Is it possible that pure and simple common sense has permanently “left the building?” In the wake of the historic, worldwide, post-2008 money printing, market manipulation, and propaganda orgy – which cumulatively, has exploded the world’s debt total to roughly $200 trillion, from just $40 trillion two decades ago (excluding hundreds of trillions of “unfunded liabilities,” of course) – it certainly appear so, particularly amongst the so-called political, economic, and financial “experts” that appear to get absolutely everything they predict horribly wrong. And always on the side of “bullishness,” of course – from Wall Street “analysts”; “hedge fund” managers; and the worst, most destructive, of the bunch, Central bankers. Day in and day out, their “brainwashing” at the altar of financial, economic, and media manipulation is breathtaking to witness; like, for instance, David Stockman’s dead-on description of the lunacy of Wall Street trying to spin yesterday’s cataclysmic PBOC Yuan devaluation as “bullish” for financial assets. Which, as usual, took them completely by surprise; but, as always, left them completely undeterred in their wanton, compromised cheerleading.
To that end, Zero Hedge wrote of how Central bank credibility has been all but destroyed. And heck, even CNBC’s favorite MSM “floor trader,” Art Cashin, espoused how not only has QE miserably failed, but become Central bankers’ only remaining option. Which, by the way, is exactly how currency devaluation is executed, even if said talking heads don’t speak of it that way. In said article, Zero Hedge speaks of “carry traders getting their fingers burnt again” – in first trusting the Swiss National Bank to maintain its monstrous, money hemorrhaging Euro peg; and now, the PBOC, to continue pegging the Yuan to the surging dollar, despite the ugliest, most catastrophically collapsing export machine in human history. Such are the perils of not only investing other people’s money; but trusting governments to a) know what they’re doing, and b) succeed at doing so.
Of course, anyone using common sense knew both pegs were doomed from day one. Not to mention, the fiat Ponzi scheme that has destroyed the world’s economic outlook for generations; and likely, when its inevitable, all-out collapse is complete, will reshape not only the world’s financial and economic hierarchies, but national borders; political affiliations, and global culture itself. None for the better, I might add, until the “dust finally settles” many years from now.
Regarding said common sense, I have made a living out of it since my first GATA postings circa 2004, and particularly since joining Miles Franklin in 2011. From day one – to be specific, September 6th, 2011, I shouted from the rooftops that the Franc/Euro peg would catastrophically collapse; and four months ago, when the topic wasn’t even on anyone’s radar screens, boldly predicted the Chinese would inevitably de-peg the Yuan from the dollar. Heck, it was nearly three years ago when I forecast the worldwide “final currency war”; and thus, when I saw last weekend’s horrifyingly ugly Chinese export data, my common sense kicked in so powerfully, I awoke Monday morning to write the “upcoming, cataclysmic financial big bang to end all big bangs” – predicting an imminent Yuan devaluation.
Of course, my expectation all along has not been a mere “devaluation” of the Yuan versus the dollar – such as the 1.9% reduction the PBOC engineered Monday night; but ultimately, the all-out de-pegging of not only the Yuan, but any currency tying itself to a major currency. In the dollar’s case, to avoid “losing” said currency wars by being tied to a surging “liquidity vacuum”; and in the Euro’s, to avoid losing one’s investment entirely, given the inevitable collapse of the European Union and its ill-fated currency. Which is why, when the PBOC Monday night claimed said devaluation was a “one-time adjustment,” I loudly mocked it in my follow-up Audioblog, “the End Game starts, as China devalues the Yuan.” To wit…
“But I digress from the real reason for today’s Special Audioblog; which, per today’s title, was last night’s historic PBOC decision to devalue the Yuan – in what they laughable deemed a ‘one off adjustment’ aimed at ‘keeping the Yuan stable at a reasonable equilibrium level.’ Yeah, two decades of strict pegging to the dollar, with barely a movement at all – yielding the commandeering of nearly all the world’s manufacturing market share; the world’s largest trade surplus, $2 trillion of recycled U.S. Treasury bond holdings; and the U.S. government labeling China – in the ultimate ‘pot calling the kettle black’ pronouncement – ‘currency manipulators.’ And subsequently, the PBOC wants us to believe a mere 1.9% overnight devaluation brings the dollar/yuan relationship into equilibrium. Or that, better yet, it will be able to control trading of the so-called ‘offshore Yuan’; let alone, the non-deliverable Yuan futures market, which as I write is projecting at least a 5% devaluation over the course of the coming 12 months. No, this couldn’t be more the polar opposite of a one-time adjustment if it tried; as clearly, per what I wrote in May’s “ugliest economic data I’ve ever seen” – and yesterday’s “upcoming, cataclysmic, financial big bang to end all big bangs” – China’s export industry is in all-out freefall; as are its financial markets, historic PBOC intervention notwithstanding.”
Which is why, when just 24 hours a later – i.e., last night – the PBOC devalued the Yuan by an additional 1.6%, to its lowest level in three years, I wasn’t surprised in the least. Other than, of course, the fact they did it so quickly after the first devaluation. And per what I wrote above, it didn’t surprise me either that the PBOC’s Keystone Kops misjudged the violent “front-running” that would occur in the aforementioned “NDF” – or non-deliverable forward market – which immediately assumed the devaluation would increase to more than 7% in 12 months’ time, forcing the PBOC to intervene this morning to support the Yuan, preventing NDF expectations to collapse further. And yet, taking irony to a new, unprecedented level, the PBOC accompanied last night’s devaluation with comments that it “won’t continuously devalue” – after having claimed the prior evening’s devaluation was a “one-off adjustment!” You know, like Moody’s downgrading the freefalling Brazilian economy last night to a notch above junk – but assigning it a “stable” outlook to “assure” investors of a better future. Yes, Brazil – whose economy is integrally tied to plummeting oil and iron ore prices; where President Dilma Rousseff’s approval rating just plunged to 8%; it’s biggest corporation – state-owned oil giant Petrobras – was sold to the Chinese to avoid certain bankruptcy; and its currency has fallen by an incredible 50% in the past year alone, with no bottom in sight. “Stable” indeed, just like the PBOC’s Monday night Yuan devaluation was a “one-off adjustment” – despite it objectively being one of the world’s most overvalued currencies.
In the wake of the second cataclysmic Yuan devaluation in two nights – which unquestionably has taken said “final currency war” nuclear – the big question now becomes “who’s next?” Not that the year’s 100+ Central bank rate cuts and QE announcements were occurring in a vacuum – as the Miles Franklin Blog has been discussing the ongoing currency collapse as loudly, and vehemently, as possible. However, now that the “800 ton gorilla” has entered the fray – with its “nuclear arsenal” of printing presses; the horrifying chain reaction has destabilized like the Three Mile Island nuclear reactor – or Fukishima, for younger readers – with the currencies of China’s direct manufacturing competitors in Asia hit the hardest, whilst the world’s pitiful band of “commodity currencies” saw their relentless collapse accelerate further – on the heels of not only WTI crude oil plunging all the way to $43/bbl, within mere pennies of its post-2008 low; but base metals having their worst day since the heart of the 2008 crisis. In fact, an OPEC report released yesterday showed that not only is OPEC currently running 1.5 million barrels per day above its quota, but Iran is already producing at 2012’s pre-sanction levels (before their so-called “peace deal” with the U.S. has even been approved); whilst non-OPEC nations as diverse as China, Columbia, Russia, and the U.S. are all producing at record levels – with no end in sight, given they all desperately need as much revenue as possible, as quickly as possible.
In other words, if you think “100+” rate cuts was a big deal – or, for that matter, monstrous QE programs such as the PBOC, Bank of Japan, Swiss National Bank, Bank of England, and ECB are currently executing, you “ain’t seen nothing yet.” As, in response to the PBOC’s “shot across the bow,” the economic and political pressures to “one up” China with their own devaluation efforts will increase exponentially. Which, given the global nature of financial markets, will cause explosive “front-running” speculation of such efforts, causing a dramatic downward spiral that is not only the “single most Precious Metal bullish factor imaginable”; but inevitably, will give rise to the hyperinflation that doomed the world’s largest, most destructive fiat Ponzi scheme from its start – on the fateful day of August 15th, 1971, when the U.S reneged on Bretton Woods by abandoning the worldwide gold standard.
And by the way, given that gold and silver prices were higher following the news – maniacal Cartel suppression efforts notwithstanding – both yesterday and today, should once and for all end the “debate” as to whether Precious Metals are mere “commodities” or, as they have indisputably been for thousands of years, real money. Last but not least, demonstrating just how much chaos has been created by “Central bankers gone wild,” even the dollar fell sharply; 1) against the Euro, supposedly due to the Greek “deal” being agreed upon in principal – which, if consummated will push Greece’s real debt/GDP ratio to a world-leading 300% (look at NBG stock if you believe such an agreement is good for Greece’s banking system); and 2) because given the Yuan devaluation, and its horrific global ramifications, the odds of the Fed’s long propagandized “imminent” rate hike instantaneously plunged from slim to none – along with Treasury rates, which are in freefall. Not to mention, yesterday’s horrifying, ominous explosion of the tell-tell “inventory to sales ratio,” which is rocketing toward 2008’s pre-recession highs like a “bat out of hell.”
Regarding financial markets, Cartel efforts to suppress gold and silver have never been more blatant; as, just like on September 6th, 2011, when it attacked Precious Metal prices amidst the Swiss Bank’s monetary suicide announcement of pegging the Franc to the Euro, efforts to prevent gold and silver excitement have been off the charts in the past 48 hours. And yet, they have still been the only asset classes to rise – and that’s just the manipulated paper markets, as opposed to the scalding hot physical markets Miles Franklin deals with. To wit, I noted yesterday how our immediately deliverable silver inventory was nearly gone before Monday night’s fateful PBOC announcement; which, as you may expect, was depleted dramatically further in the ensuing 24 hours, and will likely go parabolic following today’s devaluation news. Even the Cartel’s key “henchmen” – i.e., so-called COMEX “commercials” like JP Morgan and Goldman Sachs – are nearly “net long” paper gold and silver for the first time since 2001, whilst they load up on the real stuff overtly
And as for stocks, the PBOC’s best efforts didn’t even enable the imploding Shanghai Exchange’s two month plunge to stabilize; whilst European and Asian stocks plunged; and, of course, America’s blindly obvious PPT is doing everything in its power to prevent 2008-style carnage, whilst it hopes and prays this crisis passes. Which, in my view, it decidedly will not, as I truly believe the “Big One” has commenced. That said, aside from their comical support of the “Dow Jones Propaganda Average” – which, believe or not, bottomed at down EXACTLY 1.0% not only yesterday (i.e., the PPT’s long time “ultimate limit down” level); but in early trading this morning, market peripherals are falling apart. For one, the Dow “death crossed” for the first time in three years – i.e., its 50 DMA fell below its 200 DMA. But more importantly, the biggest bubbles – from Apple, to Biotech, Alibaba, Twitter, Tesla, and Shake Shack – are serially collapsing; as clearly, a market tsunami combining the worst aspects of 1929, 1987, 2000, and 2008 is gaining momentum. And whether it ends 2008-style, with a “deflationary” collapse that would prompt hyperinflationary monetary policy; or “Weimar-style,” in which nominal stock prices explode, but real prices collapse, only time will tell. However, when all is said and done, the two things I’m sure of are that 1) financial assets will be devalued like never before in history; and 2) real money will appreciate like no assets ever before; sadly, as supply runs out, benefiting only those who protected themselves when they had the chance.
And given what appears to be brewing in the silver market, the odds of 2008-style shortages are surging with each passing day; likely, with similar gold shortages, as in 2008, right behind them. To that end, we can only re-iterate – as vehemently as possible – that the time is NOW to protect yourself, while you still can. Here at Miles Franklin, we have conducted business for 26 years without a single registered complaint – and can not only help you with the purchase, sale, or storage of Precious Metals, but a variety of financial planning strategies we have honed over two decades of working with gold and silver – as discussed in the must hear podcast I taped with our President and co-founder, Andy Schectman, earlier this year. That said, all we ask, particularly in light of all the fantastic, free information our blog supplies you on a daily basis, is that you give us a call at 800-822-8080, and allow our staff of professionals – on average, sporting 22 years of industry experience – to give you a free consultation. And, as always, I can be reached via email at [email protected].