I don’t normally write Friday morning, in lieu of waiting for the week’s trading to close. However, as my entire family is flying in to celebrate Diana’s 50th birthday – from New York, New Jersey, Maryland, Florida, and California – I’m going to make an exception. Quite exciting – and terrifying; as I have no idea if today will indeed be the bloodbath it has all the potential in the world to be, or if the powers that be will be able to muster enough money printing, market manipulation, and propaganda to stave off panic through the weekend.
A weekend, I might add, that not only includes the expiration of the U.S. fiscal year at midnight tonight – with not even a whiff of a 2017 budget proposal in the air, making a government shutdown tomorrow morning highly possible; but a three-day weekend in Europe, given the…I kid you not…”banking holiday” scheduled for Monday. Not to mention, Sunday marks the end of the biblical “Jubilee Year” – and given all that is occurring NOW, it makes it difficult for anyone to not consider the “coincidence” of such timing. After all, Jubilee Years end once every 50 years – or in Wall Street parlance, 12,500 trading days.
To that end, do you know what Congress spent yesterday doing, when it could have been approving a budget – or heck, a “stopgap” funding bill, that could have been passed without even being read? Grilling Wells Fargo CEO John Stumpf, rightfully so, after learning that America’s supposedly “most conservative” bank has been involved – serially so, in stealing tens of millions of dollars from tens of thousands of savers, as egregiously as the Fed does by pinning rates to the zero bound. This, after spending the prior day delivering Barack Obama the biggest embarrassment of his Presidency, overriding the JASTA, or Justice Against Sponsors of Terrism Act, by 97-1 in the Senate and 348-77 in the House, delivering a death blow to not only American/Saudi relations – and likely, the petrodollar itself – but potentially, the Saudi Arabian Riyal currency.
Which, I might add, was undoubtedly why the Saudi’s reversed their OPEC negotiating stance by 180 degrees Wednesday, agreeing to the “production cap” that, as discussed in great detail in yesterday’s “was Goebbels right?”, will shortly be understood to be the unadulterated scam it is. Said “production cap” isn’t really a cap at all, and won’t even occur unless all 12 OPEC members agree to specific quotas at their November 30th meeting. Which is highly unlikely, as it already under fire by Iraq – which has all but said it will not agree to the terms because OPEC’s “official” estimates greatly underestimate its current production. In other words, this deal is nothing more than the peak of “oil PPT” chicanery – and likely, efficacy. Which, as the global economy continues to plunge, causing demand to decline between now and November 30th, will ultimately be “called out” by the markets; likely, sooner rather than later.
Meanwhile, Secretary of State John Kerry, following in Hillary Clinton’s warmongering footsteps, is all but threatening an end to diplomatic relations with Russia, in light of alleged Aleppo, Syria bombings and associated humanitarian atrocities. Frankly, it boggles the mind to consider how blatantly the Obama Administration – and by extension, the hoped for “Clinton Administration” – is attempting to bait Russia into all-out war. Which, when coupled with the “coincidental” passing of the JASTA bill; the Department of Justice’s aggressive fine of Deutsche Bank (and shortly, Volkswagen); and the potential for Congress to allow a government shutdown this weekend, makes it difficult to believe America’s “powers that be” are not declaring war on the world, financially, monetarily, and militarily. Clearly, they are terrified about something; be it collapsing financial liquidity; the inexorable rise of Eastern powers like China and Russia; or the simple fact that four-plus decades of monetary fraud has finally caught up with them. Or perhaps, all of the above
That said, such issues pale in comparison to the potentially imminent collapse of Deutsche Bank – Europe’s largest bank, with the world’s largest derivative exposure. Not that the latter title means much, as all banks – and countless corporations, municipalities, and sovereignties – are integrally intertwined by the global derivatives web that has exploded higher since the 2008 crisis, largely “off balance sheet.” In other words, when Deutsche Bank goes, everything goes – from “commercial” banks, to Central banks, to governments themselves. Which is why talk of “ring-fencing” Deutsche Bank will be non-existent – given that no entity, no matter how powerful, has either the finances to withstand what’s coming, or the credibility to attempt a “novel” approach to avoiding the global financial calamity that must mathematically occur.
Not that they won’t try, as it’s all but certain the ECB will join the Banks of Japan and Switzerland later this year in monetizing stocks – despite having been unequivocally proven not to work. And the Fed, too – which not only has been increasingly hinting at the potential for negative interest rate policy in recent months; but as of yesterday, equity monetization as well, when Whirlybird Janet said it “could be useful to intervene directly in assets where the prices have a more direct link to spending decisions (i.e., stocks)” if, “like other countries, the limits of purchasing safe assets like longer-term government bonds were reached.”
That said, as suggested by today’s title, and my September 15th Audioblog, “the top financial story of 2017, and the 21st century thus far,” the “end game” of the death of Central bank credibility has clearly arrived. And thus, no matter what Central banks – and sovereign governments – attempt from this point forward, financial markets will overwhelm them, now that the “light bulb” has officially been turned on in the heads of billions of previously ignorant investors. And trust me, Donald Trump’s attacks on the Fed independence, and bubbles, are playing a significant role in waking people up. Which, in my view, will become a MUCH bigger issue at the October 9th and 19th debate “rematches,” when financial markets are likely to be a MUCH larger area of focus.
As for Deutsche Bank, it closed yesterday at a record low $11.47/share in the States, down a whopping 7%, after reports surfaced that many of its prime brokerage hedge fund clients were pulling their cash out. This morning, its European-traded stock traded as low as $9.90/share – a level which, if the PPT cannot goose it higher by day’s end, will invite speculation that the company’s $5 billion of “CoCo,” or contingent convertible bonds, will be triggered; hyper-diluting the stock, and causing investors to realize that $100 billion of such catastrophically toxic “bonds” have been issued by other European banks as well.
In other words, the beginning of the inevitable run on capital that will suck whatever liquidity still remains in the European banking system has commenced, despite the ECB having injected €1 trillion into it in the past year alone, and pushed rates below zero. Remember, unlike Lehman Brothers, Deutsche Bank has a massive retail deposit base as well. Thus, the potential for a dramatic, near-term bank run could not be higher – particularly if fears escalate over what Monday’s “bank holiday” might bring. Such as, for instance, Standard & Poor’s downgrading Deutsche Bank from its precarious, and ridiculously unjustified, “investment grade” rating, as it suggested it might when it reduced its investment outlook from LOL, “stable” to “negative” in mid-July. This, just one day after CEO John Cryan’s “Dick Fuld moment,” claiming Deutsche Bank is “comfortably equipped with free liquidity.”
And good grief, as I write, the largest Dutch bank, ING, just announced 10,000 layoffs, following the 9,000 announced yesterday by Germany’s second largest bank, Commerzbank. As clearly, the entire European banking sector sees the catastrophe that’s about to occur, as best depicted by Goldman Sachs’ comments this morning of what Deutsche Bank may face as early as next week.
Ultimately, Deutsche Bank has four options:
- Raise capital (sell equity and/or convert CoCos, which may result in an even bigger drop in the stock price, due to dilution or concerns the liquidity raise may be insufficient);
- Approach the ECB for a liquidity bridge (this may also backfire, as counter parties scramble to flee a central bank-backstopped institution);
- Appeal for a state bailout (Merkel has so far said “Nein”); or
- Implement a bail-in, eliminating billions in unsecured claims (and deposits) and leading to a full-blown systemic bank run as depositors everywhere rush to withdraw their savings, leading to a collapse of the fractional reserve banking mode (in which there is only 10 cents in physical deliverable cash for every dollar in depositor claims)
In other words, the END GAME of systemic collapse has arrived – which in short order, could morph into the biggest currency crisis in global history. I have no idea what the world will look like after today’s trading – much less, the three-day weekend. However, I have never been surer that 2016 will mark a terrifying inflection point in financial – and potentially, political – history. To which, I can only ask, as emphatically as ever, why you haven’t PROTECTED yourself yet – like calling Miles Franklin at 800-822-8080, and asking our team of brokers, on average with more than 25 years of experience in the business, how Precious Metals can help to preserve your wealth.