Draghi and Bernanke’s Worst Nightmares Are About to Unfold

Ben Bernanke and Mario Draghi must be absolutely terrified

These two men, in the last two weeks, have both initiated open-ended bond buying programs. The purpose of these programs, aside from keeping insolvent banks in business, was to scare the markets into believing that no matter what happens, the Central Banks will be able to step in and support the financial system.

From a philosophical standpoint, this was Draghi’s and Bernanke’s “all in” moment. I won’t say they they’ve gone “nuclear,” as they have yet to truly monetize everything, but they’re not far from that.

And they’ve both failed.

Spain, which I’ve been warning will bring about the break-up of the Euro, saw the yields on its ten-year bonds break back above 6% yesterday. This is absolutely extraordinary. It indicates that within two weeks of the ECB announcing it’s going to do an “unlimited” bond purchasing plan, Spanish bonds are once again imploding.

Indeed, if you analyze the Spanish ten-year yield chart from a technical analysis perspective, you’d say that it’s bounce off former resistance (indicating that it’s now support) and is ready for the next leg up (north of 7% again).

This is Game Over for the ECB.

The EBC cannot announce an even larger program now as that would completely destroy its credibility in the markets.

Congratulations Mario Draghi, the markets were intimidated by your promise of unlimited bond buying for a total of less than two weeks.

On the other side of the pond, Ben Bernanke is rapidly approaching his own Game Over moment.

The US Federal Reserve bought roughly three quarters of all Treasury issuance last year. Let that sink in for a moment. Roughly $0.74 out of every $1 in debt created by the US in 2011 was bought by the US Fed… not by the bond market, not by foreign countries, but by our own Central Bank.

Despite this massive intervention, the US economy (according to the ECRI) has officially re-entered a recession. This is why the Fed announced QE 3 now, because Bernanke is growing truly desperate, both in terms of losing control of the markets and the potential of losing his job if Mitt Romney is elected President.

So the Fed chose to monetize Mortgage Backed Securities this time around. And the result is that the US Treasury market is tanking. If it takes out its trendline, things will get very ugly very fast.

Here’s a thought… what happens if the Treasury market begins to implode despite the Fed buying roughly 75% of all Treasury issuance?

GAME OVER for Bernanke and the Fed.

The only option left would be to monetize everything, which would mean hyperinflation (all hyperinflationary episodes have been created by monetization of deficits… you can pull this off until you lose credibility… at which point you suffer a currency crisis).

Congratulations Ben Bernanke, you’ve managed to screw up the capital markets so badly that the US is on the verge of its own European-style debt crisis… despite you taking over the entire interbank money-market and nearly all US Treasury issuance.

Folks, this is the reality we’re dealing with. The ECB and Fed have gone “all in” in their efforts to stop the debt implosion… and they’ve failed. All they’ve done is unleashed an even more serious inflationary storm than the one we were already facing.

The time to start preparing is now. The printers are running. The Great Currency Debasement has begun. Some folks will walk out of this mess winners. Most will walk out as losers.

At Phoenix Capital Research, we’re taking steps to insure our clients are among the winners. We are currently preparing a Special Portfolio of unique inflation hedges: investments that will not only maintain their purchasing power but will outperform even Gold and Silver as the Fed and ECB debase their respective fiat currencies.

We also feature a special report devoted to inflation as well as which investments will perform best during periods of high inflation (periods like the one we’re entering).

All of this is available 100% FREE at www.gainspainscapital.com

Best Regards,

Phoenix Capital Research


B'Man's Revolt

I mentioned yesterday that our wages have taken a dive and basically equal 1967 levels. I said that I have been warning about this “System” for years and what I saw as the only strategic advantage we have is to prepare by growing as much as possible, our own food, putting away some silver (and a bit of gold) for bartering purposes. I have suggested that you have a weapon for hunting/protection. I have done all the same things that I recommended, by the way.

Do I feel prepared? Not really. But I have food stocks. I have LP gas stored. I have everything I need, except long term, alternative power source (although I do have wood and a wood heater, should a total breakdown occur).

I would suggest that we are about to embark in some extreme times, and very soon.

Quantitative Easing is happening. And the reason for…

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Quantitative Easing Explained – The #Bernanke #QE3

Just in case you missed this in 2010, they’re at it again.

The Fed said it would spend $40 billion a month, for as long as it takes, to stimulate the economy by buying mortgage securities — and perhaps buy more if the job market doesn’t improve.

How will the job market improve when there are ‘still’ no jobs for those unemployed and those no longer looking [not counted as unemployed] because of lack of jobs ?????

In the week ending September 8 2012, the advance figure for seasonally adjusted initial claims was 382,000, an increase of 15,000 from the previous week’s revised figure of 367,000. The 4-week moving average was 375,000, an increase of 3,250 from the previous week’s revised average of 371,750.

What the Federal Reserve is up to, and how we got here. circa 2010

This is no laughing matter … but the video is funny as hell and does quite well at explaining the problem with Quantitative Easing.