# Liquidity in The Rise Again



## Ripon (Dec 22, 2012)

St. Louis Adjusted Monetary Base (BASE) - FRED - St. Louis Fed

For 30 years the Fed Reserve kept bank liquidity (available money) at a slow growth from 300 to 800 billion. Sounds like a big increase but over 30 years or so not really. In 08/09 they blew it up to 2 trillion fearing a run on banks with the housing crunch (my spec) and Bernake a student of the great depression is doing the opposite of what they did then by increasing liquidity further now almost $3.4 trillion. This tells me they still have major fears ahead. I'm guessing it's either the city bankruptcies or stock market. The later often follows gold and silver which if that holds true means a market hit is forthcoming.

My brother plays heavy in the market, as I've noted here before. He is bailing on it right now.


----------



## Inor (Mar 22, 2013)

I was just reading about this today:

Guest Post: 18 Signs That Global Financial Markets Are Entering A Horrifying Death Spiral - BlackListedNews.com

I also saw a similar article on Yahoo Finance, but I cannot seem to find it now. Anyway, the gist of the Yahoo article was how much treasury prices have dropped the last week or so, being led by a big sell off by China. The speculation was that China's real estate bubble is much bigger than first anticipated and they are having to dump U.S. treasuries to raise enough cash to bailout their own economy.

I guess we will find out soon enough. Summer is over in a few weeks and the market volumes will start going up enough to give us some inclination which way this is going to fall.


----------



## PalmettoTree (Jun 8, 2013)

In my opinion Bernanke is fighting off the attack on the dollar to make another currency the world reserve currency. Couple this with the fact that many fariegners hoard dollars like some hoard silver. This is true all over the Americas and Japan. It does not seem to be the case in Europe.

The other factor is hacking. Requirements and safeguards have been put in place to guard against hackers. Part of this is requiring banks to actually keep reserves in physical currency rather than just numbers on a balance sheet.

Take your pick my idea or Ripon. To his point the sheer weight of the Federal Reserve money supply has never been equaled in history. It was fine when we really were the economic superpower. Now that China and India are increasing their standards of living global demand for money is growing faster than ever before.

Can one reserve currency work? Australia and China have already agreed to link their currencies. This is killing Southern Copper one of the two biggest suppliers of copper and a major supplier of silver.

Silver is a byproduct of copper and other mining. Mining less copper reduces the silver supply. Southern Copper have shutdown some of their copper mines. Is this why silver finely moved above $20? My guess is yes.


----------



## Inor (Mar 22, 2013)

Personally, I do not worry too much about China doing their trades with Russia and Australia using Yuan rather than U.S. Dollars as long as they keep the Yuan pegged to the Dollar. For all intents and purposes it is the same as if they were trading directly in U.S. Dollars. What does concern me is if China decides to start printing Yuan the way Bernanke is printing Dollars. That would end up exporting their inflation here - just like we have been doing to them since 2008.

I agree, some of the recent rise in silver is likely due to some of the mining operations shutting down when the prices dropped below $20. I also think some of the move up is just silver re-adjusting to a more reasonable ratio against gold. I have not been watching it real close, but a week or so ago it was as high as 65:1. Now it is down to about 59:1. Historically, since 1974 it has usually been around 40:1.

As I have stated in a few posts recently, there are far too many spooky scenarios right now for me to be doing much in any market (stocks, bonds, options, metals, etc.) I am waiting to jump back in until after the budget fight is decided and the debt limit is decided. There are just WAY too many variables right now for me.


----------



## Ripon (Dec 22, 2012)

Silver went from $50 to $19. Gold what? $2xxx to $1200? I didn't see the peakon gold or recall it. Bit silver fell 150%+ off its high not that long ago. It had to bounce a little. I tend to think gold / silver lead the market. I'm not into stocks much. If they taper the print on demand (joke) money supply it will mean less to nest in stocks. 

As I tried to study our 1920's and 30's great depression it's my understanding they constricted the money supple and when stocks fell (bubble burst) people flung to cash but the limited supply made it unavailable and depression set in with hefty deflation. I think bernake believes this even if not true. He thus increased both money supply and liquidity to insure we would not deflate after the housing crunch. As much as I don't like fed policy.....they may have gotten it right.


----------



## PalmettoTree (Jun 8, 2013)

I disagree that there is any still existing ratio link between gold and silver. Sure you can calculate a ratio between the two for any given period. However the only worth of such a number is for the hustlers to promote the one out of line. For example today to push the idea silver is under valued.

It may be that silver should or will move higher but not because of the gold price. The only links that were ever real were by fiat not supply and demand. Neither their supply nor the demand is dependent on the other.

My opinion is silver demand is growing and the silver supply is not. Gold demand is decreasing and the supply is increasing (only because people are willing to spend tens of thousands to find thousands in gold).

I may be mistaken but I thought China set a date to let the Yuan float. In the interim they pegged it to the Australian dollar which is floating against the US dollar. Making it an indirect float and giving Austrailing exports an advantage over US exports.

Silver fell from $45.83 to $18.33 roughly that is a 60% decrease.gold topped out at $1,850 meaning it is like diamonds a managed demand therefore a managed price IN MY OPINION. I cannot back that up except to say the relative supply is small enough for the big boys to treat it like diamonds.

Who knows being right or wrong on PMs does me no harm or good. I'm a coin collector which means I'm being managed like diamonds in that regard.


----------



## LunaticFringeInc (Nov 20, 2012)

Ripon said:


> Silver went from $50 to $19. Gold what? $2xxx to $1200? I didn't see the peakon gold or recall it. Bit silver fell 150%+ off its high not that long ago. It had to bounce a little. I tend to think gold / silver lead the market. I'm not into stocks much. If they taper the print on demand (joke) money supply it will mean less to nest in stocks.
> 
> As I tried to study our 1920's and 30's great depression it's my understanding they constricted the money supple and when stocks fell (bubble burst) people flung to cash but the limited supply made it unavailable and depression set in with hefty deflation. I think bernake believes this even if not true. He thus increased both money supply and liquidity to insure we would not deflate after the housing crunch. As much as I don't like fed policy.....they may have gotten it right.


I have been saying for months the only reason the stock market is doing well of late is the fact that Ben and company have been pumping billions of printed money into the market to keep if from crashing back down. Oil would easily be 30 dollars less a barrel if we hadn't printed so much money the last 4 years making the dollar work less monthly. Once they cut the flow of newly printed money, the stock markets gonna take a significant dive and we are going to see some inflation, hopefully not as bad as during the Jimmy Carter days. But the bottom line is we cant continue this sharade for ever. The longer we do the more painful its gonna be and the longer its going to take us to recover from it.


----------

