THE FED IS OUT OF MONEY

Now as the title suggests, we are having a bank run in the money markets. I believe it was Monday [so much has happened so fast that I can't keep my days straight] we saw a large money market fund “break the buck” and trade down to .97 cents. Today Putnam has closed its institutional MM fund to redemptions [$15 Billion], Bank of New York Mellon has followed suit with their institutional fund, [State Street bank has chimed in with all is well, so why chime in?]. Now we know why T-Bill rates went NEGATIVE yesterday, that’s right NEGATIVE! Huh? How can that be? The only time in history that rates were negative in the US was just before the “bank holiday” in 1932. People were so scared that they would lose their monies held in banks that they invested in T-Bills and paid more than par. Par is 100, you pay a discount at purchase and your T-Bill matures at 100, the difference is your interest rate. Yesterday T-Bills traded over par, these investors are willing to park money at a guaranteed LOSS. They just want to guarantee how much the loss will be! Money is being pulled out of money market funds out of fear, fear of big losses and lack of liquidity. This capital has massively flowed into short term Treasuries to the point where rates are 0% or negative. This IS a bank run by institutions, Joe sixpack will eventually see this, does history repeat itself? Bank holiday? I think it is obvious.

Let’s go one step further in the logic department. OK, I’ll admit I thought Gold was a good investment prior to the convulsions we are now seeing BUT, if an institution can only get 0% or has to “lock in a loss” in a T-Bill, wouldn’t an ounce of Gold that pays no interest be a better investment than a piece of paper that pays no interest? Especially since that piece of paper is only redeemable in more paper? Besides, what will this new paper be worth when received? Ahhhhhhh that is why very little Gold or Silver stands available for sale anywhere on the planet, it won’t come out of hiding for pieces of paper! Now I get it! It looks like investors are now getting it in a big way based on the action of the last two days.

The last two days in the metals were nothing, NOTHING! [now I sound like Cramer]. No really, the last two days were only tremors, little ones. When it becomes obvious that the monetary system must change, it will also be obvious which asset class alone benefits. In the past when a currency failed, or a monetary system changed there would be huge losses by some and huge gains by those who foresaw it coming. These were always on a country by country or regional basis. This time it is on a GLOBAL BASIS. This will affect everyone on the planet. This will be the biggest redistribution of wealth in the history of history. This is for ALL THE MARBLES! This will make those with modest means and the correct investments, KINGS. This will make those with millions or billions and the wrong investments, PAUPERS. The coming moves up in metals will make the last two days look like flat lines on a chart

Related Posts:

• China Passes Japan as Biggest U.S. Treasuries Holder
• Next Crisis: Everything Could Be Leveled Within 12 Hours
• The proverbial “this time it’s different” is dead give away that it’s not different.
• Putting cash in the bank does not make much sense.
• As bubbles must inflate(a decoupling between price and value) so they MUST burst.

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