Saturday, March 12, 2011

The end of QE 2 and rolling over debt.

Excellent interview with Jim Rickards, Senior Managing Director for Market Intelligence at Omnis, Inc. Rickards has been a direct participant in many of the most significant financial events over the past 30 years including the 1981 release of hostages from Iran and was also the principal negotiator for the government sponsored bailout of LTCM. His clients include private investment funds, investment banks and government directorates in national security and defense. He is an advisor to the Committee on Foreign Investment in the United States and Support Group of the Director of National Intelligence and recently testified before Congress on the causes of the financial crisis.

There has been a great amount of interest in what is going to happen with the end of QE 2 in June. There have been suggestions that the Federal Reserve will end QE2. By doing so it will appear that the Federal Reserve will be pulling in it's horns, causing inflation will go away, the economy will rebalance and precious metals (Gold/Silver) will then suffer a big collapse.

Rickards explains how this is a head fake. The rollover from the intervention that the US Federal Reserve has already undertaken is so large that the Fed can - with this rollover - buy all the upcoming outstanding debt and monetize all that debt without an 'official' QE3.

There will be speeches and press conferences announcing the end of QE2, but what they are not going to say is that it is never over because the rollover of the existing portfolios is so big that they have $750 Billion a year of buying power to keep pumping back into monetization without expanding the balance sheet.

Analysts believe this charade of the end of QE2 will be used to smash down metals and commodities.

If true, we are going to be bombarded with a giant smokescreen in a desperate attempt to get people to back off from Silver and Gold.

If investing in Silver and Gold interests you, check out the Rickards interview at this link.

Much more on this in the days and weeks ahead.



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  1. Dear Whispers :)

    I have been reading your blog daily for the past year. I am a big fan of all your posts but I must say I am really digging your silver and precious metals posts over the housing bubble posts. Nice to see this type of info.

    Keep us posted on all the silver action and anything relevant you find out there other than housing.

    You da man

  2. The problem with a credit bubble is it requires new debt to enter the system at an ever-increasing rate to keep the party going. Rolling over existing debt won't do it. Early on in a credit bubble one can pull back on new debt for a time, only boosting it every time the economy seems to be slowing, but we are far past the early stages and well into the end game.
    There may well be a QE3, 4 and more in a desperate attempt to get what has not worked in the past to finally work, but steady-state is not an option. A credit bubble, like any bubble, absolutely must grow or it collapses. A "soft landing" is not an option. Deflationary collapse or inflationary spiral, and the kick in the teeth to the inflation scenario is the addiction to oil imports the US has, and what $200 oil will do to them.
    The final chapters have not been written yet, but I'm pretty sure there is no happy Hollywood ending.