This morning, I read an excellent article by Chris Martenson, about a very timely topic…
As far as I’m concerned, Global Meltdown III – i.e. “the Big One” – has ALREADY STARTED, with the only exception being the U.S. PPT’s maniacal obsession with masking public PERCEPTION by supporting the “DOW JONES PROPAGANDA AVERAGE,” at any cost (particularly during an election year). European and Asian stock markets are plunging and sovereign bonds crashing, while even PPT-supported American financials have not been immune. Actually, the fact that TBTF banks like Bank of America, Goldman Sachs, and Morgan Stanley are approaching their Global Meltdown II lows despite the Dow’s “relative strength” should tell you all you need to know – let alone, the carnage going on at JP Morgan resulting from 1) fallout from the MF Global fiasco, and 2) its recent, multi-billion dollar “hedging” losses.
The quote below gives Martenson’s prediction as to what will occur this time around, which I agree with wholeheartedly, particularly the bolded section:
The central banks will once again attempt to ride to the rescue with gargantuan liquidity measures. However, this time won’t work as in 2008, in my estimation. I see central banks being near the end of their ability to influence developments at this point. More liquidity will affect different asset classes differently, and for the first time raise real (and valid) concerns about the wide-scale debasement we are witnessing across the world’s major fiat currencies.
You see, 2008 was about the global realization that banks had overleveraged themselves, the dénouement of a decade of abuses following the 1999 repeal of the Glass-Steagall Act. The principal culprits were mortgage-backed securities linked to the collapsing housing bubble, but the infiltration of risky OTC derivatives – such as Credit Default Swaps – was likely a far bigger influence.
Sovereign nations had been experiencing weak real growth for years – following collapse of the global technology bubble and the post- 9/11 recession – but were not yet considered in danger of financial collapse. Thus, PERCEIVED sovereign strength – coupled with temporary commodity deflation – enabled Central banks to leverage up their own balance sheets with PRINTED MONEY, resulting in the below chart depicting exponential “balance sheet growth.”
Mind you, this chart only accounts for the period through October 2011 –thus, excluding the ECB’s “LTRO 1” and “LTRO 2” operations; the Fed’s “swap facility” and “Operation Twist”; two rounds of QE from both Japan and the UK; and reserve requirement reductions in China – let alone whatever covert activities have been undertaken, such as the suspicious U.S. Treasury buying by the bankrupt UK and ambiguously named “Caribbean Banking Centers.”
Of course, I put “balance sheet growth” in quotes because what was actually being “purchased” were TOXIC ASSETS at inflated prices – you know, to bail out TBTF entities. Thus, many of the “assets” above were mispriced at the time of purchase, and that was 2008-09. Since then, the GLOBAL economy and housing markets have dramatically worsened – while gasoline prices, irrespective, reached ALL-TIME HIGHS – so the value of such “assets” is now significantly lower. Heck, the “LTRO 1”, “LTRO 2”, and Fed “swap facility” funded sovereign bond purchases – not accounted for on this chart – are underwater already, particularly the enormous amount of Spanish and Italian government bonds purchased by already “zombified” banks.
By the way, when commodities declined in 2008, gold and silver DID NOT fall due to “deflation fears” or “liquidity pressures.” For example, if “all assets were declining,” why were U.S. Treasuries soaring? I mean, the MSM logic was people needed cash to pay off debt, so why would they be buying Treasury securities – particularly when PRECIOUS METALS have historically been the best asset class during periods of deflation? Treasuries are DEBT INSTRUMENTS OF AN INSOLVENT ENTITY – printing presses notwithstanding – while gold is simply MONEY, as it always has been. True, decades of PROPAGANDA have obfuscated this message, but not enough to cause the ULTIMATE MONEY to be sold during a time of peak crisis. Which is where the fraudulent, naked shorting, fractional nature of the PAPER suppression scheme came in.
What I witnessed in late 2008 was the same Cartel PAPER manipulations as always – made easier by the fearful nature of other markets, coupled with a lack of global understanding of gold’s historical role care of the aforementioned PROPAGANDA. Remember, Central banks were cumulatively still dishoarding gold in 2008 – excepting the Chinese, Indians, and Russians – and the average person had never heard of Precious Metals as an investment alternative. Irrespective, at the end of Global Meltdown I, in February and March 2009 – when the Dow fell 30% and banks like Citigroup, Wachovia, and Washington Mutual were bankrupted or nationalized – PHYSICAL gold and silver demand EXPLODED, pushing gold up to $1,000/oz for the first time EVER, and with it silver and mining stocks. In fact, PHYSICAL prices never fell close to the levels seen in PAPER gold and silver, as premiums EXPLODED from the surging demand for REAL MONEY AT ANY PRICE.
This time around, it is practically “common knowledge” those same banks are zombies, kept afloat ONLY by non-stop “ZIRP”/“LTRO” liquidity and fraudulent accounting rules. However, the banks are not the principal issue today; instead, it is the SOVEREIGN NATIONS, keeping both their banks and themselves afloat with the aforementioned, fatally flawed policies. Per the above commentary, sovereigns – including their “ringleader,” the United States – put their own credit on the line in 2008-09 to “kick the can down the road,” but unfortunately, the road has reached a dead end. Inflation has rocketed higher due to the 2008-09 MONEY PRINTING ORGY, assets on the sovereign balance sheets have gone bad – and would be much worse if not for QE – and their cumulative debt has far surpassed the “point of no return.”
As we speak, national debt levels are shifting from exponential to parabolic growth, soon to go hyperbolic unless RENEGED on or HYPERINFLATED away. Greece will be the first example of such as a decision being made – likely on June 17th, following its next chaotic round of elections – and it is hard to imagine similar decisions NOT being made throughout Europe this year, particularly in “collapsing PIIGS” like Portugal, Italy, and Spain.
Once this occurs, THE MARKET will make some decisions of its own, pricing in the inevitable “decisions” of “Big Kahunas” like France, the UK, Japan, and – finally – the United States. When THE MARKET gets involved, the Cartel will be DESTROYED, just as the London Gold Pool in 1968, as well as ALL attempts to suppress PMs in favor of fiat currencies throughout history. When this process commences – be it later this year, or at the latest next year (in my view) – what I spoke of in last week’s RANT, “SUPPLY SHORTAGES LOOMING,” will come to pass. Gold will surge through $2,000/oz like a knife through hot butter, and silver will complete the “ULTIMATE QUADRUPLE TOP BREAKOUT” at $50/oz, and then some. Unfortunately, per David Schectman’s sage words in yesterday’s Miles Franklin Daily Gold & Silver Summary:
…your wealth can increase and at the same time your standard of living can fall and that is where we are all headed. The worse case scenario is to lose you money and try and deal with the crushing inflation and social unrest that will accompany it.
In other words, this is not something I “look forward” to – other than for the hollow vanity of being proven right – but something I fear; for myself, my readers, and billions of the world’s inhabitants.
PROTECT YOURSELF, and do it NOW!
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