The $2.3 Trillion Nobody Mentions about Quantitative Easing
QUESTION: We didn’t see Quantitative Easing stimulate the economy? Was it all the money pouring out the cracks to overseas?
Thanks
GH
ANSWER: You have to look deeper than the headlines. Yes, it sounds like a lot of money $85 billion a month should have been inflationary in a closed system. But pick up the rug and you will see the real dirt. The previous Federal Reserve’s Open Market Committee minutes from October 29 had a gem buried in there that I have suggest should be carried out with direct regulation over banks. Buried deep in those minutes was the mention of a possible step to reduce the interest paid to banks on the excess reserves that they hold at the Fed.
Those expecting inflation have not only overlooked the money that leaves the system as China has $3.6 trillion in reserves, but the banks have $2.3 trillion of completely safe assets earning 0.25% that are also these “excess reserves”.. This is not money lent into the economy so it has not created jobs. It has been more hot money as banks are liquid enough to trade with that money rather than lend it out. They are hoarding cash.
The Fed should not pay interest on these reserves and then you will see that they will begin to be employed. They need to restrict their usage and.prevent that money from being used for trading. The banks are there to lend to the economy. If they will not lend to small business, they should pay interest to the fed on“excess reserves” not employed in the economy as LOANS prohibiting their use for proprietary trading. The Fed needs to limit credit card interest to no more than 10% or 3x rates paid on reserves (which is ever lower). The banks are gouging consumers sucking up disposable income by interest charges reducing the purchasing power of the consumer that further suppresses the economy, and then the government keep raising taxes. The consumer is getting squeezed from banks and government.
Banks will scream at what I am saying while they mull it over in Washington behind closed doors. However, food stores do not earn keystone (2x cost) as do clothing and jewelry stores. Banks should not be allowed to gouge consumers to increase their highest rates of returns. We use to have limits on interest rates until Volcker removed them so he could raise rates into 1981. The consumer has been screwed ever since and the national debt exploded that is bow driving up taxes.
Banks should not be hedge funds nor should they be earning 20% interest rates when reserve rates are 0.25%. The $2.3 trillion in “excess reserves” is simply outrageous and ultimately deflationary for it is indistinguishable from hoarding. So Larry Summers should target the real hoarders and not the people.
Important Special Reports
The Coming Cycle Inversion in Metals
QUESTION: Dear Martin,
I have followed your work for years and thank you very much for the public service you perform on a weekly basis. We have been forewarned on repeated occasions about major turns in the World due to your outstanding work on Cycles and the ECM. Here is my question. In early 2014 can you do a 10 year forecast based on your Cycles and ECM work that spans the years 2014 through 2024?During that time there will be two peaks in the ECM, one on October 1, 2015 which you have written extensively about and another one in early May 2024. It would be interesting to see if you believe that the May 2024 peak is as significant as the October 1, 2015 peak and by the way the last peak in February 2007 …
ANSWER: We are going into the last two 8.6 year waves of this Private Wave that peaks in 2032. Several things will happen. First, each turn in the 8.6 year wave builds in volatility and intensity. Therefore, each one will be stronger than the previous. In the upcoming Precious Metals Report for 2014, I am providing a focused discussion on the Cycle Inversion. Here you can see that the metals began producing highs on their unique cycle going into 1980. They inverted whereby the event flipped and on the very same turning point it now produced a low by 1982. This CONFIRMED a bear market.
We will be explaining all the issues and how the cycle should invert relative to the ECM. We will deal with the various issues concerning gold as a viable hedge against inflation that has been perhaps the biggest myth next to fiat. This is especially critical given the international attack on the gold trade to suppress itsUSE not PRICE in an underground economy and why coins may be the only viable way to hold gold.
Paper v Physical
QUESTION: Hi Mr. Armstrong,
Almost daily one reads from the gold media about the discrepancy between paper and physical gold. The gold bugs make their case by saying, that despite the weak price of paper gold, the demand for physical gold has never been better. To me it is just a bunch of hooey. If I have a Krugerrand in my pocket it is worth whatever the paper price is that day. So my question becomes: Has there ever been a period in history where the difference between the paper price of gold and the physical price of gold has resulted in a meaningful, practical difference?
Thanks as always,
MB
P.S. How do we register for your upcoming conference?
Almost daily one reads from the gold media about the discrepancy between paper and physical gold. The gold bugs make their case by saying, that despite the weak price of paper gold, the demand for physical gold has never been better. To me it is just a bunch of hooey. If I have a Krugerrand in my pocket it is worth whatever the paper price is that day. So my question becomes: Has there ever been a period in history where the difference between the paper price of gold and the physical price of gold has resulted in a meaningful, practical difference?
Thanks as always,
MB
P.S. How do we register for your upcoming conference?
ANSWER: This theory about paper v physical is just nonsense. The organized “paper” futures market makes gold viable and liquid. If there was no such market, it would be like diamonds and prices will vary based upon local demand. Futures contracts have existed since Babylonian times. Such markets make gold salable and thus a DEEPER market. This is just an excuse as always so they can pretend not to be wrong. Scream about paper all you want. But when it is time to buy or sell, that is the price that will govern. The fact that physical demand in Asia is strong is irrelevant.
A bull market REQUIRES any instrument to rise in terms of ALL currencies – not just one. During the 1980s, they were touting new highs after the 1985 low and gold would then surely reach $1,000. We published these charts showing that the rally was only in dollars and thus the foreign investors were not buying. So just because China is buying now means nothing when they are not buying in Europe, USA, and India is trying to shut gold down., A BULL MARKET requires whatever the instrument MUST be rising in all currencies, otherwise it is purely a Currency Inflation rather than Demand Inflation.
You can register for the conference at
Registration - 2014PEIconferences@gmail.com
Real Estate & Earthquakes
QUESTION: You wrote that real estate would rally into 2015.75. You also said that real estate is highly regional. So far here in Vegas, property is up about 25% since you wrote that. You are really amazing in your analytical skills. I understand why they came after you thinking that it was merely what you said rather than your analysis. You also said that everything is connected. I am beginning to see the world as you do. It is truly astonishing.
I too lived and worked in Tokyo for a while. I noticed myself about earthquakes and it seemed logical that if there was a plate, move one side and eventually there should be movement on the opposite side. The Rim of Fire is correlated between California, Japan and Taiwan down to New Zealand. A moron can see that much, After the 1989 San Francisco 6.9 magnitude earthquake, there was the 1994 Northridge 6.7 magnitude earthquake that struck in the San Fernando Valley, followed by the 1995 Kobe, Japan 7.2 magnitude earthquake and 1999 Chi-Chi, Taiwan 7.3 magnitude earthquake, with the 7.1 back in California at Hector Mine Earthquake on October 16, 1999. I can see the connections you make. The dates of these events even correspond to your ECM. So nature is part of the cycle of the economy as well. I am correct?
ANSWER: Absolutely. Now we have the major Japan Tohoku earthquake that hit on March 11, 2011 which was at the bottom of the ECM. We should see more earthquakes hit in 2015. The timing between Japan and Taiwan is generally about 4-5 years or half the 8.6 year cycle.
As far as real estate is concerned, the data on the S&P Case-Shiller is out and that shows we are indeed in bull market into 2015.75 and where you live is up about 29% being the top end of appreciation. Yes, this is why I say gold is not being systemically manipulated. It is in a bearish trend and that is in line with the bullish trend in stocks and real estate. ABSOLUTELY everything is connected.
Global Market Watch Nov 26th
The Global Market Watch has been posted for the close of November 26, 2013.
Best Trades Are Always Emotional
QUESTION: Hi Martin,
Two questions for you.
1. I’ve read you say something to the effect of your best trades were the ones where you wondered why the heck you just did what you did. I have also found all my best trades scared the pants off of me right after I made them. Why do you think this is?
2. Since Pi (and possibly other ratios) seem to continually pop up in nature and life, do you think our own lives have mini Pi cycles? And the larger cycles are an amalgam of all human cycles combined?
If you also have a moment, do you think the universe has it’s own larger, massive Pi cycle which governs everything?
Thanks,
LB
ANSWER: It seems that in order for major changes in trend, you simply must push it to the absolute extreme. Just like the Goldbugs are so convinced there is a giant all-powerful being/group who oppresses their market, the same theory has emerged with every stock market crash. Someone called Herbert Hoover in 1929 and said that the crash was caused by a conspiracy to ruin the Republican Party. Hoover launched the whole investigation from which the SEC was born based on that phone call for which he later apologized. NEVER has any investigation ever uncovered such a short position at the top that overpowered the market to create the crash.
Everyone is long. They get tired and there are no more buyers. Scare them and they become the biggest pool of sellers you ever saw. The market crashes because there is NO BID! It becomes a Spiral Panic sell off.
An elderly man bribed the hotel we were at for an institutional seminar. He apologized for crashing the session. He said he just had to talk to me. He had invested $50 million the very day of the high in the Nikkei. The market crashed hard in the first 3 months. He informed me it was the FIRST time he ever invested in shares. Now I was intrigued. I asked him why did he invest that day? He said brokers called him every year and said the Nikkei rallied 5% every January. He watched that happen for 7 years. He then bought the top looking only for the quick 5%. It fell 50%. When you suck in people like that, you got the very last buyer. You now run out of energy (new buyers) and crash. It is like holding your arm straight up in the air. Easily done. Now keep it there. It will become so heavy you cannot sustain it. You run out of energy. The markets function the same way.
So when it is a gut wrenching emotional decision and you are normally cold as ice, you are close to the turning point.
As far as Pi (∏) showing up in our lives, yes, you can even plot that as well. Interesting to say the least. As far as the Universe, the Precession of the Equinox is 25,800 years or (3 x 8.6) x 1000). It is the perfect cycle and circle just as 8,6 years contains 3.14159265359 days. It is always FRACTAL