Does this smell funny to you?

[beauanderos]

Gold is up $33 and silver hasn't budged? Are they now going to leave gold alone to try and divert attention from silver?

[aristobolus]

Why not? They have tried about everything else!

[brian0918]

Gold needs to do some catching-up after the ride silver just had. Of course, if the ratio is going to get back down to even 20-to-1, that also means that silver is going much, much higher.

[Corsair]

Resisting a very strong urge to quote the title and simply reply, "That's what she said."

Must...remain....mature!

[TXBullion]

Resisting a very strong urge to quote the title and simply reply, "That's what she said."

Must...remain....mature!

I cant hold back, thats what she said

[Rodebaugh]

same thoughts here. A shame to, since I am playing that AU:AG ratio like a wii.

[slvrbck]

This whole last year has smelled funny. . . is it just me, or has anyone else noticed the eerie similarities b/w the last few months, and the last few months leading up to the 08' crash. The silver run-up, while on a different scale looked quite similar to what is happening now when it ran up to the low 20's (you guys that have been around for a couple years know what Im talking about). Oil was pushing to levels that were not compatible w/ a healthy economy, I saw $3.95 on my way home from work tonight!!! The US stock market seemed grossly overvalued, and the dollar index was plummeting into the low 70's. . . look familiar? I dont know, i guess back then the world still had faith in us and our govnt and we were able to QE and bail ourselves out which managed to work for a few years. What option do we have now other than announce an end to QE2 which may spring a little strength in the dollar, probably slip the stock market a little. . . and then what???

[fb101]

QE3

[aristobolus]

And then QE4!

[theo]

Let me see if I understand the nature of QE2. The main part of quantative easing seems to be where the FED creates money in order to buy government debt. This also takes the form of what I believe is called "the carry trade" where the FED lends money to member banks at basically 0% interest and the banks in turn buy Gov't debt at about 3% interest. These tactics are unlikely to stop since there are not nearly enough genuine investors who are willing to buy U.S. gov't debt at such low interest rates.

I've also heard that QE2 is propping up the stock market. However, I haven't heard it explained exactly how this is being done. I would guess that some of the money from the FED loans is being used to buy various stocks and bonds (including munis) in order to make the major markets look more stable than they actually are.

Am I missing anything?

[beauanderos]

Let me see if I understand the nature of QE2. The main part of quantative easing seems to be where the FED creates money in order to buy government debt. This also takes the form of what I believe is called "the carry trade" where the FED lends money to member banks at basically 0% interest and the banks in turn buy Gov't debt at about 3% interest. These tactics are unlikely to stop since there are not nearly enough genuine investors who are willing to buy U.S. gov't debt at such low interest rates.

I've also heard that QE2 is propping up the stock market. However, I haven't heard it explained exactly how this is being done. I would guess that some of the money from the FED loans is being used to buy various stocks and bonds (including munis) in order to make the major markets look more stable than they actually are.

Am I missing anything?

I think that the QE's and non-existent interest rates may well result in propping up the stock market, but perhaps it is an indirect effect. You can't earn decent returns from savings, or treasuries, so investors are forced to take on greater risks for more rewards... and turn to equities to accomplish this. I think we're not gonna see the end of QE's until we're all queasy.

[theo]

I agree, low interest rates will drive up the markets by forcing investors into stocks. However, I've had the impression the FED isn't stopping there. There's no direct evidence, of course, but I would not be surprised to learn that the FED creates money and makes sure it gets into the hands of certain favored entities (banks, organizations, wealthy individuals etc) who in turn buy securities. This money could also be used to help certain financially troubled, but politically friendly states avoid default.

My question is; if the FED must continue to buy gov't bonds to keep interest rates low, what does Bernanke mean when he says QE2 will end in June? Is the FED actually going to stop "expanding its balance sheet" to buy treasury debt, because if they do the bond market may well collapse.

[brian0918]

The government props up financial institutions by buying up their insolvent assets (e.g. mortgage backed securities), which helps prop up the stock market. The Fed may not be the one doing this, but it has the same effect: delaying the inevitable, and making the crash all the worse.

[BullionStar]

This whole last year has smelled funny. . . is it just me, or has anyone else noticed the eerie similarities b/w the last few months, and the last few months leading up to the 08' crash. The silver run-up, while on a different scale looked quite similar to what is happening now when it ran up to the low 20's (you guys that have been around for a couple years know what Im talking about). Oil was pushing to levels that were not compatible w/ a healthy economy, I saw $3.95 on my way home from work tonight!!! The US stock market seemed grossly overvalued, and the dollar index was plummeting into the low 70's. . . look familiar? I dont know, i guess back then the world still had faith in us and our govnt and we were able to QE and bail ourselves out which managed to work for a few years. What option do we have now other than announce an end to QE2 which may spring a little strength in the dollar, probably slip the stock market a little. . . and then what???

Smells very funny to me also. Silver wise, I'm anticipating a correction to shake out the weak hands certainly.

[Diggin4copper]

Looks like they raised the margins on silver on Friday which caused it to slow down..

[68Camaro]

There will be "another" crash. (Actually, we've been in the middle of it since 2007, but we can't see the overall perspective yet.) Anyway, expect a double-dip, the second phase of which will be far worse than 2008. Comparing now to 2008 has little meaning because it's the same crisis, difference phase. If you want to compare, compare to the 1930s, and even that analogy doesn't work in detail as the circumstances aren't the same - different driving forces and world views. The end results today will be dramatically different than the 1930s due to the different circumstances. In the 1930s we were still on a gold standard and the dollar still had that as a basis. So while the dollar was devalued, the economy recessed, industry sufffered, and people had trouble with jobs and with buying and selling, in the end the dollar still had value, and there was a point to having those FRNs. Not so today.

Decide on your convictions and hold true to them. At some point we will have to stop assessing savings in terms of FRNs and start re-assessing savings in terms of ounces of PM. When the second phase of the crash comes it may take any of several different forms - prepare mentally for all of the possibilities. (For example, will economy crash before a hyperinflationary period, or not?) It is possible that for a time the PMs may appear to have lost value. If so, that will be very temporary, and perhaps just a mirage. You still have the PMs, and at some point the PMs will retain their traditional buying power, while the FRN will become worthless.

[brian0918]

The Great Depression wasn't so bad, in comparison to the upcoming potential outcomes for the US - particularly hyperinflation. At least during the Great Depression, prices were going down. If we have hyperinflation, we'll be broke *and* prices will be going up.

Even Weimar Germany had it better - they still produced staple goods, and could easily revert to barter as need be. People had personal connections to local producers of bare necessities, so the reduction in the standard of living was not traumatic. Once the new currency was put in place, prices were stable. The public considered it a miracle - but it was simply the result of reverting back to a gold standard.

Even if the US reverts back to a gold standard, we will face a new reality where we are no longer the reserve currency, and can no longer buy imported goods with borrowed money. Whether major price inflation or deflation occurs, there will be a global move away from the dollar as a store of value. Will they move toward the traditional store of value - gold? It seems likely. In any case, those countries will be able to price the US out of the market, as their currencies will appreciate more than the dollar, so the US standard of living is going to decline. We will have to start *producing* things we need again, which means rebuilding all the manufacturing infrastructure that we've let go into decay these last few decades.

[68Camaro]

The Great Depression wasn't so bad, in comparison to the upcoming potential outcomes for the US - particularly hyperinflation. At least during the Great Depression, prices were going down. If we have hyperinflation, we'll be broke *and* prices will be going up.

Even Weimar Germany had it better - they still produced staple goods, and could easily revert to barter as need be. People had personal connections to local producers of bare necessities, so the reduction in the standard of living was not traumatic. Once the new currency was put in place, prices were stable. The public considered it a miracle - but it was simply the result of reverting back to a gold standard.

Even if the US reverts back to a gold standard, we will face a new reality where we are no longer the reserve currency, and can no longer buy imported goods with borrowed money. Whether major price inflation or deflation occurs, there will be a global move away from the dollar as a store of value. Will they move toward the traditional store of value - gold? It seems likely. In any case, those countries will be able to price the US out of the market, as their currencies will appreciate more than the dollar, so the US standard of living is going to decline. We will have to start *producing* things we need again, which means rebuilding all the manufacturing infrastructure that we've let go into decay these last few decades.

All good points, though hyperinflation itself really can't last more than a year or two before a reset to something different is forced to happens. (The reason people should be stocking up for that period!)

If we can at least manage to stay independent through this as a country, and retain at least some meaningful democracy (God help us if we go into full socialism, or worse), this will - in the long run - be good for us. However, I probably won't live long enough to see the other side of this. There are two entire generations of Americans that have too much of a wellfare mentality, and that mindset will have to be painfully burned out of us. This country has the self-sufficient resources to be largely independent, if it chooses to work hard and be independent. It just needs the will for it, and the leadership to steer through it.