The Federal Reserve's balance sheet now includes over 1/3 of all outstanding treasury debt and, of course, the total rises each month with $45 billion of treasury purchases. But the Fed doesn't charge any interest on these treasury bonds.
" The Fed’s primary source of income is interest earned on the U.S. Treasury securities it holds; after covering expenses, the Fed distributes any profit back to the U.S. Treasury. For more information on the Fed’s structure, see the September 2003 Dr. Econ"
Since the U.S. never pays back any of it's debt but merely rolls it over every time it comes due, why in the world would the government encourage the Fed to start tapering. The government needs this free source of credit (which actually means "free cash") The interest expense on the country's massive debt load is rapidly declining month after month with the Fed continuously monetizing U.S. debt. Consequently, rising inflation which usually stimulates rising interest rates should not worry the government as it gets a free pass on paying any interest to the Fed.
I think the chemistry between the government and the Fed has reached nirvana. If they were smart, they would step on the gas pedal and increase the amount of QE rather than slow it down (taper). Just imagine! When the Fed owns all the U.S. treasury debt, the country could eliminate the "unnecessary" interest expense on this debt which currently stands at an artificially low level of approximately $340 billion. And just like that....poof!....the government can spend that $340 billion elsewhere.
QE to infinity! What's wrong with this picture? Borrowing for free with no need to pay back is as close to free money as it gets. Or should I say free fiat? Money for nothin'...kicks for free!
The Weimar Republic enjoyed the same benefits of free fiat to pay their debts as well....at least for awhile.
Got gold? Got silver? Got EXK?
Look at the 4 idiots leading the 2 political parties in the senate and the House of Representatives. They are jokes wearing mantles of human beings. John Boehner and Nancy Pelosi in the House of Representatives, Harry "the idiot" Reid, and Mitch "one foot in the grave" McConnel in the Senate. Do they inspire confidence anywhere in this universe?
Then we have Obama as our commander in chief with his approval ratings now dipping way below 50%. Obama is as clueless in domestic policy as he is in foreign policy. Affirmative action coupled with the Peter Principal has elevated another government idiot to the highest level of our country. God help us!
Couple all of this with the designated protector (agency) of our currency, the Federal Reserve, who has totally lost sight (as well as transparency) over monetary policy. The Federal Reserve at the conclusion of their last FOMC meeting revealed they are totally clueless! They have printed $2.9 trillion of free currency during the last 5 years as a grand experiment to "bolster" our economy with no effect whatsoever. So what happens to the free float of all that additional fiat now floating around in the marketplace? Well....that gargantuan expansion of credit festers like a malignant cancer underneath the surface of a complacent population that demands government crutches to finance a free life style support system...and the Federal Reserve supplies the conduit. How long can this "easy ride" last? Tick, tock, tick, tock.... Maybe it can last for a couple more months. Maybe not.
And so we have government leaders who inspire absolutely no confidence in governing with approval ratings heading toward new lows and a Federal Reserve hell bent on destroying the U.S. monetary system. Our fiat dollars are based on the "full faith and credit" of the United States Government. Unfortunately, our credit is shot and our faith in government has eroded beyond repair.
The U.S. dollar will soon be toast. Got silver?
No, really. The U.S. government is on the eve of a government shutdown, Italy is virtually collapsing, Greece is arresting opposition party leaders and facing civil unrest.....and silver and gold are trading in the red. Not only is the entire surface of the earth today becoming a visibly riskier environment to live, as well to invest, but we have new pronouncements coming from our money printing Federal Reserve. Non-voting Fed President Kocherlakota is now clamoring for accelerated money injections, above and beyond the current $85 billion/month, in order to give our moribund economy a nice kick in the pants to get it going.
Based on history, based on sound economics, based on fiat currencies sky-rocketing above the stratosphere.....silver and gold should be enjoying a ride in the green today. What the heckfire is going on? And EXK suffers today..... It is days like this that make me hit the Jack Daniels early in the morning!
Porter Stansberry has produced a very lengthy audio recording which dissects current events, debt levels, but most importantly, the dollar losing it's "reserve currency" status. Stansberry has excellent credentials. He makes a good case that the process of the fall of the dollar is already in progress and as a result, inflation in America is about to go ballistic. Of course he recommends "hard" asset investments, especially gold and silver. He predicts the collapse of the dollar will result in a catastrophe 10 times worse than the 2008 credit crisis. I, for one, agree with him. More importantly, Stansberry suggests the collapse could take place faster than anyone expects since most Americans, due to "normalcy" bias, believe that it can never happen....as they can't conceive of the U.S. dollar collapsing after such a long run and that "America is great".
I think Porter has nailed it. EXK investors should be just fine. There are no guarantees short term but in several weeks EXK investors should see daylight like never before.
Yes! Don't sell your shares at these bargain basement prices. This should be buying time for those who still have some "dry powder".
What is truly amazing is that EXK just announced stellar earnings, silver is currently up a nickel, and EXK share price is now in the red. Does this make any sense whatsoever????
Today, the debt was reported by the U.S. Treasury to be $17.075. Not too shabby....an increase of $330 billion in one day. Oh yeah. The treasury had to rebalance the books for rigging government accounts since the May debt ceiling was reached.
Will the U#$%$ $18 trillion in "official" debt by the end of 2014? And the answer most political leaders will offer is....."Who cares"?
And if interest rates go back to historical norms of around 6% (blended) on U.S. debt, the interest expense will be just a tad over $1 trillion per annum (on $18 trillion of debt). Again.....who cares? Janet Yellen will cover the bill! Not to worry. All will be well!
As the fiat paper is flying about, some smart thinking people will seek safe sanctuary in silver and gold. So you have to ask yourself. Does EXK print fiat paper or does it profitably mine silver and gold? Any other questions?
As I understand the tax, it is not on gross revenues but it's not on just taxable income. It's income before interest, tax, and depreciation deductions....something like that!
Pretty heavy tax! But you are absolutely correct in suggesting that the forward looking statement should be very interesting. I can't imagine Brad Cooke getting very interested in mining silver and gold with these low PM prices and the new, very burdensome, tax. Maybe Brad will announce more worker cutbacks (lay offs) to conserve cash. That should make the Mexican government look really stupid. But then again, governments never take credit for unintended consequences. They just look for the "free money"......some of the most stupidest people on earth! "Stay servile my friends"
Nevada will likely change their state constitution in 2015 to allow for increased mining taxes. It looks like it is coming! From Nevada's largest circulated newspaper:
"Leslie is optimistic that the mining tax will pass and two-thirds of legislators will raise mining taxes in 2015.
“Clark County voters want the mining tax raised,” Leslie said. “They wouldn’t dare not increase these taxes. The average person in the state cares about and understands the issue. The mining industry is tearing up our land and taking nonrenewable resources.”
Nevada Mining Association President Tim Crowley said the industry has not decided what steps it might take to induce voters to kill the tax resolution.
He did note, however, that gold prices are falling, a trend that would affect the Legislature’s ability to extract more taxes. Gold sold for $1,388 an ounce Friday, down $318 from six months ago.
“Nevada mining operations, like any business, have to adjust to changes in demand as well as increasing operating costs,” Crowley said. “While challenging, all mines are addressing the recent drop in gold value with the utmost seriousness and appropriately adjusting their business models.”
Excerpt from Adam Hamilton's 321Gold article today:
"But unfortunately 2013 proved to be another extreme anomaly like 2008's stock panic. The Fed's QE3 campaign led to levitating general stock markets, resulting in a mass exodus of capital out of the flagship GLD gold ETF to chase general stocks. This resulting unprecedented GLD bullion selling pushed gold prices lower, eventually triggering a couple of ultra-rare futures forced liquidations. So gold plunged in Q2.
That was actually gold's worst quarter in something like a century, wildly unprecedented in modern times. Even though market history is crystal-clear, after extreme selloffs come extreme mean-reversion rallies, gold-stock traders freaked out. They sold and sold and sold gold stocks, forcing their prices far lower than gold warranted. You can see the huge disconnect today in this chart, the biggest of this entire secular bull by far.
Much like during 2008's stock panic, gold stocks plunged far faster than gold earlier this year. While gold dropped back to levels first seen in late 2010, call it a $1300 midpoint, the HUI plunged to levels first seen way back in late 2003! The problem is this is a massive, crazy fundamental disconnect. Back then the prevailing gold prices were only around $400 per ounce! For silver stocks, silver was only near $5.25."
EXK keeps growing production and reserves quarter after quarter but stock price is lower today than when silver was priced at $5.25/oz. Go figure!
And then I listen to the guest speakers on the "Nightly Business Report" tonight and they mindlessly suggested that once the next budget deficit is resolved in March all uncertainty will then be removed, the stock markets can continue their climb to higher highs. Really? Just snap your fingers, debt ceiling vanishes, and everyone can continue to "be happy...don't worry"!
These mainstream commentators never address the problem of ever increasing debt or the benefits of continued (unabated) quantitative easing (free money injections) that must be continued to keep the party going. Don't worry, everyone....the stock market will reach new highs in the second half of 2014. THE CAN MUST BE KICKED DOWN THE ROAD! And...(they must assume) our foreign creditors will continue to slurp up our unlimited issuance of new treasury debt like they have no choice in the matter.
And I used to think the Nightly Business Report had something worthwhile to offer!
The dollar has crashed below 79.50 which some Australian Bank analyst last Thursday suggested was a trigger point for continued selling the USD down to 77. For you technical analysts out there, is that possible? If the dollar suddenly plummets to 77, then gold should rally well above $1350. And there are other "techies" out there that suggest a rise above $1350 should send gold quickly to $1425. And we all know that silver should outperform gold....so EXK is looking extremely bright!
Looks like our benevolent handlers in Congress just reached a budget accord and by the looks of it, they've kicked the can down the road once again. How will the stock market, currencies, and metals react tomorrow? Looks like the US dollar right now is hovering below 80 on the currency index. If it sags below 78 in the coming days, the metals should enjoy an upward ride. Meanwhile, silver and gold are showing signs of weakness...but that could just be a momentary fluke.
I'm hoping for another day in the green for EXK. We might be seeing signs of a "trend".....upwards. Lord only knows EXK is grossly undervalued below $4/share. GLTA
"Whopping 932,000 Americans Drop Out Of Labor Force In October. Participation Rate Drops To Fresh 35 Year Low. But more importantly, the number of people not in the labor force exploded by nearly 1 million, or 932,000 to be exact, in just the month of October, to a record 91.5 million Americans! This was the third highest monthly increase in people falling out of the labor force in US history. At this pace the people out of the labor force will surpass the working Americans in about 4 years." (From ZeroHedge)
So......everything looks just fine and the Fed can now start tapering like there is no tomorrow!
P.S. With so many people dropping out of the workforce and new jobs increasing (manipulated) beyond anyone's expectations, why did the unemployment rate rise? Some government minion dropped the ball on this one as the math would tell you a rise in unemployment would be impossible!
As always, the Fed will likely announce they plan to initiate "tapering sooner rather than later". Nothing like another round of "jaw boning" to get things moving in the right direction. But...then they won't taper, at least for a couple of years. So the Fed announcement will move markets, and PM's will take a temporary hit. And then we (EXK) will have to wait a few days for reality to set in before the rebound in PM prices.
But there is a slight possibility, that the Fed will correctly anticipate falling jobs in October before the 11/8 NFP announcement of October numbers are reported and might issue forward guidance suggesting they are prepared to ease asset purchases or possibly "increase" them depending on upcoming data in light of fiscal policy difficulties. And that would be extremely positive for metal prices. Imagine...an increase in quantitative easing. You have to love the smell of money printing in the morning!
So....we wait until Wednesday at 2:15 pm EST to find out what the man behind the curtain will announce....to all of us minions. Everything until that time will just be "drama". But don't expect big price moves until Wednesday afternoon. Regardless, hang onto your EXK shares. You will be glad you did.
I suggest the new Mexican tax has pretty much been digested into EXK's stock price by now. Since I am convinced the silver price is close to an inflection point and will head higher and that EXK is a very successful miner in it's environment, I bought back half the shares I sold a few days back.
.....like anybody cares about my idiotic trading.... Ha ha. GLTA
"Washington (AFP) - The United States will release $1.6 billion in aid to Pakistan, boosting a flow of assistance that slowed in recent years amid a downturn in relations, an official said Tuesday.
The State Department has notified Congress that it intends to release the funds already budgeted for in previous years including the fiscal year 2012."
Please Obama...increase my taxes so you can find another muslim country to donate more of our money! We don't have any need for funds in the U.S.A. Everything is just fine!
China is our biggest creditor and now they want the entire world to dump the dollar as a "world reserve currency". They have never been this vocal before!
"Debt Ceiling: China Calls for World to Be 'De-Americanised.'
"Chinese government mouthpiece says 'Pax Americana' has failed on all fronts ... Xinhua calls for de-Americanised world. China's official news agency has called for the creation of a "de-Americanised world", saying the destinies of people should not be left in the hands of a hypocritical nation with a dysfunctional government. Heaping criticism and caustic ridicule on Washington, the Xinhua news agency called the US a civilian slayer, prisoner torturer and meddler in others' affairs, and said the 'Pax Americana' was a failure on all fronts." – International Business Tribune -
Since China has no fear of risking the value of it's holdings of treasury bills when the dollar loses value after being tossed as the "reserve currency", China's next step, if they are serious about "de-Americanizing' the world would simply be to initiate a mass liquidation of it's holdings of U.S. treasury bonds. Suddenly putting $trillion of their U.S. treasury bills up for sale would decimate our bond market as well as our dollar.
China does not have to fire a single shot to bring down the U.S. So...should we listen to them? China has the power to send silver on a rocket ride. Got silver? Got EXK???
EXK should be saluted for such an outstanding quarter in light of depressed metal prices BUT how would the new Mexican taxes impact EXK's results? Well....you would have to subtract a little more than $2.5 million from net earnings (and hand it over to those wonderful government officials to distribute to....whomever....other than EXK shareholders). Here how that is calculated from today's earnings release:
New 7.5% tax on EBITDA ($29.3 million) equals $2.2 million
New 1/2% tax on gross revenue ($67.8 million) equals $340,000
Add them together and you get $2.5 million plus. Not too shabby. EXK still generated decent numbers even after figuring out the impact of the new tax (on future earnings, of course). Nevertheless, this new tax would have reduced net earnings by 20.3% if they had been imposed on this quarter's results. Now...that sounds like a more significant impact! Just how do you spin the numbers?
Has this 20% hit on future earnings been fully discounted into the price of EXK....yet? I dunno.
P.S. (Cheerleading effort) I'm still banking on EXK rising above $5/sh before mid-January primarily due to my expectations of rising silver prices before then. Mainman and I need to make some moolah on our Jan 14 calls! Ha ha
The phony statistics are screwing the precious metals......again. So EXK and other miners are pushed down deeper into the shadows. Ugh! This is getting ridiculous!
The U.S. debt clock clocked in above $17 trillion for the first time today. Another feather in the hat of America's fine achievements! Does anyone doubt that we will hit $18 trillion before the end of 2014?