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I have numerous, incredibly important issues to discuss as we head into what could be an incredibly tumultuous week; and perhaps, the “beginning of the end” – per the title of this weekend’s Audio Blog.  With emerging markets collapsing, currencies imploding and the Fed meeting Wednesday to discuss further “tapering” (yeah, right), the probability of “the big one” finally commencing has never been higher.  To wit, the PPT was overwhelmed by reality last week – not just in the U.S., but worldwide.  However, the real issue is not markets themselves; but generally speaking, the imminent end of five years of political “can-kicking”; with the most likely result being not only a continuation of the 2008 financial crisis, but an inability to reverse the carnage with money printing, market manipulation, and propaganda.

Across the world’s four corners, the horrific effects of the past five years of debt accumulation and currency debasement are being witnessed; and this time around, Central banks have neither the balance sheets nor public confidence to expand them further.  This is why calls for expanded capital controls, bail-ins and other draconian measures are proliferating – including this weekend’s Bundesbank call for a universal “wealth tax”; Japan’s grab at “dormant” bank accounts; and HSBC’s temporary ban of large cash withdrawals, following an analyst report opining it has a £70 billion capital shortfall; and why more importantly, such events are decidedly not “one-off events,” but the wave of the future.

Moreover, the Western gold suppression scheme is finally starting to go mainstream – as we discussed last week; as not only did the President of Germany’s top financial regulator discuss it last week, but even the cheerleading Financial Times wrote about it.  This reality couldn’t be more clear here in the States; as not only is the COMEX’s registered inventory down to just 375,000 ounces – with 125,000 ounces still standing for delivery from the (in my mind, defaulted) December contract – but on Friday, JP Morgan’s “eligible” customer inventory had its largest withdrawal ever.

Better yet, this Friday is “first notice day” for the February gold contract, which still has open interest representing 13 million ounces; and very likely, will terminate with more PHYSICAL delivery notices than the sitting registered inventory.  In other words, the odds of a February default are sky high; and even if TPTB finagle enough metal to give themself a “stay of execution,” it’s highly unlikely they’ll survive 2014 without being overrun.  In the words of Andrew Maguire:

The physical gold buying that took place in London on Thursday can only be described as stunning.

King World News, January 24, 2014

Frankly, we anticipate such demand to dramatically increase throughout 2014 – as likely, the “Big One” is finally arriving.

Moreover, we couldn’t be more vehement in our belief that very shortly, the entire world will realize America’s “relative economic strength” has been a mirage; based solely on a last ditch effort to utilize the dollar’s (dying) status as “world’s reserve currency” to prop up U.S. markets.  In reality, America’s economy and financial condition are in freefall; and sadly, the mirage of “deflation” will shortly be broadly recognized as well.  To that end, we want to revisit our April 2012 article, “Need vs. Want”; which, essentially, discusses how Federal Reserve generated inflation affects only things we need to survive; whilst price deflation from the ongoing economic collapse principally impacts items we want.  Once one realizes this simple concept – not to mention, that government “inflation statistics” are fraudulent – it’s easy to understand why the U.S. standard of living hasn’t been this low in centuries, with a high likelihood of falling much, much lower.  And for that matter, the S&P 500’s recent “all-time high” is pure fiction.

Bear Market 2000

Since Western economies peaked 13 years ago – and with them, the dollar’s influence – the terms “inflation” and “deflation” have been hideously butchered by economists, journalists, and propagandists alike.  To start, they fail to understand that “inflation” refers to the rate of change of the money supply, as opposed to consumer prices; and thus, that price changes are inflation symptoms, not causes.  Worse yet, they typically suggest all items are either “inflating” or “deflating.”  In other words, it’s not possible for some items to inflate, whilst others deflate.  Regarding the latter, nothing could be farther from the truth, as we have all witnessed in our daily lives.

Last month, for instance, I was informed that due to Obamacare, my health insurance policy was being raised “midstream” by 15%; that is, before my annual renewal period, which is upcoming in April – during which, no doubt, further increases are on tap.  Moreover, Key Bank – where I keep nominal amounts of cash – dramatically raised its “transaction fees.”  My homeowners’ insurance policy price just surged 18%, and my Comcast “bundle” 16%; the cost of meat, milk and vegetables are going through the roof; and I’ve consistently paid well over $3 per gallon for gas for the past year.  Diapers cost $30/box, airport parking is $23/day, and the nearby toll road – to the airport – raises its rates each year.  Heck, stamp prices were raised another 6% this weekend, making “forever” stamps one of the world’s best investments.  And what do all these items have in common, you ask?  Why, they are all things we need, of course.  In other words, there’s no way to live without them; or, for that matter, to negotiate prices down.

Conversely, cell phone prices and plans are falling dramatically.  Sure, I need my cell phone to do my business; but for the most part, most of what I use it for falls under the category of want.  The same goes for perhaps 99% of the population; and thus, amidst today’s horrific economic environment, cell phone companies are desperately acting to maintain market share; which is probably why iPhone and Galaxy phone prices are plunging, rebates surging, and even the plans themselves significantly declining in price.

Not to mention, several other pieces of anecdotal evidence of price deflation; which when considered cumulatively, demonstrates exactly why the economy is doomed.  Take this article, for example, demonstrating how low end “casual dining” chains like Olive Garden and Applebee’s are experiencing dramatic sales declines, atop McDonalds’ announcement last week that same store sales just turned negative.  The author can sugar coat the situation all he wants – in this case, citing ‘changing consumer dining habits’; but the fact of the matter is, people have less money to spend – and thus, are no longer eating out.

And how about the Girl Scouts – one of America’s oldest, proudest organizations; which for all the good it accomplishes, is supported by a massive corporate staff of 400, in lavish digs on New York City’s trendy 5th Avenue.  Girl Scout cookies have been a staple of American fund raising for decades; but unfortunately, the weak economy has dramatically weakened alumni charity contributions, causing “HQ” to put a far greater emphasis on cookie sales.

To wit, my neighbor came by with her daughter yesterday afternoon, to sell such cookies.  She said she is now required to purchase full cases of cookies from headquarters, with no ability to return unsold goods; and furthermore, “rewards” points are now awarded at far higher sales levels.  This frankly, is no different than what Delta and United now do with frequent flyer miles; or for that matter, Costco with its Amex rewards card.  Regarding the latter, my annual “refund” will be roughly $400 this year, compared to $1,000 last year with roughly the same amount and mix of purchases; and no doubt, many of the products we buy at Costco have been surreptitiously “downsized” as well – not that we’re informed of these changes.

Anyhow, my neighbor went so far as to call the Girl Scout cookie program management the “mafia”; as it now strong-arms each child to sell at least 100 boxes for $4 apiece.  And oh yeah, two other neighborhood girls are in the same troop; and my neighborhood has just 92 houses.  Given there are now 3.7 million girl scouts, the implied “tax” on Girl Scouts’ neighbors, friends, and family is nearly $1.5 billion; but don’t worry, actual cookie prices haven’t gone up – because, of course, you don’t need them to live.

As for my home price, it has stubbornly held at elevated levels due to Wall Street’s free money from the Federal Reserve; which has funneled into various vulture and “buy to rent” parasites.  Unfortunately, underlying “shadow inventory” has never been higher; and thus, with rising interest rates wreaking havoc on the housing sector (note this morning’s report of an 11% sequential plunge in new home sales), “deflationary” pressures appear set to win the day – a la 2008.  Still think the Fed will continue “tapering?”

But you don’t have to look at Zillow to realize a new housing collapse is coming.  Instead, simply look down the supermarket aisles.  As noted above, food necessities are soaring in price.  However, nearly everything else is under pressure; which is probably why “dollar stores” are doing such brisk business.  For example, take one of my favorite cereals – Special K.  For as long as I can remember, it has been priced at roughly $4/box, compared to similar brands pricing closer to $3.  By the way, no one eats as much cereal as myself; and thus, I consider myself a “cereal expert,” on a par with my knowledge of gold.

Anyhow, in the past six months, I have noticed serious “cereal wars” breaking out, for the first time ever – including even 2008-09.  Special K still prices at $4/box sometimes, but at least 50% of the time drops it’s “sale price” below $3.  In other words, Kellogg’s – which experienced very weak sales in the second half of 2013 – realizes it must cut prices to compensate for the weak economic environment; i.e, “deflation” in action.

And likewise for Dr. Pepper, manufactured by the public company Dr. Pepper/Snapple.  Dr. Pepper has long been my favorite soda – although today, I prefer its “Dr. Pepper Ten” product, which tastes similar, but has just ten calories per bottle.  Anyhow, I’m also a “soda connoisseur”; and for years, have bought Safeway’s generic brands in lieu of the real thing.  Generally speaking, Safeway’s “Dr. Dynamite” knockoff costs roughly $2.50 for a case of 12 cans; whilst actual Dr. Pepper has always cost nearly twice that much.  In my seven years in Denver, I have NEVER seen Dr. Pepper on sale for less than $3.50/case; and thus, have NEVER considered buying it.  However, lo and behold, in the past 3-6 months, not just Dr. Pepper but Coke and Pepsi products have been constantly on sale in the $2.50-$3.00/case range; i.e., low enough for consumers to finally eschew generic products for the real thing.

This, my friends, is deflation in action; which although a positive for the consumer, is deadly for public companies’ stock and bond prices; and ultimately, the finances of bankrupt nations and municipalities and insolvent banks.  This is why the Fed MUST keep “can-kicking”; as bankrupt institutions need “ZIRP” and “QE” to counteract the powerful, deflationary forces of recession.  Unfortunately, however, these toxic programs’ “inflationary impacts” tend to be concentrated solely on items we “need versus want”; and most certainly, does NOT improve the finances of said bankrupt entities.

Anyhow, it’s now 11:00 AM EST, and TPTB are doing everything in their power to calm rapidly deteriorating global financial markets.  Asian stocks collapsed this morning – particularly the Nikkei, following Japan’s record high trade deficit (way to go, Abenomics!); whilst European stocks were down significantly, closing at their lows.  Moreover, emerging market currencies are in freefall – starting with the Argentine Peso, which was devalued by 17% overnight, and the Ukrainian Hyrvnia, amidst a near civil war; whilst “Fragile Five” currencies like the Indian Rupee, Indonesian Rupiah and South African Rand are plunging as well, as Fed exported inflation encircles the Earth.  But don’t worry, the Cartel executed its 24th “Sunday Night Sentiment” capping in the past 25 weeks, and its 160th “2:15 AM” attack of the past 177 trading days.  And how about that; take a look what price silver is being capped at, via prototypical “Cartel Herald” algorithm!  Yep, you guessed it – the now seven-plus month “line in the sand” at $20/oz…

24hr Gold Silver 1-26

After an 8:20 AM EST waterfall decline at the COMEX open – remember, Wednesday is the FOMC meeting and Friday, “first delivery day” of the February gold contract – PMs have fought back admirably, aided by the massive new home sales miss at 10:00 AM EST.  The PPT pushed the “Dow Jones Propaganda Average” higher early on, but it has just gone negative, while the NASDAQ is getting smoked.  There is a veritable “paper war” going on between the manipulators and reality; and clearly, reality is gaining the upper hand.

24hr Gold Silver 1-27

How much longer can they hold off the inevitable, you ask?  We have no way of knowing, which is why we PROTECT ourselves now (with REAL MONEY), and ask such questions later.  The Fed-led global Central banking mad experiment is dying; and frankly, could be dead any day now.  And when “the Big One” commences, if you haven’t prepared already, it will already be too late!