In Visualizing Emotional Collapse: From Euphoria to Despondency we provided our readers with a chart of the investor cycle of emotions. After the collapse of  market euphoria, like we experienced in real estate or the general state of the economy around 2007/2008, comes anxiety, denial and our current state of emotion – fear – which leads to depression.
In a June 7th email to subscribers of the Daily Wealth Newsletter, Porter Stansberry has provided the latest update to his aptly titled End of America series. In it, he warns that with the Federal Reserve preparing to remove stimulus in the form of Treasury bond purchases by the end of this month, we are entering an unprecedented period in American history – and along with it, the next phase of the investor emotional cycle: PANIC.
In the next few weeks, our country will enter a period without precedence in our experience.
On June 30, the Federal Reserve has pledged to cease buying U.S. Treasury bonds. This is the second time since the financial crisis it has intervened in the Treasury market in a major way. The program of buying new Treasury issues has been dubbed “quantitative easing II” (QE2).
We’d wager not one in 1,000 Americans has any idea (or at least any real understanding) of what has been going on in the market for U.S. Treasury bonds since the financial crisis. For the last nine months, the Fed has been printing up new dollars and buying huge amounts of newly issued debt from the U.S. Treasury – $600 billion of bonds. And these purchases followed a $1.75 trillion program of quantitative easing that ran from March 2009 to March 2010.
It is no exaggeration to say that a printing press has kept our economy going for the last two years. But what will happen when the printing stops?
While we honestly don’t know, we’re going to speculate that, in the short term, the U.S. dollar will rally and commodities will suffer a serious correction. We will see a dramatic slowdown in the rate of monetary inflation. People will think prices will stop going up. Economic activity will begin to decline. Fear will lead a lot of investors to “go to cash.” That means buying short-term U.S. Treasury bonds because they’re the most liquid, most frequently traded form of cash.
As this process unfolds, we expect to see another global panic. Especially if Bernanke’s decision to stop the presses coincides with a Republican political gambit – refusing to raise the debt ceiling, which could cause a default on U.S. Treasury bonds.
Whether the debt ceiling is raised or not, it’s only a matter of time before the Fed will have to turn on the presses again. And when “QE3” begins, it will send our creditors an unmistakable message:You will never be repaid in anything other than massively devalued paper.
That will be a horrible day for the value of our currency. It may even mean the end of the U.S. dollar as the world’s reserve currency.
Read Full Article:Â The Beginning of the Panic
If you’ve been paying attention to stock and commodity markets recently, you’ll have noticed that the markets have been dropping for several weeks. These financial markets are generally considered a forecasting mechanism for what investors expect to happen down the line. If this is the case, then investors, through asset sales, are indicating that they are either scared or uncertain about what’s coming next.
Most 401k, IRA holders and investors on Main Street probably don’t understand the implications of the Federal Reserve’s move to stop quantitative easing. But you can be assured that many of the top money managers and contrarian investors like Porter Stansberry do.
If the Fed stays true to its word and removes the crutch holding our economy upright, the entire thing may come crashing down. We’re talking about the spigot being turned off and hundreds of billions of dollars that are about to stop flowing to the US government.
The only possible result if such a thing were to occur is a stock and commodities market collapse. Obviously, those who are invested heavily in the stock markets and bought into the idea that the recovery can stand on its own two legs are going to be in for a rude awakening. When it hits the financial fan, there will be panic on Wall Street and Main Street. Remember that 1000 point “fat finger” drop in 2010? Imagine that but in the form of a sustained market collapse.
While it’s impossible to predict how far markets can fall, as Mr. Stansberry noted, in all likelihood Ben Bernanke’s helicopters will take flight shortly thereafter. QE 3 will be necessary to keep our economy from falling into a deflationary depression worse than what we experienced in the 1930’s. This means that further stimulus will happen, especially considering that Mr. Bernanke is a self-proclaimed student of the Great Depression and avoiding deflation has been his goal since the beginning of this crisis.
Once that announcement of QE3 hits the global market place – and it could be weeks or months before that happens – it will be undeniable evidence that all of the optimistic opium being peddled by global governments and mainstream media is a complete fabrication.
While the dollar may see a near-term recovery resulting from panic in financial markets and capital seeking safety in Treasury assets, it will be short-lived. This next phase of the crisis can happen very quickly, and will leave the world stunned at how serious things really are.
While history may not repeat exactly, we can look to the 2008 collapse in stock, commodities and precious metals as a possible guide of near term activity. Gold dropped nearly 30% between April and December of 2008, but it recovered and went to new highs just two years later. The same with food prices.
We would not be at all surprised to see the prices of just about every asset out there decline in terms of US dollars – that includes gold and silver. While we wouldn’t necessarily recommend selling precious metals at this time (unless you are a short-term paper trader), we can envision a period in the near future where prices correct and could potentially drop 20% or more from here. If you understand the long-term economic trend in play, however, you’ll probably be happy about any drop in precious metals, energy or food prices right now. What such a decline does is give you another opportunity to stock up on assets and preparedness supplies that will gain value over the long-term as the US dollar continues to weaken and confidence in the US government’s ability to manage this crisis deteriorates.
Bottom Line: Get ready for the next phase of this crisis if the Federal Reserve does, in fact, stop quantitative easing. We can attempt to make predictions and forecasts, but with so many variables at play on the financial, economic, monetary and geo-political fronts, it is impossible to guess with any level of certainty what will transpire. We urge our readers to remain vigilant, open minded, and flexible.
More fun than a barrel of monkeys!
chicken little once said “the sky is falling”
So does that mean that a time to buy a lot of silver and gas might be coming soon. I mean that would be a good time to stock up on certain things right? Or am I thinking this through incorrectly?
That’s where I am at with this…. IF a market crash is coming, it’s going to likely result from a shift in capital from financial markets to government bonds…. this would have the effect of strengthening the dollar (perhaps over 80 on the DXY), which would mean that assets priced in dollars would see a price slide… Personally, I think there is likely a lot of support in that 1000 – 1100 level for gold, so if it happens to head down to that area I’ll take it as a sign to start stocking up… I’d love to see silver back at $25 or lower!
I am not so much looking at inflation as a driving force for silver/gold in the long-term, but rather, panic resulting from a loss of confidence in the public sector… I think this is what drove gold during the great depression, the 70’s recession and I think it is what is driving gold now.
There is also a good chance that if these capital flows back to Treasuries happens, you’ll see commodity prices crash again, which means cheaper rice, wheat, and beans – and I could always use more of those 🙂
It might even work out well for anyone looking to buy raw land or survival retreat type properties… A significant decline in housing prices could occur while interest rates drop even lower…. the sweet spot for a real estate buy may be coming — it’ll be hard to time it, of course, so perhaps if one finds a property even now it would be a good time to just pull the trigger and go for it… (I wouldn’t, however, buy a home in Suburbia or city centers right now under any circumstance).
Mac, All your above mentioned speculative opinions are right in line with my own.
I think its time to pull every last dollar out of my 401k / 403b / IRAs, etc, pay of all my land debt, hold some dollars and then put the rest of it into solar panels, silver, gold and guns.
I read that too, and if “commodities suffer a serious correction”, I’m gonna be down at the coin store with all the worthless FRN’s I can scrape together to buy silver. Junk, rounds, bars, who gives a fuck!?
BJ,
My analysis is that there is a high probability that the FED will quit its QE2 money printing right on schedule at 6/30/11, but the economy and the stock market will begin tanking without all the stimulus money. Once everything starts to tank, the gold and silver markets will also begin to drop, but then the FED and the Congress will panic and implement another QE3 money printing scheme. Once this happens the whole world will know beyond a shadow of a doubt that the US financial situation is beyond repair and there will be panic buying in gold and silver. Either buy now and endure a 10 – 20% drop over the next several months or wait and buy when it hits bottom. Either way gold and silver are far from topping out. My suggestion would be to buy 1/2 now and wait 90 days, or so, and buy the other 1/2.
I heard on shortwave last night 6/20/11 that by the 30th of this month congress is going to pass a law making it illegal for individuals to buy and sell silver and gold.
And state governments thin k this is a good thing cause of the money….WTH??
http://endoftheamericandream.com/archives/china-wants-to-construct-a-50-square-mile-self-sustaining-city-south-of-boise-idaho
I don’t fear the Chinese corp as much as the US corp. The big problem will be when they combine forces. The Chinese troops will gladly fire on Americans, and it appears the corps are attempting a merger just so that can happen.
I’m manning the little life boat. QEIII after a dry spell will raise all the boats in the harbor for a short while. Last chance to the punch bowl to convert.
I think I am going to buy a boat just so I can name it “QE3”
Glad you didn’t name it Titanic II, eh?
http://www.mb.com.ph/articles/321794/titanic-ii-sinks-harbor-maiden-voyage-uk
http://www.telegraph.co.uk/news/religion/8549395/Noahs-Ark-could-arrive-in-London-for-Olympics.html
How about this boat….Noah’s ark sails again….LoL
Ah, Noah… the OP (“Original Prepper”) hisself!
They will not stop the presses. they will only operate them in secret. There is no other choice. The debt must be reduced through Financial Repression
http://www.silverbearcafe.com/private/06.11/shearing.html
But they will only go as fast as they think they can get away with until it spins totally out of control.
Exactly. Good to see someone else noticing that there are some pretty big shades of gray in the black/white prediction parts. 🙂
I won’t disagree with this assessment GC. While the general marketplace may think all QE and stimulus has stopped, I think the PPT et. al. will work behind the scenes on some level. Perhaps, though, they need the market to crash right now so they can get some money shifting into Gov debt… they’re to the point where they are having to dip into pension funds now… The Fed is the top buyer of US debt… there’s no way they can pull QE2 without a negative effect on asset prices… the only way they pull QE2 AND stocks and commodities still go up is if there is something going on behind the scenes..
Again, lots of variables, so i wouldn’t bet my life savings on the forecasts I made above… The only thing we can know for sure is that the whole system is extremely volatile right now.
@Mac: Agreed on the volatility bits.
That’s the problem with putting even a rough +/- fiscal quarter date on things that may go splat economically, IMHO.
It could all go splat tomorrow morning at 9am EST, or it could drag on until 2020…
I wouldn’t hold my breath hoping for things to continue as they are until 2020.
Don’t want to sound like a nut, but the sooner things fall apart the sooner rebuilding can begin.
@Ben: I agree on the rebuilding bit – better to do it while younger than older.
OTOH, in this case I was saying that, much like the Second Coming, it’s going to be pretty hard to predict with any real accuracy.
I was wondering about just that! Why stop printing and say “we’re stopping the presses…” These crooked bastards would have no problem saying they’re stopping and then just slowing (or even stoping for a short time) then slowly start back up ever so gently until they’re running full throttle again. The frog in the pot sort of deal.
Eventually it will be discovered and then TSWHTF!!! …pretty much in the same fashion as outline above except in the GCSPS (Gods Creation Secret Printing Scheme) the F turns twice as fast and there is twice as much S thrown into it. Twice the panic for your dollar!
Dunno… the original article relies on a couple of moving parts to hold it up:
first, there is the assumption that the GOP would get all stubborn and refuse to raise the debt ceiling. While possible, I strongly suspect that some sort of last-minute compromise will occur, or perhaps some ’emergency’ budget slashes, thus preserving the illusion of a rescue. This will only push off the inevitable for at least a couple of years, but it will have the desired effect of pushing things off.
second, we have the assumption that the Fed will first stop, then restart the presses. What if the Fed decides to simply slow them down?
Sorry, but those two moving parts stand out as a couple of great big ‘what if’ scenarios.
Seriously? I may as well predict my being the only male participant in a year-long all-female orgy/gaming experiment with nubile young college cheerleaders – and base my prediction on winning the lottery and getting my wife’s blessing to do it. 🙂
I cannot speak to you second consideration, but as to your first:
An article on zerohedge.com (i’d have posted a link, but my phone won’t allow it) says “Republicans are pushing for a ‘brief’ default while China warns ‘US is playing with fire'”. I still find it hard to believe they’ll outright refuse to raise the debt ceiling, but, at the same time, it serves the gubmint’s purposes!
PS: unrelated as hell, but I gotta say it: I just cleared the hurdles (credit checks suck, esp. with a Chapter 13 in there) and accepted a job that gives me $15K more useless bits of gov’t paper per year now 🙂
Now I can push to get more supplies stocked up…
Congratulations on your employment with the corporation. Just make sure you return its share of the money every year on April 15.
I knew that was coming…LoL
But congrats on achieving what you desired OQ….more preps and maybe that land you want even sooner now?
Thx, guys.
@ GC – no problem – with my skillset, I use them as much (if not more) than they use me. The gov’t gets their vig, but I get more with which to ensure my eventual independence from them. By refusing to mindlessly consume, and holding fast to God, I actually do pretty well on that front, even now. 🙂
@ BJ – thank you muchly… gotta wait until Monday to break the news, and watch my soon-to-be ex Head of IT crap his pants, then scramble for a counter-offer. I want to see that *in person*. I’m in class right now (it’s a remote live class I’m doing at home, but I know most of Exchange 2010 anyway (yay boredom!)
With a bit of luck, my goal is even better, since the corp is national, and I can work remotely (this means I can wait a year or two, then slide in a request for transfer home to Arkansas… )
So damned happy right now I’m gonna burst. As long as SHTF can hold off until I’m all settled in back in the Ozarks, life should be as close to perfect as it can ever get.
I was sincere in my congratulations…sarcastic with the Tax crack…
The corporation has to be used until it is no longer needed in the escape. I encourage people to leave, but I also know it takes time to get completely away, if you can ever get that far.
What irks me are the people who continue to rely 100% on the corp with no intention of doing anything different.
I know 🙂
– and yeah, death and taxes, but even death lost its sting about 2000 years ago – only one enemy left to conquer, eh?
It’ll take time, and more than just a little preparation and planning. OTOH, once the yoke is broken, it will (I hope) be well and truly broken.
Congrats!
Don’t forget the guns!!!
…as long as I keep finding specials on .45ACP, I’m doing fine 🙂
(Now if only I can find .338 at a decent price… may have to get a smaller rifle – damned caliber is getting as rare as a virgin in New York City…)
Porter v. Peter: Peter Schiff exposes the real story behind Porter Spanberry’s “predictions”
http://www.youtube.com/watch?v=U7ZwTXwPpjY
I was “very certain” there would be a speed bump at the silver 50 but didn’t think they would raise margins that many times. I’ll stay long again and wait for the $ bubble to implode. The 2nd half of Tarp that was tucked away will go in a hurry, what hasn’t been stolen already.
Not sure if the Queen would ride in it.
http://www.trinka.com/trinka10.htm
I’m sure we will have a QE3 but it will be secret. The FR will pay other countries a premium to buy our Bill and Bonds.
With that said, if we don’t raise the debt ceiling, we may not have a QE3. Mid to long term that will be a good thing.
Let’s face it folks what ever they do will not change the facts that we can’t pay the debt we currently owe.
Years ago I read a article about the 6900 Series of US Treasury Rules or Protocols.(not sure if they were real) These rules or protocols call for the declaration of a Force Majeure and the defacto default of the United States. Maybe its time to Declare the force majeure and get it over with. What do you think?
Another possibility would be a flight from the dollar and TB’s, because it will be all to obvious that the US can never pay back it’s debt, when the economy comes crashing through the floor. China, Japan will be dumping bonds and dollars.
In that case it will be an inflationary depression. With QE3 it will be a hyperinflationary depression.
The Fed will certainly continue with the QE program, they must!
There is no alternative since there is a serious lack of buyers for bonds.
If the Fed ceased buying bonds, social security checks would stop being sent, so would medicaid and a whole basket of programs designed to keep violent people fed and pacified.
IT WILL CONTINUE, THEY HAVE NO CHOICE.
” Get ready for the next phase of this crisis if the Federal Reserve does, in fact, stop quantitative easing.”
IF is a big word. You can bet your last bottom dollar (only to be followed by another newly printed dollar) that the Federal Reserve will continue the QE program. The QE program is the only way to lower the US standard of living without directly confronting the US public by reducing the numbers in their pay check while they are in their existing job.
It’s a race down and various methods are being employed facilitating it.
The root cause is de-industrialization and it’s fallout the shrinking middle class. The symptoms are layoffs and increasing debt to replace decreasing wealth. Too often the symptoms are being confused for the cause.
I am sitting here in the lobby of an Embassy Suites in Austin Texas watching the people enjoy the manager’s ‘Happy Hour’. I hear the ‘chit chat’ and sadly reflect that 90% of the folks here have no clue of the financial tsunami of crap that is triggered to roll over the top of all of us. Nice people, nice people for now.
You know, of course, that when the SHTF, they will all stammer “Why weren’t we warned?”
@Zemco:
Keep in mind that I can be very cozy with talking generic, bland mainstream bits among the suited type. I do it every time I find myself stuck in an airport. ( I would be brushing up on Wiener jokes right now, but w/ the new job, it’ll be a couple of months before I see myself having to travel on business.)
To see me would be to never know that I prep… I’m a geek by all appearance and demeanor, and can usually be found with my face buried in a laptop. It wasn’t until a month ago that I discovered a fellow prepper working at my current employer (started talking about guns and hunting at the smoking shelter…) Funny thing is, I’ve known him for two years now.
You see, OPSEC is not just for the locality, but for any time you’re among strangers. 😉
I understand you COMPLETELY!!! my dad and Oldest sister know, but my mom and 5-yr-old sister really dont. I see my other family members not knowing and it makes me feel so bad…
Honestly, I can only hope it all crash’s as soon as tomorrow..
I am sick of these “so called” investors and investment house’s.. it is all BS..
to “truly” think just because you have money, the money should make you more money is whacked… that is, nothing but usary money junkies… I see no difference between them or crack heads looking for a “free” hit.
but hey, who cares what I think, the table is tilted and the game is rigged for the bankster’s.. all of my words are meaningless..
Have a great day all !!
Hey, I care. I like seeing other people out there who are properly awake, even if it doesn’t change the outcome.
I stopped reading at Porter Stansberry, this guy has no real credibility.
I honestly enjoy this website and most of the articles on here. I think that they are, for the most part, well thought out and painstakingly researched.
I can’t believe that you are even mentioning Stansberry’s name. He has been convicted of fraud several times. Just search his name, fraud, and SEC in any combination of the three.
It doesn’t take a rocket scientist to figure out where our country/economy/freedom/culture is heading. Frank Porter Stansbery is a common thief who is trying to make that last quick buck off of some poor sap before it all caves in.
I sincerely hope that you do more research on who you quote in future articles.
This is why we are prepping. Why more sheeple won’t wake up is unbelievable.
The money from QE2 is sitting in the member banks beefing up the balance sheets, as I have mentioned previously. It has not yet entered into the economy.
Major corporations are also sitting on a ton of money.
The Gangster Banksters are not happy with the Franks/Dodd banking law and want a free hand to do anything they want, which is why they are holding on to the money.
That and Uncle Ben hasn’t signaled that it is time to loan the money. They may just shoot themselves in the foot waiting to get what they want. Which would be bad for US.
Will it be released to pump the economy? In a word, “Yes”. Will it be enough, soon enough, to stop the further erosion of confidence? Hard to say. It’s too late to stop a double dip. Christmas will be the break or breakeven point for most small businesses.
The economy can’t “recover” until housing bottoms. If you own a home, it will be Mr. Toad’s Wild Ride to the bottom. If WE can make it to next year at this time, and Israel hasn’t slammed Iran with a first strike in the meantime, We may have turned the corner.
Increase your preps if you can.
@ “D” right on man, people need to read into who is putting out this information and Stansberry is a crook. I suggest people watch the video that Bloodyfellow linked and see a good argument put on by a much more respectable source in Peter Schiff.
Housing is a by-product of a thriving middle class that feeds from traditional industry. For short periods debt can replace wealth. The US public has used that replacement for so long abnormal became the new normal.
The housing boom was a result of debt not wealth. The day of wealth left us years ago; debt as a replacement is now gone too. Like switching from helium (wealth) to hot air (debt) to keep the balloon aloft neither are now available.
The only way we’re headed is down. The only debate is how rapid and how far.
AWESOME! BRING IT ON!!! Yeeeeeeeeeee Haaaaaaaaaaaaa! ;0P LMAO
Glad I bought my Vests and Combat Armour Now! ;0) Tee Hee… ;0)
Mac is spot plus on this entire subject. The government is waiting & hoping right now and have many other options ready.
It seems that the world governments can keep things going forever no matter how bad things really get.
Agree with Tony here. In this day and age of technological reliance, this system can go on virtually forever.
@Salvo…..
I disagree with your ‘thesis’. Any flight to so-called safety into G-Bonds with QE3 will be so short lived that it’ll be akin to calling the absolute top or bottom of any market. Not easy to do to say the least.
In effect what I’m saying here is that QE3 foremost and ultimately ensures continued stagflation which ensures continuation as a flight to safety into PMs – especially gold. Central banks around the world are doing just that. While the price of essentials goes up while wages go down even as non-essentials deflate in a stagflationary environment PM’s BECOME an essential to those with the means to buy them. IOW they already can afford the price ramp up of food and fuel. Consequently what’s left over goes into PMs and other like assets.
People tend to erroneously categorize PMs into the non-essentials basket because ‘you cannot eat them’. But what many don’t understand is that they retain their value in inverse ratios to currency debasements simply because all other alternative ‘insurance’ hedge assets are inadequate to ensure future conversion into whatever future asset provides the greatest return with the least risk.
In short, you do your readers a disservice by implying that a future dip in PMs is forthcoming and that then is the time to buy. The time to buy is now if one doesn’t own any and buy again IF it drops further. To wit, keep some dry powder for such an event but by no means plan to wait and buy through timing the market. The geopolical risks at hand alone are enough to require one to hedge against said risks by owning PMs AT ALL TIMES in sufficient quantity to help ride out a currency debasement crisis. That’s where we are and it looks will continue to be for the foreseeable future.
RH
they will probably continue QE3 but without telling us.
fact if you take the total silver bullion of the comex & world gov stockpiles it’s current total value is round the same as 2-3 days of US debt increase……
If silver gets cheaper BUY BUY BUY if it gets more expensive BUY BUY BUY
The problem is trying to keep such a big lie going,at some point it well fall apart.sooooo much dept.so many people without a clue.Im going to watch the debate,i figure one of these guys is the next president,i like Ron Paul,he is different.but i wouldnt want the job,its like being handed a big pile of crap and everyone says,you won!
I thinks it time to cash in my IRAs and prepare to convert to GOLD as soon as the prices drop.