It’s truly incredible how much ground I have to cover each and every day, given the relentlessly expanding tsunami of horrible – or better put, “PM bullish, everything-else-bearish” – headlines as the terminal phase of history’s largest, most destructive fiat Ponzi scheme plays out. Frankly, it’s getting more and more difficult to condense my daily thoughts into just a few pages; but since I’ve already taped two epic Audioblogs this week, and three podcasts yesterday alone – all of which, are available at milesfranklin.com – I’m not going to tape an Audioblog today.
My Wall Street tenure made me quite adept at cramming in important information into tight spaces, which is exactly what I plan to do this morning, starting with a quick summary of some of the myriad lies, “mis-truths,” and propaganda engulfing the globe – starting with the most insolvent state of the Union, Illinois, which prototypically represents the apocalyptic state of the global pension fund Ponzi scheme, in purporting that its $78 billion fund, now unfunded by a whopping $130 billion, or 63%, can somehow pay out. This, as tens of thousands of citizens flee the state, as Illinois rapidly raises taxes, in turn destroying what’s left of its rapidly imploding business community. And the funny thing is, “analysts” actually believe higher interest rates to be a “good” thing, ignoring the logic that rising rates destroys pension fund equity and fixed income assets; whilst conversely, lower rates raise the net present value of pension liabilities. Throw in the horrifying, unyielding demographics that make it impossible for future generations to receive enough contributions from current workers, and you get an industry mathematically certain to fail, destroying hundreds of trillions of pension assets.
Then you have the Central banks that created this mess by inexorably lowering rates to zero and below, and monetizing everything in sight; and better yet, as in the dying BOJ’s case, trying to tinker monetary policy so precisely, like arrogantly attempting to “control” the yield curve. To that end, consider that this week’s post-Trump bond market carnage has already wiped out all the BOJ tried to accomplish with its Frankenstein monster-like yield curve control scheme, causing it to, for all intents and purposes, abandon this dead on arrival “strategy” yesterday with full-blown “helicopter” JGB, or Japanese Government Bond, bidding. In turn, putting downward pressure on rates – and subsequently, upward pressure on the net present value of the very pension liabilities they intended to “save.”
And how about Ford’s CEO blatantly, starkly warning of the “huge (negative) impact” Trump’s proposed import tariffs will have on not just Ford, but the entire U.S. economy? This, in one of the few remaining industries that still does some manufacturing in America; which has admittedly passed “peak sales,” amidst declining demand, exploding incentives, and record-high inventories. To that end, I made it quite clear from the second Trump won – in last week’s “Turning on Trump” Audioblog, and countless other publications – that not only are the “renegotiation” of trade deals Trump promises impossible, but that manufacturing jobs ceded long ago to points overseas are long gone, NEVER to return. In this particular case, if Trump actually went forward on a 35% import tariff of Mexican-built (by U.S. companies) automobiles, Ford (and GM, for the second time) would unquestionably go bankrupt; whilst the Mexican Peso would crash far more than it already has, given that automobiles are its number one export. Which may well push us toward war with Mexico – let alone, if Trump actually intends to act on his anti-immigration rhetoric.
While on the topic of election promises impossible to enact, how about yesterday’s TIC, or Treasury International Capital report, confirming what I have said all along; i.e., foreign Central banks are accelerating their sale of morbidly overvalued U.S. Treasuries, as Ponzi schemes as diverse as the Petrodollar and “Sino-Dollar” collapse? Yes, we are now up to $375 billion of such sales in the past 12 months alone, the highest figure to date; led by China, which is desperate to staunch exploding capital outflows due to the very Yuan devaluation they initiated; in turn, catalyzed by the very “rate hike” jawboning the Fed has misled markets with, compounded by misguided belief that Trump can actually enact massive “supply-side” fiscal stimulus without blowing the deficit, and the dollar’s purchasing power, to Kingdom Come. To that end, the PPT’s suicidal gambit of hyper-inflating the “Dow Jones Propaganda Average” post-election – first, to reverse the initial, correct reaction of plunging prices; and second, to create a false meme of impending, stimulus-fueled “growth” – has dramatically backfired; as now the Fed will be forced to raise rates December 14th, simply to prevent looking like fools, given that the now inflation-fearing bond market has already done it for them.
And oh yeah, after China, Saudi Arabia was the second largest Treasury seller, accelerating its 2016 sales of, to date, 30% of its total Treasury holdings – partly due to collapsing oil prices; and equally, I surmise, anger about America passing the JASTA, or Justice Against Sponsors of Terrorism Act. To that end, today and tomorrow are the dates of the latest OPEC propaganda scheme – again, commenced just as oil fell to the low $40s last week; i.e., a “meeting” in Doha, Qatar between several OPEC and non-OPEC nations, to try and support prices ahead of the November 30th deadline for actually producing the production cut “deal,” that is in fact, dead as a door nail. To wit, we learned yesterday that the leadership of Iran, Iraq, and Nigeria aren’t even attending; and thus, given that their lack of cooperation was the principal reason no agreement has actually been proposed yet, I’m not sure why anyone but short-squeezed algorithm traders would care.
As for the information the “data dependent” Fed is watching – considering, of course, that the Obama Administration ran up the national debt by $350 billion in the three months ahead of the election, to generate the false “growth” that ultimately failed to win Hillary Clinton the election; fake data has been mixed at best (like LOL, the lowest initial jobless claims in 43 years, given that in today’s “gig economy,” few people have jobs eligible for unemployment insurance); whilst real data like flat industrial production, plunging mortgage applications, and weak Wal-Mart sales have plain and simple, stunk.
However, when “bond vigilantes” are starting to fear the hyperinflation we long knew would arrive – in this case, in the form of lunatic fiscal spending – it doesn’t matter what the data says, the Fed must hike rates to remain “credible” – even if the quarter point they will undoubtedly increase them by is well below the 45 basis points the actual market rose by this week. Which is probably why Whirlybird Janet and company are hoping and praying for an “external” or “black swan” reason to avoid this catastrophic fate before their December 14th meeting. As given that the dollar already breached its 13-year high (yesterday), the impact of higher rates – whilst global economic activity collapses – will be to destroy trade, catalyze debt defaults, and accelerate Treasury selling. In turn, turbo-charging the PBOC’s Yuan devaluation, further destroying U.S. economic activity and already plunging corporate earnings.
Which brings me to today’s all-important principal topic – of how global Central banks’ and governments’ dire monetary and economic predicaments (and thanks to Trump’s election, political as well) are catalyzing the enactment of the type of desperate, draconian measures witnessed only during times of crisis. Like, for example, the BOJ abandoning its insane QQEWYCC, or Qualitative Quantitative Easing with Yield Curve Control scheme, mere weeks after launching it; or governments from Australia to India officially launching the “war on cash” we – as in we, the readers of the Miles Franklin Blog – knew was coming. Which I assure you, is just the onset of the Acute Totalitarian Syndrome the world is about to experience, including financial repressions like cash bans, capital controls, and IRA confiscation; along with political repressions like censorship, as political, economic, monetary, and social conditions inexorably decline in 2017.
Regarding the “war on cash,” I cannot emphasize enough that this is not a “trial balloon” – like the one launched earlier this year here, when the topic was bandied around by Atlas Shrugged insiders like Larry Summers and Ken Rogoff. In Europe, the 500 Euro note was in fact discontinued in May; and just last week, the government ruling the soon-to-collapse financial Apartheid of India killed off more than 80% of the nation’s hyper-inflating currency, following a completely unanticipated prime time address the very morning of the U.S. election (presumably, to keep it out of the headlines).
As in the U.S., the ridiculous “reasons” given are the “criminal activity” supposedly trafficked in cash, as well as the catch-all excuse of tax evasion. However, the real reason is to control the population further; monitor its every move; and of course, set the stage for bail-ins, bank fee increases, and other means of confiscating wealth should actual “crisis” conditions occur. Like for instance, the plunging global trade that has caused the RBI, or Reserve Bank of India, to recently, “unexpectedly” lower rates, despite the Rupee already sitting near its all-time low. Or for that matter, the Precious Metal “black market” exploding further, despite 10-plus percent import tariffs – which went into hyper-drive following the cash ban, as thousands of fearful, angry, fiat-currency-hating Indians flocked to coin shops, selling out all available product, and driving gold premiums over the fraudulent, COMEX-dictated paper prices as high as 100%. And FYI, if you think this week’s Bitcoin surge, to nearly an all-time high market capitalization, is not at least partly due to Indian buying – as well as Chinese buying, given yesterday’s all-time low Yuan/dollar peg – you are missing the point of how such capital controls will, and are, causing real world people to act.
Trust me, the political ramifications of last week’s “BrExit times ten” election will hyperbolically accelerate in the coming months – starting with Italy’s December 4th Constitutional Reform referendum; which will undoubtedly fail, yielding the resignation of pro-EU Prime Minister Matteo Renzi, Italy’s fourth PM since 2008, in lieu of violently anti-EU, anti-Euro leadership; to the point that current money market “odds” of an “ItalExit” are above 60%. Economically, the accelerating collapse of history’s largest fiat Ponzi scheme – coupled with the aforementioned, until last week “unexpected” political shocks – will only continue in 2017, prompting the aforementioned draconian government responses and them some; as well as the only “response” Central banks still have; i.e, hyper-inflation and helicopter money.
Thus, the reasons to own Precious Metals, particularly in light of the violent post-election suppression operation that is starting to stretch an already tight physical market to its limits, have never been stronger. To that end, Andrew Maguire, one of the most connected physical market insiders in the world, in this interview yesterday claimed he is “absolutely sure” the artificial suppression will end in 2017. I wholeheartedly agree, as there are just too many factors forcing reality to the blinding light of reality.