Recent FOMC & China’s possible “Lehman Moment”

As I’m sure many of you are already aware, the Federal Open Market Committee (FOMC) had it’s communique yesterday — http://www.silverdoctors.com/fed-wont-taper-qe-yet/. The markets are freaking out: global currencies around the world going down in value (especially the Australian dollar http://finviz.com/futures_charts.ashx?t=6A&p=d1), stock market down, and then precious metals — which are already manipulated as it is, no doubt in my mind.

So it’s all a confidence game, isn’t it? If the markets think that the Fed is going to taper, but the Fed does a head fake by stating that they’re actually not going to taper — by stopping the purchasing of mortgage-backed securities (40 billion per month) and long-term treasury bonds (45 billion per month) until their dual goal of lowering employment and meeting inflation targets as shown by “official” (Government manipulated) measures or metrics of inflation — then the markets freak out like a bunch of coke addicts.

Some patriots discredited me by taking up Jim Rickard’s idea on deflation vs. inflation, but I believe it is one of the most logical and sensible ideas on the topic: there are two mechanisms at play here, i.e inflation & deflation, playing a game of tug of war. And like any great game of tug of war, if one side is winning (or eventually wins), it pulls with it the other side, dragging it along. It seems as though right now, deflation has the upper-hand.

For example, whenever inflation is, say, 11%, but deflation is 14%, the net difference will be deflation at 3%. Deflation is winning, EVEN WITH THE FED FLOODING THE MARKETS at zero percent interest rates and $85 billion dollars of fresh digital, fiat, debt-money. The more I learn from James G. Rickards (Author of Currency Wars) and Jesse Colombo (financial analyst who predicted finance bubbles, housing crisis, and financial crisis at the tender age of 17) the more I’m starting to learn that inflation is not what’s to be fear… it’s deflation.

Many people are “perma bears”, i.e permanent bears; still others are “perma bulls”, i.e delusional fools that think all is well with our anemic recovery due to the post-2009 inflated healthcare, education, real-estate 2.0 (yes, AGAIN), technology and emerging markets bubbles (Australia, Singapore, Indonesia, Hong-Kong, India, Canada, China, etc, etc). The reality is you should be fluid and flexible on your views to see the bigger picture: both inflation and deflation are a threat, not just one, and neither will be the demise of our globally connected banking system; it will be BOTH at different times.

We are getting the first whiffs of deflation — aside from the fact that Silver/Gold are manipulated, deflation is another reason why precious metals are going down, because the dollar is gaining strength from deflation; Gold/Silver is just the barometer of whether the dollar is losing or gaining value, because it is constant (an ounce of gold/silver will get you the same value of goods no matter the time period).

When these post-2009 bubbles pop, the Fed will feel that near K.O punch to it’s face and play it’s hand with more QE (quantitative easing) which the hyper-inflationists have been warning about. It’s not a one way ticket to inflation, neither will it be for deflation. It’s BOTH, at different times, under different circumstances. For what it’s worth, I would prefer inflation, as that continues the game a little further; allowing us more time to prepare.

These times, these circumstances, are bitter-sweet aren’t they? We need a reset of the system.

~ Irv

P.S. Oh yeah, one more thing… China’s Interbank Market Freezes Overnight. China denies such claims of default, but, then again, what collective organization has ever admitted to fault… For the best news on this story follow Patrick Chovanec.

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— Transmission over —

Jesse Colombo’s ground-breaking China-Bubble article: http://www.thebubblebubble.com/china-bubble/
James G. Rickard’s recent interview: http://youtu.be/Kiz2R2OGMvU
Follow Irv on twitter: https://twitter.com/AgBullet47

1 comment to Recent FOMC & China’s possible “Lehman Moment”

  • Rainmaker

    Nice article Irv,

    For what its worth, I agree, we get both, deflation and inflation. However, we get inflation (probably hyper) for all the things we need to survive i.e. food, water, fuel, medicine, etc. and deflation for everything else i.e. housing, vehicles, everything else. You can bet that before all this is over, a VAT will be put into effect which will make things even worse than they already are to make up for lost revenue. In addition, higher taxes to replace lost revenue on “everything else”.

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