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Great Green Opportunities from Dangerous Q.E.

Guest Commentary - DEEPCASTER

User Rating: / 0

Great Green Opportunities from Dangerous Q.E.







Wealth Preservation Wealth Enhancement

“Prior to the 2008 financial crisis, the eight central bank balance sheets were less than 15% the size of world stock markets and falling. In the immediate aftermath of Lehman Brothers’ failure, these eight central bank balances swelled to 37% the capitalization of the world stock market. But keep in mind that the late 2008/early 2009 peak was due to collapsing stock market values combines with balance sheet expansion via ‘lender of last resort’ loans.

“Recently, the eight central banks balance sheets have spiked to 33% of world stock market capitalization. This has come about not by lender of last resort loans, but rather by QE expansion…

“Central banks are ruling markets to a degree this generation has not seen. Collectively they are printing money to a degree never seen in human history.”

Bianco Research 01/25/2012

Indeed the Central Banks are now “printing money to a degree never seen in human history” Massive (Covert and Overt) QE it is.

And Bernanke confirmed earlier this week that Massive QE would continue by stating that QE3 was “on the table”, thus supporting a continuing “Risk-On” Rally.

But this QE will have Profoundly Damaging and Risk-Creating and Wealth Destroying Effects. President Reagan’s Budget Director, David Stockman, correctly called it “Monetary Heroin”.

Nevertheless, it will also provide Great Opportunities for Wealth Acquisition, as we explain.


Consider first Bob Chapman on the Magnitude of the Impact of QE.


“We announced our belief a few weeks ago that the Fed loan to the ECB could with fractional banking be $10 trillion. This past week we found that Credit Suisse shares our ideas as well. We believe that what this move by the Fed and the ECB is telling us that this is probably it. We also ask again how can the banks in the LTRP repay the funds in a timely manner? No plan has been presented before or since, there is no plan. Again, just throw money at the problem. The only player really capable of saving Europe is Germany and they would destroy themselves in the process. Everyone should have seen this coming but no one did except a handful of insiders. The resultant use of funds in the ECB distribution is hardly even mentioned in the media. It is a big dark secret.”

We don’t know who coined the phrase “Q.E. to Infinity” but, unfortunately, they were Prescient.

And, alas, Billionaire Jim Rogers was right when he said, “What the Federal Reserve is doing now is ruining an entire class of investors.”

And he could justifiably have said “classes of investors” because not only does this QE destroy the Wealth of Savers (through dramatic deflation of the Purchasing Power of their Fiat Currencies) but also the Wealth of Pension Funds (and thus Pensioners) unless their funds are extremely well managed.

And even well Managed Funds find it tough to beat Real (as opposed to Bogus official) Inflation Levels – 11% already in the USA, a Hyperinflationary Threshold level per shadowstats.com (Note 1).

Indeed, given the Constrained Budgets imposed by the Sovereigns’ Necessity for Austerity, Economic Growth is and will be insufficient to ever repay the PIIGS (plus France, the U.K. and the U.S.) loans. Consider that the U.S. Debt, which increased from $10 Trillion to over $15 Trillion under Barack Obama, is now 100% of U.S. GDP and can never be repaid given any reasonably probable Economic Growth and Tax Revenue Prospects.

But consider also the opportunities from Massive QE.

The world’s farmers produced more grain in 2011 than ever before. Estimates from the U.S. Department of Agriculture show the global grain harvest coming in at 2,295 million tons, up 53 million tons from the previous record in 2009. Consumption grew by 90 million tons over the same period to 2,280 million tons. Yet with global grain production actually falling short of consumption in 7 of the past 12 years, stocks remain worryingly low, leaving the world vulnerable to food price shocks.

”Nearly half the calories consumed around the world come directly from grain, with grain-fed animal products making up part of the remainder. Three grains dominate the world harvest: wheat and rice, which are primarily eaten directly as food, and corn, which is largely used as a feedgrain for livestock. Wheat was the largest of the world’s grain harvests until the mid-1990s. Then corn production surged ahead in response to growing demand for grain-fed animal products and, more recently, for fuel ethanol. Despite a drop in the important U.S. harvest due mostly to high summer temperatures, global corn production hit 868 million tons in 2011, an all-time high. The harvests of wheat (689 million tons) and rice (461 million tons) were also records.  (See data.)

World Corn, Wheat, and Rice Production, 1960-2011

”Carryover grain stocks—the amount left in the world’s grain elevators when the new harvest begins—now stand at 469 million tons, enough to cover 75 days of consumption at current levels. Between 1984 and 2001 grain stocks hovered around the more comfortable level of 100 days. In 2002, however, grain production fell 88 million tons short of demand, and since then annual carryover stocks have averaged 72 days of use, close to the bare minimum for basic food security. In 2006, stocks bottomed out at 62 days, setting the stage for the 2007–08 food price spike when international grain prices doubled or tripled in a short amount of time. For poor families in developing countries who spend half or more of their incomes on food, often grain staples, this led to empty plates and frustration. Protests erupted in some 35 countries as the number of hungry people in the world climbed above 1 billion.”

Emphasis added.

Bumper 2011 Grain Harvest Fails to Rebuild Global Stocks”
Janet Larsen, http://www.earth-policy.org/indicators/C54/grain_2012

Notwithstanding Cartel (Note 2) Price Suppression, Gold and Silver have unquestionably been the best performing Asset Class in the last decade assuming wealth protection and Profit are the Goals. And they will continue to be.

But there is another Asset Class which will almost certainly Outperform as we enter into the Hyperstagflationary Era. (See Deepcaster’s “Gaining From The Inflation/Deflation Conundrum” – 12/15/2011 in ‘Articles by Deepcaster Cache’ at deepcaster.com).

That class is Agricultural Products.


The bulk of the 80 Million / Year World Population Increase Occurs in Emerging Market Countries such as the BRICS.

Generally these Emerging Markets have an emerging Middle Class with the economic wherewithal to buy more and better food.

Clearly, Food is the first Priority of all People.

But as the excerpt above shows, even though Supply is increasing, the Demand generated by the 80 Million / Year population increase, is outstripping supplies.

In sum, demand is exceeding supply and given Demographic and Agricultural Production Realities, will continue to do so. Much of the world’s best arable land is already in production, and modern Agriculture is very energy intensive and especially Reliant on Portable fuels like Crude Oil.

Regarding the USA’s Oil-Food Future Probable Crises consider the following Excerpts from “Eating Fossil Fuels” by Dale Allen Pfeiffer and distributed by Carrying Capacity Network (www.carryingcapacity.org).

Today, virtually all of the productive land on this planet is being exploited by agriculture.

· At present, nearly 40% of all land-based photosynthetic capability has been appropriated by human beings.

· The energy for the Green Revolution was provided by fossil fuels in the form of fertilizers (natural gas), pesticides (oil), and hydrocarbon fueled irrigation.

· The Green Revolution increased the energy flow to agriculture by an average of 50 times the energy input of traditional agriculture.

· In the United States, 400 gallons of oil equivalents are expended annually to feed each American.

· Production of one kilogram of nitrogen for fertilizer requires the energy equivalent of from 1.4 to 1.8 liters of diesel fuel.

· Energy input has continued to increase without a corresponding increase in crop yield

· modern agriculture must continue increasing its energy expenditures simply to maintain current crop yields.

· Fossil fuels are nonrenewable.

· Total fossil fuel use in the United States has increased 20-fold in the last 4 decades.

· The U.S. food system consumes ten times more energy than it produces in food energy. This disparity is made possible by nonrenewable fossil fuel stocks….

· It takes 500 years to replace 1 inch of topsoil.…Former prairie lands, which constitute the bread basket of the United States, have lost one half of their topsoil after farming for about 100 years. This soil is eroding 30 times faster than the natural formation rate.

· The expanding human population is putting increasing pressure on land availability….

· Agriculture consumes fully 85% of all U.S. freshwater resources….

· Presently, only two nations on the planet are major exporters of grain: the United States and Canada. By 2025, it is expected that the U.S. will cease to be a food exporter due to domestic demand. The impact on the U.S. economy could be devastating, as food exports earn $40 billion for the U.S. annually.”

Given the aforementioned, it is no mystery what will happen to Food Commodities Prices.

In sum, two Great Wealth Protection and Profit Opportunities arise from the Central Banks Dangerous Q.E.

One is in the Precious Monetary Metals Gold and Silver and the other is in Agricultural Commodities Prices (See Note 3 below) both of which will likely be impelled ever higher by Dangerous Q.E.

Best regards,


January 26, 2012

Note 1: Shadowstats.com calculates Key Statistics the way they were calculated in the 1980s and 1990s before Official Data Manipulation began in earnest. Consider

Bogus Official Numbers vs. Real Numbers (per Shadowstats.com)

Annual U.S. Consumer Price Inflation reported December 16, 2011
3.39%     /     10.99% (annualized November, 2011 Rate)

U.S. Unemployment reported January 6, 2012
8.5%     /     22.4%

U.S. GDP Annual Growth/Decline reported December 22, 2011
1.46% /     -2.89%

U.S. M3 reported December 17, 2011 (Month of November, Y.O.Y.)
No Official Report     /     2.84%

And Office Source Disinformation continues, consider Shadowstats comments on the January 6, 2012 release of U.S. Employment data:

“The reported seasonally-adjusted 200,000 jobs surge in December 2011 payrolls included a false, seasonally-adjusted gain of roughly 42,000 in the “Couriers and Messengers” category.  That gain was an artifact of the seasonal-adjustment process and will remove itself in the January 2012 numbers.

“The problem is that this 42,000 gain is part of a seasonal pattern that fully reverses itself each January…”

“December Payroll Seasonal-Adjustment Problem”

www.shadowstats.com, John Williams, 1/6/12

Note 2: We encourage those who doubt the scope and power of Overt and Covert Interventions by a Fed-led Cartel of Key Central Bankers and Favored Financial Institutions to read Deepcaster’s December, 2009, Special Alert containing a summary overview of Intervention entitled “Forecasts and December, 2009 Special Alert: Profiting From The Cartel’s Dark Interventions - III” and Deepcaster’s July, 2010 Letter entitled "Profit from a Weakening Cartel; Buy Reco; Forecasts: Gold, Silver, Equities, Crude Oil, U.S. Dollar & U.S. T-Notes & T-Bonds" in the ‘Alerts Cache’ and ‘Latest Letter’ Cache at www.deepcaster.com. Also consider the substantial evidence collected by the Gold AntiTrust Action Committee at www.gata.org, including testimony before the CFTC, for information on precious metals price manipulation. Virtually all of the evidence for Intervention has been gleaned from publicly available records. Deepcaster’s profitable recommendations displayed at www.deepcaster.com have been facilitated by attention to these “Interventionals.” Attention to The Interventionals facilitated Deepcaster’s recommending five short positions prior to the Fall, 2008 Market Crash all of which were subsequently liquidated profitably.

Note 3: An underreported and strengthening trend should dramatically affect prices of three (at least) Key Commodities in 2012.

This underreported trend should be exacerbated by an ongoing and very well reported Financial Reality – the ongoing efforts of Central Banks to bolster the Economy through Quantitative Easing. We expect an Overt QE 3 from The Fed in 2012.

Results of the interaction of those two trends: the prices of Certain (but by no means all) commodities are likely to Soar, while others fall.

Major Domestic U.S., Canadian, South American, and Chinese Producers should be dramatically affected. And we expect the U.S. and Canadian Energy Industry to be affected too.

To consider these Powerful Trends and our resulting forecasts, read our Alert for week ending December 23, 2011 – “Forecasts: Commodities 2012 Shocker (& Buy Reco.), Silver, Gold, Equities, Crude Oil, U.S. Dollar, U.S. T-Notes, T- Bonds, & Interest Rates” posted in the ‘Alerts Cache’ at www.deepcaster.com.

Note 4: Regarding Deepcaster's December 2011 Letter, J.H., a lifetime subscriber, commented: "Keep the great updates coming!!"

Uncle Harry Schultz, legendary Investor and Newsletter Writer re. Deepcaster's Alert 1/11/12 said: "Thanks for today’s edition. Well spoken. Agree with all."

And re. Deepcaster Alert for 8/26/11, Uncle Harry said: "Congrats on another brilliant advisory. U have courage & insight."

We much appreciate our subscribers' comments and Uncle Harry’s wit and wisdom.

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