When I awoke this morning, I debated scripting this week’s second Audioblog – as I have a lot to say, about a great many topics. However, given that I have as much to show you, as tell you, I decided to write instead. Thus, today’s article will be a bit longer than usual. But I assure you, it will be well worth your time.
I decided to start with the simplest possible topic, of why Precious Metals have never been more valuable. After that, the day’s news; culminating in an explanation of today’s purposely provocative statement – about a topic that frankly, will be neither shocking nor novel for long-time readers.
As for said “simplest possible topic,” this is a must read for anyone that doesn’t understand – or doesn’t want to admit – that inflation has destroyed our lives, and made it impossible for “the 99%” to live comfortably. And for 90%-plus, to one day retire; enjoy the fruits of their labor; and God forbid, leave an inheritance. Published by of all sources, CNBC, “a million dollars just isn’t what it used to be” describes what anyone over 30 knows too well; i.e., that as opposed to the times of our youth, being a “millionaire” no longer makes one rich.
Sure, $1 million makes you financially better off than 90% of the global population, and 95% of the non-Western world. However, with the cost of living skyrocketing, unless you live alone, frugally so, the likelihood of maintaining it over the course of a lifetime is shockingly low. Between relentlessly rising taxes and inflation; and the surging costs of healthcare and long-term care – given rising life expectancy, devastating demographic trends, and the rise of socialism; the odds are, you are going to work a lot longer, for a lot less. Which only makes your investment choices that much more important – particularly when the unprecedented fiat Ponzi scheme that has caused such “wealth” to be devalued has caused epic asset bubbles, that must inevitably crash.
This year, my health insurance costs – all-in, when including premium and deductible increases, plus the reduced amount of coverage, are effectively up 50%. This week, I received my second property assessment in the past two years – which ultimately, will result in property taxes rising more than 15% from their 2015 level. Additionally, my HOA dues were just raised 10%; and my homeowners’ insurance, a whopping 25% from their 2015 level. Thank goodness Sylvie will be graduating pre-school this year, as education costs are in the stratosphere. And doubly thankfully, she’s not of college age – as by the time she is, the institution most responsible for destroying millennials’ lives will be long-gone; i.e, the “college conspiracy” that produces nothing for 90% of those attending, except unpayable debt that will follow them their entire lives. I mean, how much more obvious could it be, that the system broke in 2008, never to be fixed?
Sadly, the problem is global – as for the first time in history, all fiat currencies are backed by only the “full faith and credit” of governments and their partners-in-crime the Central banks; whose cumulative track records are so abysmal; and modus operandi so compromised by conflict of interest; it’s difficult to believe anyone takes them seriously. Which is probably why they are being voted out in record numbers – even thought, at this point, such a “solution” doesn’t resolve anything, other than to demonstrate an increasingly populist anger against those that have enslaved them; by an increasingly large population – numbering 7.4 billion, compared to 2.5 billion when my parents were born, 3.7 billion when I was born, and 4.5 billion when the first millennial was born. By the way, we’re just 13 years away from the year 2030 – at which point, it is estimated that the global population will rise to 8.5 billion; and 20 years later, 9.7 billion.
In other words, the cost of living is set to explode, by orders of magnitude far greater than anything yet seen – particularly under the fiat Ponzi standard that has put the world on the brink of financial ruin. Fortunately, it is by definition unsustainable – as proven by the nearly 1,000 fiat standards that have failed over the past millennia, compared to ZERO that have succeeded. Many resources will be strained over this time, but far more will be hopelessly oversupplied, for the reasons described below.
Fortunately, the only assets that have best protected investors from inflation – during times when much less people competed for much less resources; i.e., physical gold and silver; have never been scarcer, at a time when the most over-supplied “resource” of all, fiat currency, is parabolically rising. To wit, the “beauty” of a Ponzi scheme is that it must grow larger, at an accelerating rate, to avoid instantaneous collapse – whilst all along, maintaining confidence amongst the (now billions) of people involved. Therefore, Central banks are “monetizing” assets at a record rate; whilst simultaneously, manipulating, on a 24/7 basis, all financial markets.
Which unfortunately, has the deleterious “side effect” of causing historically overvalued financial assets; and conversely, historically tight gold and silver markets. According to the “Prudent Speculator,” “if you are 50 or younger, or have 10 years before (needing to withdraw) money, and do not have 100% in equities, you are crazy.” Who I’m sure, would consider you equally “crazy” to hold historically undervalued Precious Metals, at a time when real interest rates have never been lower, when they are about to be taken far lower.
We have the Federal Reserve – which unquestionably, has done more damage than any institution in global history. Trust me, it’s no coincidence that its creation coincided with the onset of World Wars I and II; and that since that fateful day in 1913, the world has been plagued by inflation, poverty, and war. Monetary inflation is responsible for more deaths than any man-made institution – which fortunately, is on the cusp of permanently ending. Thus, when I say we are in the terminal phase of history’s largest, most destructive fiat Ponzi scheme, I’m referring not to the catastrophic demise of this fiat regime, but all fiat regimes, forever. This is why crypto-currencies are rising parabolically – as one day, perhaps a lot sooner than most can imagine – the archaic system of government monetary authority will be replaced by decentralized currencies; some of which, like Bitcoin, may well prove to be stores of value akin to gold and silver. That said, the reasons for Precious Metals to do what they have done for thousands of years are no less “archaic” than when they were first discovered; which is why, as stores of value, they have never been more valuable. This is why, per the powers that be’s’ efforts to maintain “confidence” in the dying fiat regime, they have been mercilessly suppressed, at an accelerating rate, since the system broke in 2008; and why, in the not-to-distant future, it’s inevitable that physical shortages emerge, unlike anything seen in modern times.
Since Election Day, when said powers that be abruptly realized the status quo was being replaced, we have seen Precious Metal suppression unlike anything before it. The fact that paper ounces traded rose 50% last year; and stair-stepped further after the Election; should tell you all you need to know about how powerful the efforts to suppress surging physical demand have been; and conversely, how warped the dumbed-down investment community has become, in continuing to believe “paper PM investments” like ETFs, closed-end funds, futures, and options represent actual gold and silver; when in fact, use of this “phantom” metal helps the Cartel suppress prices. Which fortunately for those holding the real thing, inadvertently causes dramatically reduced supply of physical metal (per the above and below charts), and exponentially rising demand – particularly in nations most cognizant of the dangers of fiat currency.
In October 2014, the Fed ended the largest (overt) QE policy the world has ever known, passing the mantle of hyperinflationary “leadership” to the ECB and Bank of Japan. They still maintained zero interest rates for another 14 months – and to this day, rates remain below 1%, compared to the 70-year average of 6%. However, given Europe’s and Japan’s significantly worse demographic trends; and in the former’s case, political and social unrest; as well as an inability to mask these issues with an overvalued “reserve currency,” the ECB and BOJ accelerated their monetization to avert instantaneous financial collapse.
In April 2013, the BOJ launched “Abenomics,” with the goal of doubling the monetary supply within two years; whilst in June 2014, the ECB instituted negative interest rate policy, followed by a QE policy akin to the Fed’s most aggressive ventures to date, in January 2015. The BOJ followed the ECB into “NIRP hell” in January 2016; and as I write, these two banks are cumulatively monetizing $200 billion of toxic assets each month, with no end in sight.
Since the 2008 Financial Crisis, global debt has nearly doubled – which is exactly why interest rates have been artificially suppressed to 5,000 year lows; and why they must be held there indefinitely. To wit, the U.S. national debt was $10 trillion at the onset of the crisis, compared to $20 trillion today, excluding the $5 trillion held “off balance sheet” following the 2008 nationalizations of Fannie Mae and Freddie Mac. Consequently, said Ponzi scheme must exponentially increase; as attempting to hold rates at historic lows, amidst the greatest – and parabolically rising – debt edifice in history is no small feat. Which ultimately, must be called out by the long-dormant “bond vigilantes,” when the inevitable hyperinflationary Central bank response arrives.
The average fiat currency has lost half its purchasing power since 2008 against the U.S. “reserve currency”; and the more this historic crisis expands, the more overvalued the dollar will become, as institutional money flees to its liquidity. That is, until they realize the dollar is as far from a “safe haven” as one can find – which is when the Cartel is inevitably overrun by surging physical PM demand, as guaranteed as night follows day. Fortunately for Precious Metal investors, the rise of crypto-currency will compromise governments’ efforts to suppress Precious Metals, as they spend more time flailing at the amorphous, decentralized Bitcoin market, whilst physical gold and silver markets exponentially tighten. This is why I view Bitcoin and PMs to be the “twin destroyers” of the fiat regime – likely, much sooner than most can imagine.
Lately, the efforts to suppress Precious Metals have been so egregious, it’s becoming difficult for even the mainstream media to ignore it. To wit, the all-time high COMEX “commercial” short position in the “canary in the coal mine” known as silver – utilized to offset all-time high speculative demand, particularly around key technical levels like the 200-week moving average ($1,239/oz for gold, $17.90/oz for silver), and the 5½ year (Cartel-created) downtrend line – for gold, at $1,285/oz, and I’m not sure of the exact level for silver. To that end, as “buying power” has been exhausted by the limited pockets of paper speculators, the limitless-pocketed “commercials” have caused the specs to start unwinding – which is why paper silver has been down a record 14 days in a row, amidst the most violently PiMBEEB, or “Precious Metal bullish, everything-else-bearish” news flow imaginable. To the point that, the only times silver has been more oversold in the past five years were after the April 2013 “alternative currencies destruction” Cartel raid; the October 2014 pre-Swiss gold referendum PM raids; and the ultimate dollar-priced gold and silver bottom in December 2015.
Perhaps yesterday was the “culmination” of this crime-in-progress, following the Cartel’s blatantly egregious attack following what can only be truthfully deemed an extremely dovish policy statement, from a Federal Reserve that cares about nothing except the stock market, as the economy crumbles around it. In other words, so long as the PPT can maintain its dotcom-like support of the “Dow Jones Propaganda Average” (how’s this for a prototypical “dead ringer” algorithm?) they’ll pretend they are considering further monetary tightening; even if, at this point, in a year and a half’s time, all they’ve done is raise the Federal Funds rate from zero to 0.87%, whilst maintaining history’s largest, most egregiously overvalued balance sheet.
That said, their words were no more “hawkish” than their “actions” – in this case, comically so. To wit, after stating “the labor market has continued to strengthen even as growth in economic activity slowed” – this, after the worst NFP jobs report in years; let alone, as U.S. retail and capital spending has plunged to recessionary levels; they espoused that “the fundamentals underpinning the continued growth of consumption remain solid.” I mean, exactly what “consumption growth” are they referring to?
Better yet, after playing semantic games with their definition of inflation, they inserted the most Custer-like “famous last words” in Central banking history – in espousing that “the Committee view the slowing in growth during the first quarter as likely to be transitory, and continues to expect that…” (insert boilerplate language here) “with gradual adjustments in the stance of monetary policy, economic activity will expand at a moderate pace, labor markets will strengthen somewhat further, and inflation will stabilize around 2% over the medium-term.” Frankly, I could spend three pages taking apart such generic, meaningless Fedspeak. However, the fact that, with absolutely ZERO evidence, they could proclaim the worst GDP quarter in three years; following the worst GDP year since 2009; to be “transitory” is beyond credulity. This, from an institution which in December 2014 – i.e., 2½ years ago – not only said falling oil prices were a “net positive for our economy,” but that the decline in crude oil prices from June 2014 to December 2014, from $108/bbl to $55/bbl, was…wait for it…” transitory.”
Since then, the CRB commodity index has declined 30%; and as I write, crude oil has just plunged below $47/bbl. This, after the “oil PPT” – clearly, created in early 2016 when prices fell below $30/bbl, given that plunging oil is quite obviously NOT “a net positive”; has done everything in its power to artificially support the market. Which, via the same inadvertent forces that have caused physical gold and silver markets to become historically tight, have increased history’s largest oil glut; which, like the acute Precious Metal tightness, will worsen considerably for the foreseeable future, causing the vicious forces of DEFLATION to swamp Central banks’ best efforts. Which in turn, will catalyze the “most overdue financial crisis in history”; and with it, the inevitable Central bank response; spearheaded by the Fed, and a President claiming a “low interest rate policy is desired” because the “too strong” dollar is “killing” us; of HYPERINFLATION.
Yes, DEFLATION is finally re-emerging, after a nine-year hiatus caused by the most egregious, world-destroying, wealth-disparity-creating monetary expansion in global history. All the Central banks have to show for it is “dotcom-like valuations in a Great Depression Era”; the former of which, must inevitably burst, whilst the latter dramatically expands. I mean, just look at what all commodities are doing this morning – starting with crude oil, which is destined to fall back to the $30s; and the massively bubble-ized (under the ruse of the DEAD “Trump-flation” meme) base metals. Let alone, the agricultural commodities underlying the historically over-leveraged farming business; and essentially everything relied upon to maintain the jobs so necessary to maintain political, social, economic, and monetary order.
Kyle Bass is actively discussing how “all hell is about to break loose” in China, as the largest financial bubble in global history (that I have warned of for the past two years) starts to burst; which in turn, will catalyze the “cataclysmic, financial big bang to end all big bangs” that is the inevitable, and perhaps imminent, devaluation of the Yuan. This, as China and Russia are setting up an historic gold trade settlement agreement, knowing full well that fiat currencies are on the verge of dramatic devaluation. To that end, for all the hype and propaganda about Western Central bank “stimulus,” it is China’s historic “social financing” (i.e., debt) expansion that has prevented the destructive forces of deflation from re-emerging; which, as you can see below, is occurring NOW.
THIS is what Harry Dent is right about; and by the way, I have noted this countless times before, including in this article from 16 months ago. Let alone, my opus article from January 2015, the “direst prediction of all”; in which, at a time when the CRB index was 230 compared to 178 today, I espoused that the gargantuan oversupply of everything caused by two decades of Central bank monetary inflation (particularly after the system broke in 2008); compounded by the ugliest demographic trends in global history; would cause deflation to destroy everything in its path – until inevitably, Central banks would respond with the time-honored weapon of HYPERINFLATION.
Fortunately, what he is decidedly NOT right about is Precious Metals’ historic response to deflation – as NOTHING has been more PM-bullish than plunging financial markets; let alone, after having been artificially suppressed to historically low prices. Not to mention, in today’s unprecedented situation, when history’s largest, most destructive fiat Ponzi scheme is on the verge of collapse. In other words, I have never been more comfortable with my physical gold and silver positions; and conversely, so terrified about the prospects for paper assets of all kinds; including, potentially “paper PM investments” – when the “big one” inevitably arrives.
Will a specific catalyst be the cause – like a “surprise” Marine Le Pen victory this weekend? Or a bankruptcy far larger than this week’s “surprise” Puerto Rican sovereign filing? Or will it be the sheer weight of unprecedented deflationary forces, weighing on history’s most oversupplied global economy, overvalued financial assets, and over-leveraged consumer base? Frankly, the only thing I’m truly confident of, is that we won’t have to wait much longer to find out.