Today, let’s start with one of my “favorite” topics, given my strong belief that OPEC’s highly visible death throes presage the epic level of chaos the gold Cartel will eventually experience when it spectacularly fails – per what I wrote in last month’s “OPEC, like the London Gold Pool, proving Cartel’s always fail.” To that end, no blog I am aware of – outside of those focused principally on energy – has expended more digital ink on this topic – given how confident that, contrary to the all-time high long position Wall Street took in crude oil futures earlier this year, the “production cut” required to save not only the energy industry, but countless sovereign nations, would miserably fail, no matter how much propaganda and market manipulation was expended to create the perception of “balance,” amidst history’s worst – and likely, irreversible – crude oil glut.
This morning, it was reported that OPEC’s May crude oil production – the very month they extended the initial, completely futile six-month “cut” by an additional nine months – rose by a whopping 336,000 barrels per day, to its highest rate of 2017. Non-compliance was a major factor; and now that head OPEC bully Saudi Arabia has all but declared war on Qatar for no apparent reason – other than its strong allegiance with Saudi’s mortal enemy, Iran – future compliance will unquestionably be lower. However, the biggest contributing factor to May’s production surge – if you believe a word these lying, thieving lowlifes say – is the “restoration of lost supply from members exempt from the initial Vienna deal”; like Iran, Libya, and Nigeria. In other words, they – and Iraq, which is NOT exempt – are doing exactly what they said they would do; which is exactly why said “deal” was such a farce to start with. And consequently, why the energy sector is about to cause an unfathomable amount of pain in the political, economic, social, monetary, and perhaps military spheres.
Which in turn, will give Central banks the perfect “deflationary” excuse to extend – and expand – their hyper-inflationary monetary policies ad infinitum, in perfect synchronization with the mandate of their fiat Ponzi schemes. This is exactly what Goldman Mario blamed on his decision to lower the ECB’s short- and long-term inflation expectations last week; i.e, taking Central bank credibility to a new all-time low; and will give Janet Yellen yet another quiver in her money printing arrow when the FOMC meets today and tomorrow. Heck, oil price.org just published an article titled “low interest rates have postponed peak oil,” demonstrating why the inescapable feedback loop of low oil prices, low inflation expectations, and low interest rates – not to mention, dramatic technology advances – will continue to add to the glut for the foreseeable future.
Furthermore, with each successive OPEC failure, the inevitable collapse of the dying “petrodollar” moves one giant step forward. Frankly, it couldn’t be more obvious that America values its rapidly deteriorating relationship with Saudi Arabia ahead of nearly all others, given that it provides a) a steady source of oil; b) a strategic Middle Eastern ally; c) a “point man” to coordinate its relentless Middle East wars; and d) a steady demand for fiat dollars, to purchase Saudi crude.
In my mind, this is the primary reason Saudi Arabia was a top contributor to the Clinton Foundation; and why, despite blatantly anti-Saudi campaign rhetoric, Donald Trump feted Saudi Arabia’s criminal “princes” last month, lavishing them with a record arms contract so they can wage war on whomever their puppet masters at the Pentagon choose. Moreover, it is clearly the principal reason why an ad hoc “oil PPT” was created last year when prices plunged, given that Saudi Arabia’s finances – even at $50/bbl oil – are rapidly deteriorating; yielding the dire, desperate need to IPO a $100 billion stake in Saudi Aramco later this year. Which, with each passing day, appears more and more unlikely. To that end, I have always viewed Saudi Arabia as a “political Apartheid” society – in which a handful of sociopathic, money-hungry “leaders” ally themselves with the “Great Satan” America, against the wishes of the vast majority of U.S.-hating citizens. It can only end badly – very badly; and in my view, will do so, very soon.
Just as will be the case with U.S. “monetary policy,” on this eve of yet another Keystone Kops FOMC meeting, when Whirlybird Janet issues the Fed’s last “rate hike” of her soon-to-end tenure; and potentially, the last “tightening” before the inevitable arrival of the “bond vigilantes” forces her to do so, into extreme economic weakness and political strife. Which is saying a lot, given that the past decade’s (accounting enhanced) GDP “growth” was identical to the 1930s, despite the $15-plus trillion of debt piled on to individuals – as evidenced by total household debt hitting a new all-time high last month; institutions; municipalities – like the State of Illinois, which appears likely to declare bankruptcy sooner rather than later; corporations – which now have more debt than at any time in U.S. history; and of course, the Federal government itself.
Everywhere one looks, evidence that even the minuscule “rate hikes” that took the Fed Funds rate from its eight-year convalescence at ZERO to the current level of 0.87%, 18 months after the first “rate hike” – which just happened to coincide with Precious Metals’ ultimate bottom; suggests the result of this ill-beggotten policy has been miserable, expanding failure. As not only have said “hikes” decimated already overburdened debt loads – giving way to exploding auto, student, and credit card delinquencies and defaults; but they have further exposed how historically overvalued Central bank “supported” stock and bond markets have become, as well as the real estate markets that piggy back off them; i.e., “dotcom valuations in a Great Depression Era.”
To wit, despite the supposedly “strong, growing” economy – featuring barely positive GDP, and collapsing hard data of all kinds – the CRB Commodity Index is breaking below support levels going all the way back to the start of 2016, when said “oil PPT” was established in a desperate effort to prop up the CRB’s most heavily weighted component (which in February 2016, bottomed at $26/bbl); and in the process, save its despotic, murderous, Petrodollar-processing “ally,” Saudi Arabia.
Moreover, delinquencies, defaults, and bankruptcy filings are exploding, whilst year-over-year loan growth is about to go negative for the first time since the 2008 crisis; and as we learned yesterday, barely a quarter of all U.S. businesses are in the black. The U.S. government budget, also reported yesterday, is exploding higher, too – before tomorrow’s “rate hike” is even announced. Much less, the “tax cuts” and “infrastructure spending” components of the dead and buried “Trump-flation” meme; which, as I vehemently predicted two days after the election, have not a chance of occurring anyway. Which, if against all odds were actually enacted, would practically speaking, make the budget and debt situations far worse. Throw in the imminent, and likely massive “debt ceiling” increase coming this summer – which just yesterday, “Slimebag Steve” Mnuchin practically begged for ahead of Congress’ upcoming August recess; and the inexorabl plunge in retail sales; corporate capital expenditures; and even housing permits, starts, and sales; and you can see why tomorrow’s “rate hike” – which the Fed is only enacting because the PPT has been able to boost the “Dow Jones Propaganda Average” to an all-time high bubble valuation – will clearly be the last.
However, of all the reasons why tomorrow’s “rate hike” will be the Fed’s last, none loom larger than the giant pink elephant in the room. Which is, that for all the previous rate hikes, market “support,” and propaganda of great things to come, not only have real economic data and commodity prices relentlessly plunged, but so have actual, market-based interest rates!
The high of the benchmark 10-year Treasury yield, going all the way back to early 2014, was the oh-so-brief spike to 2.6% just after the election; and again, leading up to the March “rate hike,” before it promptly plunged to the roughly 2.2% it stands at today. To that end, my “2.5%, ‘nuff said” article of January 2017 – calling the top in the 10-year yield; is looking just as prescient as my similarly-themed “3.0%, ‘nuff said” article of January 2014, in light of the fact that real world indicators suggest that not only is the current, historically ineffective “credit cycle” is at its end, but so is the Fed’s LOL, “tightening cycle” as well. Yes, a “tightening cycle” – amidst a collapsing global economy – that will have taken 18 months to simply raise rates from 0% to 1%; the latter of which, even Maestro Greenspan never went below during his berserk rate-cutting crusade following the historic dotcom collapse – which he, more than any single person, personally fostered. And if you don’t believe interest rates themselves, then look at the collapse of the yield curve post-Election Day, to nearly a new multi-year low – not just in the U.S., but all major Western nations.
In my view, the past week’s historic Precious Metal paper raids, amidst a veritable cornucopia of PiMBEEB news flow, was undertaken for two principal reasons. First, to push gold back below its 5½ year downtrend line at roughly $1,274/oz, just as it approached the key psychological level of $1,300/oz; and silver, its 200-week moving average of $17.75/oz – both of which, were briefly achieved last Wednesday, before “someone” dumped $4 billion of “notional” paper gold on the COMEX Thursday morning – after the wildly dovish ECB statement, to catalyze the typical “spec” margin calls that lead to prototypical “waterfall declines.” And equally important, to “prime” the market for tomorrow’s rate hike – yet again, trying to convince it this is “bad” for Precious Metals, despite not a shred of evidence to support the notion; or the fact that PMs surged after all three previous rate hikes.
In other words, I sense a significant opportunity to acquire “dirt cheap insurance” at today’s historically suppressed prices – of physical gold; silver; and the “forgotten Precious Metal,” per yesterday’s article title – platinum.