The signs of extreme financial strain are everywhere – as one by one, economies, markets, corporation, and individuals lose the unwinnable war with “Economic Mother Nature” and the “unstoppable tsunami of reality.” Yes, “last to go” markets like the “Dow Jones Propaganda Average”; the Shanghai stock exchange; and of course, paper gold and silver, are still under TPTB’s “control” – and quite obviously, will be the last markets to succumb, due to unprecedented levels of manipulation. However, even they are showing signs of a slow, but sure loss of interventionist control – with the Dow having spun its wheels for the past year; the Shanghai Exchange down 35% from June’s bubble highs; and gold and silver clearly amidst a year-long basing process – supported by record physical demand, vanishing above-ground inventories, and the weakest production outlook in decades.
Regarding the latter, I look forward to the earnings reports of Barrick, Newmont, and Agnico Eagle today; followed by Goldcorp and Yamana tomorrow – to see if they can continue to pretend their “resources” are still viable at current prices, and their production outlooks intact. Most likely, they will be able to hold off such morbid news until the end-of-year earnings reports – assuming the Cartel isn’t defeated by then, of course. However, if they are already being forced by their accountants to throw up the white flag, it’s going to be quite the scary month for the industry as a whole, particularly “lower-tier” miners with lesser financial resources and less robust assets.
As for other “signs” that history’s largest Ponzi scheme is imploding before our very eyes, take note of the rapidly expanding list of corporate scandals – from Volkswagen’s “Diesel-Gate,” which I continue to believe will have a catastrophic economic impact on the German economy; to the ongoing saga at Valeant Pharmaceuticals – which some believe is a modern-day Enron; to yesterday’s disclosure that IBM, whose hubristic fall from grace is one for the ages, is being investigated by the SEC for potential accounting fraud. And by the way, for those that believe the labor market is “recovering,” keep in mind that IBM still has a whopping 380,000 employees – many of whom are clearly at risk of maintaining such status.
Actually, something else that caught my attention yesterday is the breakdown of several key “bubble symbols” – which all of a sudden, are looking less and less like “anomalies,” and more and more like trends. Such as the breakdown of last week’s hyper-prentious Ferrari IPO, crashing below its IPO price within days of going public. Or “market darlings” like Tesla and Netflix falling out of grace; the Dow Jones Transportation Average plunging despite falling energy costs; and, most ominously, the Russell 2000 Index – comprising the riskiest, most speculative stocks, many of which have no earnings – dramatically under performing its large capitalization peers. In any environment, these are extremely dangerous signs; but in history’s most manipulated – i.e., supported – stock markets, they are particularly terrifying. In my view, signalling a rapid erosion of not only the underlying economic environment, but TPTB’s seemingly “iron clad” market control.
Then again, when the U.S. government is forced to deplete the Strategic Oil Reserve to fund an eleventh hour increase in the national “debt ceiling” – let alone, when it appears to be on the verge of Middle Eastern war – it should be painfully clear to anyone with an open mind how desperate things have become. Or, for that matter, when the percentage of 25 year olds living with their parents jumps from 25% in 1999 to 50% today; or the percentage of households utilizing printing press funded government entitlements crosses above 50%, as it did last year; or the U.S. Labor Participation Rate falls to a 38-year low – as what’s left of the long ago gutted U.S. manufacturing sentiment vanishes into the ether…
“Andy, the reason I’m writing is you recently talked about Caterpillar having down quarters for the last eight years or so. I live in Columbus, Indiana, home to Cummins Engine Company – Caterpillar’s main competitor. A couple of quarters ago they said they were doing great. Well, guess what? They just announced a layoff of 2,000 professional employees by the year’s end.”
Of course, the United States is one of dozens – make that hundreds – of nations amidst debilitating recessions, in the context of the most suffocating levels of industrial, corporate, and government overcapacity in history; the worst financial condition in decades – if not centuries; and expanding social unrest, and geopolitical tensions becoming the norm, rather than the exception. The average commodity is at or near multi-decade lows, and the average currency at or near all-time lows, with “leading” Western nations exporting inflation (via maniacal Central bank money printing) at an unprecedented rate. And given that history’s broadest, most destructive Ponzi scheme – i.e., the fiat currency regime enveloping all nations – is in its cancerous terminal phase, money printing will rise as parabolically in the coming months and years as the U.S. national debt. To wit, August’s “surprise” 5% Chinese Yuan devaluation – which I predicted beforehand, in both April and on the very eve of its announcement – was but a “shot across the bow” in the “final currency war,” in which all Central banks are forced to devalue with hyper-inflationary monetary policy, or risk instantaneous economic collapse.
I mean, what would you do if faced with a similar predicament? Let alone, if you had caused it in the first place. Either you can allow “Economic Mother Nature” to do now what she’s going to do anyway, or attempt to “kick the can” as far as possible – in the process, making the situation far worse, and sentencing more and more future generations to death by debt serfdom and draconian government. Human nature says you will always opt for the latter, particularly when your personal safety is at risk.
Which, in financial terms, is exactly the conundrum Central banks face today – i.e, another “Fed Day,” when the FOMC unveils its latest, comically pathetic “word cloud” regarding yet another extension of zero interest rates. In this case, holding the potential for a far more dovish interpretation than “expected,” given the unmitigated collapse of U.S. economic data, commodity prices, and even the 10-year Treasury yield – which clearly, is anticipating an imminent QE4 announcement. Much less – in the spirit of the aforementioned “final currency war” – just a week past the PBOC’s “surprise” rate cut, the ECB hinting at a further QE expansion at its upcoming December meeting, and the Bank of Japan’s possibly doing the same at its own meeting two days from now. In other words, what I wrote in Monday’s “the peak of monetary lunacy? You ain’t seen nothing yet!” couldn’t be more apropos.
Heck, just this morning, just three days after Zero Hedge warned of the “giant wave” of ECB-printed money heading for Sweden’s shores, Sweden’s “Riksbank” increased its own QE program for the fourth time in the past nine months – in desperately trying to prevent the ECB’s maniacal Euro devaluation from causing a, god forbid, surging Swedish Krona. Quite clearly, currency devaluation doesn’t prevent job losses amidst a contracting global economy; and all one needs to do to prove this is look at the hideous failure of Japan – which, since “Abenomics” commenced 2½ years ago, has seen its trade deficit surge to multi-decade highs. However, when dealing with a dumbed-down population – let alone, a corporate sector whose lobbying has commandeered government policy – the “politically expedient” choice is always to print more money; and thus, actively participate in the “final currency war.”
To that end, it’s incredible to believe my first “NIRP vs. Gold” article was written more than three years ago, when Germany, Finland, Switzerland, France, Denmark, and the Netherlands first saw their money market rates go negative – and Denmark’s Central bank became the first to officially target negative rates. In my view, this dangerous, historically unparalleled circumstance – signalling collapsing economic activity and monetary velocity, and unprecedented government intervention – was the first sign that said fiat Ponzi scheme was entering its terminal stage. And yet, that was nothing compared to today’s monetary madness – wherein, amidst an historic political, economic, and social collapse, the ECB’s own, maniacal, 16-month old NIRP policy – which was “jawboned” a year prior – has caused the yield on eight European nations’ five-year bonds to turn negative.
I mean, think about it. We’re talking about negative interest rates – on long-term bonds. In other words, “too big to fail” banks are now being forced to pay the ECB, Swiss National Bank, and others to “safeguard” the very “money” their printing presses are diluting into oblivion – under the comically misguided premise that they will instead “use” it by lending it out. Frankly, I’d need a book to dissect such idiocy piece by piece. However, in a nutshell, when the world’s largest banks are insolvent in the first place – like Deutsche Bank and Credit Suisse, for example; and global economic activity is the “worst of our lifetimes”; amidst the largest sovereign, municipal, corporate, and individual debt edifice in global history; the incentive to lend money at historically suppressed interest rates is less than zero (no pun intended). And heck, given the aforementioned, relentless Central bank QE announcements, said banks are still likely to profit from holding negative yielding bonds – as the “greater fool theory” presents itself in all its glory, with Central banks providing the “bid of last resort” for assets guaranteed to lose money at maturity! Such as, for instance, the ECB – as just last week, “Goldman Mario” Draghi hinted that not only would its historic, open-ended QE scheme likely be expanded by year-end, but its already negative rates might be taken lower. In other words, providing capital gains for holders of “PIIGS” bonds of all kinds – including deadbeats like Greece – as the ECB buys them in still greater quantities.
In February 2015’s “NIRP vs. Gold, Pt. III – the death knell of fiat currency,” I noted that an astounding 16% of all global government bonds were now trading at negative yields. Clearly, assuming the “QE to Infinity” that must inevitably arrive at all Central banks’ board rooms, as the aforementioned “final currency war” plays out to its ultimate, hyper-inflationary end. And now that interest rates are plunging anew (despite record Chinese Treasury bond sales) – a trend that today’s FOMC policy statement may well turbo-charge if, as I suspect, Whirlybird Janet cannot contain her incremental “doveishness” – the odds are that 2016 will bring in a “new high” in this percentage, and then some.
Heck, even gold and silver have surged above their respective 200 DMA’s of $1,174/oz and $15.95/oz, respectively, this morning. Which, per the three articles I wrote on PM manipulation last week alone, have been defended “to the death” by an obviously terrified Cartel. To that end, it’s been five months since gold and silver traded above these key psychological levels. And now that physical demand has surged to unprecedented levels, and the war at said “technical levels” appears on the verge of being lost, the Cartel may well be in for its first bit of “trouble” since it nearly lost control entirely in the Fall of 2011 – when it was forced to go “all-in” with 24/7 PM suppression, after “dollar-priced gold” achieved a new all-time high. Not that it hasn’t already lost said “war” in countless global currencies, where the gold “bear market” ended long ago. And even mining shares have been showing some positive signs lately – although, for the umpteenth time, I cannot emphasize enough that when considering investing in them, one must never forget that whilst physical gold and silver are savings and insurance, mining shares, ETFs, closed-end funds, futures, and options are but speculations.
Given how rapidly the global economy is collapsing; and how exponentially debt levels are expanding – and subsequently, debt monetization (i.e., QE), there’s no telling when and how the next, inevitable crisis will arrive. Clearly, this summer’s market shock waves were a loud, blaring signal of how fragile said “powers that be’s” grip has become, and how close we may be to the ultimate “end game” of all-out fiat currency collapse. And not just of the countless “third world” and “emerging market” currencies that have already collapsed, but so-called “leading” economies like Europe, Japan, China, and the United States. Not to mention, the rising tide of the negative interest rate “insanity party” – which inevitably, the PBOC, BOJ, and yes, the Federal Reserve itself will be forced to join. Which is why, more than ever, the need to PROTECT YOURSELF with the only real money history has ever known has never been higher.