Debunking Tapering Mythology

January 27, 2014

One could only hope that after nine, nauseating months of lies and half-truths from the U.S. Federal Reserve and mainstream media on so-called “tapering” that we would be spared any more of this nonsense in 2014. Sadly, since the mainstream propaganda machine found this a very fruitful form of lying in 2013, and since it is rapidly running out of any other semi-plausible fiction to use in holding together our smoke-and-mirrors economies; it appears that “tapering” is here to stay – i.e. talk about “tapering”.

…The improving economy led the Federal Reserve to begin tapering its bond purchases this year. Monthly purchases of government bonds and mortgage-backed securities will be reduced from $85 billion to $75 billion this month, and it is likely that the quantitative easing program will come to a close by the end of 2104.  [sic]

The delightful “Freudian slip” above by the Conference Board of Canada is the nexus of all this propaganda, and so it is the first point which must be stressed in debunking the lies. There is no “tapering” taking place in the United States, in fact most likely the money-printing has increased. A previously familiar chart (below) demonstrates this.

Where is the supposed “tapering” which took place last year? It’s not here, meaning that no reduction in the money-printing ever took place.

But regular readers undoubtedly have another question. Why does this chart of the U.S. adjusted monetary base now appear stretched-out, rather than the simple, vertical line that they are used to seeing? Because a chart which used to be scaled in decades is now scaled in years. Throughout the entire (modern) history of the U.S. dollar; changes in the monetary base have been so slow/gradual that the chart which measured the monetary base could be scaled in decades.

Today, with the Federal Reserve’s virtual “printing press” running white-hot, 24/7; the only way we can still see incremental changes (i.e. anything other than a sheer, vertical line) is by stretching-out the scale of the chart dramatically. The simple fact that this chart has been re-scaled tells us there will be no tapering. No reputable institution would change the scale of a key statistic temporarily, for just a few months. If the Federal Reserve had any serious plans to “taper”; it would have never changed the scale of its own chart measuring the (official) money-printing.

Naturally, this necessitates flashing-back to December. After nine months of empty talk, we finally saw some sham-action from the Federal Reserve: an announcement of “tapering” – which could only actually be seen when viewed under a microscope.

Why, after month after month of extreme hype from the mainstream media and B.S. Bernanke himself, did we see the Federal Reserve engaging in the tiniest cut it could (supposedly) make? Because the crippled U.S. economy is now so frail that even pretending to have “tapered” the money-printing by any significant amount would have detonated all of its various market bubbles.

Indeed, as we observed in 2013; the first six months of talk (alone) caused the interest rate on 10-year Treasuries to practically double. Cumulatively, this had the effect of sucking more than $50 billion per month out of the debt-saturated U.S. economy, in the form of increased interest payments. It was causing such severe economic pain that in September, Bernanke finally confessed there would be no tapering, as the U.S. economy was now a Ponzi-scheme which could no longer afford to pay “market rates” of interest on its debts.

So how do we resolve the (supposed) paradox of being told that U.S. money-printing has since been trimmed – by the tiniest of amounts – while the chart which measures this money-printing continues uninterrupted in its near-vertical line? Because there are two pipes carrying the money-printing of the Federal Reserve (to the vaults of Wall Street), and the Cheap Magician running the Federal Reserve never tells us about what is in the other pipe.

Prior to the era of “QE” funny-money; all of our new “money” was simply borrowed into existence. This meant that our currencies were units of obligation. This is not as good as having gold-backed, real money – i.e. units of value – but it’s better than simply “units”.

This is what has been accomplished through “QE”, but (of course) never explained to the people. All new U.S. dollars (and all of this quantitative-easing funny-money across the Western world) are now neither units of “value” nor “obligation”, simply units. As such, there is now no possible basis to impute any value whatsoever in the U.S. dollar, and it is one of three reasons why the dollar is now already completely worthless.

But all of this discussion still only revolves around one pipe, the “QE pipe”. This is the pipe carrying the units which the Cheap Magician openly/officially discusses and at which he (and now she) points. However there is also a second, (larger?) secret,  unofficial pipe leading from the Federal Reserve to the vaults of Wall Street.

This is the pipe which carries the endless gravy-train of so-called “0% loans” from the Fed to the tentacles of the One Bank. Of course, with no interest ever attached to it; these 0% loans create no obligation. Thus these new “0% loan” dollars are not units of obligation, but are also mere units -- totally indistinguishable from the “QE” funny-money. Indeed, the “0% loan” is simply a different euphemism for the same thing: utterly worthless currency, from which no possible value could be imputed.

No one knows how many trillions of units flow through the second, secret, unofficial pipe leading from the Federal Reserve. Thus it now becomes apparent how the Fed can pretend to “taper” (with one hand) while it actually continues – or even increases – the actual rate of unit-printing (with the other). This is one of the many reasons why the Federal Reserve obsessively refuses the “public audit” which would be necessary if it were to ever become a legitimate institution: to partially conceal the insane extent of its unit-printing.

All of the lies about “tapering” are nothing but the act of a Cheap Magician. He (she) gestures openly with one hand to distract the Chumps in the audience, while the second, hidden hand performs “the magic”. It is an act which could not possibly deceive an audience of astute 10 year-olds. Yet it is apparently ‘clever’ enough to fool all of the drones in the mainstream media – and all of the slack-jawed Sheep who continue to lap-up this tripe.

One cannot discuss tapering-mythology, however, without briefly relating these lies to the precious metals markets. We’re told that “tapering is bad” for gold and silver (even though no tapering is actually taking place) meaning that talk of “tapering” is – supposedly – bad for gold and silver. But not even this fragment of the lying has any rationality to it.

As usual; we are provided with nothing but an argument-fragment by the mainstream media, because if we were given the entire (totally flawed) argument it could not even fool the Sheep. There are a litany of hidden assumptions excluded from the lie that “tapering is bad” for precious metals.

At the top of this list we have the simplest of premises. “Tapering” could only be bearish for gold/silver if a significant amount of this funny-money was (previously) being invested in precious metals. However, as we all know, this is totally false – and thus the propaganda machine doesn’t even attempt to provide any evidence for its argument.

None of this “QE” funny-money was ever being invested in gold/silver. In fact; significant amounts of this paper was/is used to short precious metals. This is one of the reasons why “tapering” – if it actually existed – would be clearly bullish for gold and silver. But there is a second (and much bigger) reason why any actual reduction in the unit-printing would be ultra-bullish for gold and silver.

It is our Ponzi-scheme economies, themselves. As previously noted; even too much talk about “tapering” is enough to seriously destabilize the U.S. economy. Any actual, significant reduction in the unit-printing must cause a complete implosion of the U.S. economy (and likely all Western dominoes). The chart above is mathematically conclusive proof of this.

All economic exponential functions have only two theoretically possible outcomes. Either they simply explode (soon) when the exponential function runs its course, or they implode – the moment the fuel for the exponential function is withdrawn. It is mathematically impossible to ever have a “soft landing” from any exponential curve, as this is the mathematical representation of “out of control”.

Let me summarize. No “tapering” of any kind has taken place with respect to U.S. unit-printing, and none will ever take place, unless the goal is to deliberately detonate these Ponzi-schemes. Thus if any (real) “tapering” occurred it would be ultra-bullish for gold and silver. However, if no “tapering” takes place; our economies will still explode (and soon) – which is also ultra-bullish for gold and silver.

All roads lead to higher gold and silver prices.

Jeff Nielson

Jeff NielsonJeff Nielson is co-founder and managing partner of Bullion Bulls Canada; a website which provides precious metals commentary, economic analysis, and mining information to readers/investors. Jeff originally came to the precious metals sector as an investor around the middle of last decade, but soon decided this was where he wanted to make the focus of his career. His website is

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