It’s Tuesday afternoon, and I’m writing amidst the blatant “poor man’s version” of 2011’s “Operation PM Annihilation I.” As you recall, that ugly chapter in Cartel history commenced in the wee hours of Labor Day 2011, simultaneous with one of the most PM-bullish announcement possible; i.e., the Swiss National Bank devaluing the Franc by 7% and pegging it to the dying Euro. Of course, back then the “starting point” was gold’s record high price of $1,920/oz., whilst silver was $43/oz. We deemed this major inflection point in TPTB’s “suppression strategy” the “point of no return”; and since then, despite dramatic escalation of all of 2011’s key issues, an unprecedented assault of money printing, market manipulation and propaganda has managed to keep financial markets afloat and precious metals down. In prior lifetimes, today’s Yahoo! Finance top story citing “an S&P run for the ages,” would be the perfect example of top-calling. However, in this case, said “top” may only be in real terms – as it’s entirely possible the Dow will be hyper-inflated along with countless “items of real value” like food, energy, rent and healthcare.
That said, MSM readership has declined to all-time lows; as not only have “the 99%” lost their ability to participate in financial investments, but don’t believe a word they’re told by the “gurus” that burned them in 2000-02 and 2008-09. Heck, we are now being treated to completely erroneous headlines on a daily basis like Yahoo! Finance’s other top story today of “Asian stocks dipping” when they in fact rose – or this gem from Friday’s Market Watch, in which the below text tells a diametrically opposed story to the headline that “Treasury yields notch largest monthly gain since January.”
The 10-year U.S. Treasury yield declined 0.214% for the month Friday, the largest monthly decline since January as the widening economic growth differential between the U.S. and European economies supported Treasury prices.
–Market Watch, August 29, 2014
Sadly, the fact that Treasury yields didn’t notch their largest gain since January, but largest loss doesn’t even represent half the madness of this article. Once again, read the text above and ask yourself why any investor would believe a (supposedly) widening gap between U.S. and European economic performance would support Treasury prices particularly when said “economic growth differential” isn’t even defined. In other words, one of the most “respected” financial MSM outlets has resorted to pure gibberish, lies and misdirection.
I’m surprised they didn’t throw in a comment about why such events are PM-bearish; which even the great Zero Hedge sometimes does, given its headline this morning that “gold tumbles most in six weeks as U.S. dollar surges.” Yes, gold suddenly plunged in ultra-thin paper markets because the dollar index was up a whopping 0.2 points, because the Yen collapsed to a new six-year low (given investor expectations of expanded Abenomics) and the Euro plunged ahead of what could be a hyperinflationary ECB announcement on Thursday.
The sad, irreversible fact is that global economic growth is imploding, with a capital “I.” Just this weekend, we saw horrific across-the-board manufacturing data from Australia to Brazil to China to the entirety of Europe. Japan’s auto sales plunged 9% year-over-year to a new three-year low; and already, debate about the potentially catastrophic impact of next year’s second scheduled sales tax increase has commenced. Heck, Scotland will be holding a referendum in two weeks regarding secession from the UK, as the global movement to escape financial cataclysm gains momentum.
Of course, U.S. “island of lies” economic reporting has reached the stratosphere of lunacy, reporting “growth” whilst the entire world contracts – via statistically insignificant heavily “massaged” diffusion indices like the Chicago PMI, which somehow managed to plunge from 62 in June to 52 in July and surge back to 64 in August – whilst U.S. personal spending and retail sales flat-lined and even the Chicago PMI’s own employment component contracted. To that end, just like masking real supply and demand in physical gold and silver markets with fraudulent paper pricing will inevitably be undermined by surging demand and plunging production trying to purport a strengthening economy when it is in fact contracting will inevitably be refuted by the realization that actual cash earnings can’t support such claims – other than from the Fed’s printing presses, of course. Maybe I’m crazy, but the U.S. national debt rising from $14.1 trillion at the height of its summer 2011 crisis to $17.7 trillion just three years later doesn’t connote “recovery” to me – nor does record low labor participation and record high entitlement payments. And don’t forget for a second that the all-important mid-term elections are just two months away; and thus, just like the Obama Administration’s blatant manipulation of the October 2012 NFP report, just before Election Day, it would be naïve to expect any less this Fall.
As for today’s primary topic, we want to follow up on yesterday’s “Thursday’s ECB decision could destroy Europe, if Ukraine doesn’t first,” given how cataclysmic the direction Europe’s “leaders” appear to be taking it. Yesterday, we highlighted David Stockman’s deconstruction of the supposed Portuguese “recovery” from its 2011 crisis lows – essentially, mirroring the U.S. “recovery” propaganda above, but yielding a far uglier prognosis. In sync with what the Miles Franklin Blog has discussed ad nauseum, the only reason “recovery” is even considered is because unfettered money printing and government market support have boosted markets to historically high valuations, amidst the worst economic environment of our lifetimes. It can only end badly – unquestionably, in real terms – and our below analysis of yet another of Europe’s PIIGS, Spain demonstrates exactly how, “in simple math.”
For the record, Spain is the Eurozone’s fifth largest economy, with six times more GDP than Portugal – and at €826 billion, four times more debt. Of course, if more realistic “GAAP-like” accounting were utilized, Spain’s debt would be nearly double the published amount, resulting in debt/GDP somewhere closer to 200% than the reported 94%. But let’s not quibble about such “complexities” – and instead, revert to said simple math.
Below is a table depicting first, the catastrophic collapse of Spain’s economy from its January 2008 peak until its banks were given the aforementioned €100 billion bailout in July 2012; i.e., when “Goldman Mario” said the ECB would do “whatever it takes” to save the Euro…and “believe me, it will be enough.” Since then, the ECB’s implicit promise of hyperinflationary monetization has catalyzed a plunge in Spain’s benchmark 10-year government bond yield from 7% to nearly 2%, despite its worst economic environment in generations.
As you can see, all major economic categories have deteriorated further since July 2012; particularly, the utter explosion in national debt. And recall, Spanish banks were on the verge of collapse two summers ago due to toxic mortgage holdings; while today, with Spanish home prices down an additional 9%, Spanish bank stocks and bonds have surged due to the aforementioned “whatever it takes” promise – which we assure you, the ECB will make good on, potentially as soon as Thursday. In our view, Spain’s sale this weekend of 50-year sovereign bonds at a paltry 4% yield demonstrates the height of financial engineering madness. And for those owning them instead of physical precious metals at prices below their costs of production – whilst European authorities rapidly advance future “bail in” proposals, no less; we can only say this – boy do we have the trade for you!
The moral of the story, of course, is that “simple math” demonstrates that banking systems like Spain’s are hopelessly insolvent – and getting more so with each passing day. And now that global money printing is accelerating and the “final currency war” in full swing – not to mention, the potential for military war in countless geopolitical hot spots – the need to safeguard one’s assets from the inevitable hyperinflation has never been more powerful. And if you are one of the “precious few” that act, we humbly ask you to give Miles Franklin a call at 800-822-8080 and “give us a chance” to earn your business.