Jim Sinclair: QE3 To Infinity-The Final End Game

[mamboni]

Jim Sinclair: QE3 To Infinity-The Final End Game



Jim Sinclair has sent an email alert to subscribers discussing the background of the OTC collapse in the wake of Lehman Brothers, and WHY the Fed has no other options than to continue QE to infinity. Sinclair states that the coming end game will be the recognition of the weakness of the Fed’s balance sheet, and a resulting collapse in confidence in 2015-2017.

As QE3 to infinity moves ahead, the balance sheet of the Federal Reserve continues to acquire worthless paper in exchange for dollars. Junk moved onto the balance sheet of the US Federal Reserve as the common share of the USA, the US dollar, continues to expand exponentially.

The end game problem is an extended recessionary business conditions going into 2015 to 2017 wherein the supply of dollars continually expands, the US Federal Deficit grows, US state deficit spending continues to grow and the quality of the Federal Reserve balance sheet proceeds to deteriorate further.

Therefore the end game is the perception of the weakness of the lender of last resort, the Federal Reserve’s Balance sheet, as it impacts confidence the US dollar and US interest rates.
MUST READ!

From Jim Sinclair:

The final end game of QE3 to infinity, with a month or two off from time to time, will be a product of the long term viability of the Federal Reserve Balance sheet and the impact on the dollar there from.

Let’s review what has transpired and begin to look at what will happen:

OTC derivative manufacturers and distributors sold fraudulent paper to almost every entity as clients of the Western world financial system. Inherently the OTC derivatives manufacturers and distributors had part of the transaction on their books. No problem as long as the entire scam was a “Daisy Chain,” a connected set of transactions that has the appearance of risk but when all netted out equals almost zero.
Until Lehman was flushed, and flushed it was, most all OTC derivatives could have been netted to zero in a derivative resurrection bank. Losers would have rejoiced and winners would have declared war. However when Lehman was forced into bankruptcy it broke the “Daisy Chain” (a chain of near risk-less transactions when netted) of the OTC derivatives scam. At this point winners had won huge and loser had lost huge and there was no longer a means of repair to the quadrillion dollar scam. The problem has no practical solution other than transferring all losing paper to the balance sheet of the Federal Reserve where then it was anticipated no non-government “mark to market” audit would ever occur. It was the perfect hole to stick the junk into.

The size of the OTC derivative market stood at one quadrillion one hundred and forty four trillion as reported by the Bank of International Settlement, the counter internationally.

The Bank of international Settlements, seeing this outrageous number, changed their computer method of valuation to maturity assuming no failures and reduced the size of OTC derivatives of all kinds to a more acceptable but still huge number of $700 trillion notional value.
In the first and second round of QE the Federal reserve purchased OTC derivatives including the variety called securitized mortgage debt to remove them from the balance sheets of the Western world financial system, thereby improving the Western world’s financial institutions balance sheet and preventing an international industry wide bankruptcy. That means the Federal Reserve has impaired its balance sheet in order to repair some of the balance sheet integrity of the Western world financial system. The amount they have purchased is significant, but not compared to total outstanding above more than one quadrillion dollars.

The reason for QE to infinity, QE3, is the failure of business activity in the Western world to pick up with early huge monetary stimulation so as to repair the balance sheet of the Western financial world financial system. The unseen crisis is the hidden weakness of the Western world financial system thanks to FASB (The gatekeepers of world accounting) which allows financial institutions internationally to hide their losses by valuing their paper at whatever the bank wants it to be with no reference to seek a market value, primarily because there is none to seek.

The crisis not seen by Fed observers is the true balance sheet condition of the loses on the trillions of dollar of worth-less paper fraudulent paper because numbers are given but no independent mark to market audit has been or is likely performed.
As QE3 to infinity moves ahead, the balance sheet of the Federal Reserve continues to acquire worthless paper in exchange for dollars. Junk moved onto the balance sheet of the US Federal Reserve as the common share of the USA, the US dollar, continues to expand exponentially.

The end game problem is an extended recessionary business conditions going into 2015 to 2017 wherein the supply of dollars continually expands, the US Federal Deficit grows, US state deficit spending continues to grow and the quality of the Federal Reserve balance sheet proceeds to deteriorate further.

Therefore the end game is the perception of the weakness of the lender of last resort, the Federal Reserve’s Balance sheet, as it impacts confidence the US dollar and US interest rates.

Now you know what brings about the end game.

In the future I will do small simple articles dealing with the impact on markets of a to be Bankrupt Central Bank, the US Federal Reserve. The end game could come sooner, but only if there was an independent “mark to market” audit of the Federal Reserve inventory of worthless paper which remains unlikely no matter who wins the election in November.

Those of you invested in gold and silver vehicles of all kinds (with the exception of ETFs and futures) rest well this weekend. $3500 will easily be a place gold trades. The Canadian dollar and blasphemy to the euro snobs, the Swiss franc, remain go to vehicles for cash positions. Yes cash because you to not have to pay to own them as you do with a sovereign paper with negative interest.


Your watchman,
Jim


http://www.silverdoctors.com/qe3-to-...me/#more-14280

[singular_me]

The size of the OTC derivative market stood at one quadrillion one hundred and forty four trillion as reported by the Bank of International Settlement, the counter internationally.

This gives me butterflies in the stomach...

[mamboni]

This gives me butterflies in the stomach...

If we utilize Galilean reductio ad absurdum analysis on the FED, one realizes that the FED will one day own in paper title virtually all domestic assets: treasury debt (bills, notes and bonds in the many $trillions), home and commerical mortgages, corporate bonds, stocks and anything else demonimated in dollars. Wrap your brain around that. The number of trillions of dollars that will be in circulation at that point will be near infinite by today's standards, at least $50 trillions!

Got gold? Got silver? Got farm land? Got guns?

[Golden]

Germany Hyperinflation Firsthand -Schiff at Moneyshow 2012

www.youtube.com/watch?v=v2lcUT1eMBE
Published on May 20, 2012 by gary flanzer

At the Peter Schiff seminar at the Moneyshow 2012 Las Vegas, a WW2 survivor from Germany approached Peter to say she has firsthand knowledge of the currency collapse in Germany. Today seems like a repeat of what she experienced as a German child. She makes comparison of Obama to Hitler government and says the currency collapse happened quickly., A bank run could happen again if people don't put their assets in hard currencies like gold and silver. (Very very sad interview ending!)

[mamboni]

Germany Hyperinflation Firsthand -Schiff at Moneyshow 2012

www.youtube.com/watch?v=v2lcUT1eMBE
Published on May 20, 2012 by gary flanzer

At the Peter Schiff seminar at the Moneyshow 2012 Las Vegas, a WW2 survivor from Germany approached Peter to say she has firsthand knowledge of the currency collapse in Germany. Today seems like a repeat of what she experienced as a German child. She makes comparison of Obama to Hitler government and says the currency collapse happened quickly., A bank run could happen again if people don't put their assets in hard currencies like gold and silver. (Very very sad interview ending!)

"Dat mann hat gold unt silber!!!!!"

Damn straight mein frau! Tragically, 99% of Americans will not listen to or profit from your hard-earned wisdom.

[mamboni]

Review: QE3 To Infinity–The Final End Game

September 25, 2012, at 6:05 pm
by Jim Sinclair in the category General Editorial | http://www.jsmineset.com/wp-content/..._famfamfam.gif Print This Post | http://www.jsmineset.com/wp-content/..._famfamfam.png Email This Post

Jim Sinclair’s Commentary

Here is a review to offset the drivel pouring out of MSM declaring "QE to Infinity" as powerless and ineffectual.
Expectations of deflationary powers overpowering QE to infinity is rank madness pandered to by world class morons in, and outside our community

My Dear Extended Family,

The final end game of QE3 to infinity, with a month or two off from time to time, will be a product of the long term viability of the Federal Reserve Balance sheet and the impact on the dollar there from.

Let’s review what has transpired and begin to look at what will happen:

1. OTC derivative manufacturers and distributors sold fraudulent paper to almost every entity as clients of the Western world financial system. Inherently the OTC derivatives manufacturers and distributors had part of the transaction on their books. No problem as long as the entire scam was a "Daisy Chain," a connected set of transactions that has the appearance of risk but when all netted out equals almost zero.
2. Until Lehman was flushed, and flushed it was, most all OTC derivatives could have been netted to zero in a derivative resurrection bank. Losers would have rejoiced and winners would have declared war. However when Lehman was forced into bankruptcy it broke the "Daisy Chain" (a chain of near risk-less transactions when netted) of the OTC derivatives scam. At this point winners had won huge and loser had lost huge and there was no longer a means of repair to the quadrillion dollar scam. The problem has no practical solution other than transferring all losing paper to the balance sheet of the Federal Reserve where then it was anticipated no non-government "mark to market" audit would ever occur. It was the perfect hole to stick the junk into.
3. The size of the OTC derivative market stood at one quadrillion one hundred and forty four trillion as reported by the Bank of International Settlement, the counter internationally.
4. The Bank of international Settlements, seeing this outrageous number, changed their computer method of valuation to maturity assuming no failures and reduced the size of OTC derivatives of all kinds to a more acceptable but still huge number of $700 trillion notional value.
5. In the first and second round of QE the Federal reserve purchased OTC derivatives including the variety called securitized mortgage debt to remove them from the balance sheets of the Western world financial system, thereby improving the Western world’s financial institutions balance sheet and preventing an international industry wide bankruptcy. That means the Federal Reserve has impaired its balance sheet in order to repair some of the balance sheet integrity of the Western world financial system. The amount they have purchased is significant, but not compared to total outstanding above more than one quadrillion dollars.
6. The reason for QE to infinity, QE3, is the failure of business activity in the Western world to pick up with early huge monetary stimulation so as to repair the balance sheet of the Western financial world financial system. The unseen crisis is the hidden weakness of the Western world financial system thanks to FASB (The gatekeepers of world accounting) which allows financial institutions internationally to hide their losses by valuing their paper at whatever the bank wants it to be with no reference to seek a market value, primarily because there is none to seek.
7. The crisis not seen by Fed observers is the true balance sheet condition of the loses on the trillions of dollar of worth-less paper fraudulent paper because numbers are given but no independent mark to market audit has been or is likely performed.
8. As QE3 to infinity moves ahead, the balance sheet of the Federal Reserve continues to acquire worthless paper in exchange for dollars. Junk moved onto the balance sheet of the US Federal Reserve as the common share of the USA, the US dollar, continues to expand exponentially.
9. The end game problem is an extended recessionary business conditions going into 2015 to 2017 wherein the supply of dollars continually expands, the US Federal Deficit grows, US state deficit spending continues to grow and the quality of the Federal Reserve balance sheet proceeds to deteriorate further.
10. Therefore the end game is the perception of the weakness of the lender of last resort, the Federal Reserve’s Balance sheet, as it impacts confidence the US dollar and US interest rates.

Now you know what brings about the end game.

In the future I will do small simple articles dealing with the impact on markets of a to be Bankrupt Central Bank, the US Federal Reserve. The end game could come sooner, but only if there was an independent "mark to market" audit of the Federal Reserve inventory of worthless paper which remains unlikely no matter who wins the election in November.
Those of you invested in gold and silver vehicles of all kinds (with the exception of ETFs and futures) rest well this weekend. $3500 will easily be a place gold trades. The Canadian dollar and blasphemy to the euro snobs, the Swiss franc, remain go to vehicles for cash positions. Yes cash because you to not have to pay to own them as you do with a sovereign paper with negative interest.


Your watchman,
Jim

[mick silver]

Operation Screw

Wednesday, September 26, 2012 – by Peter Schiff
http://gold-silver.us/images/library/Schiff.jpg
Peter Schiff

With yesterday's Fed decision and press conference, Chairman Ben Bernanke finally and decisively laid his cards on the table. And confirming what I have been saying for many years, all he was holding was more of the same snake oil and bluster. Going further than he has ever gone before, he made it clear that he will be permanently binding the American economy to a losing strategy. As a result, September 13, 2012 may one day be regarded as the day America finally threw in the economic towel.
Here is the outline of the Fed's plan: buy hundreds of billions of home mortgages annually in order to push down mortgage rates and push up home prices, thereby encouraging people to build and buy homes and spend the extracted equity on consumer goods. Furthermore, the Fed hopes that ultra-cheap money will push up stock prices so that Wall Street and stock investors feel wealthier and begin to spend more freely. He won't admit this directly, but rather than building an economy on increased productivity, production, and wealth accumulation, he is trying to build one on confidence, increased leverage, and rising asset prices. In other words, the Fed prefers the illusion of growth to the restructuring needed to allow for real growth.
The problem that went unnoticed by the reporters at the Fed's press conference (and those who have written about it subsequently) is that we already tried this strategy and it ended in disaster. Loose monetary policy created the housing and stock bubbles of the last decade, the bursting of which almost blew up the economy. Apparently for Bernanke and his cohorts, almost isn't good enough. They are coming back to finish the job. But this time, they are packing weaponry of a much higher caliber. Not only are they pushing mortgage rates down to historical lows but now they are buying all the loans!
Last year, the Fed launched the so-called "Operation Twist," which was designed to lower long-term interest rates and flatten the yield curve. Without creating any real benefits for the economy, the move exposed US taxpayers and holders of dollar-based assets to the dangers of shortening the maturity on $16 trillion of outstanding government debt. Such a repositioning exposes the Treasury to much faster and more painful consequences if interest rates rise. Still, the set of policies announced yesterday will do so much more damage than "Operation Twist," they should be dubbed "Operation Screw." Because make no mistake, anyone holding US dollars, Treasury bonds, or living on a fixed income will have their purchasing power stolen by these actions.
Prior injections of quantitative easing have done little to revive our economy or set us on a path for real recovery. We are now in more debt, have more people out of work, and have deeper fiscal problems than we had before the Fed began down this path. All the supporters can say is things would have been worse absent the stimulus. While counterfactual arguments are hard to prove, I do not doubt that things would have been worse in the short-term if we had simply allowed the imbalances of the old economy to work themselves out. But in exchange for that pain, I believe that we would be on the road to a real recovery. Instead, we have artificially sustained a borrow-and-spend model that puts us farther away from solid ground.
Because the initials of quantitative easing − QE − have brought to mind the famous Queen Elizabeth cruise ships, many have likened these Fed moves as giant vessels that are loaded up and sent out to sea. But based on their newly announced plans, the analogy no longer applies. As the new commitments are open-ended, quantitative easing will now be delivered via a non-stop conveyor belt that dumps cheap money on the economy. The only variable is how fast the belt moves.
Fortunately, the crude limitations of the Fed's only policy tool have become more apparent to the markets. If you must stick with the nautical metaphors, QE3 has sunk before it has even left port. The move was explicitly designed to push down long-term interest rates, but interest rates spiked significantly in the immediate aftermath of the announcement. Traders realize that an open-ended commitment to buying bonds means that inflation and dollar weakness will likely destroy any nominal gains in the bonds themselves. To underscore this point, the Fed announcement also caused a sharp selloff in Treasuries and the dollar and a strong rally in commodities, especially precious metals.
Given that 30-year fixed mortgages are already at historic lows, there can be little confidence that the new plan will succeed in pushing them much lower, especially given the upward spike that occurred in the immediate aftermath of the announcement. Instead, Bernanke is likely trying to provide the confidence home owners need to exchange fixed-rate mortgages for lower adjustable rate loans − which would free up more cash for current consumer spending. He is looking for homeowners to do their own twist. If he succeeds, more homeowners will be vulnerable to increasing rates, which will further limit the Fed's future ability to increase rates to fight rising prices.
The goal of the plan is to create consumer purchasing power by raising home and stock prices. No one seems to be considering the likelihood that unending QE will fail to lift bond, stock, or home prices, but will instead bleed straight through to higher prices for food, energy, and other consumer staples. If that occurs, consumers will have less purchasing power as a result of Bernanke's efforts, not more.
The Fed decision comes at the same time as the situation in Europe is finally moving out of urgent crisis mode. While I do not think the ECB's decision to underwrite more sovereign debt from troubled EU members will work out well in the long term, at least those moves have come with some German strings attached [For more on this, see John Browne's article from earlier this week]. As a result, I feel that the attention of currency traders may now shift to the poor fundamentals of the US dollar, rather than the potential for a breakup of the euro.
In the meantime, the implications for American investors should be clear. The Fed will try to conjure a recovery on the backs of currency debasement. It will not stop or alter from this course. If the economy fails to respond to the drugs, Bernanke will simply up the dosage. In fact, he is so convinced we will remain dependent on quantitative easing that he explicitly said he won't turn off the spigots even if things noticeably improve. In other words, the dollar is screwed.
The Daily Bell is pleased to offer our readers Peter Schiff's Economic Commentary. This column was originally published September 14, 2012 at EuroPac.net.

[mamboni]

Pushing down mortgage interest rates by buying MBS is analogous to buying treasuries to push down yields: the price of the underlying asset increases.....in fact for a bond, only in theory for real estate. Even if it works, and home prices rise slowly and stabilize, what do you do after interest rates have hit bottom and are bouncing off real rates of 0%? Maybe the next great innovation will be negative interest rate mortgages? You buy a house, the bank issues the mortgage to you and sends you a check (negative interest) each month? It sounds insane.....but then again....

[MAGNES]

Jim Sinclair: QE3 To Infinity-The Final End Game



Jim Sinclair has sent an email alert to subscribers discussing the background of the OTC collapse in the wake of Lehman Brothers, and WHY the Fed has no other options than to continue QE to infinity. Sinclair states that the coming end game will be the recognition of the weakness of the Fed’s balance sheet, and a resulting collapse in confidence in 2015-2017.

Sprott: No Economic Recovery

I don't post much on Economics, just some background,
I joined GIM May2006 researching the FED 2005 and what they
were doing with M3, something we don't even look at now, recent
M3 is down to sideways as well, the money is all balance sheet parked,
non of it is making it to the real economy, if it did, M3 would
be going up, using the info we had we were able to predict
the future, and maybe capitalize on it and protect ourselves,
certain actions create certain realities, the economics
works, throw in ARMS resetting Jan2007 into the mix, boom is coming
with 3-6 months materialization visible for all, and we got our first
taste of the future August 2007 with major bank run in California,
it took a year for it to really hit, with WaMu and Lehman, and the
major dominoes started falling, we have seen a lot, until there is
a change in course the outcomes will be the same and worse.
We were able to predict the future with far less craziness pre 2007.
The money masters are good at what they do, I am surprised
they have been able to string this along in this fashion, their
course has not changed and the future is somewhat predictable,
more of the same and worse, forget time lines, the way we are
going, maybe we won't see a bottom in my lifetime ? I will be turning 40 soon.
Plan your life accordingly, self-sufficient as much as possible, and live.

Sept 2012 we have " QE3 " , aimed at MBS, monetizing, no budget or time line,
just $40 Billion per month, according to their reasoning, it will boost the economy,
consumption, housing , jobs, they don't give a shit about jobs, the only thing it
will do is improve some balance sheets short term and like past I highly doubt
you will get the banks investing in production. This is war on the middle class.

Great Sprott interview, covering all of this.
Sprott, linked to many times in past had great website full of free great info.
Sprott has always been a leader, key to watch.
http://www.sprott.com/precious-metal...-metals-watch/

Article is a bit dated, but very relevant here with QE3 MBS Monetization.

[beefsteak]

Catherine Austin-Fitts (link posted elsewhere in this forum) states the FR is buying up all the fraud MBS and that is the end game, with the Banks promising to buy T-Paper with the fraud-buy-backs. I guess, then the FR will "cancel the paper" and reset the system. Should take a spell. So much for the "collapse" talk.

So many endgame choices...STILL a game of "Clue."

Fitts' "slow burn" explanation makes the most sense.

Sinclair's explanation leaves a big open ended question mark, and makes me wonder A) why he's being so archane, B) what's in it for him to speak imprecisely, since he's an insider/elite in the flesh.

hmmm