"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput


Friday, October 31, 2014

Hedge Funds Feasting on Small Specs in Silver

If you want to get some sort of idea how the big sharks eat the little fish alive, take a gander at the following Commitments of Traders chart for the silver market.

Here is the chart:

I dropped out both the Swap Dealer Category and the Other Large Reportables Category for the sake of keeping the chart cleaner and more readable.

The Blue line is the NET POSITION of the hedge funds. The Red line is the net position of the Small Spec or the General Public. The other line is the Commercial category.

What have the hedge funds been doing in silver for the last few months? Answer - liquidating longs and adding shorts. In other words, they have been SELLING.

What has the general public or the minnows been doing since then. Well, some longs have liquidated so there has been some selling but look at their position. They are still net long in the silver market!

What has silver done since the peak in July on this chart? Answer - it has collapsed in price from near $21.50 to today's low near $15.50. That is nearly a 30% LOSS in 4 month's time.

I cannot count the number of emails that hit my inbox from the gold cult members yapping about HIGH OPEN INTEREST in silver as if somehow that is yet one more reason to be long the precious metals. When pointing out to them that the interest is both from increasing numbers of spreads, and from speculators interested in SELLING THE METAL, I am usually greeted with derision and condescending rebuttals as if somehow I am ill-equipped to understand the esoteric secrets of the strange universe that they are privileged to inhabit.

Some love to argue even more throwing around such insightful comments as, "Mr. billionaire fund manager asserts with great confidence that sometime this year, silver goes north of $50" as if somehow that settles the matter.

And yet, look at the chart. What does it tell you? Answer, a long silver position has butchered those who were foolish enough to think that they knew more than the market especially Mr. billionaire fund manager who is now probably Mr. millionaire fund manager.

The thing about this which is even more tragic, is the sheer size and extent of the losses that this erratic metal can inflict on the account of anyone who gets on its wrong side. A $1.00 move in silver is $5,000 per single contract. Do the math and you get the idea how much money the hedge funds took out of the pockets of the inept general public who continue to listen to the siren-songs of those self-proclaimed market experts who keep pushing them to buy it in spite of the obvious.

Now, this late session bounce in silver is interesting as it indicates some decent buying came in late, very late, in the session but in looking over at the mining share indices, they stink, having barely managing any sort of significant closing bounce heading into the weekend.

That today was also the end of the month, a day on which one can expect to see a great many big price swings and a day on which some funds tend to realize some paper gains for the sake of their monthly statements, and the fact that those mining indices closed so poorly, one has to be skeptical that the bounce higher in this metal signifies the end of the downtrend. It could very well just sit down here for a while and move sideways while it consolidates its severe losses from this week.

I will be watching closely next week to see what kind of follow through to the upside, if any, we might get. The ability to push back above $16.00 is constructive but we will know whether or not it has any staying power early next week. Until then, the general public remains LONG and WRONG and is serving as fodder for the hedge fund bears who are mercilessly goring them to no end. A lot of would-be trading careers from the small public were ended this week by the devastation suffered at the hands of this most fickle of metals.


  1. most xlnt commentary Dan!!

    dr copper avoided big damage. that strike due nov 10th was for peru's biggest mine antamina, which produces 7% of the world's copper. late news says talks are scheduled next week.

    nasdaq had particularly large volume, which makes one think 1st of the month 401k type monies, seasonal 6 month buys time, should keep the stock market going thru the election until we see non farm friday.

    everybody should take off at least the Biblical 24 hours a week, how about now til sunday pre-open research time!

    ...looking forward to it---> sunday!

  2. Thank Dan for an excellent input

  3. Thanks Dan.

    This link below might be the most laughable huckster spiel you'll ever read.
    Check out this grandiose B.S. from Bix Weir. The manner in which he formulates this price is so ridiculous that it would probably make even Eric King giggle.

    The PM blogosphere today is like an asylum of people in a state of shock and uttering non-sensical rationalizations why silver or gold is "just getting ready" to explode.
    It's sheer lunacy in the doomer camps from some folks. And some of those same 'bugs wonder why this blog calls out obvious shills?
    If the shills out there could somehow sell anti-depressants online to their herds it might be the most beneficial service they've ever offered.
    ~~~~~~~~~~~~~~~~~~~~~~~~Here's Why $100,000/oz Silver is a Conservative Estimate

    Bix Weir

    Where The Price of Silver Is Going and Why

    Nobody should under estimate the COILED SPRING EFFECT that underlies the silver price. 45 years of computer price suppression won't blow off smoothly!
    I will attempt to quantify the potential price movements in Silver based on my 20 reasons to SELL/BUY from this article:

    20 Reasons to Sell (BUY!!) Physical Silver


    In each instance I will give my reasoning but it must all be taken with a grain of salt because there are MANY factors and consequences related to each point...but here it goes.

    CURRENT PRICE OF SILVER = Let's use $20 as Jack Lew could sneeze and send the price of silver to $20!

    1) The removal of the gigantic concentrated short position on the COMEX Silver market as reported in the CFTC Commitment of Traders and Bank Participation Reports.

    In 1980 the Hunt Brothers attempted to corner the silver market with both COMEX ....(continued and laughable)

  4. A "different" sort of analysis of the CoT report for the permabull crowd...
    And the latest CoT confirms this opinion
    by Turd Ferguson
    2 hours 52 min ago
    As of last Tuesday, the net position of the Large Specs was still 5900 contracts long.
    However, since the survey, price has fallen by $1.11 and the OI just thru yesterday had risen by over 5900 contracts.
    Therefore, it's safe to conclude that, as of this moment, the Large Specs are either NET SHORT or very close to it, just as they were at the washout price bottom back in June of last year. The resulting short-covering spike sent price back to $25 over the next two years.

    Will it happen again?

    Remote healing? Psychic abilities?


  5. That explains all the spectacular hedge fund performance numbers... oh... wait...

  6. I'd like to remind everyone that our own esteemed Trader Dan picked the exact top in the oil market, where I sold a massive XLE and UGA position within 24 hours of reading Dan's post.

    As a result of his fine call, I locked in what at the time was 5 years worth of gasoline profits that would enable me to drive two vehicles virtually cost free for that period of time.

    Now that gasoline prices have collapsed, I now have enough money to probably go 7 - 8 years.

    Who needs a hybrid when we have our own Dan Norcini?

    Thanks Dan!!

  7. With the relentless downtrend in the CRB Index, I can only be reminded of 1999, when commodities collapsed and stocks soared.

    Only this time, I believe the upcoming "Bubble Blowoff" phase will be led by:

    XLV (health care, just look at what happened to Bristol Meyers this week)

    XLU (Utilties, check out SRE)

    XLI (Industrials, check out MMM, and huge moves in TXT, PPG, EMR the last few days)

  8. Dan - you and your silver-hating cronies on this site are so so wrong. when the criminal bankster manipulators who are shorting paper silver on the COMEX are forced to cover, the price of silver will go to at least $100,000 / oz.. and that's a CONSERVATIVE estimate.


    1. awww crap. DPH already posted this gem. now I won't get credit when silver hits $100,000/oz by the end of the year.

    2. Kid;

      You know what is even scarier ( I am in full Halloween mode) than this quack? That there are people who actually PAY HIM for this stuff!

      Like I have dubbed it: it really is a CULT!

    3. Kid ;

      you should run out right now and drop $160 on ten ounces. that way you can buy DPH and myself a beer and we can laugh at all of the rest of the poor dupes who did not believe we could turn $160 in a cool $1,000,000.

    4. But, you guys don't get it, gold is up something like 400% since 1999. It is a raging bull market, and will soon take off from its pull back. When it does, silver will go to $100...and higher. And China's vaults will finally get completely filled.

  9. Here's an excerpt from Michael Batnick's latest, on his excellent Tumblr:

    You can’t fault people for being cautious in 2014. The data supported this view and there is a huge difference between being cautious and being bearish. Let’s turn our attention to the people who are the targets of a lot of venom this morning, the unapologetic bears.

    The thing about these perma-bears that makes my blood boil is that when they’re wrong they still win, it’s their investors who get burned. These people can stay wronger longer than you can stay solvent because they’ll collect their fees regardless of the outcome. The unfortunate reality is that the uninformed don’t know that this snake-oil salesman has called 14 out of the last 2 bear markets. The certainty with which these people deliver their message is amazing, they have been telling stories for so long they actually believe their own lies.

    You might notice that these people are never wrong and the reasons why is an ever expanding list of nonsense. QE is bearish, nope, the end of QE is really bearish. Unsustainable high profit margins are bearish, low profit margins are also bearish. Oil prices falling are bearish because it is indicative of a slowing economy. High oil prices are even more bearish because it is a tax on consumers. You get the point.

    These maniacs only exist to prey on the weak. People are always scared of the next shoe to drop so there will always be a mutual fund or separate account for bears. Fear is the easiest thing to sell, I can sell fear to the Grim Reaper.


    1. Eric Original;

      Wow - you could just change that slightly and it would be PERFECT for the gold cult leaders.

    2. Yeah. Permabears on stocks and permabulls on gold are quite often the same crowd, and with the same methods. At least certainly a lot of inbreeding there for sure. Both selling fear.

    3. Personally, I don't like guys who are "perma" on anything. There is always a time to buy and a time to sell, no matter what it is. I don't mean just at the end of the world either.

  10. I think what these KNW con-people and the other "Gold/silver is about to skyrocket to the moon" pinheads are doing is more than reckless behavior. I would say it is a criminal activity. They get their salary from the gold dealers, miners, hedge-founds so that they constantly preach the metals to the moon. Which of course never happens and won't happen again in our lifetime. They exactly know that what they say is wrong and they also exactly know that a lot of unsuspecting individuals will go bankrupt as a result of their lying. It is not ignorant or reckless. It is intentionally doing harm to others with the purpose of financial advantage. These people should be sitting in prison really. Unfortunately is not possible to prove though because how do you prove that someone is talking shit because he is a con-man rather than being a retard.

    1. kris kov;

      In a perfect world, such people would be ignored and laughed to scorn and held up as objects of contempt and ridicule. In some sense it is a real shame that we no longer have "the stocks" in which to put people who are worthy of being publicly shamed and mocked.

    2. The stocks is a good idea, with a sign around their head, or how about 50 lashes in public for egregiously false recommendations. Three strikes and you're out for all newsletter writers who get it wrong by a margin of 15%, and all money refunded to subscribers.

    3. Would it be difficult to prove Sinclair is not a retard but a conman?

    4. from the legal perspective I think it would be impossible. although we know what he really is...

  11. Yesterday, Louise Yamada reposted her analysis from earlier this month. Looking spot on. A few bullet points:

    >support at 1200 likely to be broken (check)
    >near term target 1000 to 1100 (wait and see)
    >Bull market for gold is over (check)
    >longer term target for stabilization 700-800 (wait and see)
    >GDX may test support at 20 (check)
    >GDX below 20 says target toward 15 (getting there)


    1. Eric, no one can see that far ahead, and this is just another form of charlatanism. Just as bad as saying gold is going to $2000. She is trying to catch a wave as part of her image building. By the way, if gold did go to $700 every mine in the world would gave to close, which would cause massive supply constraints ( check). Let me tell you finally and forever, no one but no one, can read the future.

    2. and let me tell you finally and forever, the price dynamics of Gold are not directly influenced by supply-side constraints from the miners - above ground stocks are a multiple of annual production, and unlike Silver, Gold is not consumed in any meaningful sense

      Louise Yamada called this one right: I don't care what her motives are, she got it right, and many others got it very badly wrong. Why attack the messenger rather than swallow the message?

    3. Her forecasts are not completed yet. I said that one cannot read the future that far ahead. You are in such a hurry to write that you never read the post properly. You say you don't care about her motives, but you have condemned these for profit analysts again and again, so there is some inconsistency here. As for price not being influenced if miners stopped supplying some 2500 tons a year, I can only say that is utter nonsense. Anyway, previously you admitted you are a dilettante in gold investment, and now suddenly you are an expert.

  12. One, Bo Polny, doctor no less, states that he is a chartist, and is completely objective and unemotional ( except when getting his subscriptions no doubt), assures us that gold will reach $2000 by the end of the year. Maybe he is reading his charts upside down and needs a new pair of reading glasses.

  13. ponzi ponzi double ponzi

    back up the truck and flash the plastic http://www.tfmetalsreport.com/comment/444655#comment-444655

    you KNOW it makes sense - this Guy said so, and he Knows It All http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2014/10/31_Maguire__This_Triggered_Todays_Massive_Selloff_In_Gold_%26_Silver.html

  14. Question Dan or anyone else, do you know what the true cost of production of silver is? ...6, 8, 10 dollars etc. If silver actually gets to the average cost of production or below, I would buy some. thanks

    1. Mad Max;

      No Max, I honestly do not know. A lot of silver is a by product of copper mining which makes it even tougher to figure it out.

      I wonder if copper can stay above $3.00 for much longer to be honest. Today it looked as if copper liked the BOJ plan as it seemed to be following the higher equity markets more so than silver.

    2. according to First Majestic it is $9.63 http://www.firstmajestic.com/i/pdf/FM_FactSheet.pdf

      but don't worry - COMEX is going to defaul in December http://www.forbiddenknowledgetv.com/videos/money/gold-expert-harvey-organ-by-decemberthis-whole-thing-is-going-to-collapse.html

      or January maybe. Perhaps February? March even.

    3. thanks Ophelia, I see its is $9.63 is the cash cost for First Majestic but it is for All-In Sustaining Cost per Ounce at $18.18 for First Majestic. The problem is they are a primary silver producer and as Dan pointed out a lot of silver produced is a by-product of copper.

    4. Please listen to this recent interview with the CEO: the all-in sustaining cost is $16, which he predicts will fall to $13 this year -


      Note that both the volume and the grade of Silver produced in Q3 is down very significantly on Q2 http://www.firstmajestic.com/s/NewsReleases.asp?ReportID=678487&_Type=News-Releases&_Title=Produces-3.5-Million-Silver-Eqv.-Ounces-in-Q3-Postpones-the-Sale-of-934K-Si though Lead, Zinc and Iron are all up and the recovery rate remains at 68%. There is therefore no indication that production is being mothballed or even throttled back at the present time; the problem is that right now a ton of Steel Rebar costs less than a ton of Cabbages in China http://www.ft.com/cms/s/0/cd91ea1e-5381-11e4-8285-00144feab7de.html?siteedition=uk#axzz3HmD6R4iI

    5. To get cost of secondary silver look at a company like FCX. Add back into their costs the income they report for silver and gold. Then calculate the cost per ton of oar mined and split the silver and copper out of that then you can get the silver mining cost.

      Yes it a lot if work but that's how you get the cost of production for the secondary products.

  15. To put this in perspective, and whereas I agree 100% with Dan about the gold promoting charlatans, there are just as many on the other side. The same goes for the Dow and S&P promoters. Just a question of human nature and self-interest, which means enticing the public and fooling them at every turn. Not difficult to understand really, and one would be very naive indeed to expect honesty in the biggest money making institution the world has ever known.

    1. 1. Lies, Distortion and Misrepresentation

      2. For gain

      3. Without contrition of any sense of shame, but a call for "faith based investing"

    2. Ophelia, it is all about 'capturing minds' to generate 'faith' in an omnipotent, all-knowing one. Once there is BELIEF the subscriptions then come tumbling in.

    3. No, Peter, it is not

      I - and I sense Dan - have no particular gripe with people who are on ego trips or who are plain narcissists: Harvey Organ and Jesse are good examples of people who are dumb but innocuous

      The problem lies with thise who have a commercial angle they are seeking to peddle: Silverdoctors is a good example, as is Mike Maloney and - latterly - Koos Jansen (since he went over to The Dark Side at Bullionstar.com). Some are blatantly peddling "inside information" newsletters - Maguire being the prime example, though Turd Ferguson is a low-budget alternative; and yet others are merely promoting clickbait - KWN, for example

      Contrast these with not-for-profit websites without Banner Ads or trivia for sale: Trader Dan, for example, or Kid Dynamite. You may like what they write, or perhaps not, but it is put out there free, gratis and with no strings attached. An with no figure-headed Silver Rounds either. This is surely what distinguishes these from other websites

    4. If you read my post it refers to those collecting subscriptions, which also means those in it for profit.

    5. So how does JS profit from his beliefs and website?

    6. Jim and the other insisers were given 20 million shares in the new company when trx was formed. Jim has 1.5 million shares left. We knew he had 5 million in 2005.

      So jim profited from selling shares. He is a stock promotor. Pump and dump screw the sheep.

    7. As to "his beliefs" jim beliefs in jim as to his website, ever wonder why its called jsmineset?

      It should be called jsnomineyet.

  16. My guess is that General Jim will not live long enough to see $1,650 where his "Angels" are sitting in the Battered Women's Shelter.

    Jim is getting up there in age, so is Richard Russell. I doubt they will ever see $1,650 again, which is really tragic.

  17. Very funny Mark, especially the bit about abused Angels in the Battered Women's Shelter. Maybe we could set up an angel descent ladder on Dan's website.

  18. Dan, I thought a lot of the miners had a very impressive bounce off their lows considering. The HUI pretty much nailed its 2008 low before bouncing so Mon should be most interesting. Not predicting one way or the other but if today was capitulation, it did have that smell.

    1. It certainly did have a smell, but I'm not sure it was THAT smell. Maybe you will be right for a day or two. Also we've got the silly elections coming up. The absurd Swiss gold initiative may cause some interest, but is certainly doomed to failure.

    2. I bash miners a lot, but GG performed well today. I'll give credit where credit is due.

      UAY, not so much.

    3. Eric, thank you for that, you are most gracious.

  19. Might as well post the list of infamous Charlatans, Con Men, and Flim Flammers over at KWN.

    Many of them stopped posting as "acclaimed experts" and "billionaires" because they are way too busy fighting a Tsunami of redemptions and avoiding all out fund liquidation.

    - Eric "Crybaby" King
    - James "Belvedere" Dines
    - "General" Jim Sinclair
    - James "Bond" Rickards
    - Bill "Wild Turkey" Murphy
    - Rick "I'd Love To!" Rule
    - Paul Craig "Moonshiner" Roberts
    - Richard "The Godfather" Russell
    - Eric "The Billionaire" Sprott
    - Stephen "Squeaky" Leeb
    - David "Blue Hair" Stockman
    - Egon "Egghead" Von Greyerz
    - James "Month In, Month Out" Turk
    - Michael "Screaming" Pento
    - Peter "Smug Face" Schiff
    - John "Squealer" Embry
    - John "The Monk" Hathaway
    - Ben "Prep School" Davies
    - Andrew "Secret Agent" McGuire
    - Jim "T-Shirt" Willie
    - Doug "Don't Cry For Me" Casey
    - "Steaming Turd" Ferguson
    - Bo "Chipmunk" Polny
    - John "Slit Eyes" Ing

    And all the predictions as of August 16th, 2014

    "This Is the Worst Nightmare for the U.S. and The West"

    "This Will Trigger Major Dislocations In World Financial Markets"

    "Gerald Celente - This Global Collapse Is Just Getting Started"

    "Fleckenstein - U.S. Stocks To Crash As No Liquidity Fuels Panic"

    "Silver Short Squeeze Of Epic Proportions To Shock Market Participants"

    "A Horrifying & Destructive Future For The Entire World"

    "Chart Of The Week & Vladimir Putin & Chaos Around The World"

    "It’s Amazing What People In Europe Are Doing Just To Survive"

    "Gerald Celente - The Global Ponzi Scheme Is On Its Death Bed"

    "World War III, Total Global Collapse & The Greatest Depression"

    1. Nice list of charlatans who are paid publicists/marketers for gold. These people are very unethical, and some are very dumb.

      I used to be bullish on gold in 2012. Then I began to do some serious research. What I found was extremely disturbing. The gold industry for investments is extremely pervasive. I found that nearly 100% of all highly bearish "experts" against US equities and the US dollar were actually folks that get paid to talk up gold. Or in other words they are gold-publicists or work for gold marketing corporations. Furthermore, It seemed nearly impossible to find a person who was very negative on the US economy who did not have some kind of vested interest in gold. Fear is a powerful tool, and these folks exploit this fear with unsubstantiated & highly exaggerated alarmism in order to talk up gold. Even as gold falls, this alarmism is at an all time high.

  20. somebody's got too much idle time on their hands...Didn't hear too much from you Mark when the markets were tumbling...

    1. I spent two weeks vacation in Big Bear and Lake Arrowhead camping and going on some epic mountain bike rides, one of the best vacations ever.

    2. would you like to see a REAL epic mountain bike ride? watch this: https://www.youtube.com/watch?v=xQ_IQS3VKjA

    3. Kim, a lot of passion there too. Wonder why?

    4. Mark, spending your ill-gotten gains, you son of a gun.

    5. What Mark really means is when stocks are bearish and tanking downwards he goes to Big Bear lake hoping the central banks will save the stock markets again so he can come back here and post his nonsense.

      As another poster here said Mark will never post here if the stock market start going in a down trend.

  21. Heh! Hang on a minute, you're referring to the greatest trends forecaster in the world, several legends, and billionaires.

    It might give you grim satisfaction to know that many of them will be reading this site.

  22. And Scott Nations is probably laughing uncontrollably at poor Peter Schiff, literally within 24 hours of the CNBC interview, stocks explode to new highs, Nikkei futures rise over 1,2500 points within 7 hours, and gold and silver are completely destroyed.

    EuroPacific probably another one getting ready to be liquidated due to a mass exodus of clients.

    And despite all that, the Zero Hedge "Preppers" are still "Stackin" adding to horrific losing positions. They still hate blue chip stocks and refuse to buy any.

    1. Hey Mark how come you don't come on here and post comments when the stock market is tanking down, just curious?

      Just because your monetary masters keep saving the stock markets does not mean some great economic recovery is going on?

      Recall Zimbabwae, the stock markets reached all time world record highs there too as the country went bankrupt from money printing.

      Money printing is the end game for a currency, always has been in history. Keep buying paper Mark as they keep printing.

    2. Barney, he was conveniently on vacation, spending all the money he made shorting gold.

    3. Hey Barney, the purple Dinosaur, can you explain to me just who is doing money printing? Are you talking about the US? Cause the US has not done any substantial money printing yet in its history. In fact, the amount of money in circulation is nearly unchanged in the last decade. If you are talking about QE, then you clearly do not understand what QE is, and you clearly know nothing about monetary policy. this is EXACTLY what I am talking about with all the absurd alarmism. Go educate yourself!

    4. Uhh sure Eric, whatever you say.

      All those trillions of dollars of assets on the Fed's balance sheet just magically appeared. They did not have to create money to pay for them.

      And yup Peter, Mark comes back from vacation to post when Japan starts printing money and buying stocks to boost markets.

  23. @EricWebber

    You have got to be joking, right?? QE is absolutely printing money. Where does the fed get the money to buy bonds and other financial assets??!! QE is a CB crediting it's account with money created out of nothing!! So it can buy assets no one else wants ostensibly to keep interest rates low but in reality to allow the USG to continue it's unconstrained deficit spending. Banks and other institutions that sell these worthless "assets" to the fed are then enabled to create more money with these excess reserves. Are you actually arguing that because there is no increase in physical banknotes in circulation that this means there is no money printing????

    1. No I am not joking. This is what I am talking about – you need to stop listening to gold charlatans and do your own educational research. Here are some main points.

      1. If QE was indeed “money printing” or an operation to directly insert money into the private sector – then a gallon of Milk would already cost you over $500. Is this what you observe when you go to the store? Open thy eyes and observe the REAL world in which you live!
      2. The government doesn’t “print money” in the way your ZH goldtards have taught you. Most of the money in our monetary system exists because banks created it through the loan creation process. The only money the government really creates is due to the process of notes and coin creation. These forms of money, however, exist to facilitate the use of bank accounts. That is, they’re not issued directly to consumers, but rather are distributed through the banking system as bank customers need these forms of money. The government “prints” Treasury Bonds, which are securities, not money.
      3. Banks do NOT lend reserves, despite what your ZH lunatics tell you! This myth derives from the concept of the money multiplier, which we all learn in any basic econ course. It implies that banks who have $100 in reserves will then “multiply” this money 10X or whatever. This was a big cause of the many hyperinflation predictions back in 2009 after QE started and reserve balances at banks exploded due to the Fed’s balance sheet expansion. But banks don’t make lending decisions based on the quantity of reserves they hold. Banks lend to creditworthy customers who have demand for loans. If there’s no demand for loans it really doesn’t matter whether the bank wants to make loans. This is why, ultimately, multiple rounds of QE become DEFLATIONARY – because the lending industry becomes too staturated.
      4. QE is NOT money printing, NOR is it inflationary! This is the biggest myth purported by the Goldtard community – and is the NUMBER ONE playbook used by the gold marketers to get gullible folks like you to go buy gold. QE is a form of monetary policy that involves the Fed expanding its balance sheet in order to alter the composition of the private sector’s balance sheet. This means the Fed is ‘creating’ new money and buying private sector assets like MBS or T-bonds. When the Fed buys these assets it is technically “printing” new money, but it is also effectively “unprinting” the T-bond or MBS from the private sector. When people call QE “money printing” they imply that there is magically more money in the private sector which will chase more goods which will lead to higher inflation. But since QE doesn’t change the private sector’s net worth (because it’s a simple swap) the operation is actually a lot more like changing a savings account into a checking account.
      5. QE is not monetizing debt – despite what you read on the whacko ZH site. Because the USA is sovereign in the US Dollar, the government is always able to procure funds by harnessing the Primary Dealers to bid for bonds (who then on-sell the bonds mostly). Therefore, the idea that QE is monetization is a myth. Rather, QE serves as an interest rate operation that serves to lower long-term rates in a manner very similar to the way monetary policy works at the short-end of the curve.
      6. QE is NOT money printing and will not cause hyper-inflation. Many have tended to compare the USA to countries like Weimar or Zimbabwe to express their concerns. But if one actually studies historical hyperinflations you find that the causes of hyperinflations tend to be very specific events. Generally:

      A. Collapse in production.
      B. Rampant government corruption.
      C. Loss of a war.
      D. Regime change or regime collapse.
      E. Ceding of monetary sovereignty generally via a pegged currency or foreign denominated debt.

      The hyperinflation in the USA never came because none of these things actually happened. Comparing the USA to Zimbabwe or Weimar was and still is extremely ABSURD!

  24. California Agriculture.
    As you will be hearing on the national news in USA, Southern California got a little rain Friday night and Saturday morning. Local news carrying it as "Disaster in Camarillo". Water mud and debrits got pinto the slab floor houses. One couple could no get out thru the front door and the weiner dog is missing. It's really mist and a few showers. One street of upscale houses build on a slope in a gully got more runoff from the burnt slope than the drains could handle. Tough on the home owners but hardly unexpected.

    Crop wise the rice farmers in Northern California usuall flow irrigate 250-300 thousand acres a year. This year it will only be 50 to 100 thousand acres. Price of rice locally already going up at retail and wholesale levels.

  25. 'A lot of would-be trading careers from the small public were ended this week by the devastation suffered at the hands of this most fickle of metals.'

    You're so right about that. You have no idea!!!!


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