This morning, we’d love to focus on just one topic. However, as has been the case for weeks, “economic fires” are breaking out everywhere; such as those in the Ukraine, where the “U.S.-brokered” truce has broken down in less than 24 hours, yielding mass rioting, soldiers firing on citizens and collapsing currencies – such as the Olympics-hosting Russian Ruble, which fell this morning to an all-time low. But don’t worry, as Obama – in Syria-like fashion – has warned the Ukrainians not to “cross the line.” Or else what? We’ll bomb them, too? Or perhaps, in Syria-like fashion, Putin will scare Obama into backing down. I sure hope so.
Speaking of geopolitical foes, let’s follow up on yesterday’s “death knell to tapering”; in which we showed global demand for U.S. financial securities plunging below the 2008 crisis lows – and thus, necessitating increased QE in the coming months. Emphasizing the point further, take a look at this terrifying chart of last year’s U.S. Treasury purchases – ignoring, of course, that we proved the Fed bought perhaps 50% more than purported. Yes, just what they’ve reported to have bought was 150% more than the rest of the world combined; as opposed to what they likely actually did, which was likely closer to 300% more. And now that the global economy is plunging at its most rapid rate in since 2011’s Global Meltdown II – on a crash course with that of 2008’s Global Meltdown I freefall – do you really believe they can stop monetizing?
Starting with yesterday’s “Fed Minutes,” farce through this morning’s spate of seemingly endless “horrible headlines.” Sadly, these “five pages of misery” reflect a dying global economy, collapsing monetary system and expanding social unrest. The fact that nearly a third of Americans – living in the so-called “greatest country” – still live with their parents says it all; but more sadly, such “anomalies” are rapidly becoming the new, global normal.
Regarding yesterday’s FOMC minutes publication – at 2:00 PM EST – we wrote just hours before that such a release was a Cartel “key attack event”; as it attacks paper gold and silver every time FOMC minutes are released, in its heightened desperation to prevent the masses from connecting Fed actions with the untenable economic plight we face. As always, the Fed – in minutes from a meeting three weeks ago – said absolutely, utterly nothing incremental. If anything, it simply showed how utterly clueless they are to explain why economic activity is so weak, how to respond to it, what factors to focus on and even how to communicate its aims.
FYI, U.S. Treasury yields barely budged on this “news.” However, as always, PMs were naked shorted within picoseconds, whilst the Dow was held essentially flat. Later in the afternoon, gold and silver were bombed further with Cartel algorithms, while the Dow was slowly walked down by the PPT – part and parcel to their overarching goal of tricking the MSM into writing of how “markets” are terrified of tapering; when in fact, only PMs got hit particularly hard. Of course, while this blatant paper raid was being conducted, PHYSICAL metal was being swept up by the Asians at unprecedented rates; and consequently, why it’s just a matter of time before the first highly publicized default occurs.
By the way, crude oil continued to march higher whilst PMs were attacked due to “deflation fears”; and this morning, it was reported that U.S. electricity prices hit a four-year high in January; while simultaneously, natural gas and fuel oil prices surged. But don’t worry, all’s well, as the January CPI – reported this morning as well – rose just 0.1%! Moreover, as if the unfolding cataclysm that is the worst California drought in 200 years isn’t ominous enough – per what we wrote in Wednesday’s, Most Important Reason to own Precious Metals – an equally devastating drought has overwrought Brazil. Consequently, global agricultural prices have been surging; led, of course, by coffee. But again, don’t worry – as the Fed, ECB and Bank of Japan believe deflation is what we should be worrying about. And how do Central banks respond to such “worry?” By printing more money, of course.
Now, if “deflation” were defined by the trend of economic activity, they’d be 100% correct; as the global economy is not “weakening,” but free-falling. Unfortunately, inflation is not an economic phenomenon but a monetary one; which sadly, much of the world is realizing as we speak, with the rest to learn shortly.
As for the global economy, the situation is deteriorating at an alarmingly rapid rate. In China, for example, the world’s largest credit bubble is on the verge of collapse; and if last night’s horrific plunge in the HSBC PMI Manufacturing, from 49.5 to 48.3 doesn’t indicate such, I don’t know what does. However, if such ugliness isn’t enough to convince you the “world’s growth engine” is not growing – at purported by a government that admits its economic data is flawed; than how about the data of its dying neighbor, Japan?
Yes, in a land where consumer inflation is at an all-time high, whilst the government complains of accelerating deflation, it was reported last night that the Japanese trade deficit exploded to an all-time high. The ugly chart below is almost unimaginable for a nation recently lauded as the world’s most powerful manufacturing machine. However, it couldn’t be clearer how far Japan has fallen; and frankly, each day that passes, we are more and more convinced a hyper-inflationary collapse may be in the cards in the very near-term.
As for the rest of the world, let’s start with earnings reports – published this morning – of its largest, most economically-sensitive corporations. First off, mining and construction giant Caterpillar reported its 14th consecutive month of declining global retail sales. Next up, Marriott Hotels reported a 17% EPS decline, and significantly reduced its 2014 guidance. And for the coup de grace, Walmart – i.e., the world’s largest retailer – not only reported 4Q 2013 EPS of just $1.34 versus the Street consensus of $1.59 and $1.67 in 4Q 2012, but reduced its 2014 guidance substantially. Throw in the plight of an automotive industry experiencing across-the-board price cutting amidst record sub-prime financing and channel stuffing, and you can see why the U.S. economy is itself on the verge of implosion.
As for today’s Western hemisphere economic data, we started the morning with miserable European PMI numbers; as the overall Eurozone figure unexpectedly declined, led by a nearly unprecedented collapse in the newly communist France; which frankly, is giving Greece, Spain, and government-less Italy a run for their money in the race for weakest economy in Europe. Moreover, today’s European Consumer Confidence Index experienced its biggest plunge in 18 months – and biggest “miss” since August 2011, when Europe was being rocked by Global Meltdown II.
However, such “misses” pale in comparison to the U.S. Philly Fed economic index released at 10:00 AM EST. Last month, it was +9.4; but this month, it plunged to an astounding -6.3 compared to the “expectation” of +8.0. This was the lowest the Philly Fed has been in more than a year, and the largest miss versus expectations since – what do you know – August 2011; amidst not only Global Meltdown II, but the last “debt ceiling” crisis. Which, by the way, coincided with “dollar-priced gold” hitting an all-time high of $1,920/oz. OK, so economic activity is plunging just as fast as in August 2011; the national debt has risen by $3 trillion – with the debt ceiling abandoned last week; and the gold price is where?
Well, it’s now 11:05 PM EST; and as you can see, gold and silver have fought off every imaginable “cap” and “attack” algorithm imaginable – particularly the 7:45 AM EST waterfall decline that occurred with absolutely nothing else budging – to recoup roughly half of yesterday’s post-FOMC minutes, Cartel-inspired losses.
Thanks to the daily POMO, or Permanent Open Market Operations support afforded by the PPT at 10:00 AM EST, the “Dow Jones Propaganda Average” is being purported to signal all’s well. However, with each passing day, more and more people – the world round – are realizing that not only are such markets rigged; but in the case of the Dow and numerous other equity indices, symbolizing not economic growth, but hyperinflation fears. Throughout history, instances of nominal gains rapidly morphing to real losses are too numerous to count; and thus, it would not surprise us to see the Dow surge to 100,000 – albeit, as the cost of living surges far more rapidly; superseded only by gold and silver. Conversely, if the Dow plunged back to 1,000 we wouldn’t be phased either; particularly as gold and silver, under such a scenario, would also surge into the stratosphere.
Sadly, the “misery meme” is expanding at a rate not seen since the Great Depression. Only this
time, the world doesn’t have REAL MONEY to fall back on, unless they buy it from retailers like Miles Franklin. And in the case of the United States, a deadly financial cocktail of horrific demographics; cascading debt, a non-existent manufacturing base and the soon-to-end hegemony of “king dollar” will exacerbate this terrifying trend. Consequently, the U.S. standard of living is doomed to collapse more here than anywhere else; and why, per this excellent article by Michael Pento, we anticipate panic, breakdown, and chaos in the coming years – or perhaps, months.
And when it arrives, the literally trillions of dollars sitting on the sidelines – not to mention Euros, Yen, Pounds and other fiat trash – will, as they have always done, flood into the historical safety provided by real money; i.e., PHYSICAL gold and silver.
And when the herd starts to move – which frankly, it could at any time, given the expanding global “misery” described above; if you haven’t already secured your metal, you may NEVER get another chance.