When the global financial system permanently broke in 2008, Washington and Wall Street – in their implicit, ironic roles as economic leaders – launched the most maniacal global “reflation” program in history. By virtue of the U.S. dollar’s “reserve currency” status, a deer-in-headlights world allowed America to dictate an impromptu effort to staunch the bleeding and hopefully restore the global economy to health. Frankly, there was no other choice; and with most Central bank balance sheets at relatively modest levels it was worth a shot. And thus, everyone simultaneously lowered interest rates to zero, printed money with reckless abandon, monetized sovereign debt, bailed out “too big to fail” entities, and dramatically expanded fiscal stimulus programs.
Unfortunately, by 2011 – when the U.S. was stripped of its (undeserved) triple-A credit rating, Europe’s PIIGS nearly collapsed, and Japan’s “deflation scare” accelerated – it started to dawn on TPTB that the all-out money printing schemes of 2008-10 were decidedly failing. Across the globe, economic activity was still plunging whilst inflation was rising; and of course, trillions of new debt most of it completely unproductive – were all the aforementioned “leaders” had to show for it. At this point, political and monetary “ammo” had been largely spent and thus, there was only one thing left to do i.e., extend the money printing schemes exponentially. However, going forward, much of it was to be done covertly. Hand in hand, market manipulation was dramatically increased as well again, for the most part covertly. And simultaneously, an unprecedented Goebbels-esque campaign of global economic “recovery” was launched.
Well, here we are in 2014 and the global economy is – unquestionably – at its low point. Frankly, there isn’t even a comparison to 2008 (with the exception of the panic lows which will inevitably be revisited) or 2011; as by any objective measure, all global economies are in dramatically worse shape. Consequently, money printing has rocketed higher with reckless abandon, market manipulation has become omnipresent and “recovery” propaganda has been supplemented with similar lies regarding “deflation,” “de-escalation” (in the Ukraine), and “tapering.” Thus, while the three-year anniversary of the 2008 crisis yielded a terrifying inflection point, the six-year anniversary threatens to introduce the end game.
Regarding money printing, it’s becoming increasingly clear that universal recognition of “QE to Infinity” is upon us as is the “realization of reality” regarding the dying global economy and the imminent understanding that not just Precious Metals but all financial markets are manipulated 24/7. Heck, even the aptly named “London Gold Fix” is under scrutiny; and as of August 2014, the “London Silver Fix” will be permanently discontinued – as the rats continue to flee the sinking ship. Most importantly, I truly believe the aforementioned propaganda campaigns have reached their effective end; as at this point, it’s difficult to believe anyone truly believes the lies anymore. Sort of like V for Vendetta, when the population finally “woke up” – and subsequently the central planners’ delicately planned dominoes started to fall.
Clearly, the 2008-11 policy failures were impossible to mask and now the aforementioned money printing, market manipulation, and propaganda campaigns of 2012-14 are being called to the carpet as well. Only this time, there will be no way out for the “evil troika” of Washington (and its Western cronies in the UK, Japan, etc.), Wall Street and the MSM – the latter of which already appears to be abandoning ship based on the increasingly bearish tone of its commentary.
To wit, there is simply no more room to increase overt money printing without stoking hyperinflation fears and if they continue to do it covertly, the end game will only be reached more quickly. Trust us, there’s a reason why, amidst the horrific global economic environment – in our view, the worst of our lifetimes – food, energy, insurance and all other items we “need versus want” are surging in price! Conversely, retail sales are collapsing per the damning charts in this article, with absolutely ZERO real impact from the season’s newest propaganda scapegoat “the weather.” And considering the aforementioned, surging inflation, today’s retail sales numbers are actually far worse than reported – if one were to convert them to “prior year dollars.” Of course, the one area where retail sales are surging is the “inflation protection sector” – such as rare art and top-notch real estate which hopefully will help you understand what will happen shortly in the purest inflation protection assets on the planet once the Cartel is inevitably broken.
From China to Japan (the world’s #2 and #3 economies, respectively) to the Eurozone, “emerging markets,” and the soon-to-be deposed “superpower,” trends are remarkably similar. No real economic growth, surging debt, raging inflation and expanding unemployment, poverty and dependence. In other words, the conditions that have historically catalyzed draconian government rule, financial repression, and war. The U.S. government’s institution of the FATCA capital control laws in July are but a taste; let alone, soon-to-be instituted “transaction taxes” in Europe, “debt taxes” in Australia, “bail-ins” across the world’s insolvent banking systems, and assorted financial repressions. If we’re lucky, such thievery will be limited to the financial sector – in which case one must hold PMs to survive but more likely things will turn far more nasty.
The point here is that the delicate propaganda veneer is cracking; as evidenced by this morning’s horrific PPI number, i.e., the second straight monthly inflation surge, whether including or excluding “non-core” items like food and energy. Remember, just last week, Janet Yellen warned of low – and soon-to-be falling – inflation and yet, oil prices are $102/bbl., food prices are up 22% in the past four months to nearly an all-time high; and essentially all staples of life are surging in price (see yesterday’s commentary re: paper and ink prices) often, hidden from view such as supplemental airline fees.
Thus, it should be no surprise that actual nations with wealth and trade surpluses are rapidly fleeing insolvent currencies like the dollar in favor of ones with a modicum of implicit intrinsic value; as exemplified by last night’s earth-shattering announcement that Russia is planning a global “de-dollarization” meeting supported by China and Iran, among others. Clearly, the writing is on the wall – that not only the “Petro-dollar,” but ‘EVERYTHING dollar’ is on its final legs which is why it is truly staggering how few Westerners are acting to protect themselves. Tomorrow’s nearly guaranteed result of a new, PM-positive regime in India will seal the deal further; and thus, what was recently a “pie in the sky” dream – of wholesale BRICS and Arab abandonment of dollar trade – appears more a fait accompli than ever.
In our view, today is an historic one on multiple counts as not only is the Russian “de-dollarization” operative a potentially historic inflection point but the Western Central bank façade of “control” is being soundly broken. Just last week, for example, “Whirlybird Janet” delivered her version of Alan Greenspan’s infamous 1996 “irrational exuberance” speech – in averring that pockets of the small cap sector appear to be overvalued. And yet, like Greenspan and Bernanke before her, she subsequently stated her intention to keep the printing presses running full out via her soon-to-be infamous comment that “a high degree of monetary accommodation remains warranted as many Americans who want a job are still unemployed – and inflation is below the central bank’s 2% target.”
Better yet, the world’s supposedly most conservative Central bank, the Bundesbank, yesterday told the Wall Street Journal it is “willing to Back ECB Stimulus Measures to Battle Low Inflation”; in effect, giving up the ghost on its own multi-year propaganda stratagem following one of the largest monthly plunges in German investor confidence ever. Amazingly, Finance Minister Wolfgang Schauble then “pulled a Yellen” today in his horribly damning comments that European “rates are not fulfilling their economic function,” “financial markets have almost excessive confidence,” and “market liquidity points to new bubbles.” And thus, within a week’s time, the leaders of the world’s two most influential investment banks have not only admitted their policies have created financial bubbles but intend to keep the printing presses running – full tilt! Gee, I wonder what will happen to gold and silver prices particularly if the Ukrainian crisis – which today was officially declared a WAR – measurably worsens. Oh, that’s right, things are perpetually “de-escalating” and thus, there’s nothing to worry about.
Which brings me to “the markets” – which per above, appear on the verge of a cataclysmic dislocation from TPTB’s control. Whether the end result is crash or hyper-inflation matters not; as either way, essentially all paper assets are destined for catastrophic real losses. To start, let’s look at today’s U.S. Treasury markets – which just days after we predicted an explode higher is doing just that; let alone, as government-massaged PPI inflation was reported to be massively higher than anticipated.
To wit, we postulated the government was supporting the 2.6% level on the benchmark 10-year Treasury with the same ferocity and determination as it’s capped the 3.0% level, in its fear the entire world would see QE for the economic failure it has been. And lo and behold, yields literally crashed below 2.6% this morning breaking through a powerful, Fed-created “quintuple bottom” formation – en route to October’s low of 2.5%, and likely, the erasure of all of the past year’s propagandized “taper talk” gains. In other words, the world is decisively betting on U.S. economic collapse; and with it, not only an end to “tapering,” but increased – and potentially infinite – QE. Hence, the title of last Friday’s article, “Twas the Night before QE Infinity” ironically, following Thursday’s “Most Damning Proof Yet of QE Failure.”
And then we have the Precious Metal markets, which this past week have been so blatantly suppressed even my good friend – Turd Ferguson – wrote me to disclaim his disbelief. To wit, here are yesterday’s DLITG or “Don’t Let it Turn Green” algorithms in action, on both gold and silver…
…as the PPT’s DLITR, or “Don’t Let it Turn Red” algos enabled “record highs” for the S&P 500 and “Dow Jones Propaganda Index” – even as historically abysmal retail sales numbers were reported…
Meanwhile, this morning’s PM surge – yet again – was capped via the exact same means as always; in both cases, prototypical “Cartel Herald” algorithms – for the third straight day at exactly the 8:20 AM EST COMEX open. And – what a shock – gold’s gains for the second time in three days were stopped at exactly 1.0%, just as it crossed the Cartel’s 10-month “line in the sand” at the key round number of $1,300/oz. As for silver, I’m sure you’re not surprised as to where it’s price magically “heralded.” Yep, the six-year “battlefield” that is $20/oz…
Still, as I write at 12 PM EST, bonds and PMs are significantly higher, while stocks are tanking. Per the subject of today’s commentary – and countless others, like yesterday’s “Hell’s Bells” and last month’s “World of Economic Rot” – such action screams of global fear; and with it, the likelihood that not some but all Central banks will be forced into massive printing press expansion in the near-term. Frankly, we don’t think they can avoid it; and thus, why anyone would wait to protect themselves is beyond me. All one has to do is observe U.S. Mint Silver Eagle demand – on pace to shatter last year’s record pace by 35%, amidst historic futures backwardation, to realize the “true state of Precious Metals.”
Last but not least – and eventually, worthy of a dedicated article in its own rite, is this incredible chart depicting the global distribution of consumer gold demand. If you can believe it, the U.S., Europe and Japan combined account for just 10% of current demand, despite having 17% of the global population and more than a third of the world’s wealth. Not to mention, the world’s largest debt loads and money printing schemes and by far, the world’s most overvalued currencies and worst demographics. At some point soon, this money will flee “reserve currencies” like the dollar, Euro, Pound, and Yen into real money and when it does, if you haven’t yet built your own stash, it will be too late!