles me however is the corruption of our political system, in particular the ever-increasing size and role of the federal government. I am watching in stunned disbelief that a government agency, the IRS, could target and harass American citizens merely because they happen to share an opposing view of government than the current administration. We watch reporters have their phones bugged and reporters doing their jobs to ferret out truth either being charged as criminals by the government or harassed in other manners. If that was not frightening enough, we now learn that phone calls and communications of our citizens are being monitored effectively destroying any privacy rights that we might have.
“Additionally we have American citizens killed in Benghazi because apparently an election was upcoming and news of that nature was not conducive to the re-election efforts. We have regulatory agencies such as the EPA answering to no one who are running roughshod over the property rights of many law-abiding citizens as further evidence that the Administrative State, the 4th branch of government, no longer seems to have any constraints on its power.”
”Further Signs of Internal Weakening in the US,”
Dan Norcini, traderdannorcini.blogspot.com, 06/09/2012
What to do? Deepcaster and other Independent commentators have been giving Specific Recommendations for Profit and Protection for Months now.
But respected Market Guru, Jim Sinclair, succinctly sums up certain (but not all) Key Elements of the Prescriptions:
“My Dear Extended Family
“But still you do nothing. Why?
“You do not diversify. Why?
“You do not direct register. Why?
“You still do not certificate. Why?
“You let ignorant brokers talk you out of protecting yourself. Why?
“You keep your shares in street name of CEDE and Company and do not even know it. Why?
“You trust computer based banks. Why?
“Everything you have done with computer based banks is in public record and this is not a problem for you. Why?
“I am on a mission to inform you, yet you look the other way as if asleep. Why?”
IBID, Jim Sinclair
jsmineset.com, 06/12/2013
Be Prepared for “Bail-Ins,” Bonds Bursting and Hyperinflation… Three MEGAS.
Best regards,
www.deepcaster.com
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