This is another one of those “where do I start?” mornings; as frankly, my poor little brain is being stretched in multiple directions by the forces of lunacy.
It would be easy to commence with last night’s news that none other than Blythe Masters – head of JP Morgan’s commodities division, and chief nemesis of truth-seeking, free market advocates the world round – has been asked to join the CFTC in an advisory role. Talk about asking the fox to guard the henhouse! But then again, in today’s world of lies and deceit – as a fraudulent, multi-decade economic paradigm comes to an end – what else would one expect? And no, don’t “worry” about it; as the bullish forces of gold and silver will not be usurped by a handful of clueless, overconfident brats in Washington and New York. The entire world is starting to understand the extent of fiat monetary peril and real money sovereignty; and inevitably, the “financial world as we have known it” will collapse under its own weight; perhaps, much sooner than you can imagine!
UPDATE: Just before publication of this article, Blythe Masters withdrew her candidacy for the CFTC role, following literally thousands of angry “tweets.” LOL, I guess Twitter has some use after all!
Of course, such zeitgeist changes take time; in this case, nearly 15 years and counting. Ever since the tech bubble burst in 2000, the “evil troika” of Washington, Wall Street and the MSM has attempted to recapture the 1990s glory days – of surging stock prices, plentiful jobs and careless spending. However, per the Bloomberg Consumer Comfort Index we published yesterday – and oh yeah, CNBC’s ratings, those days are long over. Care of a 14-year sequence of political, economic and social calamity, public “confidence” has been inexorably weakened. Even an historic, Fed-induced housing bubble in the mid-1990s failed to restore the public’s pre-2000 purchasing power and economic comfort; and now, any hope of a return to the “American dream” has been shattered.
It’s no coincidence that the 1999 repeal of the Glass-Steagall Act – ushering in a catastrophic era of financial engineering, also occurred at this time. Not to mention, the commencement of mass job outsourcing due to the 1994 NAFTA treaty (which Ross Perot warned of, via his prophetic “giant sucking sound”), supplemented by the suicidal 2001 granting of “most favored nation” status to China. The cumulative effect of these events caused America’s economy – and dollar – to permanently peak; and here we are today, with a dying labor force, plunging real wages and no hope of resurgence. Consequently, the dollar-led world has been plunged into crisis after crisis; each time, “rescued” by additional money printing – which care of the laws of “diminishing returns,” no longer produce anything but debt, inflation and social unrest.
Today, the exported inflation created by Fed money printing is causing “Arab springs” to crop up the world round, from the “MENA” region –i.e., Middle East/North Africa; to the Ukraine, Turkey, South America, Thailand, Southern Europe and even the “world’s growth engine” – China – which this morning saw repo rates surge anew, following publication of the lowest ever PMI services figure. As we wrote last week, the “financial cancer is no longer dormant”; as the past five years of intensive, destructive “financial chemotherapy” has all but killed the patient; at best, keeping him alive just a few miserable years longer.
Within that context, let’s discuss this morning’s catastrophic NFP jobs report. To start, keep in mind that essentially every Wall Street “pundit,” “guru” and “sage” predicted it would rebound from last month’s horrific 74,000 figure due to “better weather”; as opposed to the Miles Franklin Blog, which scientifically demonstrated essentially ZERO correlation between job creation and the weather. Not to mention, the below chart – depicting how this year’s weather-related employment disruptions didn’t hold a candle to those of the past five years’…
Not that the BLS can’t fabricate whatever jobs number it chooses, in its unending quest to influence markets, elections and monetary policy. However, we were quite confident that an “anti-weather” bounce was not in the cards; and voila, not only were December’s figures unrevised, but January’s 113,000 job gain well below the 181,000 consensus. In fact, the only confusing matter to us was that the unemployment rate only fell to 6.6%, from 6.7% last month – given that 1.3 million people’s long-term unemployment benefits were officially terminated.
Clearly, the BLS is desperate to prevent the so-called “unemployment rate” from being seen as the utter mockery it has become; as clearly, it is using every accounting gimmick imaginable to avoid subtracting said 1.3 million people from the Labor Force, which would have plunged the unemployment rate closer to 6.0%. Frankly, I believe it specifically “goal-seeked” 6.6%, given that 6.5% was the Fed’s previous “end of ZIRP threshold”; which as you know, was permanently abandoned in December, coincident with the Fed’s initial “tapering” decision.
But don’t worry; because as sure as death and taxes, said 1.3 million will be subtracted from the Labor Force – and simultaneously, added to the food stamp payrolls; enabling the entire world to realize the true state of America’s “recovery,” just as the Miles Franklin Blog predicted at year-end…
In our view, last month’s NFP “whistleblower” allegations simply highlight the obvious; that is, the true state of U.S. unemployment is not only approaching that of the 1930s, but amidst a permanent weakening that will necessitate dramatically increased entitlement spending. According to John Williams of Shadowstats.com, the true unemployment rate – or as we call it, the underemployment rate – is closer to 23% than the officially reported 7%. Particularly in light of the fact that this weekend, 1.3 million more people officially left the labor force – because their unemployment benefits expired – it should be crystal clear why the Fed eliminated its previous, 6.5% threshold for ending its ZIRP policy. Heck, we may well see 6.5% in next week’s December NFP report; at which point, the understanding of just how structurally damaged the U.S. labor situation has become should significantly expand. Consequently, the Fed will feel increased pressure to not taper, but increase QE; likely, by the middle of the year.
–Miles Franklin, December 30, 2013
Ironically, the BLS actually increased the Labor Force by 499,999 in January, per what it calls the “annual adjustment of the population controls”; yet again, literally making up jobs when none exist. Of course, the overall trend is decidedly against them; and thus, just as exploding PHYSICAL gold demand will inevitably overwhelm Cartel efforts to suppress PAPER prices; the reality of economic destitution will rout BLS efforts to propagandize “recovery.”
As for the market’s “reaction,” it was even more contrived – and ridiculous – than the data itself; although, as I write at 10:15 AM EST, the forces of reality are starting to overcome the PPT and Cartel. As you can see below, stock prices initially spiked on the NFP report – only to subsequently plunge when FOMC perma-hawk Richard Fisher said such data would not deter his view of “tapering”; as if anything ever would. Next, stock prices surged when, of all things, the Japanese Yen started plunged anew.
I mean, I get this whole “yen carry trade” thing, but this is getting silly already. I mean, what on Earth about miserable U.S. economic data – and Fisher’s comments – would cause the dollar to plunge against the yen, and subsequently surge? In other words are we to believe that if tapering is “paused,” this is “great” for the Yen/dollar and “terrible” for the Dow; but if not, vice-versa? Not to mention, why is there now an essentially 100% correlation between the Dow and the dollar/yen exchange rate?
The answer, of course, is that financial markets are now completely overrun by government algorithms; which via unprecedented levels of manipulation and propaganda, have attempted to create a “meme” that Federal Reserve easing will cause the Bank of Japan to ease “more”; and thus, foster hyperinflation sooner rather than later. Such convoluted thinking will be heartily laughed at when the history books are written; much less, the concept that stock markets could produce meaningful, real gains under such circumstances. I assure you, those in Weimar Germany, late 2000’s Zimbabwe and modern Venezuela and Argentina will tell you otherwise; and eventually, so will Americans and Japanese investors alike. That is, what remains of them – as retail equity participation in both nations is extremely low; and in the case of the U.S., ironically, last week we saw the largest ever retail equity outflow!
As for PMs, just how much more blatant could the Cartel have been? Both metals initially surged after the NFP report; only to be immediately capped by prototypical “Cartel Herald.” And where were they stopped, you ask? Gee, what a surprise. Gold was up EXACTLY 1.0% – at its new “line in the sand” at $1,270/oz.; and as for silver, double shock – as yet again, the Cartel’s now eight-month “line in the sand” at $20/oz. was defended like Mt. Sinai, the Alamo, and Thermopylae combined. And again, “CIGAs” – or Comrades in Gold Arms; don’t worry; they unequivocally will be defeated – as they always have throughout history.
Anyhow, it’s now 10:30 AM EST, and gold has surged back to $1,265/oz. and silver to – I kid you not – $19.99/oz.; whilst the Dow sits right at the unchanged level; in the latter case, awaiting “POMO” operations to prevent yet another violation of “PPT Rule #1”; i.e., “thou shalt not allow PMs to surge whilst the Dow plunges.”
Who knows what will ultimately happen on Tuesday morning, as “Yellenomics” is unveiled to the House Financial Services committee? The aforementioned Richard Fisher can play all the “bad cop” games he wants, but the fact remains the Fed cannot continue to “taper” (as if it ever really did) if it wants to prevent an immediate market crash, as we have seen the early signs of this past month – particularly if the U.S. economy continues to freefall, as this week’s ISM Manufacturing, Factory Orders, Construction Spending, Consumer Comfort Index and NFP reports depict.
In all circumstances, the upward pressure on PHYSICAL gold and silver demand will increase dramatically; while conversely, the downward pressure on PAPER assets will expand – thus, yielding the necessity of increased, not decreased, Fed money printing and monetization. It’s only a matter of time before “the Big One” hits; and when it does, if you haven’t already protected yourself with real money, you may NEVER get the opportunity.