First off, I’m proud to say that the debut stop of my nationwide “Q&A rap session tour” with Andy Schectman, here in the Denver/Boulder area, was a rousing success. Consequently, we are immediately planning our next stops. Which, if you believe you can facilitate – by either bringing together a group of interested individuals; or helping us secure a suitable, cost-effective venue – would greatly influence our choice of the next city to visit. Separately, Andy Schectman’s nationwide speaking tour with Jim Sinclair and Bill Holter is set to hit Tampa, Florida on February 21st. If you are interested in attending, please contact us at [email protected].
That said, it’s on to review the hideous week that was, notwithstanding yesterday’s comical, PPT-aided “dead cat” equity bounce – based on two completely fabricated sources of “good news.” The first of which – Japan’s “surprise” NIRP announcement – is decidedly NOT good news; and the second of which – a rumored “emergency OPEC/non-OPEC meeting – was decidedly refuted within hours of its fraudulent dissemination. To wit, Japan’s NIRP announcement Friday morning. Which yes, was “surprising” to the extent that BOJ Governor Hiruhiko Kuroda said last week that NIRP was not a possibility. However, to anyone with half a brain, it couldn’t have been more clear that Japan would follow the ECB’s lead – as I have loudly warned since Mario Draghi took the sub-zero plunge 19 months ago. To wit, what I wrote two months ago, in summarizing the entire, sordid history of post-Financial Crisis NIRP developments.
“Today’s “NIRP vs. Gold, Part V” heralds the imminent “escape” of the NIRP contagion from the imploding European continent. Which, I assure you, is just the beginning; as likely, a few years from now – perhaps, a “precious” few – I expect negative rates to become the global norm; including here in the United States of Global Monetary Destruction, when the equally inevitable “Yellen Reversal” arrives.”
Well, it didn’t take a few years, but just two months for Japan – deeply mired in recession, and unable to push the Yen down any further – to take the plunge as well. Which, in essence, is a mere cosmetic move – as not only will the reduction of its bank deposit rate from 0.0% to -0.1% have ZERO impact on Japanese economic activity; but likely – yesterday’s 2% plunge aside – prove unable to push the Yen significantly lower amidst a cadre of currencies whose issuers, like the PBOC, have far greater currency war “ammunition” in their quivers. To wit, it was only one week ago when the BOJ admitted an expansion of “QQE” was unlikely, as it literally was running out of stocks and government bonds to buy! In other words, how anyone could consider yesterday’s NIRP announcement to be “equity bullish” is beyond me. Or, for that matter, ignore the reality that it was clearly “accompanied” by massive PPT support – as evidenced by financial markets’ initial reaction of declining, before “miraculously” recovering.
Of course, sovereign bonds decidedly will benefit from the BOJ’s move – which, in the most poignant example of the “Great Deformation” of financial markets yet, exploded higher yesterday, across the globe. Here in the U.S., for example, where economic data, across the board, was as bad as could be imagined – the benchmark 10-year Treasury yield plunged to 1.92%, versus 2.35% when the Fed “raised rates” five weeks ago; and the all-time low of 1.63% in April 2013. You know, when “tapering” supposedly commenced, and gold prices were crushed under the guise that the Fed would tighten monetary policy. Well, they did theoretically tighten – by a mere 25 basis points, nearly three years later. And yet, interest rates are plummeting toward all-time lows; whilst economic activity is at an all-time low, and said “policy error” on the verge of being reversed. Not to mention, U.S. QE never actually stopped – as the Fed’s balance sheet, as we speak, sits at its highest-ever level. Moreover, care of its ongoing, under-the-radar policy of “reinvesting interest and rolling over maturing bonds,” the Fed, in the next three years alone, will monetize $1.1 trillion of Treasury bonds irrespective of the fact that QE supposedly “ended.”
That said, it wasn’t just U.S. Treasuries that soared yesterday, but nearly every sovereign issue on the planet – in perhaps the biggest single-day sovereign bond surge ever – resulting in a whopping $5.5 trillion of sovereign bonds trading at negative yields, representing 23% of global GDP. And with the former set to surge, as global NIRP is discounted; whilst the latter plunges, amidst an historic economic Depression, get ready for that 23% figure to dramatically surge in the coming years. That is, until hyperinflation inevitably “comes to town.” All in all, as Precious Metals bullish of a development as is imaginable – and decidedly NOT bullish for equities.
Which is why the PPT, Fed, ESF, and gold Cartel were working overtime the past two days. In the latters’ case, highlighted by Thursday’s diabolical silver “fix” at $13.58/oz, whilst the market price was trading at $14.41/oz. In other words, the most blatant, out-in-the-open form of paper manipulation in the history of the silver market! Of course, the flip side of the equation is the massive physical demand it engendered. To wit, first in gold, when a whopping 73% of its remaining registered inventory was withdrawn from the COMEX on Tuesday – leaving the total, at a mere $100 million worth, down 98% from its all-time high in…drum roll please…September 2011…when paper prices, in U.S. dollars, peaked before the Cartel went hog wild taking them down. And next, in silver, where 21% of the COMEX’s entire registered inventory was withdrawn on Thursday, leaving it 60% below where it was nine months ago – and in dollar terms, at a mere $400 million, 75% below its all-time high in…drum roll please…mid-2008, just before the Cartel viciously attacked paper prices during the Financial Crisis to ensure Precious Metals were not considered “safe haven” assets. Which, subsequently, catalyzed the largest, longest silver shortage in U.S. history.
Moreover, as today’s title suggests, Japanese NIRP – which in and of itself, was more symbolic of the global march towards hyperinflation; and explosion of said “final currency war”; than any actual, meaningful policy change – wasn’t even close to the day’s ugliest, most PM-bullish news, which I’ll get to momentarily.
In the meantime, check out these “horrible headlines,” and tell me if they inspire you to buy gold and silver; or financial assets like historically overvalued stocks – when even “FANGs” like Apple and Amazon are imploding, breaking down the last pillars of “leadership” in the imploding global equity complex – as highlighted by the Shanghai Exchange’s 28% plunge last month alone.
1. A new poll in which 40% of Germans demand Angela Merkel’s resignation, for not more aggressively addressing the “migrancy crisis.” You know, the same one that prompted Sweden and Finland, this week, to announce the deportation of 80,000 and 32,000 refugees, respectively – who will only end up in neighboring nations; who will in turn expel them; creating an increasingly unstable environment, in which social unrest will inevitably explode.
2. The increased urgency of a Brexit vote, which was initially expected in late 2017, but now appears more likely this summer. Right now, polls suggest a 50% chance that the UK will exit the European Union. Which, if it does, will make the prospect of Grexit” appear to be “good news” in comparison.
3. Oh yeah, the fabricated “good news” in the oil market noted above – of Saudi Arabia supposedly proposing an across-the-board, OPEC/non-OPEC supply cut. Which, for reasons I have discussed for the past year, has not a chance of occurring. Not to mention, whilst oil prices were being “dead cat bounced”, was refuted hours later – by OPEC leader Saudi Arabia; non-OPEC leader Russia; and oh yeah, Iran, which essentially said “not a chance in hell.”
4. Utterly imploding global economic data, like collapsing shipping (a new all-time low for the Baltic Dry Index), transportation volumes, and construction equipment orders – which cumulatively, yielded China’s largest industrial profit plunge since 2008. Not to mention, in the U.S, where the ugly 4Q GDP number – of a “worse than expected” 0.7% – was yet again positive only due to Obamacare-related healthcare spending. But that wasn’t even the worse U.S. economic data – not even close; as December durable goods orders, which will be incorporated into further revisions of said 0.7% GDP growth, plunged an astounding 5.1%, versus “expectations” they would rise. Throw in Macys’ second dramatic earnings guidance reduction this month, validating what I have predicted all along – i.e., this was the worst holiday spending season since 2008; and U.S. crude oil inventories hitting an 80-year high; and you can see why the aforementioned “Yellen Reversal” is approaching like a runaway train.
5. In what could be one of the most socialist, and economy-destroying “helicopter drops” in history, the Swiss will shortly be voting on a referendum that would require the Swiss government to pay every Swiss adult £1,700/month, and every child £100/month forever – to be paid for with increased taxes; and no doubt, covert money printing. And to think, barely a year ago the Swiss were voting on whether the SNB should buy gold!
Which brings me to what I believe is the ugliest, and most PM-bullish, news item of the week – far more PM-bullish than even Japanese NIRP. Which is, the continuing implosion of China’s monetary system; which, with each passing day, inches closer and closer to unprecedented, world-destroying chaos. In this case, the insane capital controls initiated in recent weeks, as a result of the historic capital outflow caused by the PBOC’s own, epically-botched decision to attempt a “controlled” Yuan devaluation. Which, as I anticipated in September 1st’s “most dangerous, destabilizing force on Earth,” is dramatically backfiring – as every Yuan-owning entity in China, both domestic and foreign, is attempting to exit the Yuan, by all means possible, due to the PBOC’s blatantly transparent goal of a far more significant devaluation.
To that end, January saw the second largest monthly outflow of Yuan ever. Hence, the plunging “offshore Yuan” – causing the “controlled devaluation” to be overwhelmed by far larger “black market” declines, amid expectations of what’s to come. Which, in turn, has catalyzed a further slowing of economic activity in a nation that, by its own admission, is “growing” at its slowest pace in 26 years.
In my view, this one, hostilely Communist act alone will likely set back the “great Chinese industrial revolution” indefinitely, and make the inevitable, large-scale Yuan devaluation we all know is coming that much more painful – for the Chinese, and the rest of the world – which cumulatively, will be the victim of the greatest deflationary exportation in human history. This, at a time when debt, the mortal enemy of deflation, is at an unprecedented high, rising nearly parabolically as we speak. In other words, Chinese capital controls have only made the upcoming, unprecedented “jubilee” of global debt defaults that much more certain. And simultaneously, an equally certain surge in Precious Metals demand – at a time when not only are “inventories” at an all-time low, but production has nowhere to go but down.