I wasn’t planning to write this morning (Friday); and in fact, will have completed this article before the December NFP payroll report is released. Regarding said report, my advice is the same as always regarding the “island of lies” reporting of the nation’s most politically-sensitive statistic. Which is, to ignore the fraudulent headline numbers – even if “worse than expected” – and look into the internals; which unquestionably, will reveal a true unemployment situation, at best, on a par with the 1930s. Last month’s “headline numbers” set a new “high bar” for government lying (putting it on a level ground with thieving American corporations); making it more likely than ever that “the glaring weakness in true U.S. unemployment will become widely understood” – per a prediction I made last year. Which, for that matter, will be the case with all nations that pretends “employment” is strong; such as Germany, which “coincidentally,” is the chief steward of the world’s second largest currency.
As we head into today’s meaningless “employment report”; which in a world of collapsing currency, commodity, and crude oil markets is already as “old news” as the buggy whip, here are some of the headlines I see. For one, it was reported that in November, U.S. credit card debt growth had its biggest decline in over a year. In other words, people are no longer spending – and this, just as the holiday spending season commenced. Thus, given that nearly all the “jobs” the BLS reports are in the retail sector, is it even possible that employment rose in December – at all?
Or how about the Baltic Dry Index falling yesterday to its lowest-ever level in early January? Yes, lower than even January 2009, at the height of the worst economic crisis (until now) of our lifetimes? Or, switching gears; to Asia, where Japanese corporate bankruptcies exploded to an all-time high, Abenomics notwithstanding; and ditto for the number of Japanese households receiving welfare, which hit an all-time for the sixth straight month.
Or better yet, how about in the soon-to-collapse financial hell that is Europe; where yesterday, the continent’s largest bank, Banco Santander of Spain, had its stock suspended because due to a desperate need of $9 billion of capital to stay solvent? Yes, my friends, the entire European (and Western) banking system is dead in the water – afloat only due to ECB QE and covert Fed “swap agreements” that hand them free, perpetual loans of freshly printed currency to use as collateral against their rapidly collapsing portfolio of toxic loans.
This morning, Santander announced an overnight, heavily dilutive equity financing – no doubt, “aided” by Central bank bids, that chopped 15% off the stock’s valuation. Sadly, as Bill Murphy would say, that’s just “jacks for starters” for the dying European banks, particularly if the “Grexit” I have predicted for two years comes true – as it certainly appears it will. Remember, the Greek elections are just 16 days from now; and the leader of the sure-to-win Syriza party, Alexis Tsirpas, just last week said “Germany had most of the nominal value of its debt written off in 1953, so the same should be done for Greece in 2015.” Greece has roughly €400 billion of debt. Gee, I wonder how the Banco Santanders of Europe will handle most of it being written off.
Here in the States, we’re in the aftermath of the second FOMC-related, PPT-aided equity explosion in three weeks – and the third in three months); based on absolutely NOTHING incrementally positive emerging from the “minutes.” To the contrary, the FOMC minutes were wildly Precious Metal bullish, given the Fed’s obvious fears of global economic contagion and reluctance to even consider rate hikes (gee, could the fact that Treasury yields are plummeting toward record levels have something to do with said reluctance?).
Better yet, yesterday’s equity hyper-drive was attributed to FOMC voting member Charles Evans saying that raising rates would be a “catastrophe”; in other words, validating exactly what we have said all along – that interest rates can never, ever be raised. Heck, just last night, non-voting FOMC member Narayana Kocherlakota claimed a rate rise in 2015 would “retard inflation recovery.” And better yet, in the category of things difficult to believe, he also claimed – I kid you not – “if we have 2% inflation, we’ll have maximum employment.” Yes, this is how dimwitted the people making our nation’s financial decisions are – which is why a decision to NOT buy Precious Metals is utterly insane.
And by the way, if he is in fact correct that 2% inflation is required to materially increase employment, he’d better not read my articles from earlier this week – “the direst prediction of all,” and “death by deflation.” To wit, now that the entire world is heading into an unprecedented Depression, with unprecedented excess capacity, prices of nearly everything will likely plunge for years to come. Except, of course, prices that will need to rise to pay for the insolvency of governments and the financial institutions – like taxes, insurance, and fees. Not to mention, the cost of protectionism, like import tariffs.
Which brings me to today’s topic, which is something that has bugged me for the past week. Which is, the fact that when deflation truly kicks in, everything will decline in value – except money itself, i.e. physical gold and silver. The fact that nominal values will eventually explode when hyper-inflation arrives is immaterial, as real values will continue to plummet irrespective – just as they did in Weimar Germany and 1990s Zimbabwe, to name a few examples. Yes, everything that can’t maintain its purchasing power will plunge; and what “asset” will lose more purchasing power than U.S. Treasury bonds?
Yes, I know – “QE” has supported them for six years; and currently, despite the so-called “end of QE,” Treasuries continue their historic “bull market” due to “front-running” of anticipated “QE to Infinity.” However, like stocks – and in many cases, real estate; valuations are at all-time high levels, whilst fundamentals are at all-time lows. After all, who on Earth would voluntarily lend money to the most heavily indebted, insolvent entity in history? The answer, of course, is NO ONE. And thus, once the inevitable “Yellen Reversal” yields QE4, 5, and “Infinity” – driving Treasury yields close to zero – the “deflation” of Treasury bonds will be historic, not just in the U.S. but the entire Western world. Sovereign debt deflation has already started in nations that don’t have “reserve currencies” backing them – think Greece, Venezuela, and Russia; and eventually, the Western Treasury implosion will be the most damaging economic event in history, compounded by the horrific derivatives underlying them.
And while this happens, gold and silver will just sit there doing what they always do; i.e., maintaining their purchasing power, whilst that of all else collapses. With it, you and your financial kin will be spared the financial purgatory that is coming. And without it, it’s entirely possible that most, if not all of your life’s savings will, at the least, be “severely discounted.”
PROTECT YOURSELF, and do it NOW!
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For your infinite amusement, presenting following article…Had you seen it before?
https://fortune.com/2015/01/05/jpmorgan-chase-split/
Now, I want to see a recommendation from JPMorgan stating that Goldman Sachs should be broken up into pieces.
Followed by recommendation from HSBC that Deutsche Bank should be broken up into pieces.
Followed by recommendation from Deutsche Bank that Citigroup should be broken up into pieces.
And so on and on and on, with each set of criminal gangs publicly calling out for the other gangs to be broken up.
I saw the article, but didn’t read it.
Back from my days as an equity analyst, I always thought it comical that each brokerage (Goldman, JPM, etc.) has an analyst covering the other brokerages, issuing buy and sell ratings on their competitors’ stocks. Talk about a conflict of interest!
Hello Andy,
I read your news audio and written on a regular basis and well it really scares me to death.
Unfortunatelly I much agreee with your view of things, but honestly dont want to believe it and some times wish a I wouldnt know and understand the situation.
I am prepped up with gold and silver, but as I am not rich its just a little, anyway.
Being in Germany I wonder if the Euro will colapse the same way, as the dollar will, or even worse?
Funny you see the Santander news, as this sidenote shocked me in the morning while checking the news on Friday. In the German public this went totally unnoticed!
Is it a good idea to hold silver as well, or should one stay only with the gold, as it is more important in the money system. I just feel that this big stack of silver I am storing might be useless.
On the political side, I still see America as a friend of Germany – but somehow the situation gets politicals in the same way out of control, like it does on the financial markets.
Me thinks some nation leaders should do same official statements with verbal claimings of suport and friendship ( real ) instead of eyeing each other in distrust.
Pls keep your good works up, and good luck.
Friendly Greetings from Germany
Frank
( apologize for my English )
Frank,
Yeah. Hmmm, oil collapses and SAN needs $9 billion to stay solvent. Just a thought.
I have long written that the Euro will collapse, and it may just do that after the Greek votes. But ALL currencies will collapse against gold.
And as for Germany, they could care less about America. It’s every man for himself; and my guess is China and Russia have far more to offer Germany as allies than the U.S..
Frank,
In response to your question about having silver or gold, I will reply with a question, “when you want to buy a loaf of bread, which metal would be best to use”? Answer: He won’t have change for an ounce of gold, so I suggest using an ounce of silver. An ounce of gold could be used for buying his entire store.
Well I for one am grateful that you were indeed inspired to write such an excellent and timely article this Friday morning Andrew. Thank you immensely!
What is truly mind boggling is the sheer amount of human cognitive dissonance that is still being employed by the sheople being herded to the greatest sheering ever in their lifetime.
One might suppose that simple commonsense would make it self evident that had either the victims of the Weimar and Zimbabwe hyperinflations, or even the more current Russian Ruble and Venezuela Bolivar fiascoes, simply kept a reasonable amount of Assets/ Savings in honest money of gold and silver Coins (ie “Hard Money”) they wouldn’t have lost even a minute of sleep, much less suffered a significant hit to their net worth.
A smart man learns from his mistakes.
A wise man learns from the mistakes of others.
Thanks for all you do Andy. Miles Franklin is indeed blessed to have you on their team.
Cheers & Semper Fi,
S. Rex
Thanks for the kind words.
Sooner or later, “Economic Mother Nature” always wins.
a
Hi Andy
Do you think Santander is the dead entity that Bill Holter was referring to with the crashing oil price? You seemed to have implied it above.
If so how would a collapse of Santander effect the other European banks?
I have a more interesting proposal, what if it’s Deutschebank who have blown up? I say this because I know they are now carrying the largest derivatives book of any bank in the world.
Now presumably they are exposed to the oil pricing drop, and also proberbly exposed to the Rubel implosion also, but now let’s add Santander and a Greek default to the mix and we might be looking at a serious crisis brewing not in Spain or Greece but in Germany.
If this is the case then we would without doubt see the euro implode very rapidly if Germany went into crisis, and that would be without doubt be very rapidly systemic throughout all of the worlds banks. Just a thought!
Andy,
Again, you are overthinking things. Santander is not “the” dead entity. They were all dead long before oil plunged, supported only by ZIRP, NIRP, QE, and all kinds of off balance sheet supports.
They will ALL go down, not a question. And as for Deutschebank, don’t forget this from 18 MONTHS AGO…
http://www.reuters.com/article/2013/06/14/us-financial-regulation-deutsche-idUSBRE95D0X620130614
a
What do you say to people who argue that the 10yr yield is going down only because foreigners are seeking a safe haven in USD? They say that the falling 10-yr yield is therefore no indication of a failing economy.
They are seeking a “safe haven” because the global economy is collapsing! And as for “no indication of a failing economy,” what more do I need to write to demonstrate the U.S. economy is in freefall? Let alone, as OIL was the only sector creating jobs the past seven years!
Mr. Hoffman, I am a little confused. You stated, “Or how about the Baltic Dry Index falling yesterday to its lowest-ever level in early January? Yes, lower than even January 2009, at the height of the worst economic crisis (until now) of our lifetimes?”
Do you mean that the Dry Baltic Index fell to it’s lowest level ever or do you mean to it’s lowest level in any January of any past year?
Yes, lower than even January 2009!
http://www.zerohedge.com/news/2015-01-08/day-history-baltic-dry-index-has-never-been-lower
Mr. Hoffman,
ZeroHedge actually says that the BDI has never been lower at this time of year, meaning just the first week of January even though the title says “The Baltic Dry Index Has Never Been Lower”. In what way is that of value?
Sorry to have troubled you over this nonsense.
Not nonsense, but I’m not sure why you are so fixated on it. For one, it is VERY material to be at an all-time low for any given week, as the BDI is extremely seasonal in nature. And more importantly, forget the nuances and focus on the fact that amidst the so-called “recovery,” it continues to sit near all-time lows, on an absolute basis.
http://people.hofstra.edu/geotrans/eng/ch7en/conc7en/bdi.html