It’s 7 AM MST Tuesday morning, and hard to believe that when I awoke three hours ago, I hadn’t a clue what I’d write about. “Fortunately,” the grotesquely deformed, Central bank poisoned, rapidly imploding global economy provides an endless supply of “horrible headlines” to discuss, enabling the Miles Franklin Blog to do what it does best; and for me personally, to enjoy the “sleep of the just” – knowing I have prepared for a dangerous future with the only assets guaranteed to protect from what’s coming. In today’s case, a combination of horrific economic data, increasingly unstable financial markets, and unadulterated Central bank lunacy provided enough platform to write a mini-book; which fortunately for all of us, my three-page daily minimum prevents.
OK, where to start? Generally speaking, today’s theme is yet another installation in the “deformation” series I commenced January 2nd’s must read article, “the direst prediction of all.” In it, I highlighted the great work of David Stockman, who’s “Great Deformation” book discusses how 15 years of maniacal rate repression and market manipulation have caused massive industrial, commodity, and infrastructure oversupply; which will take years – if not decades – to be worked through. And given the world was pushed past “peak debt” to enable it – via desperate, hopelessly futile Keynesian methods – the path to massive debt default, either directly or via inflation – has been set in stone.
It’s been barely three weeks since my last article on this topic was published; but since then, so many scary things have occurred, it was worth revisiting today. As was the case then, I have many such “deformations” to list. However, this time around, the situation feels far direr – like the “end game” is staring us in the face. Remember, the only “tool” TPTB still have is market manipulation – most of it covert; and when it no longer produces the desired effect (i.e., rising asset prices and confidence in the “recovery” we have long been propagandized promised), the inevitable, global fiat currency collapse will hit us like a Category F5 tornado.
What first got my juices flowing was the incredible spate of brazen lies proffered by those most incentivized to fleece the “99%”; which care of the lapdog financial media, are spread the world round on a daily basis. Heck, even the CFA Institute itself, a so-called “paragon of conservatism,” just emailed an article titled “riding out Eurozone uncertainty”; as opposed to what it should be writing, if it were indeed conservative – i.e, “run, while you still can!”
To wit, the horrific, world-destroying forces of “financial activists” which, to quote David Stockman, are the “mutant progeny of Central bank financial repression.” These sociopathic vultures are amongst the “1%” that have directly benefited from QE, ZIRP, and other hyperinflationary monetary and fiscal policies. And despite the obvious, horrific damage these policies have caused, they continue to be touted as “experts,” because the aforementioned market manipulations, for the most part, have yet to fail.
Warren Buffet, for example, who I have long noted as one of the great financial traitors of history – especially as his father was a Ron Paul-like real money advocate – was on CNBC this morning claiming how great the record level of capital distributions (share buybacks plus dividends) is for shareholders; without, of course, noting how corporate debt has literally exploded to pay for such largesse, whilst capital spending and employment have plummeted. Which, of course, benefits company management more than anyone, given how corporate boards’ principle focus has rapidly shifted from building long-term corporate value to maximizing short-term share appreciation – which “conveniently,” their compensation is increasingly tied to.
Meanwhile, as astutely highlighted by Peter Schiff this week, Goldman Sachs is all but shouting at the ECB to increase the level of its already insane, hyperinflationary monetary policies – such as the €1.2 trillion QE program it just initiated, and the negative interest rate policy that threatens to catalyze an all-out run on already insolvent European banks. Inflation only benefits the 1% that receive such inflationary largesse; but care of said deformations – not just in the financial and industrial world, but the economic data used to describe it – the myth of “deflation” is held out as “proof” that more money printing is needed, despite centuries of evidence claiming otherwise. Moreover, the fact that “deflation boogeymen” exist not just in the evil world of Warren Buffet and Goldman Sachs, but the so-called “goldbug” community itself simply make it that much more treacherous a minefield to navigate.
As for the ECB, don’t forget for a second that Mario Draghi himself is an ex-Goldman Sachs employee; as is the head of the Bank of England, Mark Carney; and the head of the New York Federal Reserve, Bill Dudley. Of course, here in the States, we don’t even need Goldman Sachs’ influence to maintain America’s inevitable course towards hyperinflationary collapse. What, with FOMC members like Chicago Fed President Charles Evans making comments (yesterday) like “one could argue the Fed is not accommodative enough,” and there are “no serious costs of modestly overshooting inflation targets.”
Last but not least, the insane MSM “hero worship” of the handful of hedge fund managers blessed to sit in the “sweet spot” of market manipulation; such as the aforementioned Warren Buffett – who, few remember, would have been destroyed in 2008 if not for Federal bailouts. Let alone, said “mutant” activists like Bill Ackman and Carl Icahn; and so-called “gurus” like Jeff Gundlach. In the latter’s case, he claimed this morning that interest rates have bottomed. Yet, despite the fact that, in his own words, “high yield bonds under-perform Treasuries in a rising rate environment,” one should purchase collapsing Puerto Rican municipal bonds due to their high yields! And such “advice” – likely, supporting his personal book of toxic Puerto Rican bonds – is actually circulated like that of a prophet; only in this case, said “prophet’s” advice is the equivalent of “the house is burning, so run inside!”
Regarding rates, I have for the past year claimed investors would “front-run” QE to Infinity as the global economy collapsed – taking sovereign yields in “leading” Western economies to all-time lows. That is, until hyper-inflation inevitably “comes to town” – at which point, all bets are off. Well, box number one can certainly be checked – as cumulatively, global rates hit a 5,000 year low this Spring; led, as you can imagine, by the bonds of nations most actively engaged in overt QE, like the Eurozone and Japan. However, a “funny thing happened on the way to maximum financial repression”; which is, that in the past two weeks, rates have surged despite unrelenting, horrific global economic data. This morning, for instance, the 10-year Treasury yield has surged to 2.18% from a low of 1.68% three months ago, despite a weak PMI service reading and horrific Gallup Economic Confidence reading. Not to mention, last week’s worst GDP report in years; relentless evidence of expanding economic weakness; and oh yeah, the most unequivocally dovish stance the Fed has taken in years.
Perhaps this morning’s catastrophic trade deficit number has something to do with it – exploding from $35 billion in February to $51 billion in March, representing its worst print since – drum roll please – October 2008, and the biggest “miss” versus expectations ever. In other words, signaling the modest increase in oil prices has utterly annihilated an already dying U.S. economy. Not to mention, said 1Q GDP “growth” – which will clearly be revised to negative territory as a result. To which I can only say, nice job, “oil PPT!” – which, despite history’s largest glut, have managed to push WTI crude back above $60/bbl. LOL, it’s hard not to laugh at Janet Yellen first calling low oil prices a “net positive for the economy” six months ago. Now that the economy is sitting at its lows, and oil prices rising, I wonder what words of wisdom she’ll have for us now.
Back to the trade deficit, the bad news is far worse when you look into the details; as excluding energy, it was the worst deficit in the 23 years the data has been compiled. In other words, a collapsing U.S. export sector is running headlong into the higher prices the so-called “deflation” the Fed harangues about is actually creating.
As for the 10-year Treasury yield – not to mention, the 10-year German Bund yield, which has doubled in the past week (albeit, to just 0.46%) – I last week surmised that the increased Chinese selling indicated by recent TIC, or Treasury International Capital reports, was likely a major factor; assuming of course, that the Chinese aren’t lying. That said, said hyperinflation has to arrive sometime; as the deformation of historically low rates, amidst record money printing and a soaring cost of living, has to eventually cause something to “give.” Which is why I am watching the recent, relentless rises of bellwether commodities like the 10-year Treasury yield, crude oil, and copper with a very close eye. Oh, those pesky “ramifications” of deforming the economy – and financial markets – with limitless money printing, market manipulation, and propaganda.
Before I conclude, I have a few more ugly “deformations” to discuss – such as Wall Street’s “latest craze”; i.e, the unfathomable securitization of “peer to peer” loans, conducted by “shadow banking” entities over the internet. Or how about the Bank of Australia cutting interest rates to a record low 2.0% this morning; citing – aside from collapsing iron ore prices, which dramatically impacts Australia’s mining export dependent economy; rising property prices in Sydney; and a “strong currency.” To which, I can only say HUH? Under what Bizarro World premise are rates reduced due to rising property prices – let alone, in one specific part of a country? And better yet, what part of the Australian Dollar’s six-year low is considered “strong?”
I won’t even get into this morning’s Chinese margin increase, yielding a 4% plunge in the Shanghai stock exchange. Which if not for the insane, bubble-like valuation of U.S. energy, biotech, social media, and restaurant stocks, would be considered the world’s largest equity bubble.
Or an article this morning pointing out how global home sales in the $100+ million range are soaring off the charts, with one particularly arrogant billionaire claiming “they’re better than gold, because you can boast about them.” Conversely, home prices in the “99%” of the market where most of the world lives have barely budged amidst the Central bank catalyzed, high-end housing echo bubble – to the point that even CNBC questioned how unlikely this “divide” can continue. Let alone, with collapsing lumber prices screaming of the end of whatever upside momentum housing still remains.
Last but not least, the insane French government has announced its latest, terrifying salvo in the worldwide “war against money, that cannot be won.” Yes, lucky Parisians, your collapsing economy will now be compounded by excessive capital controls, cash usage limits, and even gold transfer monitoring. Which is why the Miles Franklin Blog is reiterating the “urgent cry to Europeans” we first issued in January – to “GOTS,” or get out of the system as soon as possible; particularly with the very real possibility of a catastrophic “Grexit” event within months, if not weeks.
To conclude, I see this morning that yet again, the Cartel is capping with all its might at gold’s two year “line in the sand” at $1,200/oz; which, per the fabulous work of Steve St. Angelo, is simply catalyzing unrelenting, record gold exports to China, India, and the rest of emerging Eastern world. As noted yesterday, it’s only a matter of time before the world realizes just how much of the West’s gold is gone, and how much of it sits in Eastern vaults – as well as on Eastern wrists, necks, ankles, and fingers. The “fraying barrier between deformation and collapse” is getting thinner with each passing day; and when it finally rends, if you haven’t already protected yourself with real money, it will already be too late.
Great post Andy.
These deficit figures for the US are very alarming to me and there is just no good economic news anywhere in the world any longer.
The US $ index seems to have peaked so it is difficult to see Ackermann’s 120 being ‘achieved’ now
I can’t help thinking the Greece situation is the one that will bring down the house of cards. I think Greece will turn their backs on the EU sometime this year and default.
The BRICS will back them and this will ruin the balance sheets of many of the Euro banks.
The likes of Spain and Italy will follow the example of Greece and that will signal the accelerating disintegration of the EU.
It may well be something as “predictable” as Greece, or perhaps something out of leftfield. However, history’s largest Ponzi scheme is clearly in its terminal stage.
Andy how in the world did gold not soar today with the drop in the dollar?
LOL, you could say that for perhaps 1,000 days over the past decade. The GOLD CARTEL! Which, like all other such manipulation organizations (like the London Gold Pool in the 60s), will spectacularly fail.
Hi, Andy! I think I understand why all TPTB statements make no rational sense to us mere mortals: “New Age” thinking tells us that we are all really “gods”, and if we just channel our collective will towards the same end, we can make “Mother Nature” move in any direction WE choose! The fact that it hasn’t yet happened is PROOF that too many folks read and believe items like in your blog, which then get in the way of the collective energy flow towards the hoped for goals.
See how simple it all is- we just cannot tolerate all this negativity slowing our achievement of “godhood”! If you think this is crazy, remember- it’s been taught in the schools for years, and these folks VOTE!
Sounds good, I’ll try anything at this point.
Once again Andy makes cogent and terrifying observations. He points out that many gold bugs are lately taken in by the deflation boogeyman. The only deflation is in the price of junk nobody needs. Everything else is shooting through the roof. Maybe Andy’s warnings about the horrors that are to come may be challenged to the extent that they have largely already arrived. What can one say to sooth the pain of a 25 year old college graduate with a master’s degree who must flip burgers or wait tables because there are no good jobs? So many of them are deceived into believing a degree in engineering or perhaps law will make a difference. It won’t. Most of the good engineering jobs have been outsourced. As for lawyers — law firms all over America are folding up or at least firing staff. Even legal work is being outsourced to India. More and more law school graduates are resorting to suing their school because they can’t get the good job they were promised in exchange for exorbitant tuition. Watch some TV and see just how accurate Andy is when he says the whole edifice is coming down. What do you see? Law firms advertising for law suits. Pharmaceutical companies promoting anti-depression drugs. Once upon a time TV ads promoted the output of America’s great job and wealth-producing industries — every sort of consumer appliance, American made consumer electronics, tools made in America, lawn mowers, cars, clothing, and so on. These industries are largely dead. Now our primary product is litigation and financial manipulation and speculation — and mind altering medications to help ease the pain of financial despair. Think of how all this happened. America’s legislative bodies have been hijacked by lawyers, who by their nature, are generally not producers of real wealth, but more akin to pirates who re-distribute other people’s wealth unto themselves. Thus we have degenerated into mostly a parasite economic culture. Facing this ugly reality, it would be quite risky not to take Andy very seriously and take action geared toward personal financial protection, because this terrible situation is only going to get a lot worse — and very soon. It would prove very useful for Andy and his colleagues to produce some articles containing specific examples of how financial insurance can be achieved with certain percentages of asset allocation to PM’s so that as fiat toilet paper plunges in purchasing power, a certain percentage of allocation into PM’s can maintain parity or at least keep the erosion of purchasing power to a reasonable minimum so as to prevent a complete wipe-out. And complete wipe-out is what the vast majority of the West’s complacent middle class is about to experience. Stay complacent and get ready for privation and hunger. And don’t count on SS and pension checks! Too many elderly people base their life plan on these payouts — which probably will not survive what is coming.
I would like to pose this question to ALL the “Big Guns”.. Yourself, Jim Willie , Jim Sinclair.. Jim Holter, Eric Sprott, Etc.. etc.. So if you could please mention it on your travels I would very much appreciate it.
AFTER the dust has settled… (Economic reset, Gold trade standard in place)
In your opinion – How many Hours or Days or Weeks of human labour would it take to acquire 1oz of Silver?
Chris Duane has stated – Throughout recorded history, 10 days of human labour equates to 1oz of silver.. Do you think this equation will stand again after the reset/collapse?
Many thanks in advance for your opinion.
I would defer to Chris D. on that one. He’s the expert.
Curious on your take on the argument of pay cash for a house or lock in at a low rate now…..in terms of inflation/possible hyperinflation in the future. Had this discussion with some guys and was a mixed result. Assuming its not your last nickel and you could easily go either way.
Hard to see mortgage rates much lower, though of course it’s possible.
Regarding hyperinflation and mortgages, I’d warn you not to expect to “benefit” from it.
Debt is the enemy of all, try to avoid it if possible is the best advice I can give.