It’s Friday afternoon, following the market close; and I know it sounds rote at this point – but geez, just how “deformed” has the world become? Here in the States, the Supreme Court upheld Obamacare by a 6-3 vote, sentencing Americans to the inevitable tax increases and government bureaucracy that will put the United States of Socialism far closer to Europe’s hopeless situation than most can imagine. Which, by the way, is yet another reason to run, don’t walk, from government sponsored retirement plans like IRAs, pensions, and 401ks. Simultaneously, the Senate passed Obama’s “fast track” TPP trade bill; which, thanks to WikiLeaks, we now know has little to do with trade, and everything to do with covertly usurping citizens’ rights. In other words, yet another red, blaring signal to “get out of the system” as quickly as possible.
And then there’s Europe; where, as Greece heads into its final weekend of (troika-orchestrated) solvency, Marine Le Pen of France – who will likely be France’s next President – loudly espoused her intention to “FrExit” the Euro zone. Here at the Miles Franklin Blog, we could not have been more vehement in our view that a “Grexit” is guaranteed; and the way negotiations have all but collapsed this week – contrary to unrelenting propaganda of an “imminent deal” – we may well wake up Monday morning to the first stage of this inevitable political, economic, and social catastrophe. Global PPT and propaganda operatives have been working overtime to maintain “calm” whilst said “negotiations” have rapidly back-slided. That said, with Greece set to officially default on Tuesday as “bailout #2” expires, it’s going to be difficult to paint lipstick on this ugliest of PIIGS if a new “deal” is not in place when markets open Monday – as if such a deal could possibly be ratified by the Tuesday default deadline. And again, even if a “deal” is agreed upon – which at best, would be another “extension” that strings Greece along a few more months – NO ONE will consider this a “positive” event. More likely, markets will simply realize we have reached the “kick the can to infinity” stage; and subsequently, start to overwhelm said manipulative forces by assuming the inevitable, perhaps imminent, worst-case scenario.
Of course, per the disastrous “tectonic market shifts” we first discussed six weeks ago, the worst imaginable scenario would be rising interest rates in an environment of historically high debt; and equally unprecedented equity, fixed income, and real estate valuations. Not to mention, plunging commodities and currencies. Which is exactly what is occurring as we speak – as, per the original title of today’s article, the benchmark U.S. ten-year Treasury yield is pushing up against the “key round number” of 2.5%. Simultaneously, European sovereign yields have surged to multi-month highs, well above the ECB’s pre-QE levels. Not to mention, the corporate “junk” yields that typically provide a blaring “tell” of imminent credit market weakness – which have decidedly bottomed, with a loooong way to go to their 2008 highs.
And oh yeah, there’s that little thing rapidly being understood to be one of history’s most egregious stock bubbles – in China, which as we speak, is in the process of bursting. Today (Friday) alone, the Shanghai Exchange plunged by 7.4% – representing its biggest one day plunge since…drum roll please…the bursting of the last Chinese equity bubble, in 2007-2008, when the Shanghai Exchange collapsed by 71% in a year’s time. Only this time around, it’s not just the Chinese stock market bubble that’s collapsing, but the entire debt-infested, historically overbuilt, shadow-banking financed economy.
And by the way, if you want to know just how dire the global debt situation has become, consider that just today, the Congressional Budget Office, or CBO, published a report predicting the U.S. national debt would double by the year 2040, to a whopping $36 trillion. Of course, the real figure is far more, as the published $18.2 trillion – which has been “frozen” for four months, pending the inevitable debt ceiling increase that will cause it to instantaneously surge – excludes $5+ trillion of “off-balance sheet” debt owed by Fannie Mae and Freddie Mac, and $200+ trillion of rapidly expanding “unfunded liabilities.”
As for the original title of today’s article – on the topic of the blatant, covert QE the Fed is clearly amidst, in light of expanding foreign selling of U.S. Treasuries – I was going to call it “2.5%, Nuff’ Said.” Said title would have followed up January 2014’s “3.0%, Nuff’ Said”, when the Fed was pushing down rates overtly, amidst the maniacal “QE3” scheme that boosted its balance sheet by an incredible $1.6 trillion in just 23 months (in actuality, far more than $1.6 trillion). Today, simple observation of trading patterns – as I have been doing with Precious Metals prices and the “Dow Jones Propaganda Average” for years – makes it crystal clear the Fed is as terrified of the 10-year Treasury yield rising above 2.5% today, as 3.0% back then. Which, considering the propagandized “recovery” is 18 months more advanced, illustrates just how desperately addicted to record low interest rates the dying, historically “deformed” economy has become – here in the States, and everywhere.
That said, when I started writing this article, it was Friday afternoon. However, per the new title, my focus changed 180 degrees when the following news emerged mere hours later, aptly described by Zero Hedge as “the biggest Friday night bomb in recent European history” – as Greek Prime Minister Alexis Tsipras, amidst a nationally televised speech, called for a citizen’s referendum, to be held July 5th, on whether or not to accept the “Troika’s” last ditch “bailout #3” proposal – which Tsipras vehemently denounced as not only a violation of European Union rules, but an attempt to “humiliate the Greek people.”
To wit, said proposal – of an additional €15.5 billion of ECB-printed money, would have “kicked the can” a few more months. However, according to sources, many European governments won’t ratify it even if Greece miraculously does. Irrespective, additional “austerity” measures will accompany said “blood money.” You know, exactly what the Greek people voted Tsipras, and his Syriza compatriots, into office four months ago to eliminate. Moreover, of said €15.5 billion, essentially ZERO would reach the pockets of Greece itself – as nearly all would be used to repay previous “Troika” loans. In other words, by definition, a blatant expansion of the hideous Ponzi scheme that has added nearly €250 billion to Greece’s debt load since said “bailouts” commenced in 2010. And take a look at where Greece’s political, economic, and social situation stands today; unequivocally, at its ugliest, most unstable level in decades – if not centuries.
In other words, as brilliantly deduced in Mish Shedlock’s June 16th article, “How Greece played Germany like a violin,” Alexis Tsipras has “checkmated” Europe’s financial slave-masters by spending four months demonstrating to his constituency how ruthless, and unacceptable, the Troika’s bailout demands are; essentially, no different than the ones that have driven Greece’s economy into the ground. To wit, since “bailout #1” in 2010, Greece’s GDP has plunged by an astonishing 30%, whilst its unemployment rate as exploded from 12% to 27%, and debt/GDP from 129% to 185%. And this, amidst the accumulation of €250 billion of (ECB-printed) “bailouts” that Greece must repay to the IMF, ECB, and other European warlords over the next 40 years. Not to mention, the enormous amounts of Greek debt acquired by German, French, and other PIIGS banks under the assumption that it, too, would be “bailed out” by ECB Ponzi schemes QE programs. And LOL, countless trillions of “credit default swaps” engaged under the assumption of Greek “bailouts to infinity.”
Anyhow, before the referendum is even held – on Monday, July 5th – said “bailout #3” appears to be dead on arrival. As noted above, it is unlikely to be ratified by several European governments – let alone, Greece; and frankly, I’d put the odds of a Greek “yes” vote at slim to none. Let’s face it, the Greeks define being between a “rock and a hard place”; and frankly, have nothing to lose in voting “no.” To wit, if they vote “yes,” the aforementioned economic hell will worsen, with an additional €15.5 billion debt burden to boot. Let alone, as the global economy is amidst its worst recession in generations, with nowhere to go but down. That said, if they vote “no,” how will their collective lives be significantly different? Sure, the resulting debt default and “Grexit” will yield a further decline in GDP, employment, and the Greek standard of living for a period of time. However, Greece is already near rock bottom; and thus, like Iceland in 2008, it, too, will bottom, stabilize, and re-emerge within a decade’s time – with a debt-free balance sheet, and complete control of its economic sovereignty.
During that time, I might add, the exact same thing is likely to occur in far larger nations – like Spain, Italy, and France, for example. And thus, what Greece will endure will likely be viewed, as time passes, as the “norm” rather than the “exception.” Not to mention, a “piece of cake” relative to the steep decline in living standards at the aforementioned nations, which have yet to endure the economic misery Greek has lived through for the past five years. And thus, given the Greek population just four months ago voted the “anti-austerity” (read anti-Euro, pro-default) Syriza party into power, who could possibly believe that, when asked to directly accept or reject another onerous “bailout,” they would vote “yes?” Judging by the acceleration of the historic bank run following last (Friday) night’s referendum announcement, Greeks are well aware that a “no” is nearly a fait accompli at this point.
And the beauty of it all, from the perspective of truth-seekers like readers of the Miles Franklin Blog, is that, unlike the Scottish secession referendum, or Switzerland’s “save our Swiss gold,” government/Central banking propaganda and market manipulation will have ZERO impact on the vote’s outcome. In other words, evil, destructive, status quo-seeking U.S. government and European “Troika” forces have been completely taken out of the equation – leaving Greece’s fate entirely in the hands of its beleaguered, downtrodden, desperate people.
Ironically, Angela Merkel’s pathetic “ultimatum” of yesterday (Friday) afternoon – that Greece must have a viable austerity plan by the market open Monday, “or else,” was all but laughed at by Alexis Tsipras; who not only called her bluff but, in surprising Europe with the referendum announcement, put Merkel and her Troika comrades on the hot seat. Kind of like the end of the Batman movie; when Batman has the Joker hanging from a ledge, until the Joker surprised Batman and reversed their predicaments.
That said, July 5th is now poised to become a potentially historic “inflection point” of political, economic, and social revolt (IF NOT EARLIER, AS IT APPEARS THERE IS NO WAY THE EUROZONE WILL RATIFY SAID “BAILOUT #3”). I mean, talk about “Independence Day Fireworks”; except this time, said fireworks won’t just be in the States, but worldwide – and they will decidedly NOT be “celebrating” anything.
To that end, I have not a clue how the near-term will play out – although I suspect a Greek “no” vote to be a near slam-dunk; again, assuming there’s even a vote at all. Unquestionably, TPTB will do everything in their manipulative power to restore the decided lack of “calm” such an event will engender. Heck, AS I WRITE ON SATURDAY, A DESPERATE PEOPLE’S BANK OF CHINA, IN RESPONSE TO THE EXPANDING STOCK CRASH THEY CREATED, CUT BOTH THEIR BENCHMARK INTEREST RATE AND RESERVE REQUIREMENT RATIO, REPRESENTING THE FIRST TIME BOTH WERE REDUCED ON THE SAME DAY SINCE…DRUM ROLL PLEASE…OCTOBER 2008. However, I truly believe a Greek “no”- or default, irrespective – may catalyze the “big one” we all knew was coming; likely, much sooner than most can imagine.
To that end, the only thing more “rock bottom” than Greek economic sentiment, in our view, are physical gold and silver prices – amidst record global demand, collapsing inventories, and a mining industry so decimated by more than a decade of price suppression – to levels not only below the cost of production, but long-term industry viability – peak production is all but guaranteed. Whether July 5th proves to be the “lift-off” of “dollar-priced gold” from its four-year, Cartel orchestrated purgatory I have no idea. However, it would seem this rare window of opportunity would be a rather good time to PROTECT YOURSELF from what might be; if not now, than shortly thereafter – at historically low prices, no matter what metric one uses.