As the immemorial saying goes, “where there’s smoke, there’s fire.” And in the case of our lying government, “fire” is a heavily understated euphemism for raging inferno. Thus, when a “senior White House official” denies Obama told attendees of this week’s G-7 summit that the strong U.S. dollar was a “problem” – just three months after the White House released a statement claiming the strong dollar to be a “headwind to growth” – you can bet Obama not only said it, but did so emphatically. In other words, a major shot across the bow to the ECB, the Bank of Japan, and the People’s Bank of China – as the “final currency war” accelerates toward its inevitable apex, when all fiat trash plunges in value.
On that same line of reasoning, when the Department of Justice launches a probe of “potential Treasury Market Manipulation,” it’s a near certainty it’s not only true; but rampantly so. Then again, isn’t that exactly what the Fed does overtly; in purchasing short-term Treasury securities (with freshly printed dollars) to maintain zero interest rates; and long-term Treasuries when actively engaged in “Quantitative Easing?” In other words, the government opening an investigation into Treasury manipulation is, for all intents and purposes, no different than the “fox council” opening an investigation into “henhouse kidnapping.” But don’t worry, gold and silver aren’t manipulated – right?
Or how about this one – as the esteemed “Maestro” continues to do everything in his power to distance himself from the global financial hell he created during his two decade reign of printing press terror? Yes, the man who sold his soul for power, 21 years after penning “Gold and Economic Freedom,” made some of his most damning statements yet; of just how inevitable a U.S. debt default has become, in not only claiming “the notion that we have a trust fund is nonsense,” but the U.S. government is “way under-estimating the national debt, because we are not including contingent liabilities.” I mean, this is the man that served as head economic cheerleader and propagandist; money printer in chief; and global market manipulation king for 19 years, finally telling it “like it is” as he – and the currency he helped to destroy – near their inevitable deaths.
And then there’s Greece; where, notwithstanding the ongoing collapse of everything Greek related – from Greek stocks and bonds; to PIIGS sovereign bonds; the European economy; and the Euro currency itself – we’re still told a new bailout deal is imminent. This, despite the Syriza party having been elected on an “anti-bailout” platform; Greece missing a measly €300 million interest payment on Friday (but don’t worry, they claim it’s not a default because they can simply “bundle” it with the other €1,200 million due by month’s end); and oh yean, the head of the European Commission, Jean-Claude Junker, literally not taking Alexis Tsipras’ call this weekend. But don’t worry, all’s well. Greece couldn’t possibly default on its €400 billion of debt; “Grexit” the Euro; spark a global debt and derivative meltdown; or catalyze a worldwide economic contagion.
Or how about the Chinese stock bubble – which inflated further this morning, following news that April’s 16% import plunge was followed up by another 18% in May? And this, atop the Chinese “containerized freight index” now 20% lower than a year ago. Yes, the 150% year-over-year gain in the Shanghai Stock Index, taking P/E valuations above 70x, fueled by 4.2 million new retail margin accounts, is eminently sustainable. I mean, there’s simply no way this smoke could yield fire.
And then there’s the U.S. housing “recovery” – built on a foundation of record low interest rates amidst record high debt; which despite explosive gains in the “1%” market where the lucky recipients of Fed largesse have cleaned up, has not trickled down to the “99%.” Or, for that matter, the fact that lumber prices, mortgage applications, or home sale volumes themselves don’t corroborate. Better yet, the fact that last month – care of new, suicidal government regulations – the newly nationalized Fannie Mae and Freddie Mac are backing mortgages with down payments as low as 3%. No, that can’t possibly be a sign of desperation. Nor can it portend exactly what occurred in the 2008 mortgage meltdown. Right?
And for all those remaining “oil bulls”; whom not only don’t get the ramifications of Friday’s bearish OPEC decision, but the massive increase in global supply with no hope of slowing – what part of the smoke of Exxon Mobil’s stock breaching a 28-year uptrend doesn’t indicate the likely fire of further, dramatic oil price declines for the foreseeable future – hyperinflation and/or Middle East war notwithstanding?
And last but not least in today’s lesson in smoke and fire, take a good hard look at these charts of U.S. Mint and Royal Canadian Mint silver sales over the past eight years; particularly since 2011, when the silver price commenced a 68% decline to six-year lows. Subsequently, ask yourself if it is possible silver prices are trading at artificially suppressed levels? Not to mention, when former CFTC commissioner Bart Chilton, in October 2010, claimed “there have been repeated, fraudulent efforts to persuade and deviously control the silver price.” Or, for that matter, when such activity has been all but mathematically proven by the Miles Franklin Blog.
OK, now that the “fun” part of today’s article is past, let’s move on to its “more serious” aspect. Which is, the Miles Franklin Blog’s seemingly endless task of refuting monetary lies, mistruths, and propaganda. And who better to play the protagonist than our old friend, Harry Dent, the “born again deflationist” best known for 1) his 1999 prediction that the Dow and NASDAQ would reach 41,000 and 20,000, respectively, by…drum roll please…2008; and 2) his April 2011 prediction that the Dow would plunge to 3,000 by…again, drum roll please…2014.
Yes, the “deflationary boogeyman” is at it again, using the age old strategy of extrapolating current trends infinitely; not only ignoring Economic Mother Nature’s first commandment – i.e., “past is not prologue” – but the fact that many such trends have been artificially created by market manipulation. In a nutshell, Harry Dent is as intelligent as they come regarding economic analysis. However, like so many other newsletter writers, his lack of understanding of financial markets shines as brightly as the North Star on a clear winter night.
To wit, David Schectman asked me this weekend to read, and refute, Dent’s latest hack job on gold, deeming it “doomed” to fall to $700/oz. Unfortunately, I mistook what David wanted me to see for a link to Dent’s recent interview with Alex Jones – which I subsequently listened to in its entirely. That said, I’m glad I did – as during those 45 minutes, I gained more insight into Harry Dent’s thought process than ever before. Which was quite enlightening, as in many ways he reminds me of myself.
Yes, watching him was a revelation – as not only does he speak passionately, and for the most part knowledgeably – he even looks a bit like myself. Regarding his views on the global economy, I couldn’t agree more on essentially every point – such as…
- Horrific demographic trends doom essentially the entire Western world to a deadly deflationary crisis in the coming years – which is exactly what I’ve written about Japan and the U.S., for example
- QE never works – as the concept of ‘prosperity by money printing’ is as illogical on paper as it is flawed in practice
- The Chinese economic and stock market bubble is far worse than the U.S.; symbolizing the unprecedented, Central bank fostered “bubble logic” encircling the globe
- Social and geopolitical conflicts will dramatically worsen due to expanding global economic weakness
Heck, he even tells people to protect themselves, and do it now like I do; although unlike myself, he gives a specific date for the economic and financial market implosion we all know is coming. I.e., “later this year” – which, as most readers know, is the date being bandied by everyone from Martin Armstrong to the Shemitah itself. Could “the big one” occur later this year? You bet it could – which is why I, too, plead that you protect yourself, and do it now. However, it could just as well start later – or much sooner – which is why market timing, particularly in rigged markets, is so dangerous
That said, once his economic analysis was done, he made recommendations regarding how to protect oneself. Which is where our views dramatically diverge; albeit, with the most pronounced differences being regarding Precious Metals. Seven weeks ago, I refuted his views on gold in “deflation boogeyman” – and today, I intend to take such analysis one step further. But before I get to gold specifically, I want to make the point that, in my view, Dent’s “fatal flaw” is not his analysis of gold itself, but the nature of financial markets; much less, the “pink elephant” of manipulation that he, like so many others seeking to make a living by purporting freely traded markets, fails to acknowledge. Or perhaps, he simply doesn’t realize it, no matter how obvious – or mathematically certain – it is; which wouldn’t surprise me one bit, due to the time immemorial human trait of (self-serving) denial.
To wit, he claims that amidst the upcoming, cataclysmic financial crash, “cash” will be the place to be; and specifically, dollars. I, too, have practically screamed – for nearly two years – that the dollar index would surge during the upcoming crisis; which it decidedly has, given the “liquidity vacuum” created by misguided investors racing into the so-called “safety” of the dollar’s liquidity, no matter how much the Fed debauches it. However, unlike the Miles Franklin Blog, Dent makes not a peep of the fact that monetary value declines when dollars are printed; instead, utilizing the age old canard that because “deflation” destroys so many dollars, they become scarcer – and thus, more “valuable.” History says otherwise – and one needs look no further than 2009, when gold hit a multi-year high as the Dow plunged to 7,000, to realize it. Of course, that was before the historic, global money printing orgy devalued the value of all fiat currencies – which is probably why, no matter where you’re reading this, your cost of living has dramatically surged since. Not to mention, your nation’s unemployment; debt accumulation; and the level of general government disapproval
As for gold itself, in this info graphic, he lists the five reasons why gold is “doomed” to fall to $700; which, by the way, would represent a price so draconian, at least two-thirds of the world’s gold mines would be mothballed.
1. DENT – “Deflation” will hurt gold prices, because gold “moves hand and hand with inflation.” Also, “goldbugs live in fear of hyperinflation”; and “even after years of central bank money-printing, inflation has stayed surprisingly tame.”
REALITY – Gold was the best performing asset in the 1930s, when the government revalued it 75% higher; and in 2008, when, blatant Cartel suppression notwithstanding, it was the world’s best performing asset class. Also, us “goldbugs” don’t live in fear of hyperinflation, but devaluation of the fiat currencies we are forced to hold – given fiat currencies’ perfect track record of failure. As for “tame inflation”; for one, he should ask himself how his cost of living has changed in recent decades; and secondly, how bad inflation has been for the 6.9 billion non-Americans whose currencies have imploded.
2. DENT – The Fed has NOT destroyed the dollar’s value, as “innovation” and “technology” have offset such trends.
REALITY – What could be more apples to oranges than comparing technology to money printing? Moreover, “standard of living” is as ambiguous a term as you can find – particularly as the “1%’s” standard has improved far more than the “99%.” True, we have faster cars and more iPads, but that doesn’t make the real cost of living any lower. Frankly, I can’t even make heads and tails of this claptrap, as it makes absolutely zero sense.
3.DENT – “There are more dollars in the world than any other currency. Deflation will destroy more dollars, so the greenback will gain strength. There’s no other currency available to unseat the dollar as reserve currency anytime this decade. That’s bad for gold.”
REALITY – Are you starting to understand how disjointed and nonsensical such statements are? Not to mention, lacking logic or connection. For one, exactly why would the dollar “gain strength” because more of them are being destroyed? Again, the statement doesn’t even make sense. As for the latter, what does the fact that no other currency can unseat the dollar as reserve currency – which I whole-heartedly agree with – have to do with gold? Again, not only is this an apples to oranges statement, but gives zero reasons why it is “bad for gold.” Which, of course, historic empirical evidence loudly disproves.
4. DENT – “Gold is not money. It is a commodity, like oil, corn, or pork bellies, but a lot less consumable.”
REALITY – Frankly, if I wrote NOTHING in response, I could make “rest my case” by letting such a base, unsubstantiated statement stand on its own. However, for argument’s sake, if gold were not money – which frankly, I couldn’t care less if it is, so long as it protects my assets – why did it surge when all other commodities plunged in 2008-09, despite the aforementioned Cartel attacks? Moreover, exactly why does gold need to be “consumable” to be valuable? You know, the age old propaganda of “you can’t eat gold,” so it’s of no use. Ugghh.
5. DENT – “Adjusting for inflation, gold hasn’t gone anywhere for 225 years”; “gold is a non-appreciating asset”; “you can’t rent it out for income”; and “it costs money to store in any sizable quantity”
REALITY – These are his four propaganda-tinged arguments of why the “shine’s gone”; almost as if he’s going out of his way to disparage it, and the “goldbugs” that own it. For one, I’m not sure what “inflation” he’s speaking of, but in making the statement that gold has been a bad investment for 225 years appears specious at best – particularly given how it has not been freely-traded, due to either fixed prices or manipulations – for most of that time. It certainly was the best performing asset from 1999-2011 – before the Cartel went hog wild suppressing prices; and in non-dollar terms, has been in a bull market for years. As for you can’t rent it out for income, I’ll simply chalk that one up in the “you can’t eat gold” camp – as if only hard assets like real estate (which he expects to plummet) are worthy investments. And last but not least, for the precious few wealthy enough to own “sizable quantities” of gold, the costs of storage are immaterial compared to not owning it during a crisis. Or heck, what about the “storage costs” of holding stocks in a brokerage that goes bankrupt, like Lehman Brothers or MF Global?
Well, that’s enough Harry Dent refutation for a day. I think I’ll go take a shower. Hopefully, this article helps you understand that whilst his economic arguments are lucid, his market commentary is as far from “scientific” as it gets. Frankly, in many ways it resembles the propaganda we have endured from Wall Street, Washington, and the MSM since gold re-emerged as a monetary “threat” at the turn of the century. As always, we advise you to do your own due diligence. And if Harry Dent’s fallacious views on gold are a part of it, we’re guessing you will decidedly NOT be swayed.
Great job Andy!!!! you always hit the nail on the head. The world has turned upside down and it simply needs to stop before the entire world is a wasteland. Keep up the good fight friend. We need you and Bill now more than ever. Cheers
As always thanks for your no nonsense analysis. You are absolutely right! Dent puts out the standard financial planner BS that has never took the time to get a finacial education. He like so many so called smart people don’t understand the fundamentals of price, value and how to best retain purchasing power. Dent is also very wrong when he quotes inflation which he mistakes as price. Inflation is the increase of the currency supply which the US Fed/Gov will continue to hyperinflate until the US has a currency crisis!
I’m we are headed straight into a currency crisis, political crisis and then the “worst”, a social crisis.
Thanks much. Incredible that guys like him have such a following, given their track records.
Just heard an Armstrong interview and it seems he blows in the same horn like Dent, isnt it?
Would like an Andy Hoffman “pick apart” of the Armstrong thesis.
Anyway, I am in the Andy , Bill boat as your work makes just much more common sense, while with the other guys you feel those shady parts your brain doesnt want to pick up.
( The danger I guess with missleading reports is that if one doesnt want to admit that one doesnt understand what the “genius” puts out there and so just stops the own thinking. And that might cause the fall into the pit, I would say.)
To be honest, I listen them too, trying to figure out what say are saying, .. always worring I missed a point… and then Andy sets me straight again.
Thank you so much for your precious work!
Oldie but goodie…
an eye opener, and written before I woke up to the problem 😉
You’re welcome to think Harry Dent looks a bit like you, but methinks his head is a bit “dent”ed…if you catch my drift, that is….
I most certainly do.
From Dave Kranzler
I believe the illogical movement in 10yr Treasury yields reflects the fact the Fed is losing control of its tight grip on the bond market and longer term interest rates. Note that German bunds have also experienced a similar spike up in interest rates and volatilty. In the context of my view that there was a derivatives accident somewhere in the global banking system in the last two weeks, it could well have been an OTC interest rate swap bomb that detonated. Andy like Bill says, there are dead bodies behind the scenes & their piling up! I know you’ve touched on shemitah & are a rational & logical guy.Prepare irregardless, but kinda makes you think. Things sure seem to be lining up for it. Great work! Ps Dent is a tool.
As I wrote this morning, it’s hard to not speculate on a connection between Deutschebank, the world’s largest derivative holder, having its CEOs resign and offices raided just as rates spike higher – “unexpectedly” so, I might add.
Another ‘sterling’ piece, Andy. We bought all our gold, silver and platinum back in 2001/2002. I woke up one morning and heard a news blurb that Bill Gates had bought a silver mine somewhere in Central America. If we ever buy more, and we may, we will be calling you. Don’t want to jinx things, but YOU ARE EERILY ACCURATE & CORRECT!