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We have several important things to say today, but let’s just get the big “pink elephant” out of the room first.  Which, of course, is yesterday’s blatant paper PM raids, following Friday’s ugly NFP report and the weekend “Catalon-astrophe” – in which 81% of Catalonians voted to secede from Spain.  I have written for years of “Cartel Rule #2” – i.e., “all great PM days must be followed by horrible ones” – and yesterday’s effort was no different, as evidenced by the whopping 6% plunge in the HUI mining index.  To wit, since the blatant April 2013 PM raids, the HUI has had sixteen 5% up days.  In the 16 subsequent trading days, it has declined on 14 by an average of 2.6%.  Par for the course, particularly when one holds “paper PM investments” in lieu of the real thing.  And not to “harp,” but even I am in awe of the PPT’s recent string of “dead ringer” algorithms on the “Dow Jones Propaganda Average” – including every day since QE supposedly “ended” on October 27th.  In other words, the stock market is no more “rising” than precious metals “falling.”

4 Dow Graphs 11-11-2014

Of course, today’s Cartel shenanigans are significantly more tenuous than in the past, given the advanced stages of the global fiat Ponzi scheme collapse.  Physical metal is being acquired at record rates to the point that silver shortages are occurring; whilst the mining industry is imploding and PMs are more in backwardation than at any in the past 15 years.  In other words, TPTB are “playing with fire” in their current can-kicking scheme; and more so given the PMs unique price in elasticity – i.e., demand increases as price rises.

To that end, secular Americans do not understand that commodities are also priced in currencies other than dollars; and in gold’s case, as we discussed in 2012’s “dollar-priced gold” at historically high levels.  In India, for example, gold is just 25% from its all-time high; as well as 18% in Brazil, 17% in Indonesia, 15% in Japan, 13% in South Africa and 2% in Russia.  In these six nations, two billion people reside, or nearly 30% of the world’s population; and on a weighted average basis, their gold price is just 20% below its all-time high.  Which, on an equivalency basis, would be around $1,550/oz. in America.

For the entire world, roughly 20% separates the gold price to its all-time high.  And since 96% of the world’s denizens live outside the U.S., the vast majority are within “striking distance” of the buying panics that characterize tops.  Which, by the way, are far more aggressive than what we are seeing at today’s Western bottoms – where the U.S. Mint has sold out of silver, PM backwardation is at the aforementioned 15-year highs, and the world’s largest PM exchanges and ETFs are being rapidly drained of inventory.  This is why we find it comical that MSM commentary – biased or otherwise – uses the “strong dollar” as an excuse for gold and silver price weakness.  Conversely, if one lives in Japan, India, Russia, or South Africa – the “weak” Yen, Rupee, Rand and Ruble are driving record PM purchases.  And cumulatively, there are a lot more Japanese, Indian, South African and Russian buyers than American sellers.  And oh yeah, from our perch at one of America’s oldest largest bullion dealers, we not only are not seeing selling, but never do.

Which brings me to the “deflation” Western Central bankers warn us of every second of every day; which, in turn, the MSM and Wall Street tell us are the reason for PM declines.  I.e., the deflation that unerringly accompanies contracting economies as the entire world is experiencing today.  And oh yeah, plunging stock markets, of which 1929 and 2008 are but two of hundreds of historic examples.

Sure, the majority of global stock markets are 50% or more from their all-time highs – invariably, set in either 2000 or 2007.  However, “miraculously” the stock markets of three of the world’s largest money printers – the U.S., UK, and Germany – are at or near record highs.  Yes, a fearful “deflation” in which stocks soar to record highs.  Perhaps in the Bizarro World; but until today’s unprecedented money printing group never before experienced on Earth.  Of course, given that “misery indices” the world round, which measure the sum of inflation and unemployment are at new all-time highs as we speak, it’s quite difficult to espouse “deflation” – particularly in “need versus want” items like food, healthcare, education and insurance.  And despite the recent decline in gasoline prices – which by far, have more negative ramifications than positive; ten gallons still cost Americans a whopping $30 versus just $17 a decade ago.  And even if “deflation” were possible in a fiat Ponzi scheme – which it decidedly isn’t – what part of gold being the best performing asset in both 1929 and 2008 are we missing?  Let alone, when the 2015? 2016? collapse is principally centered on imploding currencies.

Misery Indices

Today’s principal topic is the “fatal flaw” of fiat Ponzi schemes, following up what we wrote in September’s “single most Precious Metals bullish factor imaginable”; i.e., the relentless currency volatility and collapses that are worsening with each passing day.   Which, for that matter, is one of the “three death trends” we discussed last week.  All three were “center stage” yesterday, as atop the currency plunges, oil prices plunged anew. And today is even worse, with oil having just broken below $77/bbl. and “the dollar” surging against nearly all currencies – including the Euro (take note, Swiss citizens), Rupee, Real, Ruble and Rand.  And of course, the Japanese Yen is about to breach a seven-year low of 116/dollar on news that the second phase of the sales tax increase proposed to “pay for” Abenomics may be ditched, following an historic plunge in the Japanese government’s approval rating.

Amidst this chaos, I listened to this brief commentary from the Chief Investment Officer of Saxobank of Denmark warning of a “full scale currency war between China and Japan.”  Ah yes, the third – and most important – of the aforementioned “death trends”; i.e., expansion of the “final currency war” as global economies implode and money printing explodes.  And this is just China vs. Japan, one of countless such “wars” ongoing.  Recall, just two weeks ago the U.S. warned the ECB not to take its Euro devaluation “too far,” following the Euro’s plunge after ECB QE was announced.  And this, on the very same day the Fed “ended” QE and the Bank of Japan announced its “kamikaze” money printing initiative.  Remember, a “strong dollar” – relative to other fiat currencies – is politically “unacceptable,” as it yields weaker corporate earnings and job creation.  And thus, it’s only a matter of time before the aforementioned “full scale currency war” goes global; and when we say a “matter of time,” we mean NOW; possibly starting with this month’s APEC, BRICS and G-20 meetings.

To that end, this article catalyzed today’s commentary of the “dangerous spiral taking hold of emerging markets” – describing in simple steps, the premise of the aforementioned “single most precious metal bullish factor imaginable.”  To wit, the “vicious circle” of capital destruction when fear strikes a global fiat regime causing capital to rush to the “reserve currency” like oxygen in a backdraft.

  1. Capital outflows, leading to weak investment;
  2. Accordingly, exchange-rate depreciation;
  3. Hence inflation, loss of purchasing power and weakening consumption;
  4. Hence problems for the central bank faced with sluggish growth and inflation;
  5. The sluggish growth amplifies the capital outflows.

This is indeed the “fatal flaw” of today’s dying fiat regime; as the worse the global economy gets, the more capital flees illiquid currencies in favor of stronger ones.  And in this case, the Fed’s bluff of ending QE will only intensify flows into the dollar, given the exponential increase the world’s second and third largest money printers – the ECB and Bank of Japan – are undertaking.  Not to mention, if indeed China engages Japan in full-scale currency war, they will force the Fed into QE4, given that that Yuan is currently pegged to the dollar.  And thus, said “vicious circle” will only grow more vicious until either a “black swan” destroys the system extraneously or the inevitable “Yellen Reversal” from within.

Either way, it’s difficult to believe Westerners are not already following Easterners’ lead in rushing to precious metals; particularly as shortages are occurring, as production sits on the cusp of an historic collapse.  And for those wise enough to act, we hope you’ll give Miles Franklin a call at 800-822-8080 and “give us a chance” to earn your business.

P.S.  For anyone that still has hope for the America’s political process, please watch this short video regarding the “making of” Obamacare.  Afterwards, if you do NOT act to protect yourself, we will be shocked.