Sometimes I wish I were writing this newsletter in Asia; as in – China, India, or Japan. Actually, I was writing in China last month; but that doesn’t count, as I was on vacation. Thus, what I’m actually saying is it would be nice to write to a nation that appreciated the historical context of my words; and one that understands I’ve been DEAD ON with my macroeconomic calls for as far back as I have been making them. That is, from the time I sold ALL my equities in April 2000 when the tech bubble started to burst; only to sit 100% in cash until moving my entire liquid net worth into PM miners in May 2002; and finally, to PHYSICAL gold and silver in May 2011. Sure, readers of the Miles Franklin Newsletter understand what David Schectman, Bill Holter and I are saying. However, our “shadow world” represents less than 1% of the ENTIRE WESTERN WORLD; and thus, everyone from “Joe Six-Pack” to the MSM ignore us completely.
In the former’s case, they are too busy struggling for survival to care about the esoteric world of economics; and as regards the latter, they are so ingrained in the environment of MONEY PRINTING, MARKET MANIPULATION, and PROPAGANDA – i.e., “1984 IN 2013” – they have lost all sense of reality. Sadly, greed, sloth, and the unwarranted sense of entitlement the world’s “reserve currency” has given Americans their education system to become one of the worst in the “first world.” Austrian economics are no longer even mentioned – let alone taught – as “Keynesians” have run roughshod over what was once the world’s beacon of economic and social progress. Much of the MSM is now owned by the very people pushing the “serfdom society” that 40 years of fiat currency has engendered; and sadly, will continue doing so until its inevitable demise.
If I were writing in the East, my following would be dramatically higher; and likely, I would be as renowned as “experts” like Paul Krugman are in the West. Moreover, if I were Media Director of an Eastern bullion dealer, business would be rocking and rolling. Asians have centuries of history with the virtues of REAL MONEY; and thus, properly utilize gold and silver as their primary means of preserving their savings. This is why Miles Franklin and other dealers are currently seeing very slow – albeit, late summer – business, while Eastern demand has set every imaginable record. However, this year’s Cartel-orchestrated PAPER smash has caused worldwide PHYSICAL supplies to collapse – not to mention, the production outlook for years to come; and thus, Miles Franklin and its peers are on the cusp of an historic reversal of fortune – at least, from a business standpoint.
You see, strong PM business comes with a steep price; as care of what I have written the past three days – in “THE MOST IMPORTANT ARTICLE I’VE EVER WRITTEN”, the “ FRAGILE FIVE,” and “CHINA – COMPLETING THE FED’S INFLATION EXPORATION CIRCLE,” – higher Asian PM demand has been accompanied by surging inflation and, in several high-profiles cases like India and Japan – collapsing currencies. To wit, Indians and Japanese holding gold and silver look at their computer screens and see Rupee Gold and Yen Gold just 5% from their respective ALL-TIME HIGHS; but at the same time, are experiencing extremely difficult living conditions amidst maniacal government policies on the verge of DESTROYING their nations.
Conversely, “DOLLAR-PRICED GOLD” is 30% below its August 2011 high – when the U.S. national debt was roughly $3 TRILLION lower – causing American PM holders a great deal of consternation; particularly while enduring daily PROPAGANDA touting the “end of the PM bull.” Remember, America’s “reserve currency” status has temporarily enabled inflation to rise at lesser rates than in the East; and thus, its fiat Ponzi scheme has lasted longer than the rest. Not low inflation rates, mind you, but lesser rates that enable the public to continue boiling like lobsters in a pot – instead of openly revolting as they are in the East. Just ask the people of Egypt, Turkey, and soon-to-be India, Indonesia, and South Africa – among others. Not to mention, the so-called “Western” nations of Brazil, Argentina, and Venezuela.
Remember, we don’t buy gold and silver as investments to “make money on” – although price appreciation is certainly not a bad thing; but instead, to preserve the purchasing power of our savings over time, which gold and silver ALWAYS have. To wit, those in the aforementioned Eastern nations would gladly give back some of their recent PM “gains” in return for a lower cost of living, less draconian government, and reduced odds of widespread social unrest and/or civil war. Of that, I ASSURE you!
Anyhow, the U.S. government remains hell-bent on plunging the world into WAR; and simultaneously, convincing the masses of a “SO-CALLED RECOVERY” incorporating manipulated “diffusion indices” amidst a “NEW EMPLOYMENT PARADIGM” of low-paying, part-time retail jobs. REAL data like durable goods and factory orders, imports/exports, freight traffic, and entitlement growth tell a different story; let alone, wages so low, tens of thousands of fast food workers are demanding twice their current “minimum wages.” But according to the MSM, such data should be ignored; as so long as the “DOW JONES PROPAGANDA AVERAGE” keeps rising, “all’s well.”
To hammer the latter point home, I’d guess the average employee in the fast food industry – you know, where the vast majority of new jobs are created – works 25-30 hours per week, at the minimum wage of $7.25/hour. Assuming 50 weeks of work and a 30% tax rate, such jobs yield annual take-home pay of just $6,300-$7,500. And for those “lucky” enough to hold two such jobs – enabling 50-60 hour work weeks in menial, difficult labor – they earn a whopping $12,600-$15,000 per year. Health insurance alone can cost that much these days; and JUST WAIT until Obamacare is fully enacted following the 2014 mid-term elections. And thus, tell me if you believe a real “recovery” is occurring!
Anyhow, I digress; as the title of this article focuses specifically on DEBT – i.e., the fiat currency generated cancer causing ALL the world’s economic problems. I can’t help but laugh – and cry – when I see the unending focus on potential Fed “tapering” of its QE program; first, because tapering doesn’t mean ending, but simply slowing it down; and second, because the ENTIRE WORLD knows the Fed is currently the ONLY meaningful buyer of Treasury bonds. The “BURSTING OF THE BIGGEST BUBBLE IN HISTORY” may well be occurring solely due to this factor – plus, knowledge that China and Japan have become aggressive sellers. Yet, the MSM desperately clings to hopes it is instead due to an “economic renaissance” causing rates to “normalize.” Well normalize they certainly are, but NOT for any positive reasons, that’s for darn sure. And just wait until the economic ramifications – worldwide – of higher rates start to affect the aforementioned “diffusion indices”; let alone, REAL economic data that was in free fall before rates started rising.
To wit, each 1% increase in rates adds a whopping $170 billion to the U.S. annual budget deficit; let alone, tens of billions to the countless municipalities, corporations, and individuals that rely on rates tied to currently ALL-TIME LOW Treasury yields. And don’t forget the catastrophic losses of the world’s largest Treasury holders; China and Japan – holding $1.1 trillion each; and the Fed itself – thanks to QE4, holding more than $2 trillion of Treasuries and another $1+ trillion of mortgage bonds directly tied to them. Worse yet, the Fed has painted itself into a “DURATION TRAP” by purchasing longer-dated maturities over the past two years; and thus, could lose $1 TRILLION or more if rates continue to rise – which of course would need to be replenished with fresh MONEY PRINTING. As I watch the PPT keep the Dow flat for the second straight day; whilst the world’s largest asset class – i.e., FIXED INCOME – implodes; I can’t help wondering when the MSM will realize we are in the early stages of a global “IMPLOSION OF NET WORTH, AND RACE FOR CAPITAL PRESERVATION” that will ultimately end in re-monetization of the world’s ONLY debt-free money; i.e., PHYSICAL gold and silver.
But the “hits keep coming”; because as it turns out, the East is actually more leveraged AS A WHOLE than the West. Sure, outside of Japan, government “debt to GDP” ratios are lower (assuming, of course, they are truthful). However, as it turns out, the level of corporate leverage in the East is far higher than the West – outside the UK banking system, of course; and thus, overall exposure to higher rates is actually worse in the Eastern Hemisphere!
Combining government, municipal, corporate, and individual debt, the same result is viewed WORLDWIDE; as “Financial Debt/GDP” has become so gargantuan, it matters not which nations are “worse.” Such debt ratios bring to mind LEHMAN BROTHERS and the Federal Reserve itself; not to mention, the fact that hundreds of trillions of lethal derivative instruments are carried “off balance sheet.” As I watch the Yen, for instance, plunge this morning toward its recent, multi-year lows, I can’t help wondering if “THE REAL YEN BOMB – STARTS NOW!”; that is, if its depreciation becomes so acute, Japan’s long-time government supported bond market will finally “give up the ghost”; and thus, get swamped as the U.S. Treasury market is today. And if so, will the Japanese sell some or even all of their $1.1 trillion of Treasuries to fund what the JGB market no longer can?
Source: The Economist, Incrementum AG
In other words, there are no “safe havens” amidst the “IRREVERSIBLE, GLOBAL DEBT ADDICTION” that will inevitably result in massive “cardiac arrest” for the entire worldwide banking system. That is, aside from the ONLY debt-free financial instruments the world has EVER known; and that it EVER will; i.e., PHYSICAL gold and silver. Rapidly rising rates are GUARANTEED to destroy everything in their path – from stocks, to bonds, real estate, and even sovereign governments; and only PMs will be immune, as the “last men standing.” Thus, I welcome tomorrow’s “NFP payroll report” (today when you read this); as the BLS may already be too late to stop the inevitable, global bond collapse – whether they choose to report a “better than expected” or “worse than expected” number.