In February’s “Draghi’s Reckoning Day,” we re-emphasized what we have said since Mario Draghi’s infamous July 2012 speech – when he promised to do “whatever it takes” to save the Euro” and “believe me, it will be enough.” That is, no matter how much money printing, market manipulation, and propaganda he engaged in – the ECB would eventually have to “pay the piper” for sentencing Europe to the same fate as his “partners in crime” at the world’s other major Central banks. We had no doubt the death spiral Europe was entrenched in would get exponentially worse in true Ponzi scheme fashion; and less than two years later, could not have been proven more correct.
Today, European unemployment, youth unemployment, debt and social unrest (see last week’s EU Parliamentary election results) are at or near all-time highs with all relevant metrics moving in the wrong direction. And thus, pressure on the ECB to “act” has grown so powerful, it is all but a fait accompli it will announce new draconian monetary easing policies tomorrow; including, potentially, negative interest rates, a new LTRO or “Long-Term Refinancing Operation” for its hopelessly insolvent banking system or even flat out QE. And thus, on this “Reckoning Day Eve, we focus on the likelihood that the most powerful money printing group yet is about to push global price inflation to the forefront; and with it, the urgent need to protect oneself with real money.
That said, the usual “horrible headlines” must be waded through before today’s “king horrible headline” can be discussed. And man could we use a thick pair of boots today! We have much to discuss, but first and foremost is a topic near and not-so-dear to our hearts, i.e., the unending cacophony of misleading, statistically insignificant, politically compromised “diffusion indices” that have plagued the propaganda landscape for years. We have long written of how meaningless they are for the aforementioned reasons and many more; most importantly, because they have close to zero correlation with real economic activity. To wit, it’s quite amazing how the sharp increase in the “Chicago PMI” in the first quarter coincided with -1.0% GDP growth, isn’t it?
In fact, not only is the U.S. government publishing such misleading data at an unprecedented pace, but private firms as well; such as the “crony capitalists” at Markit, who aim to go public this summer with a $5 billion valuation. For $5 billion, one could buy all the supposed registered gold inventory at the COMEX five times over; but instead, the “1%” receiving free Fed money will use it to speculate on one of the true cancers of society at unprecedented valuations. I can’t imagine how Markit generates the revenues necessary to maintain a $5 billion valuation; and frankly, wouldn’t be the least bit surprised if it was the same way Thomson Reuters has been recently doing – i.e., selling its market moving data – prior to publication – to high frequency traders.
Worse yet, such data rarely correlates to similarly created publications, given the randomness of surveys, “adjustment factors,” and other mathematical abstracts that cumulatively eliminate the stated modus operandi of the surveys. Let alone, the political “influence” that clearly plays a significant role – as validated by Tuesday’s colossal blunder by the ISM or Institute of Supply Management. Yes, at 10:00 AM EST its manufacturing PMI survey was reported to have fallen from 54.9 in April to 53.2 in May; just 20 minutes later, the May figure was changed to 56.0, due to utilization of the wrong “seasonal adjustment” factor; and an hour later, adjusted again to 55.4 right in line with expectations.
First off, why on Earth are yes/no survey questions “seasonally adjusted?” Secondly, isn’t it amazing how the tightly controlled financial markets acted exactly as TPTB hoped once the “appropriate” data was published? Thirdly, how is it that the all-important employment component can decline whilst the overall index increases? And finally, how does one explain this hideous farce; i.e., how the ISM has clearly enlisted private consulting firms to goal seek its results? In our view, the key takeaway of such foolishness is that – as we have long noted – “diffusion indices” have absolutely utterly zero credibility for countless reasons. Thus, we warn you to ignore such subjective compromised data in favor of the real empirical data that indisputably screams depression; that is, if it can even be deemed credible to start with – like the “accounting errors” that California recently made costing taxpayers an incredible $32 billion.
And note it’s not just the United States of Economic Propaganda making such errors – purposefully or otherwise – but all nations; as highlighted by the fact that just one day after we mocked the “official” Chinese PMI figures for being blatantly held above 50, the privately issued HSBC China PMI figure was reported at 49, indicating recession. Better yet, despite a near record high European cost of living, the ECB – just two days ahead of its highly telegraphed monetary easing announced a record low CPI! Gee, what a “coincidence!”
As for the “surging” U.S. economy (never mind the first quarter’s -1.0% GDP reading), pray tell how the left two charts below can even be optimistically interpreted as indicating a housing recovery – or how the right two charts can be ignored when concocting a “recovery scenario.”
And for those citing increased auto sales as indicative of said “recovery,” it’s quite clear recent sales “growth” is due principally to surging 2007-style subprime lending – as well as all-time high channel stuffing; in both cases, accelerating the inevitable end game of write-offs, layoffs, and bankruptcies.
In fact, one needs look no further than this morning’s reports to realize just how broken the economy has become; let alone, the fraudulent way its progress – or lack thereof – is reported. First off, another 4% weekly plunge in mortgage purchase applications – which sit near 20 year lows, despite mortgage rates plunging to nearly all-time lows. Next a hideous 3% plunge in non-farm productivity coupled with a 6% surge in unit labor costs – and no, not due to higher wages. Better yet, a catastrophic “unexpected” plunge in the trade deficit from $40 billion in April to $47 billion in May – yielding immediate 2Q GDP growth estimate reductions on the order of 0.5%.
Not to be outdone, the ADP employment report came in much worse than anticipated at 179,000 versus the 210,000 estimate – whilst April’s numbers was revised lower as well. Consequently, what does that mean for Friday’s all-important May NFP report – which “coincidentally” is estimated to produce 213,000 jobs compared to the May 2013 “birth/death” gain of 210,000? Using simple math, it appears destined for the second straight month to be entirely composed of phantom jobs; which with each passing day becomes recognized by the entire world. And on the topic of universal recognition of U.S. economic data fraud, does it surprise you that after the aforementioned litany of horrible empirical data, the “ISM” reported non-manufacturing activity to have risen from 55 to 56 in May, while the “Markit” non-manufacturing diffusion index rose from 55 to 58?
Let’s face it the odds of the U.S. economy meaningfully improving whilst two-thirds of global PMI indices are in negative territory – including essentially all major economies – are slim to none; particularly given the litany of hard data stating otherwise, such as the largest corporate earnings decline since the Lehman crisis! As are the odds of financial markets not being manipulated, including “taboo” precious metals prices.
In other words, the tsunami of reality is rapidly overcoming the propaganda on nearly all fronts. For example, with MSM outlets now writing regularly of gold manipulation – such as this Bloomberg beauty, and these from the UK Financial Times and German financial news – it appears the Cartel’s days are numbered. Not to mention, the top propaganda scheme of all time; i.e., convincing the masses that “deflation” is at hand. Perhaps for iPhones but decidedly not items we “need versus want” – be it here or essentially anywhere the Fed’s money printing cancer has been spread; which is to say, everywhere!
And thus, as gold is maniacally suppressed under $1,250/oz…
… the “Dow Jones Propaganda Average” supported with equal “dead ringer” algorithmic vigor; and the benchmark 10-year Treasury yield not allowed to escape the 2.6% – 3.0% range we have vociferously discussed, we come to today’s main event; i.e., tomorrow’s ECB “reckoning day.”
Recall July 2012, when the irreversible European financial crisis reached its last “fever pitch,” as highlighted by the height of the ongoing “Greek Tragedy,” the aforementioned Spanish bank bailout and multi-year lows in the soon-to-be-defunct Euro currency. In response, Mario Draghi boldly claimed he would do “whatever it takes” to save the Euro – starting with the 100 billion Spanish bank bailout the EU simultaneously approved. Six months later, U.S. “QE3” was launched; and four months later, Japanese “Abenomics” followed shortly thereafter by the monstrous, secretive Chinese money printing we have persistently highlighted.
Since then, global financial markets – aided by the most spirited “PPT” efforts imaginable – have been on a tear; although sadly, the underlying economic picture has massively diverged in the same manner as paper and physical PM markets; with the former held down like an overinflated beach ball in salt water, and the latter experiencing surging demand from the usual suspects. As for silver specifically, we’ll simply let our article from Monday morning say it best!
Unequivocally, the European economy is at its singular low point since the ill-fated union commenced 15 years ago; and thus, it’s just a matter of time before the real value of European stocks and bonds reflect this irreversible expanding reality – either via crash or hyperinflation.
In recent months, “Goldman Mario” has made it crystal clear that – like “Helicopter Ben” before him – he is desperate to avoid a Japanese style economic collapse; and thus, will print unlimited Euros to prevent the “crash” scenario under his watch. Such actions – as proven by the Bank of Japan and Federal Reserve, among others – will decidedly fail to improve anything; and conversely, will accelerate Europe’s downward spiral – let alone, dramatically inflame the “final currency war.” All one has to do is watch the principal “victims” of such hyperinflationary policies – i.e., “emerging market” currencies which are again falling sharply – to realize just how dangerous what the ECB is on the verge of announcing is.
From our standpoint, we are sitting on the precipice of economic history; with tomorrow’s ECB “reckoning day” bringing us one giant step closer to the inevitable hyperinflation that has destroyed all of the prior 600 fiat currencies. Frankly, we are amazed that anyone remains aloof to this oncoming, generational financial storm; which through the purchase of even a modicum of real money can be largely averted.
the tsunami of reality is rapidly overcoming the propaganda on nearly all fronts
You make your point well. At what point will investor demand for metals, notably the managed money on the COMEX surge to the point where it can overcome the naked short sales that keep price controlled?
My general stock and energy stocks go up….metals and miners go down….still and constantly.
Keep up the good work
Yes, due to MANIPULATION!!!! Which, of course, ALWAYS fails in the long run.
Like I said before Deflation will be allowed to set in deliberately what a shocker NO QE from Mario, Looks to me that when the US prints then the SDR basket of currencies
(euro,Yen,Pound sterling,US dollar)also print ,when the us dollar stops printing they stop printing .
BTW i’m not a deflationist I’m in the Hyperinflation camp but lately it appears they are able to mask hyperinflation which in my opinion should have already taken place there definitely is some sort of currency game going on with the SDR basket of currencies. for the metals holders it would be awsome if the yen,dollar,euro,pound would all print massive amounts of fiat but then the powers that be would also wipe out the debts I believe the debts are staying forever
Remember, “deflation” is impossible in a fiat regime – as Central banks MUST keep printing. And whether bubble-ized financial markets “deflate” or not, the items we “need vs. want” – like food – will continue to rise in price.
why do they need to print ? just keep adjusting the negative interest rate lower same thing isn’t it?
Adjusting the rate is just one tool. Actually, it’s not printing at all, but hoping (futilely) that banks will take funds out of the ECB, and LEND them – thus, creating money. Of course, they won’t – as they’re insolvent!