I don’t know where to start this Monday morning as potentially devastating geopolitical and economic developments are emerging so rapidly, it is difficult to give them all justice. However, as the Miles Franklin Blog’s principal aim is apprising you of everything you need for your due diligence process.
Frankly, I haven’t got the strength to write of market manipulation today – thank goodness, Bill Holter did so already; as it has become so pervasive and perverse, that it’s the single most important factor in today’s “price discovery” process. And as much as I’d like to believe precious metals are the “most” manipulated market, there’s really little difference in how much money printing and algorithms the government via its “TBTF” proxies commit to everything from stocks to bonds to currencies. However, the one thing we will note is that amidst the worst economic fundamentals of our lifetimes and most dangerous geopolitical environment, equity sentiment – at least, for the “1%” still owning stocks – has NEVER been higher; whilst the world’s most under-owned and undervalued asset class, precious metals has seen sentiment weaken to levels witnessed 13 years ago. And by the way, for those that believe the NASDAQ is soaring for any reason other than Fed-aided, PPT abetted manipulation of the largest cap stocks – with the most influence on the index’ valuation – consider that we are on the verge of an all-time high, despite 47% of all NASDAQ stocks in bear market corrections!
Which is probably why, just as last June and December, when the Cartel was attacking PMs with similar veracity, we’ve received numerous emails asking if the likes of Harry Dent, Martin Armstrong and Larry Edelson were “right” in their unrelenting predictions that gold will fall in the “short-term” before rising in the “long-term.” To that end, we have warned of the dangers of relying on newsletter writers for years, particularly those utilizing “technical analysis” without any regard for fundamentals, valuations and – oh yeah – the aforementioned manipulation representing the single more important aspect of precious metals “trading.”
Remember, every previous attempt to suppress gold and silver prices has miserably failed – invariably done in by the relentless power of physical demand; and NEVER have the forces of PM-bullish reality been more potent. And this morning, following a brief wrap-up of the myriad “horrible headlines” enveloping the global economic landscape, I’ll bring out the “big guns” of propaganda refutation to once and for all silence the foolishness of claiming PMs have fallen since Labor Day due to a “strengthening dollar.”
To start this “weekend of discontent,” China reported its lowest GDP growth since the 2008 global financial crisis, lowest capital expenditure growth since 2001, and year-over year electricity output growth of negative 2.2%. Pray tell, how can the global economy grow when its largest “growth engine” is in reverse? This is probably why the OECD dramatically reduced its global GDP forecast, whilst the World Bank warned of a global job crisis and Japanese politicians publicly fret of the ramifications of “Abenomics” ending next April, with the nation in its worst economic situation in decades.
Meanwhile, Europe is not only on the verge of economic collapse, but revolution following nearly two million Catalonian secessionists rallying Friday in Barcelona, just days before Scotland’s historic independence referendum. And for those that think David Cameron’s “no” vote pleas are based on anything but self-interest, consider the shocking fact we learned this morning; i.e., an independent Scotland would own 90% of the North Sea’s oil and gas production operations. As for the rest of Europe’s expanding instability, Air France and Lufthansa pilots are commencing massive nation-crippling strikes this morning in yet another death blow to Europe’s collapsing socialism miasma; whilst Germany’s Anti-Euro political party scored big gains in this weekend’s elections, and Spanish and Italian sovereign debt surged to fresh all-time highs.
Next up, following Friday’s “Secession Movements gaining Momentum” article, the great Hugo Salinas Price wrote a brilliant piece discussing how when all is said and done, the root cause of said secession movements like so many of the world’s ills is fiat money. This morning’s continued plunge in “emerging market” currencies trumpets this point loud and clear as the so-called “strengthening dollar” continues to pillage the global economy – most notably Russia, where the Ruble plunged to a record low on the heels of new suicidal Western sanction will most certainly be “avenged.”
As for the United States of Global Destruction, there’s simply too much to discuss regarding the economic implosion gaining momentum with each passing day. I’ll get into it further in tomorrow’s pre-FOMC meeting “warm-up”; but suffice to say, today’s “unexpected” plunges in August industrial production and manufacturing speak the point loud and clear. Not to mention, the ultimate in “island of lies” accounting chicanery, as this morning’s Empire State Manufacturing Index dramatically contradicted the Industrial Production index by surging from 14.7 last month to 27.5 this month. The only problem – as was the case with last month’s Chicago PMI “surge” – was that the Empire State’s employment component plunged from 13.6 to 3.3. And we all now know how August’s NFP report turned out, “surging” Chicago PMI (also with a weakening employment component) and all, huh?
And now on to the aforementioned “big gun” of propaganda refutation as depicted by today’s dramatic title. To that end, I thought I’d start with a long-term chart of the “dollar index” for those that actually believe the dollar is “strengthening.” As we have written ad nauseum over the years, not only is the dollar index barely above its all-time low relative to the world’s “non-reserve” currencies, but has barely budged in the past decade. Do you see that teensy, tiny upward “squiggle” at the far right of the chart? Yeah, that’s the recent “strengthening” PM bulls are being propagandized to fear even after prices have already been smashed well below their cost of production, amidst the most bullish fundamentals of our lifetimes.
Of course, as we have written equally vociferously of over the years, “the dollar” is best measured not against other fiat trash but real items of value like food, energy and real money – of which, it has lost 98% of its purchasing value since the Fed’s creation a century ago. However, for those following the Wall Street/Washington/MSM propaganda, keep in mind that the “dollar index” weights include 58% Euro, 4% Swiss Franc (currently pegged to the Euro), and 14% British Pound. In other words, it essentially measures the “U.S. vs. Europe” currency war that will continue to expand until both currencies – and potentially, both unions – collapse.
The current “propaganda du jour” states that since Europe is expanding QE whilst the U.S. is slowing it down, the dollar will “strengthen.” Of course, not an ounce of brainpower is utilized to analyze what is already factored into this relationship; as is the case with gold and silver, which are universally expected to fall in tandem with further “dollar strengthening.” Never mind that they too have already been (manipulated) dramatically lower or that the correlation between PMs and the dollar index has been ZERO for the past decade. Or, as noted above, that there isn’t even a logical argument why the dollar’s fundamentals versus the Euro would correlate to its fundamentals versus gold and silver. To the contrary, if indeed the dollar is in for a significant strengthening against the Euro, the supposed “reduced demand” from 300 million Americans – in itself, a comical fallacy – would be swamped by simultaneous demand increases from 550 million people who either use the Euro or currencies pegged to it.
Putting the “dollar strengthening” fallacy in its full glory, let’s just say a nuclear bomb destroyed Europe. If such a tragedy were to occur, gosh forbid, no doubt the “dollar index” would not only “strengthen,” but surpass the 1984 and 2001 highs – and then some. I know it’s an extreme example; but in terms of real impact on gold and silver demand, it’s not a heck of a lot different than massive ECB NIRP and QE announcements whether the Fed is “tapering” or not. In such a scenario, the dollar would certainly strengthen against the Euro, but plunge against any and all items of real value – particularly gold and silver. And thus, we simply want you to see the “forest through the trees” as the current round of market manipulation, propaganda and general foolishness comes and goes; which, we hope will catalyze you to act now to protect yourself before it’s too late.