Monday, I wrote of myriad, global examples of where there’s economic “smoke,” there’s likely fire. And to that list, add this week’s out-of-the-blue resignation of Deutsche Bank’s co-CEO’s – followed by an investigation by German prosecutors of widespread tax fraud. Perhaps this is the true reason for the impromptu resignations; or perhaps, the company’s miserable stock performance relative to its peers – down 79% since its April 2007 peak, compared to 35% for the XLF ETF. However, the fact that Deutsche Bank is one of the world’s largest derivatives holders – and that the resignations occurred directly after a powerful, “unexpected” surge in interest rates – appears too coincidental for my blood. Not to mention, DB is of the most exposed banks to the “Grexit” that is all but guaranteed to occur – and less than two years ago, FDIC Vice Chairman Thomas Hoenig deemed Deutsche Bank “horribly under-capitalized.” Long-time readers know I am the most “anti-conspiratorial” analyst out there. That said, it’s difficult to ignore the possibility that the massive interest rate derivatives held by the world’s “TBTF” banks – many of which are hidden “off balance sheet” – aren’t in the process of blowing up as we speak, as some are speculating.
While on the topic of “smoke” and “fire,” another topic I generally avoid is speculating on when and how the COMEX will lose its ability to “set” gold and silver prices via a paper trading platform featuring unfettered naked shorting by so-called “commercial” traders who are nothing of the sort; but instead, the same “TBTF” banks writing the aforementioned derivatives utilized to manipulate interest rates, and who knows how many other markets. Ultimately, the COMEX will be rendered irrelevant by the inexorable shifting of gold and silver trading to the East; principally China, the world’s largest gold producer and consumer. That said, as I wrote last week, with global demand rising, and supply peaking, the odds of a “COMEX-iddent” – in which demand overwhelms the piddling amount of the COMEX’s purported inventory, causing a delivery default – increase with each passing day.
In said article, I wrote of how last week, for the first time ever, the amount of open interest outstanding at the expiration of an options contract (in this case, June) was more than the entire registered inventory – of less than $450 million worth of gold. “Magically,” JP Morgan (who else?) found just enough gold to satisfy these contracts – but as the brilliant, emerging analyst Avery Goodman of Seeking Alpha speculated in this article, more than likely, said “gold” was in actually a gold “swap” involving the U.S. government. Whence said “gold” actually came from I won’t speculate, but his logic is quite difficult to refute – particularly as such swaps have been admitted to on countless occasions. Irrespective, with so little available-for-delivery inventory in the first place, it’s difficult to believe it won’t be demanded – in droves – when the next financial crisis commences.
Yes, the “next financial crisis,” which we have vehemently warned of since the last one in mid-2011. You know, when Greece nearly took Europe down with a debt/GDP ratio of 140%, compared to 180% today – with ZERO money left, and an immediate need for a €50 billion bailout that would take debt/GDP to 200%. Not to mention, when the U.S. lost its triple-A credit rating after the national debt breached the then “debt ceiling” of $14.1 trillion; compared to today, when it only isn’t higher than the reported $18.2 trillion due to “extraordinary measures” – like stealing “borrowing” from public pension funds until a new, significantly higher debt ceiling can be negotiated. And of course, when “dollar-priced gold” peaked at $1,920/oz – and silver at nearly $50/oz – before “TPTB” reached the market manipulation “point of no return,” in realizing that without 24/7 price suppression, the so-called “Achilles Heels of the Financial World” would destroy them. Today, dollar-priced gold has been suppressed to unconscionable levels below the industry’s cost of production – although in countless foreign currencies, prices are soaring – amidst the weakest global economy in generations, and the most maniacal money printing orgy of all time. In other words, “something’s gotta give”; and we assure you, be it sooner or very sooner, it will; be it via Deutsche Bank’s derivatives book, the COMEX’s obvious inventory shortage, or otherwise.
Care of unprecedented money printing and market manipulation madness – particularly since history’s largest fiat Ponzi scheme “peaked” at the turn of the century, and “broke” in 2008 – “Economic Mother Nature’s” immutable laws have been temporarily usurped. As has logic – in political, economic, and mass media actions and words. I have written ad nauseum of such “deformations” – in tribute to David Stockman’s brilliant description of such; knowing full well that somewhere, some way, something will take history’s largest, flimsiest House of Cards down. To that end, today’s article was inspired by simply glancing at yesterday afternoon’s headlines – of countless instances of political, corporate, and media insanity, in which logic has been entirely ignored, and the lost art of common sense “dead and buried.” I’ll get to the article that “put me over the edge” momentarily; but in the meantime, here are some examples of why I don’t just think, but know the proverbial “end game” is on the horizon.
To start, one of the world’s worst anti-gold propagators – many readers, I’m sure, know exactly who I’m talking about – posted an article yesterday utilizing every imaginable Wall Street tactic to “baffle with BS,” as they say – in claiming gold was up on “short covering, bargain hunting, and even some safe haven buying.” I mean, just how much misinformation can be crammed into one article – from one of the oldest, largest Precious Metals purveyors on the planet? And this, mere hours before they followed it up with an even more egregious piece of claptrap, moronically titled “physical demand may be gold’s last hope” – as if admitting the physical substance gold is in fact a paper product; featuring an oxymoronic, blatantly passive-aggressive sub-headline claiming “downside risks persist, but gold looks mildly bullish.”
Throw in some mindless fundamental comments, and a slew of rote Wall Street technical analysis – of markets so heavily manipulated, I don’t even look at charts anymore – and you can see just how “deformed” commentary on history’s most valuable substance has become. Frankly, I’m surprised they even acknowledged the fact that yet another major gold mining strike appears imminent in South Africa – the world’s sixth largest producer; or, for that matter, the myriad real issues driving gold demand up, and supply down. Let alone, the aforementioned “taboo” topic – of the COMEX, where global prices are set, having barely enough gold to fulfill delivery requirements. Or, to expand the point, the prospect of it disappearing if just one of the 100 million-plus individuals, corporations, institutions, municipalities, or sovereign nations decides it wants to use a few hundred million dollars to purchase what’s left.
Then we have the Central bankers that supposedly “control” the world’s economy and markets speaking pure gibberish – like the head of the Bank of Japan, who this weekend cited the Peter Pan fable as the driving force of his monetary “strategy”; i.e., “‘the moment you doubt whether you can fly, you cease forever to be able to do it.” This, from a man running the printing presses of the world’s third largest economy, having just doubled the money supply in the past two years alone!
And simultaneously, nonsensical comments from a Royal Bank of Australia governor regarding the Australian dollar – which has plunged 37% in the past four years, as GDP growth “coincidentally” declined to its lowest level in…drum roll please…four years. And this, as the RBA reduced its benchmark interest rate to its lowest ever level – last month. To wit, “the Australian dollar has further to weaken,” and he is “open to further monetary policy easing to maintain growth.” In other words, despite the fact that historic monetary easing has been ineffective – other than to destroy the Australian dollar’s purchasing power; and that “growth” is at its lowest level in years; he wants the AUD to decline further, and is willing to take unprecedented measures to make it happen.
To that end, I could go through countless other “deformative” topics, like oil prices soaring as Saudi Arabian production hits an all-time high – and Chinese demand growth a 17-year low; or the complete lack of media commentary regarding the “unexplained” surge in global interest rates that continues in earnest this morning, threatening to destroy history’s largest debt edifice. Let alone, the ominous weakness in European stock markets, with the specter of a continent-wide (and potentially, global emerging market) destroying Greek default staring the world in the face.
At least the Greek tragedy is being discussed; but typically, in the shallowest of terms, with little mention of the massively negative ramifications a default and/or “Grexit” would entail. That said, even I hadn’t comprehended how “deformed” the situation had become until I read this mindless article from – who else, but head MSM cheerleader Yahoo! Finance. Titled “Greek leader seeks party backing as EU warns on cash deal hopes,” its two pages summarize just how dire the situation has become; and just how desperate the parties involved are to avoid the inevitable default of Greece’s roughly €400 billion of debt, owed largely to European banks, sovereign nations, and the Troika.
I mean, it is just me – or was Syriza not voted into power under an “anti-austerity” platform – demanding that no new bailouts would be accepted under any circumstances? And given that its leader, Alexis Tsipras, has relentlessly claimed as much, how can a new bailout even be “on the table,” let alone practically feasible? Not to mention, even if the “Troika” of the ECB, EU, and IMF were actually disposed to throw away €50 billion of printing press created taxpayer funded currency for a new bailout – which according to blaringly loud comments, like these from the German Bundestag this morning, they are decidedly NOT – why would anyone believe an additional €50 billion would help, when the previous €220 billion have put Greece on the brink of ruin? Not to mention, that due to the ECB’s maniacal NIRP and QE schemes, the 24% plunge in the Euro over the past 12 months would cause an equivalent amount of said “bailout” being lost to inflation before Greek “recovery” efforts even begin. And what of the Greek people? Or, for that matter, Syriza’s leaders? All of whom have no interest in being “bailed out.” I mean, seriously, are we to believe that all that has occurred in Greece this year will magically disappear in the coming weeks – with Greece accepting an economic death sentence in the form of additional, unpayable debts – accompanied by additional, suffocating austerity terms? Madness, I tell you!
In a nutshell, “TPTB” are well aware that, propaganda notwithstanding, a Greek default and/or Grexit would be catastrophic; not just to Europe, but the entire global emerging market complex – as exemplified by damning, off the record comments by “an EU official” – that “no Eurozone leader wants to be the one who pulls the plug on Greece.” Let’s face it, if Greece goes, all the PIIGS – and countless others – go; and no amount of market manipulation will be able to mask it. In other words, the “peak deformation” the Greek saga engenders is on the verge of being the “black swan” that finally breaks TPTB’s iron clad grip on financial markets – and economic perception – that has enabled the can to be kicked so much further than anyone could have imagined when the 2008 financial crisis arrived.
To that end, as anxious I am for “justice” to be served to the Troika – and gold Cartel – it’s difficult to avoid fearfulness of what the world might become in its wake. Neither I, nor Harry Dent, Martin Armstrong, Larry Edelson, nor anyone else knows exactly how such events will unfold – and certainly not their exact timing. However, even the aforementioned “gold bears” all agree that something wicked this way comes – and that right soon. To that end, only you can decide your level of comfort on the “protection continuum” of alternative protection solutions. As for me, I’ll sleep the “sleep of the just” knowing a large percentage of my hard earned savings are held in the only substance to have maintained its monetary purchasing power throughout human history.