Eric Sprott – We Are In The Biggest Ponzi Scheme Of All-Time
from KWN: Today billionaire Eric Sprott warned King World News, “… we are in the biggest Ponzi scheme of all-time.” This is the second in a series of interviews with Sprott that will be released which reveals the increasingly desperate situation Western central planners face as we head into 2013.
Here is what Sprott, who is Chairman of Sprott Asset Management, had to say: “As I’ve already said, there was only one purpose for those (Fed) minutes and that was to keep the real indicators of inflation at bay. As you know, oil was starting to move up again, and gold and silver were acting well.”
Peter Schiff: Get Real Money, Gold and Silver – As The Fed Will Not Stop Printing Money
by Greg Hunter, USAWatchdog:
Money manager Peter Schiff warns that Japan will likely stop buying U.S. government debt. He contends, “If the Central Bank of Japan has a choice between monetizing Japanese debt or U.S. debt, they’ll go for their own debt . . . that means the Fed has to print even more money.” Closer to home, the new debt deal also means more money printing because of even bigger deficits. According to Schiff, “The majority of the tax increases were cancelled. The spending cuts were cancelled . . . the Fed is going to have to keep buying bonds to keep interest rates from surging.” Schiff thinks talk from the Fed about stopping the $85 billion a month money printing (QE) is preposterous. Schiff says, “They can’t do it. . . . The minute they try to take the cheap money away, the phony economy is going to crumble.” What’s not going to crumble is the gold and silver market. Even though precious metals have been down recently, Schiff says, “So what, buy more. Look at the sell off as an opportunity to unload more of your fiat currency and get some real money.” Join Greg Hunter as he goes One-on-One with Peter Schiff, CEO of Euro Pacific Precious Metals.
Why QE Will Never End
Regardless of the MOPE and the SPIN, QE can never end.
Thanks to the good Tylers at ZH for this very simple explanation. PLEASE TAKE THE TIME TO READ THE LINK BELOW AND PLAY WITH THE SPREADSHEET PROVIDED.
Again, for fiscal 2011, the interest on the U.S. national debt was $454B. http://www.treasurydirect.gov/govt/reports/ir/ir_expense.htm
This is at an average coupon of around 3% and an average maturity of under 5 years. So, with a funding cost of 3%, the interest on the national debt was roughly 1/3 of the 2012 deficit. Aha, but what would the funding cost be if rates were 6% instead? The interest on the debt would have been $900B and the total deficit would have approached $2T!
EL-ERIAN: Asset Prices Are Getting Even Farther Away From Their Fundamentals
The central point of his argument lies in the notion that the Fed’s easy-money policies have divorced prices from market fundamentals. As a result, investors are not choosing an asset on the basis of fundamental analysis, but rather on its value relative to another asset as part of the search for yield. The higher appetite for risk has been spurred by expectations of persisting ultra-low interest rates and continued quantitative easing by the Fed.
As central bank balance sheets swell, El-Erian believes that investors will soon refuse to accept investment vehicles, such as high yield corporate bonds, equities, and highly leveraged products, whose valuation is often indirectly influenced by the Fed’s asset purchases, and to a lesser extent, its forward policy guidance.
The prices of these asset classes are divorced from their fundamentals, he explains, and “With the weaker central bank impact, prices need to have greater consistency with the realities of balance sheets and income statements.”
Just when a full-blooded rally gets underway, the Fed comes out and spoils it! Last night (Aussie time) saw the release of the minutes to the Fed’s December board meeting. The market was a little disappointed at the lack of complete craziness of the board members. Evidence of considered and rational debate resulted in some selling of stocks. There is a lingering fear amongst the speculator class that the Fed may have some semblance of a plot that they haven’t lost yet.
Here’s the offending part of the minutes release (with our emphasis):
‘In their discussion of the staff presentation, some participants asked about the possible consequences of the alternative purchase programs for the expected path of Federal Reserve remittances to the Treasury Department, and a few indicated the need for additional consideration of the implications of such purchases for the eventual normalization of the stance of monetary policy and the size and composition of the Federal Reserve’s balance sheet.’
We highlighted the important bit. It’s saying that a few (two?) of the committee members hold the view that additional purchases of treasury debt could make it tough if the Fed ever wants to think about returning to a normal monetary policy.
What is normal, you may ask? It’s a pointless question, because in the monetary system we currently operate under you’ll never see normal again. To answer the question though, normal means getting rates back above zero, to maybe 1% or 2%….