I never know where my next RANT topic will emerge, yet on some days three or four different inspirations materialize, often from highly disparate sources. But my good friend Bill Holter of GATA fame leads the list of “outside sources” of such topics, as the two of us view the world in much the same way.
What made me a good analyst was my ability to identify the “daily zeitgeist,” i.e. how the day’s news incrementally penetrated the longer-term financial market outlook. Of course, back then my competitors were only viewing the mainstream news, while today I must seek out the handful of “good, smart people” deciphering the psychobabble, and transforming it into truth. Joining the “GATA Army” in 2003 was the best business decision I’ve made, utilizing it to meet more such people than at any juncture in my career. Until Miles Franklin, of course.
Below, Bill writes of the enigma of record low interest rates simultaneous with record high inflation (i.e. MONEY PRINTING), as well as the myriad government manipulations utilized to maintain this paradox. Moreover, he correctly concludes that collateral damage from this insane policy is destroying the nation – and theworld – from the inside out, preventing savers from saving and financial contracts (such as retirement plans and insurance policies) from maintaining long-term viability.
Five-Year Treasuries at 0.85%?
To all; while checking the markets this morning I saw the 5 yr Treasury pass by the screen at .85%. Yes, less than 1% interest! So if you hold on to this for the 5 year life of the bond, you will receive (compounded) a whopping 105% of your original investment back. Historically, bond investors would always demand at least some “premium” over the inflation rate, not so today. And please, don’t forget that the current “inflation rate” is tabulated by the BLS minions who cook every economic number to fit the Stepford script that “everything is fine”. So we have a bogusly low reported inflation number yet “investors” are still accepting a guaranteed negative yield.
Yes, I realize that “investors” did not do this, the Fed did. The Fed has stepped into the markets and bought bonds down to these yields. I know that all of this is obvious and not new information but it really hit me over the head this morning, WHO would settle for this type of return? You will get virtually no return on your capital and then receive “Dollars” at the end of 5 years which history has shown not to be such a good idea. “That” was in the past, now, common sense tells you that the Dollar must be devalued greatly so why would anyone “lend” in this fashion?
The whole idea behind the current ZIRP is to push investors out of safety and into more “productive” investments to help kick start the economy. Traditional investors in Treasuries have no business whatsoever going further and further out the yield curve nor lower and lower in credit quality (their is no such thing anymore) to stretch for yield. I am not only talking about retirees here, “traditional” investors include insurance companies, pension plans etc., you know, the CORNERSTONES of our financial system!
I know that this is not a groundbreaking or insightful writing, it is obvious, but sometimes the “obvious” doesn’t ever get seen until it’s too late. The “obvious” has always throughout history been the cause or reason to explain every panic that followed. What is also “obvious” is that if you cannot get any yield on your Dollar investments then why not shift your capital to another, stronger (strongest) currency. Yes, this is why Gold has done what it has done, investors one by one have done the logic and decided if they were not going to get a yield, they would at least own a currency that would not debase in value.
So on the one hand you have the Fed “pushing” investors out of Dollars and on the the other hand they are trying to “scare” investors out of Gold. While all of this is occuring, the Treasury and Fed have been systematically destroying their balance sheets. It is not a question of if, only a question of when this scheme backfires. No matter how much coercion, spin, falsified economic numbers and just plain fraud is employed, it is all untenable and will not stand. Mother Nature and common sense will return in very ugly fashion, it is more than obvious! What is also very obvious is that what is being (and has been) done is not by “mistake”, no, no one with an 8th grade education could have arrived where we are by “mistake”. Regards, Bill H.
For the past year, I have vehemently urged readers to withdraw savings from BANKS, given the enormous, imminent systemic risks. The global banking system is more insolvent than in late 2008, as worldwide real estate assets are dramaticallyweaker, and the derivatives protecting them dramatically more underwater. Only non-stop Fed “liquidity” and fraudulent FASB accounting changes from early 2009 (allowing banks to value worthless assets as they wish) have kept the doors open, while lending activity has ground to a halt, never to return until the system crashes and “reboots.”
However, systemic risk is just half the reason to withdraw money from banks, the other being the Fed’s terminal ZIRP monetary policy, as solidified two weeks ago when Helicopter Ben proclaimed “zero interest rates until at least 2015.” In other words, not only is your capital at risk in the banks, but you receive ZERO interest for that privilege. The banks may be able to borrow Fed Funds at 0%, but not you. Youreceive 0% on your capital, but pay exorbitant rates to get it, if you can even get it at all.
This is the beauty of PHYSICAL gold and silver, which pay the same 0% interest but NEVER decline in value, and has ZERO risks of any kind.
This is why PHYSICAL gold and silver are MONEY, and why they have survived as such for all of human history.
This is why PHYSICAL gold and silver stored outside the banking system – even in your own home – is safer than fiat currency saved in a bank!
Do not allow the current market lethargy – created solely by GOVERNMENT MANIPULATION – to lull you into a false sense of security, as it won’t last long, I am 100% sure.
PROTECT YOURSELF, and do it NOW!