How Uncle Sam’s welfare to Wall Street puts our savings at risk

It continues: Wall Street will receive its full aid of $85 billion worth of liquidity each month. So declared the Federal Reserve after its Federal Open Market Committee (FOMC) meeting last week, citing an economy that is still recovering too “moderately” to introduce any changes right now. The hints continue that a taper in its program of Quantitative Easing may come as soon as December, keeping the market biting its nails. Any quarter now it could happen, once the numbers align with the faith-based recovery that they know is happening – or at least so they swear to us. The recovery is indeed faith-based: faith in Keynesianism, faith in money printing, and faith that the house of cards they are building will not collapse any time soon, as long as they keep building it. (Of course, reality and straightforward accounting tell a different story.)

Meanwhile, apparently Washington believes that Main Street needs no more aid, as they have begun to cut its food stamp program, even as a record number of Americans receive them: up to 20% of the population in many states, and 14% of American households overall. (Please pause to think about that for a minute: nearly one in six Americans receives food stamps!) Yet on November 1st, a temporary boost to the program ended, thus tapering the average household benefit by $36. Considering that the average total benefit is only $278, that is quite a drop.

For a little perspective, the entire Supplemental Nutrition Assistance Program costs around $80 billion per year. Quantitative Easing gives Wall Street more assistance than that every month. So cutting food stamps is a lot of pain for very little gain, relatively speaking.

This should serve as a stark illustration and a reminder of where government loyalties lie. Corporatist cronies win over concerns of average people every time (except possibly when a major election is approaching). The liquidity created by Quantitative Easing is a prime example of those competing interests and proof of whose needs come first. Senior citizens living on Social Security can’t even get a respectable cost of living adjustment because of the accounting tricks at the U.S. Bureau of Labor Statistics. Anyone who has been to a grocery store lately can plainly see that the Shadow Government Statistics calculation of 10% inflation squares with reality much better than any statistic the government is currently putting out. Inflating away the dollar steals purchasing power. Lying about it is a double whammy because it denies compensatory damages that are due to those hurt the most.

Of course, fostering an environment of dependence on government, especially by a government as incompetent as ours (see Healthcare.gov), drains real productivity and is ultimately unsustainable – whether the dependents are on Wall Street or Main Street. It all comes out of the productive sector in the end, and that portion of the economy is stretched to the breaking point.

With our government as bloated as it is, the truth is that everyone needs a taper. Everyone needs to find a way back on their feet and to stop playing shell games – with interest rates, statistics, currency manipulation, and free money. And it should begin with Wall Street since they are the ones getting the lion’s share of the welfare payments.

Do you see an end to this madness any time soon? Is the government going to stop the printing presses, or wean itself off of unsustainable spending? It’s because of this incessant nonsense that gold and silver are so important in protecting wealth from the escalating attacks on all sides, and it’s because of this that you deserve to have some gold and silver in your own portfolio.

Precious metals on the move

London Fix PM price at week’s end, and change over previous Friday:

• Gold: $1,306.75, down 3.0%
• Silver: $21.75, down 2.7%
• Platinum: $1,453.00, up 0.9%
• Palladium: $737.00, up 0.5%

In the news

Gold to have “growing prominence” as protection from “risks inherent” in fiat currencies
“As the world moves towards a multi-currency reserve system, gold will play an important role as a foundation asset that diversifies risk… As more currencies are included in the reserve system, gold’s relationship with other currencies will likely evolve. It is likely that gold will retain its generally negative relationship with the U.S. dollar, but it will also serve as a hedge against all fiat currencies… As the monetary system evolves to make room for alternative reserve currencies, gold will have a growing prominence as a balancing mechanism against the risks inherent in fiat currencies.” – World Gold Council (link)

Bank of America Merrill Lynch: Gold looks scary good
“We have changed our view on gold from bearish to bullish. This is still a long-term bull trend. There has been no damage to its long-term uptrend which began back at the turn of the century.” – MacNeil Curry, Bank of America Merrill Lynch’s Head of Global Technical Strategy (link)

Jim Sinclair: For gold, everything hinges on the dollar
“We are facing the annihilation of currency. We are facing the shift of America as the leading and most influential nation of the world to some form of banana republic… If it wasn’t for food stamps, we would be facing long lines of people waiting for free food… I think the dollar gets hammered. I believe we are headed for hyperinflation.” – Jim Sinclair (link)

Why gold is ascending as world’s premier currency
“Gold is not so precious because it’s scarce, but because the opposite is true: gold is precious because the annual production is so low relative to the stock. This stability and security is a crucial precondition for creating confidence. Gold has acquired this feature over centuries, and cannot lose it anymore.” – Ronald-Peter Stoferle (link)

China continues to import massive amount of gold… for a power play as global reserve currency?
“We believe it unlikely that imports via [Hong Kong] represent the only route by which gold reaches the Chinese mainland, but any figure put on other gold imports would be pure speculation given the lack of any official data. This all ties in with speculation that China may actually be surreptitiously building its gold reserves ahead of a future global reserve currency power play at some unspecified time in the future.” – Lawrence Williams (link)

Budget “deal” has only hastened de-crowning of U.S. dollar as global reserve currency
“The real problems of government largess, money printing, artificial interest rates, asset bubbles and debt have not been addressed at all. Rather, Washington has merely agreed to perpetually extend its lines of credit and to have the central bank purchase most of that new debt… Since there appears to be no political solution in sight it would benefit investors to take steps now to protect their portfolios from the de-crowning of the U.S. dollar as the world’s reserve currency.” – Michael Pento (link)

Chart of the week

Federal Reserve responsible for 100% of S&P 500’s rise
“The following chart shows that from the low in 2009, to date, astonishingly, 100% of the market’s rise has taken place on days when the Fed is buying assets. On all of the other days the market has fallen. So, what we are looking at is not a genuine new bull market. Instead, we are simply looking at the Fed pumping money in which is pumping up equity prices. Meaning, the Fed is blowing bubbles deliberately.” – Robin Griffiths (link)