The Federal Reserve has been Checkmated

Not even 2 weeks after quantitative easing (QE) ended, the Federal Reserve (FED) has announced that it is currently working on another major stimulus (should the economy slow down), which it absolutely will due to significant structural imbalances caused by decades of government involvement in our economy and nearly a century of central bank planning. For the past 3 years, the FED has cut rates, predicted summer recoveries, provided liquidity to markets, secret bailouts, public bailouts, and QE (monitization of debt). The printing press has been working overtime.

Source: St. Louis Federal Reserve

However, despite government, media, college, and ALL of conventional wisdom propaganda, the economy just can’t turn around. The Keynesian economists just can’t figure it out, they continue to try and cure an economy that suffers from too much debt, regulation, and central planning (manipulation) with even more debt, regulation, and central planning. Now for over 3 years we have been told by Ben Bernanke and friends that things were okay, a recovery was just around the corner, and just a little more stimulus was needed to get us over the hump. The media continues to treat his predictions and assessments as the most accurate source in the world, when his assessments couldn’t have a worse track record.

Here is a link to a great video of Bernanke assessing the economy from 2005 to 2007. As you watch this, remember that we are literally heading into the largest crisis since the 1930’s.

For those that don’t have the time to watch it, let us give you some of the highlights.

  • 2005 Bernanke states that housing: is fundamentally strong, will not see a national decline, will not impact the economy in a negative way, and is positioned well demographically. Really? Demographically, 2005 just so happens to be the EXACT year baby boomers peaked in their home buying habits making housing “demographically” going forward a complete disaster.
  •     2006 The economy will grow and the drag from the housing sector will significantly diminish.
  •     2007 Sub prime is NOT an issue and we expect moderate growth. We should see strength in the economy starting in the summer.

Of course we all know what comes next, 2008 summer recovery, 2009 summer recovery, 2010 summer recovery, and 2011 summer recovery. Trillions from the government and the FED have been pumped into the economy, so much so that the U.S. government borrows 45 cents for every dollar it spends. We have been told that this is for our own good, that the spending and borrowing is what saved us from another depression. We have been told that prices becoming more affordable, homes falling in price, and a strong dollar would hurt us. Central planners have created a deflation boogie man that is going to get us even as a record 44 million people apply for food stamps. We can’t help but wonder if they wouldn’t mind food prices coming down?

We have also been told that gold and silver are in a bubble, that the evidence is all the “we buy gold” stores popping up. You know, the ones that Americans go to in order to sell their gold for 10 cents on the dollar!!! Yep, that sounds like a bubble to us.

Central banks are net buyers of gold, in fact, they are loading up a record amount of gold for 2011.  We should note that central banks did not purchase tech stocks in the 1990’s or real estate in 2000.

China, the #1 producer of gold, is also now the #1 importer of gold. Oh and they are also encouraging their citizens to purchase the yellow metal too.

Yesterday, Bernanke was asked if gold was money by Congressman Ron Paul, his response was “no.” Just to be clear, gold has been used and stored as money for over 5,000 years. In fact, as already stated, central banks are regularly buying gold, yet in the land of fiat currency, where for the past 40 years the world has been on a fiat currency experiment, the most important central banker of all is willing to look the world in the face and state that central banks buying gold is part of tradition. Maybe this is the part of the same tradition when it comes to devaluing the currencies they are in charge of and bailing out the “too big to fails.” All just a part of banker family tradition, almost makes you feel warm and cozy.

For those that are not familiar with gold, our analysis has shown us that gold is still a store of value around the world. It is only in the west where it is treated as a speculative commodity. Most Americans, especially those who consider themselves experts in economics or business, have no idea that for every 100 ounces of gold sold on the COMEX, there is only 1 ounce of gold to back it up, something that has obviously distorted the gold markets and suppressed the price. believes that gold buying is not a banker tradition, it is a bankers hedge, a hedge against their own system of fiat currency that is literally LOANED into existence. Yes we know, we often mention how they love to print, but before they hit a single button, the currency created by the bankers is always loaned out with an interest rate. Making an increase in the currency supply inevitable because in order to pay back the banks, there will have to be new currency created in order to cover the interest for the original loan. This entire fraudulent banking system and government run economics has run a muck in the last 40 years. It’s no coincidence that 97% of U.S. debt has been accumulated since the death of the dollar’s tie to gold in 1971. With the world now backed by the full faith and credit of the United States, who is literally borrowing to service previous borrowing, the game is almost up.

Not a dime has been repaid by the U.S. government since 1960, not a single penny. Debt ceilings year after year are increased without debate, spending, stimulus, and a constant expansion of government is pushed by both parties, no matter who is in power. Government statistics and forecast are nothing but pure propaganda, yet they are presented as trusted information by the media. Not one major news agency has EVER questioned government data or absurd government forecasts. According to John Williams of, senior citizens’ social security checks are 44% less than what they should be, by excluding things that go up in the official inflation rate, and including government hedonics. The cost of living increase according to Mr. Williams has become the cost of survival index.

Debt Ceiling Propaganda, a Complete Distraction

Today, the big news is the debt ceiling with congress and the president arguing over fake cuts that will supposedly happen over the next 10 years. Of course these cuts and savings are all dependent on government data and forecasts. Currently, Obama is spouting out numbers that project a FED funds rate that will average 2.5% until 2020, even though the actual average FED funds rate for the past 30 years has been around 6%.  Obama is also projecting 4.2% growth over the next 3 years, something that is simply impossible due to the change in our demographics and lack of a driver for jobs. Anyone (hint hint media) that would simply apply realistic GDP growth or debt interest payments would see that any planned cuts are going to be completely offset by lower revenues and higher interest payments. Plus, even if congress and the president agree to cut 2 trillion over the next 10 years, we are adding an “official” 1.5 trillion in new debt on an annual basis. always makes it a point to say “official” any time we mention government debt, since the actual real debt is much higher. If the government included total new debt (all unfunded liabilities that will have to be paid) our annual deficit for 2011 would be 4 trillion and our total national debt is around 100 trillion dollars. Of course remember, if we actually paid our seniors what was promised, the situation would be even worse. We should note that is NOT advocating for entitlements, in fact, we oppose them all as they are highly destructive to society. We are just merely pointing out that the only way those who do advocate for entitlements can argue “that they work or aren’t bankrupt,” is to manipulate the numbers and screw the very people they say they want to protect.

The End Game

Call it a reset, collapse, crisis, or doom and gloom, believes that yesterday’s official announcement by Chairman Bernanke showed the world, specifically the bond markets, that the FED has been checkmatedby the natural forces of economics. No matter what the government or the FED do, unemployment is rising, long term unemployment is getting worse, and faith in the dollar is waning. The first round of quantitative easing saw a 70% rally in the Dow Jones, the second round of quantitative easing saw only a 6% increase. Meanwhile, despite precious metals trading on the COMEX (100 paper ounces vs 1 actual physical ounce) silver continues to make 30 year highs, while gold is breaking all time highs in all currencies.

The FED has thrown everything it possibly can at trying to jump start the economy, yet the engine just won’t turn over. The imbalances that the FED has created, the bubbles that they have inflated, and the fraud that has infected the entire financial system due to fiat currency, has finally checkmated the FED. The entire system is completely dependent on the FED injecting more liquidity and keeping rates low, even the U.S. government is dependent on the FED to satisfy its borrowing needs. The FED from November to June accounted for 70% of U.S. treasury purchases. In our opinion, this week was a major turning point and wake up call to the world. The course the U.S. is on is simply unstoppable.