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It’s very early Thursday morning, in a historically manipulated financial world that has become an utter vortex of propaganda, ignorance and complacence.  As David Stockman put it yesterday, “there is a PPT, and it is the Federal Reserve.”  More broadly, the world’s “financial leaders” have become addicted to rigging everything from stocks to economic data to media coverage; as often as not, completely oblivious that what they are doing is not only wrong and ill-fated but destroying the lives of millions – if not billions – of people.  Yes, we like to portray “TPTB” consistently as if they are all sociopaths like Jamie Dimon – or for that matter, lesser “VIPs” like Jeffrey Christian.  However, many are simply weak-minded, intellectually-challenged, or too ensconced in a status quo benefitting their interests.  As I wrote three years ago in “Human Nature, Part II”…

Approximately 61% of U.S. murder cases are prosecuted, nearly all with a FINANCIAL motive.  Family, friends, and colleagues are the most likely to be murdered, nearly always with MONEY – either directly or indirectly, as the central issue; and nearly all of the 39% of unsolved murders are drug-related, i.e. due to MONEY.  Ditto for white collar crimes, such as the ones perpetrated by Washington and on Wall Street – as well as civil cases, such as the ones my wife and I watch constantly on “Judge Judy.”  Plain and simple, if financial gain is possible, by hook or crook, the average person will rabidly pursue it, particularly those in the greatest amount of need.

To that end, the only real difference between 2014 and prior eras are the bankers’ “tools” – or better put, “weapons of mass financial destruction.”  It’s far from the first time bankers have commandeered governments via lobbying and illicit “deals,” particularly during fiat currency regimes.  However, never before – in this case, commencing with the 1999 repeal of Glass-Steagall – have they had access to such massively disruptive forces as derivatives, off-balance sheet accounting and high frequency trading algorithms.  Or, for that matter, such a total ability to circumvent not only industry regulations but Federal laws.  In this particular case, as we travel through the terminal stage of history’s largest fiat Ponzi scheme, Central bank machinations have been deemed sacrosanct – not just for the “1%” that benefit from them but in the government’s eyes, the ambiguous, amorphous platform of “national security.”  And while most of what they do is clandestine, much of it – like QE, for instance – is not.

Day in and day out, “news” is produced to paint a picture conducive to financial markets – often with the day’s “meme” changing 180 degrees from the day before.  For instance, one day “good” economic news is cited for surging stocks and plunging precious metals under the guise that “all’s well”; whilst the next, “bad” economic news is cited for the exact same market moves as weakening economic activity is cited as “deflationary” for commodities, but wildly bullish for financial assets because Central banks will undoubtedly increase stimulus.  Forget for a moment the countless paradoxes incorporated into such reasoning – such as increased stimulus being bad for precious metals or expanding economic activity a negative for silver, the world’s second most widely utilized commodity.  The fact remains that right now, the only difference between 2008 and today is the one “temporary exception” of rigged markets; and all one requires to PROVE this is the knee-jerk reaction of multiple Federal Reserve Governors to last week’s “horrific” 9% decline in the “Dow Jones Propaganda Average” from its all-time high level – as discussed in “manipulation, jawboning, and prayer.”  Yes, they panicked – just as they have following each post-2008 “taper tantrum” – in intimating “moar” money printing; i.e., an Americanized version of Draghi’s “whatever it takes.”  The net effect, of course, will simply be more inflation, debt, and wealth inequality accompanied by weaker economic growth, currency wars, geopolitical tension, social unrest, and draconian government responses.  However, like rats on a sinking ship, they will always seek the high ground of money printing, rather than stand still and instantaneously drown.  At least the Titanic’s rats, in rushing to the upper decks, had hope of avoiding the worst case scenario.

Fortunately for the “99%,” the 1%’s prayers will not – and mathematically cannot – be answered.  Take, for example, the recent collapse in global crude oil prices.  TPTB desperately want to portray it as a result of “positive” factors like the U.S. shale boom.  However, like the paradox-riddled commentary noted above, such an explanation holds no water.  True shale oil has increased materially in the past three years.  However, per this chart, it has simply replaced declines in the rest of the world causing overall production to be relatively unchanged from a decade ago.  And as for demand, not only is it plummeting due to the expanding global recession – particularly in the world’s largest incremental consumer, China – but structural issues, such as the telecommuting trend that caused U.S. consumption to peak a decade ago.

To wit, the PPT may have manipulated stock prices back from last week’s lows; but in the real world, markets like crude oil are telling a decidedly different story.  As I write, WTI crude is trading at $80.50/bbl., down a whopping 25% in the past three months, barely above its pre-QE3 lows of mid-2012.

WTIC 10-22-2014

To that end, we weren’t kidding when we wrote last week that “collapsing oil prices portend unspeakable horrors” – such as the likely collapse of the rapidly depleting, heavily overleveraged shale oil industry.  And lo and behold, take a gander at this morning’s Yahoo! Finance “top story”…

Investors Pulling Money headline

Of course, today’s article is not focused on oil prices, but interest rates – particularly, the world’s most important rate, the benchmark 10-year U.S. Treasury yield.  Nearly six months ago, with the 10-year yield at 2.6%, we presciently warned of the “most damning proof yet of QE failure” – i.e., plunging interest rates despite not only a supposed “recovery,” but Federal Reserve “tapering.”  Simultaneously, we published “2.6% – ‘Nuff Said” – describing the Fed’s blatant, desperately manipulative attempts to support the 2.6% level that had formed a “technical floor” following the initial “taper” surge from the mid-1% range; ironically, mere months after executing the polar opposite strategy; i.e., doing “whatever it takes” to prevent the key round number of 3.0% from being breached to the upside (recall the “mysterious Belgian buyer).  In other words, the Fed simply reacts to each day’s new crisis – cumulatively, running around like chickens with their heads cut off.  This is why they smarmily speak of potential rate increases – albeit, not until a “considerable amount of time” has passed – when PPT supported markets are rising, but shift to panic mode when the PPT loses control, as occurred last week.

TNX 10-22-2014

Anyhow, not only was the Fed’s “war for 2.6%” decidedly lost last month, but we actually touched 1.9% last week before settling around 2.2% – i.e., the Fed’s “new 2.6%.”  Clearly, they have set up a new “line in the sand” at 2.2% level – just as they have at $1,250 gold and $17.50 silver – believing that somehow, if they can just contain these arbitrary levels, the PPT can successfully “do its “job.”  Unfortunately, as we learned last week, the “best laid plans” of manipulators don’t always work (and in the long-term, NEVER); and given the catastrophic, expanding plunge in global economic activity – let alone, commodities and currencies – the odds of manipulative success don’t appear to be too strong.

Holding precious metals this far below their cost of production in a year when clearly global production will end on a par with 2013’s record levels is in and of itself a powder keg waiting to explode.  But also trying to support historically overvalued stocks and bonds simultaneously, is in our view, a potentially catastrophic “recipe for disaster.”

This is why we sit and wait with our insurance against this inevitability – i.e., physical gold and silver; as no matter how hard they try, TPTB will not be able to hold off the forces of “Economic Mother Nature.”  Hopefully, you too will take such precautionary actions – and if you do, we hope you’ll give Miles Franklin the opportunity to earn your business.