The Big Print is Coming

We are discreet sheep; we wait to see how the drove is going, and then go with the drove. We have two opinions: one private, which we are afraid to express; and another one – the one we use – which we force ourselves to wear to please Mrs. Grundy, until habit makes us comfortable in it, and the custom of defending it presently makes us love it, adore it, and forget how pitifully we came by it. Look at it in politics.
– Mark Twain

Humanity’s most valuable assets have been the non-conformists.  Were it not for the non-conformists, he who refuses to be satisfied to go along with the continuance of things as they are, and insists upon attempting to find new ways of bettering things, the world would have known little progress, indeed.
– Josiah William Gitt

The media I’ve had a lot to do with is lazy.  We fed them and they ate it every day.
- Michael Deaver (Former top aide to President Reagan)


Has The Fed Waited Too Long?
Those that know me understand clear as crystal that I don’t approve of massive money printing.  I think it is theft, plain and simple, and represents an egregiously deceptive manner of transferring wealth from the poor to the wealthy and from the productive to parasitic financial oligarchs.  That being said, the world we live in is being led by a bunch of crooked banksters and the Central Planners that do their bidding.  At the top of the Central Planning global ponzi pyramid, is our very own Federal Reserve, headed by master Keynesian magician, the Wizard of Eccles, Ben Bernanke.  For the vast majority of 2012, the Federal Reserve has been playing a very, very dangerous game.  This game has been to pretend that they will not be printing any more money in an attempt to get commodity prices down as low as possible before they proceed with the inevitable.  While they have done this on a smaller scale many times in the past, this particular game of chicken has in my opinion gone dangerously wrong.  You see, ever since the 2008 debacle the Fed has been quite aggressive and more or less “ahead of the curve” when it has come to feeding new liquidity into the system…until now.

All of the prior programs were ready to go at the first hint of economic weakness.  Even if they weren’t launched right away, the intention to print was made clear and this stabilized the system in the short-term.  Not this time.  This time the Fed realized that their models weren’t working.  Employment continued to be weak as inflation picked up.  Everyone was starting to complain about gasoline and the public was increasingly making the connection between Central Banking/fiat money and the rise in their cost of living.  Occupy Wall Street emerged on the scene.  All of these things put Bernanke and all his other vampire brethren on the defensive, and indeed in a box.  They increasingly had to rely on less effective, more opaque means of providing liquidity.  The Fed swaps to Europe was one example.  The European LTRO was another.  All of this has been done and all of it has now proven to be a failure.  The periphery of Europe is in mired in an all out Depression and many of the BRIC countries are much closer to being in a collapse than many want to admit.  That said, there is still this consensus that the U.S. is experiencing decent growth that will continue and perhaps accelerate into 2H12.  Not only do I not agree with this, I think there is a good chance the U.S. is now experiencing negative growth.  I think May represents the first month of real domestic weakness.

Stocks are Collapsing on Bad News                        
What I have noticed this quarter more than in any other in recent memory is that names are vaporizing on even the hint of bad news.  Let me show you some frightening examples.

Fossil  

Dell

Cisco Systems

JC Penney

If the market was confident that this was just a blip I do not think these stocks would have responded this way and then barely rebounded.  Similarly, there are many names that have put up strong results, only to have sold off on the news.  HD, COH and RL come to mind.  To me this is evidence of the market sniffing out economic weakness ahead, and more importantly a Fed that is behind the curve for the first time since 2008.

The BIG Print is Coming
Momentum is a strange thing in general, and social experiments as large and complex as massive economic systems are not immune to its mysterious ways.  Once momentum gets going it is extremely difficult if not impossible to reverse in the near-term.  This is why I have been pounding the table on China not doing anything as things unravel over there.  In waiting so long to try to respond to their major slowdown, they have now seriously risked a hard landing, unless they have a plan (this is not clear as of yet) as I outlined in last week’s piece China Better Have a Plan.

Here in the U.S., I think that The Bernank’s plan was to pretend they didn’t need to print more money, get commodity prices down and then hope that the economy would respond favorably to that development.  This wouldn’t have negated the need for more printing; however, it would have bought time and allowed for a potentially lesser degree of action.  Instead, what has happened is that the global ponzi is completely and totally incapable of holding itself together without consistent and increasingly large infusions of Central Bank money.  The debt burden is too large, the mal-investments too pervasive, the corruption too systemic.  The whole house of cards that is the global economy will vanish into dust rather quickly without more and more printing.  So what do you think they are going to do?

If I am correct, and the U.S. economy itself is now in the early stages of what will probably turn into a serious economic slowdown, then it will not be easily stopped with incremental Central Bank policies.  The fact that they have waited this long and the fact that the global economy is in the midst of a serious slowdown tells me one thing.  They are way behind the curve and by the time they realize this it will be too late to stem the momentum.  That said, I do expect them to respond and the fact that things will have gotten much worse than they expected will mean a major response.  I’m not talking operation twist part deux.  I mean a serious print.  Potentially the BIG ONE.

In this sort of scenario, the inflation hedges will sniff it out first.  So I would expect the precious metals to bottom well before everything else does.  In fact, we could be looking at a situation where the metals and their shares rebound sharply while the U.S. equity markets continue to decline.  This could last many months.  I want to point out that the GDX bottomed in October 2008 and was up 100% before the S&P 500 bottomed in March 2009.  So over a five month period the GDX doubled while the SPX declined 25%.  Don’t think that can happen again?

Peace and wisdom,

Mike

43 Comments

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  1. The Fed will wait till the horrible numbers come out. Then thats when the S&P and the panzies will rally. Then that will be game over.

  2. EXCELLENT work as usual Mike.
    There is a crucial issue to consider, that is the more and more massive debt to the big banksters, NOT getting either debt money or other funds onto the street for the Sheeples. Jim Quinn caught the recent surge of this money to the Sheeples in his excellent piece on sub prime car loans.
    Many billions, which he documented in detail, went to BAC, ALLY, Capital One, etc for NINJ, no doc car loans. These funds can only have come from ONE source with specific instructions as to application. Car biz is off to the races, Sheeples and pollies happy again, new car in every garage.
    I cannot see how another massive print, which we know is all they can do of more debt on top of insolvent debt will do much good except maybe short term.
    The stock market MUST be kept up at any cost, and your selective charts up above are clear indication of the foundations rotting, along with the Failbook IPO debacle.
    Thansk for the good works.

  3. What you’ve got to consider is that the Obama administration senior official blurted out that they intend to ride the dollar to ZERO! What in the PHUCK do you think will inflate it away to ZERO? QE! DUH! More digits/printing! My stupid uncle, a millionaire, actually still believes in this government and will not buy bullion! He popped off that he might have to spend his life in Finland IF things get worse! He’s PHUCKING 81 years old! The sheeple are asleep at the wheel folks! This is only going to end BADLY! Real life example that the American public are clueless! Forget about the middle class because they support this system without ever asking a question! Buy your silver and PHUCK ‘em!

  4. california woman

    Mike
    Your comments are so insightful that I check your website at least once daily. Thank you for all your hard work !

  5. One has to consider how the FED’s actions in the past have now trained market movers to pursue crisis for the expected payout, instead of productive pursuits. Great post.

  6. Its a shame that our goverment is going to ruin our great country, sure feel sorry for the young people who will have to live in a very bad country. inflation will ruin everyone.

  7. With the heat on Bernanke, he wants everyone begging for mercy before he unleashes QE3. Even though our master Keynesian magician, the Wizard of Eccles, Ben Bernanke (if I was an English teacher I’d give you an A+ for that visual imaginary Mike) was nearly wholly responsible for the housing bubble, he made it as Time’s Man of the Year in 2009 for his bailout schemes for his buddies on Wall Street–even though he could have prevented the largest bubble in U.S. history in the first place, yet actually illicit-ed it.

    But it was a great gig right, power has been consolidated from the middle class and poor to the rich since then, from the small business to the even too bigger to fail business, and American named the magician Ben as the MAN for his disastrous, easy money, no oversight decisions.

    Well, of course, a lot of folks are on to these games now. So, he’ll want everyone begging for more QE before he does it again. It’s why they are doing everything they can to get everyone invested in stocks–so when they tank they will be happy to be “saved” by Ben again. And then the next great transfer from American’s to their elected despots can continue.It’s all about greed gone apeshit wild with power thirsty psychopaths.

    Where I disagree with most on the next QE is that it still won’t initially be the AHA! moment for America as a collective. It will simply be the AHA! moment for all of us that have been paying attention. The rest of America won’t have the AHA! moment until it’s too late.

    The thing that will drive me batshit again is that when the Fed QE’s again you’ll get all these douchebag investment managers patting themselves on the back for such savvy investment skills yet again….when, in fact, all that matters is the liquidity for stocks. It’s amazing how many in the investment management business totally dismiss QE having anything at all to do with their success. What a joke.

    Of course, at the end of the day, the joke is on ALL OF U except the few.

  8. Great article–thank you! To those doubters out there, consider this: With gold at a high price (and likely to climb), I consider silver to be the poor man’s gold. Why not buy some silver as protection? Just a thought. What would you do when, as in Russia years ago, a wheelbarrow full of rubles bought a single loaf of bread at the local (and nearly empty) bakery…….what would you do if anything close to that type of inflation were to happen in the U.S.?

  9. What’s gonna happen if Romney gets elected, republicans take over the senate, they get rid of Bernanke, cut taxes and govt programs bringing in the trillions of private equity that is currently on the sidelines and raise rates?

    • And continually bankrupt the country with excessive military, empire, spending.

      • The stimulus was 25-30 years of pent-up Liberal/progessives wish list. Pathetic. We need to become more isolationist and institute a plan to become energy independent with a Manhattan Project-style approach. Not a Solyndra approach as the current liar-in-chief has taken.

    • I wish it could happen, but the problem is we’re already on the slippery slope. Any attempt to curtail monetization results in pain, and politicians won’t stand for being “blamed” for it. They will just wait until everything collapses and take credit for picking up the pieces.

  10. Romney is 100% pro Bernanke and the too big to fail system. The fact that most still don’t connect these dots at the polls tells me we’ve got a long way to go before the system can clear itself.

    • I disagree. Romney has said that he will replace Bernanke, and also must offer a figleaf to Ron Paul to build a coalition that can win. Ben is acting like a man trying to save his job, hence save Obama as well. Thus a new QE is QED. A new president with a mandate to fix things will have a window of grace to inflict some economic pain that serves a greater cause. My greater concern is that Romney either doesn’t win, or else is not enough of a salesman to sell the needed pain to the public.

      • The only thing I disagree with is Romney and Ron Paul, I do feel that Romney wil pay lip service at the convention but once he’s in it’s forgotten or some international incident will happen and people will forget what Romney promised the brownshirt repubs who are gonna fall in line with this Technocrat are going to be very dissapointed, however I pray I am wrong but I’m just not holding my breath! :)

  11. Great article, however by assuming that they are ‘behind the curve’, you place yourself ‘behind the curve’. If I were the Dr Evil of C.H.A.O.S. and my stated goal was to bring the U.S.A. to it’s knees, I could not have implemented a more diabolical plan. In less than four years our whole economic system has been degraded. One has to ask, are these wizards so very, very ignorant? Or are they too smart by half. Every policy, every action has had an overall negative impact on our financial well being. At some point you have to ask, could they really be that dumb? Or is this the exact result they were looking for. Take a step back, make a list of their actions, and the result of those actions. Just bad luck? I leave you to your own conclusion.

  12. This is the normal behavior of addicted people and their codependent enablers. Any addiction, including spending addicts and gamblers, will result in ruin. The mentally ill are in charge and the outcome is certain – certainly bad.

    This behavior is being purposely used by those who want to fundementally change America. The need is to economically crash the country, and then recover us in the utopian world of communuism. There is too much evidence that this has been the plan for a long, long time.

    Equally, there is a need to promote insecurity through increasingly violent demonstrations and wait until we cry to our government for security. Security will come to solve the problem created by those same people wanting fundamental change.

    And in exchange for security, we will lose our wealth and our freedom.

    • This behavior is being purposely used by those who want to fundementally change America. The need is to economically crash the country, and then recover us in the utopian world of communuism. There is too much evidence that this has been the plan for a long, long time.

      It is the pattern the same types have used for many generations: crash the system, foment discontent until everybody will join in your revolt, then, having gotten rid of the government, seize control during the period when there is nobody in charge. Historically, this has been done through even greater violence against your partners in revolution, essentially eliminating the opposition while it is easy to do so. The good guys are never willing to go to the extremes that the “progressives” are, whether they are social progressives like the communists or fascist ones like in Germany; they all considered themselves to be progressives, and the end result — massive government control — is always the same.

  13. That’s why we ought to support the real Occupy movement, the democratic collective with general assemblies and a stated discipline of non-violence. Once we refuse to engage into the revolt-repression cycle and start thinking deliberately about our fates as a society, greed and lies lose all effectiveness. We are in a moral crisis. The economic consequences are but a symptom.

  14. Who’s taking bets that the elections in November will not happen and we’ll be under martial law ? Obama is not going anywhere period watch and see!

  15. good article. i think we are heading for a big slow down in the u.s. Economy also.

  16. Goldbugs have been expecting the credit bubble to lead to policymaker Big Prints soon for a decade. It’s coming, but give it some time. Remember the US only represents 20% of the fiat money bubble. Japan did a little more printing last month. China will be easing soon. Europe requires a significant dose of printing right now to keep the party going. The US is not in as bad a shape…perhaps a small dose of printing is on tap in June or July so the Fed won’t be in the game prior to US elections. Anyway, the patient is may be able to survive a bit longer before the big dosage…

  17. Just to let all know, They can’t print money in Europe. The European Union cannot print money. That is one of the big problems. I agree we are on a path of destruction. You can’t look at a few stocks and begin finger pointing. Cisco stock fell 92% from 1999 to 2002, this was not a foreshadow to destruction.

  18. I can’t take a 20 minute drive here in town without seeing brand new cars everywhere!! These people are idiots. They love being lied to. Remember the old days during the 80’s when everybody was driving rust buckets, and k-cars were popular. Not anymore. Everybody’s keeping up with the Jones’ on easy money. Live it up now, ’cause you won’t live it down later!!!

  19. As usual, great Jim Willie commentary:

    http://tinyurl.com/73brkku

  20. The problem could have been solved long ago, at the get-go of the crisis, and NO MORE currency would have had to be printed than was given to the banksters [FDR’s phrase, by the bye]. 99+% of the time this is discussed there is terrible confusion over the terms ‘money’ and ‘currency’. Just as we say ‘number’ for our abstract concept of math, for example, and ‘numeral’ as its sign, so should we understand that ‘currency’ is the notational aspect of our monetary system. ‘Money’ is an abstract concept which can never be printed, but it can be expressed in the denominations of its currency, which can be paper, shells, beads, or the famous old English tally sticks. In truth, these all can be said to be ‘fiat’ currencies!

    NEVER forget that the Constitution specifies ‘the full faith and credit’ of the feral gubbmint, NOT bags of G&S. If you still think G&S are currencies, even if in the form of coins [and I own a goodly amount of Silver Maple Leafs], then I suggest you attempt to pay your municipal and feral gubbmint taxes with them. Afterward please send me an email describing the reception you were given: [email protected].

    The best way to understand money and currency is to read Stephen Zarlenga’s “The Lost Science of Money” 2nd Edition, his magnum opus and the best single volume ever written on the subject. His historical approach clearly delineates the facts of currency and major monetary systems, debunking a LOT of myths and wishful thinking. For example, the most stable currencies in human history to date have been the common, minor Roman iron and copper coins used daily by the hoi polloi, NOT gold and silver. The historical problem w/both G & S is the constant danger of dilution to lower purities, or being shaved on the edges. That by the way is why many European coins still have messages engraved on their edges: as proof they’re not shaved!

    At any rate, the problem is NOT the notational quantity of printed currency, but the fact that it was given to the con men at the top, the Ponzi perps who commit high crimes and frauds. This absolutely guaranteed it would have minimal circulation, and instead be frozen into their vaults or held as assets to re-establish their fatally corrupt affairs, once again at the expense of the lower 98%.

    The funds should have been distributed to the lower 98%, so they could have paid down their mortgages and other loan-sharked purchases, ANYTHING to get velocity moving again. Mind you, it is highly likely dear reader, that you and I would find their purchases the diametric opposite of what we prefer, but de gustibus non est disputandum applies here as well. At 69, I recall my father’s frequent harping on the salient facts of the last Great Depression: “The buildings were there and the factories, all the workers, but there was nothing to pay them with, so nothing went around'” which was his way of describing the crippling lack of velocity at that time. Look out your window: it’s deja vu all over again.

    If we were as civilised as the Chinese, say, or the Shah of Iran, we would round up the perps, convict them in a Court under law, then on national TV broadcast their execution by firing squads. When the Shah did this, in one year Tehran and Iran went from being the easiest places on the planet to score heroin to being the most difficult. I’m sure that when a corporate head who’s stolen tens of millions in China is dispatched to his/her well-earned rest, the masses are satisfied and revolution is forestalled for at least another six to twelve months.

    The same would work here for us as well, or at least until the next sElection of Geldman Sacks Ponzi Puppet 2, most likely the same ‘dark horse’ they last bought in the back lanes of Chicago. These are matters I know something of, as my alma mater was Mother Cabrini Hospital, Cook County, Chicago, 1943. Thus I can say with confidence that a ‘dark horse’ can never come out of the Windy City: there’s always enough good light to check its teeth and testicles, to see if it could bite you or break your balls!

  21. I read your article with interest. I also read zerohedge articles. On the same day that your article was posted, a Phoenix Capital article outlines how there can be no additional QE before the elections because of the political blowback. Possibly a “Twist” but not a full blown QE.
    As I explained to my wife, two articles from two writers I respect and 180 degress different in prognostications. Her answer, “Noone can predict the future.”

  22. christiangustafson

    Mike, how can we have another blast of fedgov money creation and the quantitative easing while we are so close to the debt ceiling, with a completely dysfunctional political system? The Fed has little room left today to create new debt with a new scheme.

    It’s my thesis that we have one more episode of 2008 style deflation and white-hot market panic. Only after we set shocking new lows, and probably with a new administration, do we get some sort of bold monetary action or experiment. And that is the real doozy of which you speak, Hail Mary time. Deflation, then desperation, ending in monetary failure.

  23. There is no answer to the big print, just as there is no question.
    It’s the inverse of the vaporizing of the hedgefunds, 700 Trill of notional money, that is being reinitiated back into the system. It’s the paradoxical: Do we have deflation with inflation, argument.

    Printing, if it goes towards RESET, I say, go for it! It’s the chemotherapy to the system.

  24. Ronald L. Trickel

    This is maddening, watching our economy and our country unravel right before our eyes.
    Most people aren’t even watching or paying attention. They must be in denial as we inch closer and closer to the precipice. So what is there to learn from the systemic corruption that has led us here. I think that it is not that democracy does not work. I think it is that big governments in general do not work. The money and control gets to far away from those who could hold someone responsible for it. Then corruption runs rampant and we end up
    somewhat like we are.

    • When justice is given a backseat to economic gain, this is where we end up. Long ago our elected officials began systematically seperating responsibilty and risk from economic endeavors in an effort to stimulate economic growth. There is nothing new today, we are just closer to the end of the road. The right thing to do is not always the most profitable, and may be painful, at least in the short run – especially after floating so far downstream. May God give us the character to pursue, and the patience to wait, for the better end.

  25. In the end, the economic chaos and over indebtedness have a purpose: they are being synchronized worldwide so that there is a global problem that will have people crying for a global solution. Shazzam! Global Governance to the rescue. It is all these competing governments that are the root of the problem (they will say). The only solution is global government with a single global (fiat) currency. It will end war and bring prosperity to all! (they will promise). If only we are allowed ALL power, then we can solve ALL problems!

    We have seen this over and over: government creates or allows a problem so as to generate a constituency for their predetermined solution, which always involves more government control.

  26. Great post Mike, Just sent it out to my data base.

  27. I haven';t followwed CISCO stock but I do know they seem to have a superior product that I would be tempted to invest in were it not for hospital and medico bills. The days of wine and rose passed me my a decade ago. About the only way things coulod be better is if only I had a lot of Italian blood but then I have had enough tansfussions mybe I will get lucky!

  28. The Fed has to double down at the very least to keep the game going. I’m guessing 6 trillion will stave off a major calamity for another 6 – 9 months.

    • Uhmm, yes, rather like the Indian ruler who sought to reward the fellow who created chess as a game. He told the Maharajah that all he wanted was rice, to be calculated thusly: one grain on the first square, two on the second, four on the next, then eight, sixteen, and so on, until the last square. The Maharajah said this was not great enough for such a splendid game, but the fellow said it would be. By the time they’d reached the halfway point it was clear there would not be enough rice in all India to get to the end….

  29. The Fed will have to double down to keep the game going. I’m guessing 6 trillion will prevent a “major market event” from happening for the next 6 – 9 months.

  30. the keynesians had their chance,they took the trillion dollar stimulus and gave it to the public sector unions,and bundlers (via green co’s).
    800 billion tarp to private sector unions, and crony capitalist.
    the trillions in qe’s,and twists went to the banks.
    i’ll never forget the sneerky little laugh from o’bama,when he said there were no shovel ready jobs,so the working class recieved nothing.
    i’m in some agreement with the one commentor,this could be purposeful,when ever you hear global it’s scary,the american fed and their big bank tools have who knows how many trillions of tax-payer dollars on the line in the euro-zone.
    when the one commentor said there was no one in the euro-zone that can print money is not really correct,if the euro-zone broke-up i think about all of them can and will print their own money,and if these seperate countries get back on their feet faster than america,the dollar falls,this is when the trillions of tax-payer money goes,globally.

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