“The good thing about the Federal Reserve’s announcement is that it removed the suspense and doubt swirling about each and every Fed meeting for the foreseeable future.  The only possible blockbuster announcement going forward is one that says that they are reversing course.  That will never happen until some form of chaos ensues.  They confirmed what we all knew.  There is no changing course.  There was no alternative path.

We should not feel too bad for the Fed.  It is a private corporation owned by banks.  The Treasuries that they have accumulated are really calls on the tax revenues of the government.  Purchasing mortgages also could put them in the position of being one of the largest holders of real estate under certain circumstances.  It is believed that the Fed has also been a significant buyer of U.S. equities....

Continue reading the Robert Fitzwilson piece below...  


To hear the man with over 40 years of experience in the resource

markets and how he is positioning his clients to weather

the current financial storm click on the logo:

“If there is a financial maelstrom, that might be considered “high ground”.

For those who have seen the movie Jaws, there is a famous moment when the people on the boat get their first glimpse of the massive shark with which they are battling for their lives.  The immense size of the shark prompted someone on the boat to say “We’re going to need a bigger boat!”.  Chairman Bernanke told us last Friday that we’re going to get a bigger financial boat.  As big as it needs to be, whatever that number entails.

Until Europe and the Euro became unstable, the plan had been to allow the dollar to decline in order to stimulate exports and manufacturing in particular.  This also implied a stronger Euro, which would allow the Europeans to be supportive to their largest trading partner, China.  If China did well, it would provide more buying power for U.S. Treasuries.  More buyers of U.S. Treasuries meant lower borrowing rates and more borrowing in general to fund the U.S. deficit.

When Europe hit the wall, the plan had to be temporarily abandoned.  Europe has not been fixed, but it feels like some sort of stubborn resignation has emerged.  The structural problems remain, but the members of the EU have begrudgingly reached a form of status quo as there really is no alternative for them either. 

Unlimited printing for us means unlimited support for other central banks and banking systems.  If financial chaos were to ensue in the near future, it would mean that our Fed has lost control.  It has not.  That was the key takeaway from Thursday’s announcement in our view.

By announcing unlimited printing, the Fed has effectively put a floor under 80% of the U.S. economy and will throw unlimited money at getting the other 20% back up and running.  We will see whether or not it works, but that is the path we are traveling.  It also looks like we are back to the original plan of dollar depreciation and Euro strength.  The latter has staged a massive rally from the lows, leaving the shorts as road kill along the way.

Financially, we have staved off the chaos that will inevitably be the result of all of this folly.  Chairman Bernanke’s message is clear.  He and his brethren remain in control.  We believe that equities will move higher and that rates will be tame.  The same man that can print unlimited money to buy stocks, suppress rates and stimulate housing is the same man that can print unlimited money to ensure that the prices of metals and commodities remain in acceptable trading ranges for the time being.

The recent assault on the price of oil is a good example.  The sharp reversal from the recent highs probably had a helping hand from someone.  There is no spare OPEC capacity and there was no release from the Strategic Petroleum Reserve to account for the reversal.  The underlying message is loud and clear. They are still firmly in control and will do anything to promote their objectives whether one agrees with them or not.

What could turn control into chaos is the threat of war.  An armada has been assembled in the Middle East, presumably to prevent a closure of the Straights of Hormuz.  A Chinese general warned their troops to be ready for war with Japan over the ownership of islands recently purchased.  China and Japan both need energy, and these islands indirectly involve the ownership and control of a great deal of it.  Students of history know that wars often begin over key resources.  There is no more key resource than oil.

For some people, wars are viewed as a good thing.  Wars involve destruction.  Wars divert attention from failing monetary systems and inescapable debt spirals.  Wars also focus unemployed populations on perceived wrongs and away from their plight.  As repugnant as the concept is to most people and societies, it is the history of the human race.

War is one of the two obvious wild cards in view.  The other is the U.S. election.  Neither can be predicted.  As we await the outcomes of these events, we will have to navigate the temporarily becalmed financial markets and remain vigilant for new wild cards.

It is particularly important to have a substantial allocation to the precious metals for the day when control is lost and chaos emerges.  We favor silver over gold for many reasons, but a combination of the two are a must for anyone hoping to survive and prosper through what comes next.”

© 2012 by King World News®. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.  However, linking directly to the blog page is permitted and encouraged.

The interviews with Ben Davies, Dr. Keith Barron, Jean-Marie Eveillard, Bill Fleckenstein, Egon von Greyerz and Felix Zulauf are available now.  Also, be sure to listen to last week’s line-up of other KWN interviews which included Rob Arnott, Michael Pento, Gerald Celente, James Dines and Marc Faber by CLICKING HERE.

Eric King

To return to BLOG click here.

© 2012 by King World News®. All Rights Reserved. This material may not be published, broadcast,

rewritten, or redistributed.  However, linking directly to the blog page is permitted and encouraged.

Subscribe to RSS
KWN Blog