The great Richard Russell, now 91 years old, has been endlessly asked why he still writes Dow Theory Letters after all these years. And, for that matter, why he works so hard to maintain his health. His answer – both professionally and personally – is “I want to see how things turn out.”
I’m just 45; but damned if I don’t want to find out how things turn out, too – whether it takes one week, one year, or five decades. We are living through an historic period – of exponential population growth; parabolic money printing; and dramatic changes in the political, economic, and social landscape. And sadly, said money printing – dating back to the abandonment of the gold standard 44 years ago – has set the stage for cataclysmic financial happenings for years to come; which unquestionably, will have dramatic, perhaps terrifying ramifications on all aspects of our lives – as well as our children’s. So yeah, I too, want to “see how things turn out.”
For much of the world, said “ramifications” have already commenced – as in the countless “emerging markets” whose currencies have crashed; and whose “business” relates principally to commodity production and sales. Here in the States – and other “first world” nations whose printing presses are more powerful – the ramifications are certainly clear and present, but not yet as dire. Yes, we have record high, or near record high debt, entitlement spending, childhood poverty, and living costs; and record, or near record low manufacturing jobs, real wages, Labor Participation, home ownership, small business formation, and family formation, among others. However, the dollar’s continued – but rapidly waning – “reserve currency” status has, for now, enabled the majority of the Fed’s hyperinflationary policies to be “exported” overseas.
For the thousandth time, the principal reason the world is amidst its worst economic Depression in memory – with an even bleaker intermediate-term outlook; is Central bank money printing, as NEVER has every currency on the planet been unbacked. Not to mention, NEVER has “financial engineering” been so advanced, causing the debt explosion that, by definition, all fiat currency regimes experience, to compound exponentially. And trust me, we’re just getting started. To wit, the U.S. government admits that on November 18th, it will officially be out of cash, having spent six months stealing from pension funds and other citizens’ assets to prevent the inevitable increase of its “debt ceiling.” Which, sometime in the next month will be dramatically raised – potentially adding more than $500 billion of “national debt” in a single day.
For the average person, money printing has caused a relentlessly increasing cost of living – to the point that one-income households are nearly extinct. And given that the majority of “breadwinner” jobs have either been eliminated or shipped overseas, the Middle Class that made America great is nearly extinct, too. Overseas, these trends are even uglier – as care of the aforementioned currency crashes; and the fact that manufacturing jobs pay far less there than here; the net result is a global decline in the standard of living. Except, of course, for the “1%” that receive the printed money. Not to mention, as the “markets” they “invest” in have been completely commandeered, to pad their pockets and give a false impression of economic health.
Most people are resistant to change – and thus, don’t push back against the “powers that be” causing them such hardship. However, as Simon Black wrote today, “everyone… absolutely everyone… has a breaking point – where the status quo becomes so uncomfortable, and so painful, we snap. And walk away.” This is the crossroads the world finds itself at today; both economically – per what I discussed in August’s “end of belief Central banks can save us”; and socially – per last year’s “revenge of the people.” As for “markets,” it’s difficult to believe anyone with half a brain and a fully open mind – be they financial “experts” or not – doesn’t realize they are grossly manipulated, in all aspects – around the world, around the clock. Between markets’ enigmatic, nonsensical movements; official government interventions; and countless public scandals, it should be crystal clear that markets’ historic functions of discounting future events and allocating capital have been permanently disabled. Consequently, “1%” of market participants have become wildly wealthy, at the expense of the “99%” – whilst the global economy has become so horrifically “deformed,” it is unlikely to recover for years, if not decades, to come.
Regarding change, so much is occurring in this Fall of Discontent, it’s difficult to keep track of all the negative developments. I mean, geez, since taping Audioblog #119 barely 24 hours ago (it’s Friday afternoon), I’ve compiled six pages of “horrible headlines” and commentaries. Which, as always, I must “distill” to find the most powerful incremental message. Today alone, headlines such as the following are practically screaming of the rapid, global realization of how dire things have become, such as the following.
- “Economists finally admit, the odds of a U.S. recession are on the rise”
- “Why are the IMF, the U.N., the BIS and Citigroup all warning that an economic crisis could be imminent?”
- “Global depression coming – even powerhouses Germany and the U.K. are slowing dramatically”
- “Credit Suisse stuns investors, with 50% bigger than expected capital raise”
- “Goldman demolishes jobless claims hype: “This does not signal a booming labor market”
- “Oil rally to reverse, price to stay lower for longer: Goldman Sachs”
And if you thought the “copper PPT” I started writing of earlier this year – when the inexorably declining, and massively oversupplied copper market started having miraculous, “Dow Jones Propaganda Average”-like surges each time it looked ready to collapse – was a big deal, that’s nothing compared to what we are witnessing today. To wit, when Lehman Brothers II Glencore saw its stock and bonds start collapsing last month, we learned that its two largest exposures were copper and zinc. And now that we know said exposures may be above $100 billion, it couldn’t be clearer that if copper and zinc prices keep declining – or frankly, remain around today’s multi-year lows – the company could come crashing down, taking who knows how many mining companies, commodities traders, and banks with it.
Which is why I couldn’t help but snigger when copper suddenly, with no apparent catalyst; and no other market materially moving, rocketed 3% higher in one day last week. Let alone, today’s “market” farce, when Glencore announced that its associated mining companies will cut their zinc production by one-third – yielding an 11% surge in zinc prices. Okay, so we’re to believe gold prices can decline when COMEX registered gold inventories plunge 86% in the past 14 months, and 95% since the 2008 crisis – amidst an environment of record global demand and stagnant production, to boot. And yet, if Glencore, which produces just 4% of the world’s zinc, cuts production by 33%, yielding an infinitesimal 1% drop in global zinc production, it should cause the zinc prices to surge 11% in one day?
Of course, the moronic MSM attributed base metals’ surge to this meaningless event; and Zero Hedge didn’t help the “lying game’s” either; in their typical, hyperbolic take, tying in this week’s “dollar demolition” – in which the dollar index “plunged” by a whopping 1.5%. Yes, Zero Hedge was focused more on the market reaction to the rapidly fading expectations of Fed rate hikes – which care of last week’s unconscionably horrible NFP employment report, has clearly been pushed to 2016 at the earliest (and by “the earliest,” I mean NEVER). However, the fact remains that none of these “explanations” make the slightest bit of sense. And thus, as I wrote last month of the silver market, “Occam’s Razor” tells us the most likely – and in this case, obvious – reason is the correct one. In other words, “the powers that be” are so terrified of the potentially catastrophic ramifications of a Glencore bankruptcy, they first goosed the copper market last week; and today – simultaneous with a meaningless supply reduction announcement – did the same with zinc.
Of course, both markets – and essentially all commodities – remain near historically low levels, with the CRB Commodity Index just a few percent above the 40-year low it touched last month. And thus, far more “manipulative work” will be required to save Glencore; the U.S. shale industry; and countless commodity producers the world round. Like Sisyphus, fighting steeply uphill – against unbeatable, undefeated opponents like “Economic Mother Nature” and the “unstoppable tsunami of reality.” From my highly trained analytical perch, I’ll take the “under” on that bet. Just as I’ll take the “under” on Central banks’ cumulative, comically misguided and patently self-serving belief that they can hyper-inflate their way to Main Street prosperity.
Which brings me to today’s principal topic, “credibility implosion” – as per what I noted above, of distilling the day’s key incremental message – it comes down to, as Zero Hedge put it, the “dumbest thing you will read today – maybe, ever.” Actually, they were referring to Chicago Fed President Charles Evans claiming the Fed’s “dot plot chart clearly shows the U.S. economy is doing better” – which yes, reflects supreme stupidity from one of the nation’s chief financial stewards. To that end, said “dot plot” refers to the Fed governors’ individual expectations for where the Fed Funds rate will be in the coming months and years – which not only have been decidedly wrong for years on end (always erring on the high side, as part of their relentless “recovery” propaganda); but given that it continues to push said “rate hikes” further into the future, with lesser and lesser scope, I’m not sure how a supposedly intelligent human being could come to that conclusion. Not to mention, when Evans simultaneously called for rates to be held at zero indefinitely, and below 1% until at least the end of 2016.
That said, Minneapolis Fed President Narayana Kocherlakota one-upped Evans, in calling for negative interest rates now. Yet, sadly – both Evans and Kocherlakota’s Keystone Kop printing press antics were overshadowed by one of the most ominous statements in a generation, by “token hawk” Dennis Lockhardt of the Atlanta Fed – who dramatically accelerated the Fed’s ongoing “credibility implosion,” in stating he “understands why people may get a little skeptical of the Fed.”
Yes, Dennis, “people” are getting “a little” skeptical of the Fed – or, in layman’s terms, the entire world has completely lost faith in it and the Central banking cabal, which has cumulatively destroyed billions of lives, with billions more to come. To wit, whilst a handful of truth seekers like the Miles Franklin Blog have been calling out the Fed’s incompetence; propaganda; and in many ways, unadulterated criminality for years, the majority of the world has kowtowed to “Maestro” Greenspan; “Bernanke the Hero”; “whatever it takes” Draghi; and the rest of the world’s economy and culture-destroying money printers. But now, as Henry Hill espoused at the end of Goodfellas, “it’s all over.” The world is finally starting to realize what a fraud the Fed has been, and is; and thus, that the “end of belief Central banks can save us” is upon us. Or, more appropriately, the “beginning of the realization Central banks have destroyed us.” This is why financial markets are wildly convulsing, despite relentless manipulative efforts to “kick the can” a few more feet. It’s also why Precious Metal demand is exploding; supply vanishing; and the production outlook at a multi-decade low. This my readers, is where the proverbial rubber hits the road – as when dissention within the ranks comes public, the “end game” is clearly nigh.