Just three weeks ago, the FOMC left the Fed Funds rate at a “range of 0.00% to 0.25%” for the 83rd straight month. A week earlier, the PBOC “unexpectedly” reduced its own benchmark rate; and, as discussed in “the peak of monetary lunacy? You ain’t seen nothing yet,” Mario Draghi suggested the ECB is ready to use “all available tools” to meet its objective of “returning to price stability over the (ever-ambiguous) medium-term.” These Central bank actions, combined with similar policy adjustments the world round – like the Reserve Bank of India cutting rates after the Rupee had already hit an all-time low – suggest the “final currency war” I warned of three years ago is in full-swing, on the verge of going nuclear.
That said, without question, the FOMC clearly decided that, as the de facto Central bank “leader” – i.e., the institution more responsible for destroying the world than any other – its window for replacing its “recovery” jawboning with action was rapidly closing. After which, any remaining shred of “credibility” it still had would be gone. Consequently, it launched the last, and most intense, salvo of its 2½ year propaganda/market manipulation war – in suggesting it might, on a “data dependent” basis, of course – raise rates at its December 19th meeting; in what I subsequently deemed a “December rate hike or bust” campaign, and I do mean bust.
Consequently, its kindergarten-worded “policy statement” was altered to give the impression of increased economic confidence – even if it not only made little sense, but had more qualifiers than a pharmaceutical infomercial. To wit, for the 11th straight month, the FOMC deemed the plunge in oil and other import prices “transitory.” And incredibly, omitted “recent global economic and financial developments may restrain economic activity somewhat, and are likely to put further downward pressure on inflation in the near-term” – just one month after putting it in, despite not a shred of evidence suggesting such worries have abated. Last but not least, it changed the prior months’ (as in, eleven months’) “in determining how long to maintain the zero to 0.25% Fed funds target range” to “in determining whether it will be appropriate to raise the target range at its next meeting.”
The latter, from an institution that in the past year has suggested imminent rate cuts with a variety of similar “word cloud” changes; each time, trumpeted by its MSM “partners” at the Wall Street Journal, CNBC, and the like. Which, without fail, never panned out; from the the ballyhooed replacement of “considerable time” in December 2014 with “patient” – which supposedly meant the Fed was getting ready for a March 2015 rate hike. To, in March 2015, removing “patient” – in lieu of “the Committee judges that an increase in the target range for the Federal Funds rate remains unlikely at the April FOMC meeting.” In other words, suggesting a rate hike was possible shortly thereafter – which of course, didn’t happen. And equally comically, when April arrived, they simply took out all reference to specific meetings, by adopting a temporary, unofficial policy of ignoring timelines entirely.
Not that an infinitesimal “rate hike” would have the slightest impact on global economic activity; and certainly not Precious Metals – from a fundamental perspective. However, the desperation to portray a semblance of control – instead of the “ten ring circus of Keystone Kops” Central banking activity has been increasingly viewed as – was clearly atop the Fed’s agenda, irrespective of the fact that since the September meeting, global economic activity had clearly deteriorated. To wit, in its infinite wisdom, the Fed believed that since their PPT partners had been able to engineer a ridiculous, 1,700 point “Dow Jones Propaganda Average” rally – ironically, commencing the day of the abysmal October 2nd NFP employment report (enabling it to temporarily reclaim its 200 day moving average of roughly 17,600) – it had enough “cushion” to jawbone of “recovery” and “imminent rate hikes.” And thus, buy a bit more “credibility time” – whilst, of course, qualifying such optimism with the standard “in determining whether it will be appropriate to raise the Fed Funds rate, the Committee will take into account a wide range of information – including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.” In other words, it will be, as always, “data dependent.” And man, has the ensuing “data” been bad!
Since that fateful day, every imaginable piece of economic news – on a worldwide basis – has deteriorated, and dramatically so. That is, except the blatantly fraudulent “sixth sigma” beat of the October NFP employment report; which, as usual, was far worse than expected once one actually reads it. And oh yeah, the “Chicago PMI Index” – which is so comically volatile and useless as an economic indicator, I last year wrote an entire article about it – was similarly “much better than expected.” And this, in a city that was recently downgraded to junk status, within a state that technically defaulted on its debt this summer.
In the U.S. alone, the following economically reports – all upwardly goosed, I might add – were either worse than expected, or outright negative…3Q GDP; the Bloomberg Consumer Confidence Index, the National Association of Realtors’ Pending Home Sale Index (-2.3%); personal income and consumer spending; Consumer Sentiment; the ISM Manufacturing Index; September Factory Orders (-1.0%); the October ADP employment report – which completely contradicted NFP; the Challenger Layoff Report; September Retail sales (+0.1%, atop a downwardly revised August figure); the Empire State Manufacturing Survey (-10.7); October industrial production (-0.2%); the October PPI
(-0.4%, versus an expected +0.2%); the National Association of Homebuilders’ housing index; and as I write Wednesday morning, October Housing Starts – which “unexpectedly” plunged 12%. And don’t forget, the myriad negative September data points will only serve to push the BLS’ initial estimate of 3Q GDP “growth” of 1.5% – i.e., one of the lowest GDP prints in years – lower; potentially to less than zero before all is said and done.
Not to mention, one of the few “positive” indicators to emerge (not positive, as in good; but simply, above zero) was yesterday’s October CPI reading of +0.2%; which, in true economy-killing “need versus want” fashion, featured declines in discretionary items like apparel, but large increases in non-discretionary items like healthcare (the biggest component of said “GDP growth”); and “shelter,” as the cost of renting hit an all-time high. Regarding the former, nearly all Americans – myself included – were informed in early November that their health insurance premiums would skyrocket in 2016, putting a dramatic dent in an already moribund retail sector – as evidenced by catastrophic earnings reports, since October 28th, from bellwethers like Macy’s, Nordstrom, and JC Penney.
However, that’s the “good news,” compared to what’s going on elsewhere; as since October 28th, every imaginable measure of global trade has plunged to either its 2008-09 financial crisis lows, or lower. I mean, you name it, and it’s collapsed – from China’s containerized freight index; to U.S. trucking, railroad, and port activity; to the U.S. sales-to-inventory ratio. And of course, the “grand-daddy” of all global trade indicators, the Baltic Dry Index, which yesterday crashed to within a hair’s breadth of its all-time low – comprising 30 years of data. And this, before we’ve even reached the seasonally weakest first quarter of the year!
And oh yeah, the CRB Commodity Index is in FREE FALL, under the weight of the greatest oversupply in history; the result, as I have long-written, of two decades of maniacal Central bank money printing and Wall Street financial engineering. Commodities – i.e., the world’s top revenue source, for corporations, municipalities, and sovereign nations alike – are now, on average, at or near all-time lows; with the CRB Index, at 183 as I write, trading below the 40-year low of 185 it first attempted to breach in late August. Led into the abyss by, OH NO, copper and zinc; the two commodities Glencore relies on to survive. Consequently, most commodity currencies – i.e., most currencies – have plunged anew, in nearly all cases to, or near to, all-time lows. In some cases, such as dying “BRICS” like Brazil, to the point of economic collapse, social revolution, and/or political coup. Which of course, means the “dollar index” has exploded higher, to not only the chagrin of “final currency war” participants on Main Street, Wall Street, and Pennsylvania Avenue, but the Fed itself – as none other than Vice Chairman Stanley Fischer admits. And don’t forget the Chinese, whose record string of daily Yuan devaluations, following horrifying trade data released after the October 28th FOMC meeting – suggests the “cataclysmic financial big bang to end all big bangs” I predicted to the day back in August – i.e, a significant Yuan devaluation – is just getting started.
As for the granddaddy of global revenue producers, crude oil, it’s “transitory” decline has extended by an additional 10% since the October 28th FOMC meeting – with WTI crude having plunged from $45/bbl to $41/bbl as I write, following another massive Cushing build last night, but Saudi Arabia raising its selling discount to its highest level since…drum roll please…crude’s financial crisis low in early 2009. And as for the “unspeakable horrors crashing oil prices portend” – which I warned of 13 months ago – does it surprise anyone that Europe is facing an historic “migrant crisis” from collapsing Middle Eastern nations? Culminating in, last weekend, the worst Western terrorist attack since 9/11? Or that – again, since the October 28th FOMC meeting – Obama officially authorized “boots on the ground” in Syria; joining long-time arch rival Russia; and as of this week, France; as clearly, the makings of World War III are in place.
Socially speaking, the secession movement in Catalonia, Spain – where 25% of Spain’s GDP emanates from – took a giant Parliamentary step forward last week; following the prior week’s historic political coup in fellow “PIIG” Portugal, and expanding unrest in Greece. And given what occurred in Paris, undoubtedly the burgeoning secession movements – from the European Union and/or Euro currency – in France, Italy, and the UK will take giant steps forward as well. Not to mention, in the de facto European leader Germany; which, whilst still reeling from the historic Volkswagen “Diesel-Gate” scandal,” sits on the cusp of social chaos, given Angela Merkel’s insistence on accepting a million Muslim emigrants into the country.
In other words, since the Fed’s October 28th meeting, a mere three weeks ago, global “horrible headlines have gone parabolic, as Economic Mother Nature nears all-out victory.” Which is probably why any sentient being with a pulse and an uncompromised agenda knows that not only is the Fed’s supposed “agenda” for raising rates (which has been altered countless times already) has not only decidedly NOT been met; but to the contrary, the case for “NIRP” and “QE to Infinity” – both of which must inevitably happen – has never been stronger. Which is why I’m so intrigued as to what today’s (doctored) October 28th FOMC “minutes” will say. Which, sadly, is more likely a function of how successful the PPT is at supporting the stock market than all the aforementioned factors combined.
“The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen some further improvement in the labor market and is reasonably confident that inflation will move back to its 2% objective over the medium-term.”
Back in July, I wrote that the “only difference between late 2008 and today” was historically manipulated “last to go” markets like the “Dow Jones Propaganda Average” and paper gold and silver. Well, that’s nothing compared to today; as not only has global economic activity dramatically weakened – and Central bank money printing proportionately increased; but unprecedented market manipulation has caused a complete and utter break from fundamentals. To wit, global PPT efforts have (temporarily) rescued stocks from their well justified August lows – even as commodities, currencies, and bonds have plunged below those lows. And as for Precious Metals, even I have not seen anything like this in my 13½ years in the sector – with prices now down by a record 17 days in a row or so; “coincidentally,” commencing the second the FOMC’s October 28th policy statement was released. Which, equally “coincidentally,” was exactly the moment both metals had finally exceeded their 200 day moving averages, following five months of vicious Cartel resistance. Which, in silver’s case yielded the worst retail industry shortage since the 2008 financial crisis.
And as this has occurred, data from around the world – from East to West – has revealed record PM demand and plunging inventories; whilst gold and silver mine production has been confirmed to have fallen in 2015, en route to what I anticipate will be catastrophic declines for years to come.
In other words, on all imaginable fronts, “since the Fed’s October 28th meeting,” the impetus to not raise, but lower rates has expanded dramatically. As have the fundamental reasons to own Precious Metals, and not financial assets like stocks. To which, I can only reiterate for the umpteenth time, that “Economic Mother Nature” always wins. And this time, given the unprecedented manipulative efforts to usurp her, her inevitable “victory” will be more spectacular than ever.