The minutes of the September Federal Reserve meeting were released today and it’s being read by traders to mean the Fed will print a bunch of new money and this drove up the markets or rather pre-inflated them. This buying of worthless paper assets with worthless paper money is referred to by the FED as Quantitative Easing. This will be the second round of this and is known as QE2, you know, like the ocean liner, of course some people are re-christening it as the voyage of the Titanic. Start short selling ice.
Now the big discussion is exactly how much money will they print, half a trillion? Two trillion? Or will the Fed disappoint the market by not printing as much as they expect? Not enough money means deflation and not inflation, talk of a gold bubble is coming up again. There are people holding a lot of gold on speculation and you don’t need to have very much of any commodity changing hands to drive the price down. All you need is for buyers to think they will hold out until the price bottoms out. The problem is that speculators often need to raise cash for margin calls and such, if too many start selling then the price will drop like a rock.
The so-called foreclosure crisis may have nothing to do with problems in processing actual foreclosures but rather a massive paper fraud. It’s starting to look like a number of the mortgages used to create the trillions in securitized debt obligations don’t even exist. The stories of people being foreclosed on who didn’t have a mortgage or changing the locks on people who aren’t delinquent are hints that the really big scandal is yet to break. How much of the whole business was simply fraud? Securitizing a mortgage pays a small commission, securitizing a non existent mortgage pays 100%. Some 2.7 trillion dollars of this funny paper is still on the bank books with no one having any idea how much of it represents real assets or how much any of it is really worth.
Corn continues to increase in price although we are still far short of the level that produced food riots across the third world in 2008, but the Wall Street speculators are just getting warmed up. The supply is much tighter this time with droughts and flooding nearly worldwide, not that there is any real shortage, just tight enough that Wall Street can jam up the works.