Before I get started with today’s all-important topic, let’s discuss the lunacy of what I long ago deemed the “world’s worst government” – of the banana republic of…drum roll please…India.
Two years ago, with the Rupee at an all-time low of 67/dollar, India’s “Congress” political party instituted 10% gold and silver import tariffs; in an effort to, LOL, “reduce the nation’s trade deficit” – as if gold and silver are “trade goods,” as opposed to, plain and simple, money. Unquestionably, the tariffs had an immediate, negative impact on Precious Metal imports. That is, until a massive “black market” developed – particularly in gold. Sadly, the Indian trade deficit has remained sharply negative, as the nation’s putrid economy has continued to worsen. To the point, I might add, that this year, the Reserve Bank of India has been aggressively, “unexpectedly” cutting interest rates.
And what do you know? As I write, the Indian Rupee is on the verge of plunging below said all-time low of 67/dollar. Which is the identical experience of nearly all “emerging market” currencies – and particularly, the “BRICS” nations that Goldman Sachs predicted in 2001 would rule the global economy for the next century. To that end, no one has been more critical of the collapsing BRICS economies than myself – in March of this year, and September, for example. And thus, no one appreciates the “poetic justice” of Goldman shutting down its BRICS equity fund this week, after investors withdrew an incredible 88% of its assets in the past five years.
Eighteen months ago – i.e., less than a year after the onerous Precious Metal tariffs were implemented, the Congress Party was swept out of office by the supposedly “pro-gold” BJP Party, led by new Prime Minister Narendra Modi. Remember, India is not only the world’s largest gold-consuming nation – although in recent years, China has made it a “neck-to-neck” race – but its citizens actually think of gold and silver as money, in the same manner fiat-brainwashed Americans do of “dollars,” or Europeans of “euros.” Thus, they didn’t take kindly to being taxed 10% on their Precious Metal purchases – particularly when most banks (traditional retail outlets for Indian buying) were essentially banned from importing and selling metal.
And thus, when Modi not only left the tariffs in place – despite suggesting otherwise whilst campaigning – and only modestly loosened banks’ Precious Metal sales regulations, the people could not have been angrier. Which is probably why, now that they have had some time to consider the ramifications, gold and silver imports are likely to meet or beat all-time high levels this year. Not to mention, as Cartel naked shorting and surreptitious Central bank selling, leasing, and swapping – has created historically low prices. And mind you, the below charts exclude said black market, which is stronger, and more organized, than ever – particularly in gold, given the absolute dollar levels involved.
And not only has Modi betrayed a billion-plus Indians with his anti-gold policies, but insulted them with the “gold monetization” scheme he unveiled last week. Which, I might add, is not the first attempt by fiat currency worshiping, “monetary apartheid” Indian governments to do so – all of which have miserably failed. To wit, the Indian government, fresh from its failure to persuade religious shrines to “lease” their gold to them, is offering private citizens paltry interest rates of 2.2%-2.5% to “lend” their gold for periods of, LOL, 5-15 years. And again, the difference in interest rate between a five-year and a 15-year “loan” is a measly 0.3%. And this, in a nation which overtly admits to 4%-5% annual inflation. In other words, the government is asking people to hand them their inflation lifelines in a nation where inflation is rampant; well above the offered interest rates; paid in printing press-fabricated Rupees; and FYI, was more than 10% just one year ago, before the Rupee started plunging, and the RBI started cutting interest rates. To which, I ask, what would you do if not only were you a lifelong Precious Metals advocate; not to mention, when your ancestors were equally staunch believers; when the price of your fiat currency was plunging (as it is in most nations), and the value of gold in your local currency surging?
The answer, of course, is that not only would you not even consider such an insidious, wealth-confiscating scheme, but you’d probably buy more gold – knowing full well that where there’s monetary smoke, there’s fire. In other words, the Indian government, like all other “Western” governments, fully intends to hyper-inflate the Rupee into oblivion – and unquestionably, the only way to protect yourself will be with the very gold and silver they so desperately seek to take from you. Laughably, under the guise of “helping” India – just as the U.S. government did in the early 1930s, when it “asked” Americans to trade in their gold for (then gold-backed) dollars to “help” America escape the Depression. Only to, just a few years later, ban the private ownership of said gold, whilst revaluing it nearly 100% higher.
OK, now that that ugliness is out of the way, let’s move on to the real ugliness that is today’s principal topic. Which is, the all-out collapse of global economic activity that will likely last for years to come; mathematically guaranteeing the default of tens, or perhaps, hundreds of trillions worth of debt – of historically indebted consumers; corporations; governments; and of course, Central banks.
On January 2nd, I penned the “direst prediction of all” – which nearly every day since, I have canonized as one of the most important I’ve ever written. Citing David Stockman’s brilliant theories from his “Great Deformation” book – not to mention, my own experience as a Wall Street commodities analyst – I espoused my firm belief that unprecedented oversupply of everything from commodities, to infrastructure, to governments themselves – borne of 15 years of historically destructive monetary policy and financial engineering, both here and abroad – will cause massive deflationary pressures that will wipe out global trade indefinitely; cause massive, worldwide debt defaults; and ultimately, the complete collapse of history’s largest – and only global – fiat currency Ponzi scheme.
Since then, the global economy has dramatically weakened – to the point that January 2015 is now considered the “good old days.” To wit, the CRB commodity index plunged from 230 back then to 190 today – having briefly touched a 40-year low or 185 two months back, which will surely, convincingly breach in the coming weeks and months. Think about it. A 40-year low in commodities, nearly going back to the abandonment of the gold standard in 1971; after which, hundreds of trillions of dollars, Euros, Yen, and the other fiat trash have been printed, borrowed, and spent. Not to mention, as the maturing of worldwide commodity deposits has caused the price of exploring, developing, and producing them to soar. To which we can only say, if that doesn’t tell you just how much oversupply the world is facing, nothing will. And by the way, we are now hitting the one-year “anniversary” of Janet Yellen first describing the oil price collapse – and import prices of all kinds, for that matter – as “transitory.” Which, I might add, was reiterated less than two weeks ago, in the FOMC’s October policy statement. FYI, the CRB index was 250 a year ago – whilst WTI crude was $61/bbl, and “Dr. Copper” $2.90/lb – compared to 190, $44/bbl, and $2.25/lb, respectively, today.
No matter where one looks, the economic carnage is front and center – not to mention, the dangerous political and social ramifications – like for instance, the Greek-like political coup ongoing as we speak in Portugal. Let alone, the rapidly approaching mass debt defaults, from every imaginable source. To that end, David Stockman’s latest MUST READ article on the topic is what catalyzed this article. However, it doesn’t take a “rocket scientist” to see said carnage around us. Which “fortunately,” I report on for a living.
Whether it’s utterly imploding trade activity – from the all-time low Baltic Dry Index; to various measures of worldwide shipping volumes and prices; to this weekend’s horrific Chinese trade data; the wholesale vanishing of manufacturing jobs – particularly here in the U.S,’ “strong October NFP report notwithstanding; to the below quote, from this weekend, from the CEO of the world’s largest cargo shipping company, Maersk – the economic collapse the Miles Franklin Blog has long predicted is not only occurring NOW, but in spades. And ominously, at a far quicker pace than even we could imagine. Which is probably why not only are commodity and high-yield bond prices collapsing, but the average currency has plunged to, or near, its all-time low.
“The world’s economy is growing at a slower pace than the International Monetary Fund and other large forecasters are predicting. We believe global growth is slowing down. Trade is currently significantly weaker than it normally would be under the growth forecasts we see. We’re a little bit more pessimistic than most forecasters.”
Yes, “most forecasters” are over-optimistic. However, the Miles Franklin Blog – which doesn’t “forecast,” but simply tells the truth as it sees it,” has been decidedly more pessimistic than the useless lot of uninformed, uneducated, or otherwise comprised “forecasters” perpetually offering “hockey stick” forecasts of perpetual growth and recovery – at a time when “through the floor” is far closer to reality.
To that end, we can only reiterate, as loudly as possible, that the historically destructive, open-ended, accelerating money printing madness that has doomed the global economy – and its political and social fabric – to the “direst prediction of all,” will only worsen with each passing day, in direct correlation to the pace of economic collapse. Which is why, more than ever, it has become painfully apparent that the end game of global fiat currency collapse – and real money explosion – is becoming as imminent as it is inevitable.