Yesterday, I discussed how the “perfect cataclysmic storm” has unfolded in barely a year’s time – of the historic collapse of commodities; currencies; credit; and in the majority of the (non-manipulated) world, equities. Which unquestionably will continue for years; and potentially, a decade or more.
In a nutshell, 15 years of maniacally “defensive” money printing – atop 30 years of “offensive” money printing, when the global economy was (artificially) expanding – has not only created history’s largest debt edifice, but unprecedented industrial and infrastructure oversupply. Which, per October 2014’s “crashing oil prices portend unspeakable horrors,” is wreaking havoc on all aspects of our lives. To wit, a sampling of this morning’s headlines. First, the economic…
- Corporate loan charge-offs and delinquencies surge
- Behold the deflationary wave – China flooding the world with unwanted commodities
- Why $20/bbl oil is a possibility
- Oil producers’ currencies are collapsing, as Brent breaks below $40
- When not even terrorism can boost oil prices
- Adjusted U.S. new home sales fall to lowest-ever level
- U.S. chain store sales collapse, following already disappointing Black Friday
Next, the political…
- U.S. denies bombing Assad’s forces, blames Russia
- Turkey refuses to withdraw troops from Iraq, threatens sanctions on Russia
- “We’re at war, get it through your head” – Trump doubles down on anti-Muslim comments
- Iraq seeks to cancel security agreement with U.S. – Will invite Russia to fight ISIS
- China begins G-20 leadership with ideas to reduce dollar’s role
- New U.S. tax deal will tack $700 billion onto national debt
- Global stocks slump as mining rout accelerates, concerns grow of Chinese “stealth devaluation” (lowest Yuan/dollar fix in 52 months)
- CRB Index hits new 40-year low, as oil falls to early 2009 levels
- U.S. transportation stocks plunge most since Black Monday
- S&P declines further, as energy crash continues
- Institutions dump stocks for fifth week, record selling capitulation hits industrials
- Ever greater distortions hint at rising crash probabilities
- Credit crashes through 2011 lows, CCC yields surge to highest since 2009
- Déjà vu, Eh? Canadian stocks plunge to two-year lows
- Anglo-American’s massive restructuring, involving 85,000 layoffs, shows miners bracing for prolonged downturn
- Freeport McMoran, world’s second largest copper miner, suspends dividend
- Anglo’s shadow hangs over Glencore investor day, as shorts circle
- Something just snapped in China – Bitcoin takes out stops, soars higher
…and last but not least, the absurd…
- Angela Merkel is Time’s Person Of 2015, followed by ISIS Leader Al-Baghdadi and Donald Trump
- Trump Accuses Merkel of “Ruining Germany” in response to “Person of Year” snub
- UK Petition to ban Trump from entry gets enough signatures to be debated by Parliament
However, as the PPT was busy limiting the Dow’s losses to exactly 1.0% – i.e., its “ultimate limit down” on 99% of all trading days, just as +1.0% is the gold Cartel’s “ultimate limit up” – the “horrible headline” that stuck out most ominously emanated from the Great White North. When, to essentially zero media attention, the Governor of the Bank of Canada – as in, Janet Yellen’s Canadian counterpart, Stephen Poloz – stated, loud and clear, that negative interest rates were imminent.
- BOC Poloz: Now sees effective lower bound for policy rate around -0.5%
- BOC Poloz: Canadian financial markets could function in a negative interest rate environment
- BOC Poloz: “Should the need arise” for unconventional monetary policy, “we’ll be ready”
And there you have it. Given that Canada’s commodity-dependent, recession-wracked economy is in freefall, why not join the “monetary insanity party” as well, eh? I mean, how incredible is to consider that in today’s Bizarro world, Central bankers are stupid enough to lower rates – let alone, below zero – when the currencies they are paid to protect are already plunging? In Canada’s case, the appropriately named “loonie” is trading at an 11½ low, just 18% above the all-time low achieved 25 years ago.
In other words, the “NIRP tsunami” is about to cross the Atlantic, as the world inches closer and closer to its “A-Ha moment” – of universal realization that the only way fiat currency Ponzi schemes end is with “QE to Infinity.” Which, given that all currencies are now in the same boat; all emitting signs that said scheme is amidst its final, suicidal phase; will undoubtedly envelop the entire world, as the “final currency war” goes thermonuclear.
To wit, a second straight day of Miles Franklin Blog timelines, detailing a global journey to monetary insanity in less than 3½ years. Starting with July 2012’s “NIRP vs. Gold, Pt I,” in which I pointed out the first instances of this fiat cancer in Europe, in “high quality” credits like Germany and Switzerland. “Coincidentally, a mere two days before Draghi’s infamous, Euro(pe)-destroying “whatever it takes” speech. At which point, the Euro was trading at 1.25/dollar, versus an 11-year low of 1.09/dollar today, and 1.05/dollar prior to last week’s “hawkish” ECB statement. And by the way, the reason I called it “NIRP vs. Gold” was to mock the time-honored anti-gold propaganda that gold is not worth owning because it pays no interest or dividends. Of course, in a negative interest rate environment (I can’t believe I’m even writing of such a preposterous, unnatural condition), gold and silver pay higher interest rates than bonds and “cash.”
Fast forward to May 2013, when “NIRP vs. Gold, Pt II” was penned; when, amidst an ECB rate cut to a mere 0.5%, Mario Draghi suggested official negative interest rates were possible. Which is exactly what occurred in June 2014, when the ECB took its bank deposit rate to -0.1%, fulfilling Goldman Mario’s “whatever it takes” promise, and sealing the Euro’s fate.
In February 2015 – i.e., earlier this year – rates were taken down further, to -0.2%; whilst an historic, open-ended QE program was launched. And subsequently, “NIRP vs. Gold, Part III – the death knell of Fiat Currency.” Followed by October 2015’s “NIRP vs. Gold, Part IV – who’s left to join the insanity party?,” when it was learned that more than one-third of all European sovereign bonds, totaling more than €2 trillion, were trading with QE-to-Infinity-anticipating negative yields. Which, I might add, was just a month before last week’s historically hyper-inflationary decision to extend QE “at least” six months; by “at least” €360 billion; to “at least March 2017.” Or, in the Fed’s own “QE to Infinity” words, “until the ECB council sees a sustained adjustment in the path of inflation.”
Last but not least – or more aptly put, last but not last – today’s “NIRP vs. Gold, Part V”; heralding 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. I.e., when Whirlybird Janet is forced by PPT- and BLS-swamping market forces to admit the economy is collapsing, and respond with not only negative interest rates, but history’s largest, globally-destroying QE scheme.
All this, at a time when global Precious Metal demand is already at an all-time high; whilst above-ground inventories are already at all-time lows; as, per the above “horrible headlines,” the global mining industry grinds to a halt. Particularly, the base metal mines that produce half of the world’s silver; which, when all is said and done, may well cause the potential 25%-50% production decline postulated on last year’s “Miles Franklin All-Star Silver Panel Webinar” a reality. Not to mention, per yesterday’s “what does this chart mean to you?, COMEX “commercials” like JP Morgan are on the cusp of going net long the gold futures market the gold futures market for the first-time since 2001. This, as gold “speculators,” in the ultimate contrarian statement, have taken their most bearish position on gold futures since 2002.
Gee, I wonder how this will turn out – for the speculators taking on the ultimate insiders; and the global monetary system in general.