Monday’s are the toughest time to write, given how the significant quantity of “horrible headlines” each weekend. TPTB, as always, did their best to prevent the masses from realizing how scary things are getting, via some of the most blatant, last hour “hail mary” rallies imaginable. Recall Friday morning, when we wrote of the “mysterious” spikes we should expect in interest rates as the Fed desperately defends them, in their unmitigated terror that plunging rates will signal their complete and utter failure in reviving the economy. And thus, it’s no surprise Zero Hedge specifically characterized Friday’s late day rally – boosting the benchmark 10-year Treasury yield from 2.50% to 2.53%, whilst completing a perfect “dead ringer” pattern for the Dow Jones Propaganda Average – as “mysterious.”
That said, the news was anything but equity supportive; and as you’ll see by the terrifying list of “horrible headlines” below, it’s difficult to believe any objective person won’t shortly realize what must ultimately occur. To that end – demonstrating extreme historical irony – it appears that military conflict between China and Vietnam is borderline imminent. Vietnam; where America first initiated the money printing spree that catalyzed abandonment of the gold standard, and inevitably, the end game of currency collapse. And China; destined to usurp America as global superpower; certainly economically, and perhaps militarily as well.
Given the rapidly expanding global unrest catalyzed by exported Federal Reserve inflation, political tensions related to such petty disputes are breaking out the world round, and in some cases like the Ukraine, due to far less “petty” issues. And when one speaks of exported inflation, by far the most alarming aspect is the rampant surge in global food prices; i.e, what we last year deemed “The Most Important Reason To Own Precious Metals.” Which, by the way, was written in February, before a nearly 20% food price increase that threatens to decimate the U.S. economy; and, of course, be “blamed” when second quarter GDP growth, too, is way below expectations.
Thus far, April retail sales, industrial production, and homebuilding sentiment (in this, the seasonally strongest period) have been abysmal; and as we described in “Three Numbers: +288, +234, and -806,” the labor market has weakened to perhaps its worst level since the Great Depression. No, not 2008’s Great Recession; but the 1930s’ Great Depression – with the only significant difference being the level of printing press funded entitlements. Meanwhile, what we have warned of ad nauseum is playing out tragically; as not only have the historic, potentially multi-decade California and Brazil droughts worsened considerably, but a variety of other extraneous factors have coalesced to cause across-the-board food prices to surge, with no end in sight and a rising cadre of retailers stating they can no longer “eat” such losses; and thus, will begin passing through such cost increases en masse.
Source: Economic Collapse Blog
Again, we cannot understate how terrifying the global impact of surging food prices will be; ultimately, making the 2010-12 “Arab Spring” pale in comparison. In most categories, food prices are at or near all-time highs – but particularly here in the States, where Janet Yellen insists inflation is “below 2%,” despite the past two months’ monthly PPI readings registering at +0.6% – excluding food and energy. There’s a reason why even the most mainstream food companies – like Campbell’s Soup this morning – are reporting weak revenues and poor sales outlooks; as plain and simple, people can’t afford food as they once did, given surging prices and plunging real incomes.
Heck, I just read that the average cost of a Big Mac was $4.62 in January (before beef prices rose 9%, to a new all-time high). By now, it should be clear to all that McDonalds’ “Dollar Menu” has become a major loss leader; as validated by the widening gap between the PPI and CPI, and the aforementioned announcements that everyone from Safeway supermarkets to Landry’s restaurants are on the cusp of major price increases. And don’t forget the impact of socialism on the cost of consumer goods; as I assure you, the combined impact of Obamacare and minimum wage increases will be devastating. If you don’t believe me, look at what corporate giants like Walmart and IBM are doing!
As for the economic “recovery” that has been propagandized in true Orwellian form, how’s this for a shock to the system? Kudos to Zero Hedge for sourcing this incredible story of the hundreds of thousands – if not millions – of new cars languishing in global car parks. Validating the fact that GM’s “channel stuffing” activities recently reached record levels, essentially all mainstream car manufacturers appear to have been producing vastly above demand for some time; and consequently, will likely experience major cash crunches in the near-future. As for GM – no problem, as they are considered “too big to fail.” However, no matter how much money the Fed prints and gives them, economic fundamentals will continue to deteriorate; thus, catalyzing both economic implosion and price explosion of the items we “need versus want” – such as FOOD and ENERGY.
To that end, perhaps the most shocking news imaginable – and validating, for those in the Miles Franklin reader camp – is this weekend’s admission that Germany’s largest bank, Deutsche Bank (which, by the way, is under investigation for manipulating gold prices), “suddenly” requires €8 billion of capital and subsequently, plans to raise it at up to a 30% discount to the current price. Recall last June, when FDIC Vice Chairman Thomas Hoenig – himself, a former Fed governor – didn’t just characterize Deutsche Bank as undercapitalized, but horribly so; i.e., “It’s horrible; I mean they’re horribly undercapitalized – they have no margin of error.”
Clear evidence of economic “recovery” – n’est ce-pas? And by the way, for those still trying to break the cognitive dissonance of soaring bank stock prices (read: money printing, market manipulation, and propaganda) and plunging bank fundamentals, note that European loan “growth” is at an all-time low, having contracted unabated for the past two years.
Source: Zero Hedge
Wherever one looks – from Asia, where debt and money supply growth has actually outpaced the Fed since 2008; to “the Land of the Setting Sun”; to the Chinese credit/construction/real estate collapse; to the West, evidence of economic deterioration and inflation explosion are everywhere. To that end, ask yourself this: How on Earth can oil and food prices be rising so rapidly? Not to mention, insurance, healthcare, education, and taxes in an environment of essentially ZERO global GDP growth? Could it have something to do with money printing? And subsequently, what impact do you anticipate on consumer prices when “Draghi’s Reckoning Day” arrives next month – yielding negative deposit rates and/or wholesale quantitative easing; or the “doubling up” of Abenomics next year; or better yet, “Whirlybird Janet’s” inevitable “tapering” capitulation?
Before I get to today’s principal topic – and “market action” – I’d be remiss to point out yet another, extremely validating article published this weekend; describing just how clueless the Federal Reserve is, how criminal the Wall Street banks that own it have become, and how parasitic the hedge bombs that exploit inside information have become (at which, they still can’t make money).
Source: Zero Hedge
Yes, per a recent article from Zero Hedge, it appears JP Morgan and other government “partners” are hosting $250,000 per plate dinners with “Helicopter Ben” himself, in which top hedge fund managers and Wall Street analysts can spend other people’s money for the opportunity to ask Bennie what he thinks the Fed will do; as by now, it’s becoming painfully obvious that “markets” are 100% driven by Central bank money printing – along with PPT, Fed, ESF, and Cartel manipulations, of course. Anyhow, the shocking, terrifying takeaway from such dinners – according to first-hand accounts – is Bernanke does not expect the Fed Funds rate to rise back to its historical average of 4% in his lifetime. In other words, “ZIRP to Infinity.” And thus, for those that still believe the Fed has a viable “exit strategy” from its $4.4 trillion (and growing) balance sheet – amidst near record low interest rates, surging inflation, and a collapsing global economy – I suggest you re-think your assumptions. Not to mention, the unrelenting attacks on the dying dollar standard – as signified by tomorrow’s historic meeting between Vladimir Putin and Xi Jinping, in which the “holy grail” Sino-Russian natural gas agreement is expected to be agreed upon; potentially, excluding the dollar entirely.
And on to today’s “markets”; starting with the “mysterious” equity surge after 12 hours of global weakness, featuring the Nikkei closing just six points above the Bank of Japan’s 14,000 “line in the sand,” and the Shanghai Exchange five points above the equally “supported” level of 2,000. Moreover, what we have pounded the table about; regarding the Fed’s failure to support the 10-year Treasury yield at 2.6%, and imminent, equally devastating failure at 2.5% – is playing out in prototypical form. To wit, despite numerous “mysterious” spikes such as Friday’s aforementioned “hail mary” rate surge, the 10-year rate has again fallen below 2.5%, just two days after its 11-month support of 2.6% was decidedly breached. “Recovery,” indeed!
As for precious metals, one can only laugh when watching how intently the Cartel is protecting its own 10-month “line in the sand” at gold $1,300; let alone, its six-year crusade at battlefield $20 silver. I mean, just how obvious can it be that the Cartel is desperate to prevent $1,300 from being breached – just as the Fed was at 2.6%? After a comical six defenses of $1,295 on Friday, they have been forced today – with oil surging to nearly $103/bbl – to defend $1,300 five times – with the capping algos set, on cue, to round times like 4:00 AM, 6:00 AM, 7:00 AM, 8:20 AM (high of the day, at the COMEX open), and the 10:00 AM “key attack time #1,” when global PHYSICAL trading ends.
Last week, we wrote of the “Speck-tacular Analysis” in Dmitri Speck’s book about gold manipulation; aptly titled, “The Gold Cartel.” I have already read half of it; and frankly, even I have learned much about the most important aspect of the precious metals market. Western Central (and private) banks have been suppressing gold and silver for decades, and in reading this book – and the Miles Franklin Blog – you, too, will understand this. Fortunately, every such attempt – throughout five millennia – to suppress real money has failed; and this time around, the fundamentals supporting precious metals – and damning fiat currencies – have never been stronger.
The chinks in the current Cartel’s armor – such as plunging precious metal production and inventories, combined with surging demand and premiums – have never been more obvious, nor irreversible. And thus, when Ron Paul says gold always “wins in the end,” you should take note. It’s just a matter of time before the end game commences; and if you haven’t already protected yourself when it does, it will already be too late.