This weekend, a reader sent me a Forbes article with one of the most clueless, disingenuous themes imaginable; i.e., “there is zero evidence (repealing Glass-Steagall in 1999) unleashed the financial crisis.” I have always been fascinated by Forbes’ flip-flopping around reality and delusion, especially as Steve Forbes is a notable gold bull; in fact, one of the most vocal advocates of a new gold standard. Then again, for a variety of reasons cumulatively depicting the flaws of
human nature, even many of the financial world’s brightest minds refuse to acknowledge the most important factor driving them; i.e, the manipulation of markets by the “weapons of mass destruction” developed post-1999 by banks armed with modern technology, unlimited Federal subsidies, not a shred of regulation or oversight, and the often explicit guarantee that they are indeed “too big to fail.”
Why do I bring this up, as I write on what could turn out to be an utterly terrifying Monday morning? Because watching the, as Zero Hedge put it, “bidless” Euro open a cent and a half lower last night, amidst plunging oil prices and exploding fears of a Euro-killing “Grexit,” it truly horrified me to witness what derivatives have created. As first hinted at by the May 2010 “flash crash” – when the Dow plunged 700 points in minutes due to an overload of high frequency offers that created a vacuum of illiquidity costing hundreds of millions of instantaneous losses, derivatives have not only destroyed markets permanently, but driven retail and institutional participation to record low levels. The October 15th flash crash in Treasury yields – when the 10-year yield plunged from 2.21% to 1.87%, also in minutes, was a second blaring warning of what’s to come. And trust us, when “what’s to come” inevitably arrives – perhaps this year – if you haven’t already protected yourself, it will be too late to save yourself.
Throw in the fact that the handful of banks that operate the majority of such algorithms are, for all intents and purposes, insolvent – funded solely by the Fed, ECB, and other Central banks’ printing presses – and you can see just how dangerous “markets” have become. Not to mention, when said Central banks’ own stock and bond buying have driven valuations to record levels amidst the worst fundamentals of our lifetime, whilst the few institutions still remaining are robotically programmed to buy into such lunacy, driven by to archaic, suicidal “rules” built into the financial world’s “DNA.”
Throw in the sheer lunacy of the government taking over key businesses; such as housing, given that Fannie and Freddie now purchase essentially all new mortgages, and we’re talking about not only a “radioactive” financial industry, but one on the verge of nuclear implosion. And this, the sector that produces more “profits” than any other in America! In other words, not a shred of humanity, common sense, or incentive remains in the financial world (other than for the government-backed “1%” to pillage the “99%”) – yielding “markets” more prone than ever to being instantaneously vaporized. Which is exactly what’s barreling down the tracks like a runaway locomotive; likely, MUCH sooner than most can imagine.
Yes, now that TPTB have safely tucked away the monster bonuses their 2014 manipulative efforts enabled, the “whole shebang” is collapsing before our eyes. The world round, there is no longer a shred of doubt we are amidst an all-out economic collapse of historic proportions. And now that Central banks utilized all their “dry powder” in levering up their balance sheets post-2008, there is no remaining safety net; not in the slightest. When inevitably the “Yellen Reversal” is unleashed upon the world – i.e., Federal Reserve admission that the U.S. economy is in effect collapsing, and thus in need of “QE4” – I’ll bet anything the “assumed response” will not occur, in lieu of a horrifying loss of confidence in all things paper, including the dollar itself.
And irrespective of how much money is printed (distributed not to the people, but TBTF banks that will hoard it given the utter dearth of profitable loan opportunities), the “death by deflation” that 44 years of money printing caused will consume and destroy them like gale force wind blowing over leaves and matchsticks. One by one, currencies will serially crash, whilst the monster debts and overcapacity created by four-plus decades of capital “deformation” will destroy global trade for years, perhaps decades to come. This is what’s happening as I write – i.e., NOW; and frankly, I am far more terrified today than amidst the throes of Fall 2008.
For the billionth time, “inflation” refers not to consumer price levels, but the rate of monetary creation. “Deflationists” focus principally on the low velocity inherent in an over-indebted economy that prevents price levels from rising – principally for “want versus need” products, of course. And to that end, they are dead right – aside from not understanding the fact that gold and silver are NOT “deflation-prone commodities.” The “diminishing returns” of debt accumulation are well known mathematical truisms, and we discussed America’s falling into this trap three years ago. Heck, it was one of the first things I wrote of when joining Miles Franklin! This is what I wrote of in Friday’s MUST READ article, the “direst prediction of all“; which, unquestionably, will yield freefalling commodity prices until the entire economy implodes into a pile of dust, or psychotic Central banks hyper-inflate their nominal value, whilst destroying their real value further.
Moreover, said “deflationists” – as well as essentially all mainstream analysts – entirely ignore the fact that hyperbolic money printing ultimately destroys the credibility of currency issuers, inevitably causing currency runs that have destroyed EVERY ONE of the previous 599 fiat Ponzi schemes. And the deeper the world goes into debt; the wider the gap between productive capacity and actual demand; and the more strained social and geopolitical relations become; the more likely that a fuse, any fuse, will emerge to set in motion the aforementioned “end game.” At this point, which I find difficult to believe is not VERY, VERY soon, the only thing that can save you are assets immune to such enormous wealth destruction, either by “inflation” or “deflation.” Which are, of course, the only assets to have met every definitional parameter of MONEY for the past 5,000 years; i.e., physical gold and silver.
This morning, WTI crude has not only plunged through $52/bbl, but $51/bbl as well – en route to the $35/bbl lows of 2008, and perhaps significantly lower. Only this time, the CRB index will likely beat oil itself to its 2008 lows – as the global, comprehensive collapse of essentially all commodities screams “death by deflation” louder than anything the Miles Franklin Blog can possibly write. Germany reported its lowest “inflation” reading since 2009 this morning, exemplifying how this cancer is spreading like wildfire – and even the Fed’s best efforts to prevent the “most damning proof yet of QE failure” are imploding, as the 10-year Treasury yield has plummeted to 2.04%, en-route to “filling the gap” created by the aforementioned October 15th collapse, and far lower levels thereafter.
And what do you know? Despite yet another ferocious Sunday night attack, as well as countless other this morning, gold and silver are soaring whilst all other global markets collapse. U.S.-priced gold is comically being capped at exactly $1,200 (but not for long, methinks), but in all other currencies is literally exploding higher. Starting with Euro-priced gold, which DECISIVELY breached the psychological (and heavily Cartel-defended) barrier of €1,000/oz this morning; as well as Swiss franc-priced gold, which surged through CHF 1,200/oz like a hot knife through butter. Regarding the latter, in hindsight, NOTHING could have been better for gold than the ill-fated Swiss “no” vote; but I’ll save that for another day, other than to say a “yes” vote represented the only chance that would have been afforded humanity for even a modest slowing of the printing presses, and expectations thereof. For now, all I can say is RUN, and do it FAST, from all things paper – into the time immemorial safety of real money!
Hi Andy,
I am always hearing experts saying “Do what I say” when it comes to telling people how to distribute their assets to avoid the coming economic collapse but I never hear them tell anyone how they deploy their own money. Just once I would like to hear someone say “My assets are distributed here, here, and here.” To me, that would make them a lot more believable.
Dave K.
Dave,
No one has been more upfront than me. Aside from my home, I have 90% of my liquid assets in physical gold and silver, stored at Miles Franklin’s Brink’s facility in Montreal. The remaining 10% is in cash, in a Charles Schwab non-marginable brokerage account.
a
Good comment and a good upfront reply from AH.
Great material Andy.I have been a listener of yours for 3 years now.I am 62 now and don’t have any cash to speak of.I have 2 houses that I owe half of their current worth on. I also have hidden away about 1k oz of silver. The only gold is mostly in jewelry. If you were in my shoes,would you sell one house and pay off all debt or continue renting one out? I have excellent cash flow to keep everything paid,but wonder what could happen in a crash. I love the audio interviews you do and hope you can continue the excellent pouring forth of knowledge. I would appreciate any advice you can share.Thanks again for all you do to keep us in the know!!!!
Gerald,
I cannot speak of what’s best for you. However, as you ask, if it were me, I would sell one of the houses, pay off all my debt, and sleep well.
a
Hi andy, why has oil plunged so much so fast. Is this based on some inside job? Is usa trying to do economic warfare on Russia? I have not heard a real reason for the collapse. I know the central banks can destroy our economy tomorrow whenever they want just like in 1910 to pass the fed reserve act so I have some inkling this is rigged too for some agenda. What’s the real deal here simple supply and dand I don’t believe anymore. I don’t believe in any free markets anymore
Keith,
I have written about this essentially every day for months! DEMAND is plunging, and SUPPLY is surging. The fact that Obama was stupid enough to say he wanted lower prices to hurt Russia doesn’t mean the U.S. had anything to do with it. And why would we, as NO ONE will be destroyed more by plunging oil prices than us!
a
Thanks andy, i guess the drop seems very steep and very fast. If its not rigged (the price of oil) and is really based on free market of demand vs suppply, then demand really dropped and we are in a whole lot of trouble. They wont be able to paint the picture too much longer.
Andy, at work the oil plunge was being tossed around the water cooler. Are asking if there are any official charts showing decreased demand for oil? Some of us still think its by design and I’d like to show them something official.
thanks
Keith,
There is a 2 million barrel/day difference between supply and demand. This is a FACT. This is why the OPEC decision tanked prices.
This is info readily available on the internet.
As the financial numbers become ever more absurd we shall see the mainstream media be instructed to admit the real backing of the dollar which is violence (implied, threatened or actual) or what I call the “unit of destruction” which is currently world money having replaced gold in that role on 15th August 1971 (see my posts on Hidden Secrets of Money). This has just started as already Obama has begun to frequently boast about the global superiority of the USA armed forces in his speeches. You will hear more on this as the unit of destruction is a claim on all the world´s wealth and so provides an almost infinite backing to the dollar.
The man with the gun (Uncle Sam) decides what money is and he knows it is his gun and will now start to say so openly. How are you going to “protect yourself” from that? Gold will not help you when the unmarked van comes to take you away for re-education or termination and I am sure you must be on the list!
hi Andj,you nailed it for me.the flash crash of 2010 did it for me.thats when i took my cash and started stacking.i have two accounts that i traded in.one is a sep ira,the other was an options account,(was heavily into options).you also nailed the part about(sideline money folks)retail not participating anymore couldn’t be more true.i live on a pretty much middle class street with retired teachers,cops,doctors,tradesmen,etc.they will not go anywhere near the market ever again.some stack now,others,well they’re just going about everyday life while almost everyone else is oblivious to whats coming.i enjoy reading your prospectives more so than most finance bloggers.thanks for some good reads.
Chris,
Thanks, i appreciate the kind words.
a
Hi Andy
Well I have listened to, and read your work for the best part of three years now.
Up until this point I read hundreds (literally) of articles a month and listened to every argument for and against PM’s. I worked out in 2011 that we were headed like a runaway train for the buffers, and unless any sane person were to pop their head up in the world of politics or banking we would be destined at some point to run out of track. Well contry to any sanity provailing we have now discovered that Daffy Duck is the driver and has put the peddle to the metal to bring us to where we find ourselves today.
In the last year or so, there has been a plethora of misreporting and misdirection to PM investors like I had never seen up until this point, this told me one of two things.
a) I had made the biggest mistake of my life in investing in PM’s in 2011
b) we were being played and the likes of you Andy were one of the only straight shooters.
I like you am 90% in, and I don’t mind admitting I have questioned my sanity on more than a few occasions as we saw raid after raid on PM’s over this period.
2015 is the very first time I feel completely vindicated for what I thought might have been the greatest foley of my adult life. So I would like to thank you Andy for being my goto guy when I was in my darkest hours of doubt about where this was all leading.
I think there isn’t a stacker out there who doesn’t now feel it was all worth it looking at how things are now playing out. I have little doubt we will have to wait until the end of Q1 before we see the first casualties of the oil price plunge, but once they start they will be coming thick and fast
And that my friend is when our silver and gold are really going to shine.
Thanks Andy. Yes, we are all in this together – and we are dead right.
Yup. Vindication is coming for sure.
I am 30% Physical, 30 percent precious metals fund, 30 % cash.
No debt to speak of and sleeping well at night.
Now stacking food, water purification and hard goods in the event of inventory product flow issues to my local grocers.
However, family still thinks I am nuts but little doubt now that I will look wiser than many soon.
Love this site.
Hi Andy,
Fyi, the Forbes article referenced in your opening line was written by Yaron Brook and Don Watkins. Forbes publishes a variety of opinions that don’t align with Steve Forbes’ views.
Sincerely,
Mo
Thanks. However, it’s his name on the newspaper, and why he’d want such drivel published in it is beyond me.