What if the Fed actually were dumb enough to raise rates Wednesday – amidst the “worst global economy of our lifetimes”; and crashing worldwide financial markets – like commodities, junk bonds, currencies, and the majority of equities? In other words, the type of catastrophic conditions that typically cause it to reduce rates? And this, whilst the “dollar” is surging, putting a dagger in already crashing corporate earnings, as competing Central banks – particularly, the ECB and PBOC – are actively taking the “final currency war” thermonuclear? Not to mention, as the fraudulent – and at this point, comically transparent, “recovery” is already one of the weakest in U.S. history?
Well, we’re about to see; as if the PPT, the ESF, the gold Cartel, and the Federal Reserve’s own “open market operations” desks are unable to reverse last week’s horrific trading action – and frankly, the world’s most powerful market-manipulating algorithms have their work cut out for them – we may well see the “perfect cataclysmic storm” of the Chinese unleashing the “cataclysmic financial big bang to end all big bangs,” as the Fed engages in the “only financial event as potentially cataclysmic as a significant Yuan devaluation.”
Amidst the final, thermonuclear phase of history’s largest, broadest fiat Ponzi scheme, bubbles of epic proportion are serially popping as we speak – integrally, irreversibly entwined in the common threads of monetary hyperinflation; parabolic debt growth; unprecedented industrial overcapacity; and the ensuing political, geopolitical, and social instability that has destroyed hundreds of fraudulent currencies throughout history. And this is decidedly NOT just about the “second” and “third” worlds,” which were hopelessly bubble-ized goners from day one. No, this time around, the epicenter of what will be the greatest financial collapse in history will be the so-called “first world.” Which, as we speak, is being rapidly exposed for the Banana Republic regime it is has been since the gold standard was abandoned in 1971.
And nowhere more so than the “leader of the free world,” the United States. Which care of the most virulent, wide-reaching scheme of money printing, market manipulation, data cooking, and propaganda of all time, has not only built the largest debt edifice in global history – in the federal, state, municipal, corporate, and individual sectors – but the most overvalued financial markets ever; including stock valuations above the 2000 peak, and high yield bonds above those in early 2008. Yes, thanks to the Fed and PPT, stocks are actually, objectively, more expensive than at the peaks of the cataclysmic bubbles that defined the beginning of the fiat Ponzi’s end game.
And this, as historically “cooked” earnings – in many cases, aided by government-sanctioned accounting changes that encourage such fraud – are already in steep decline, having fallen year-over-year for the past three quarters; joining the year-over-year declines in everything from retail sales, to industrial production, durable goods orders, and even “island of lies” diffusion indices like the Chicago PMI and ISM Manufacturing Indices. Heck, even the most financially illiterate can understand ominous data such as the below – of the bubble-bursting implications of an explosion of money-losing companies; amidst an artificial, ZIRP-created environment in which default rates have been pushed toward all-time lows.
Of course, not just U.S., but worldwide debt defaults are surging – cumulatively, to their highest level since 2009, especially in the “emerging markets” everyone knows will default. Which is probably why the average global currency is at, or nearly at, its all-time low; in most cases, dramatically weaker than the spike-bottom lows at the heart of the 2008 financial crisis. And again, I’m not just speaking of “third world” currencies, but nearly all currencies – from the Euro; to the Yen; the vaunted “BRICS”; and of course, soon-to-be-unpegged currencies like the Yuan.
Of course, it’s here in the U.S. where the sheer volume of soon-to-be-defaulted debts are the highest; although you’d never know it, given the unrelenting, comically transparent propaganda of U.S. “relative strength” from Washington, Wall Street, and the Mainstream Media. Which, of course, has been temporarily masked by the dollar’s fading “reserve currency” status – enabling the deleterious economic market impact of unfettered money printing to be modest relative to the rest of the world. Where, for example, the vast majority of equities are in bear markets, as bond yields explode.
That said, U.S. corporate debt defaults are also back at 2009 levels, with a whopping 72% of metals and mining companies in distress. I mean, we’re talking about hundreds of billions of defaults-to-be in the commodity sector alone – many of which will likely occur in 2016. Which, of course, starts just two weeks from now.
In fact, major “high yield” bond funds were collapsing before Friday’s junk bond bloodbath – its worst single-day performance in four years. And with the CCC-rated bond yield – i.e., the equivalent of the subprime mortgage market circa 2007 – at its highest level since the 2008 crisis (more specifically, the weekend of the Lehman Brothers bankruptcy), it doesn’t take much to realize how close we are to the tipping point. Or, per the title of today’s article, the “imminence of oblivion.”
And this, with the Fed, amidst worse economic conditions than 2008, and lower commodity and currency prices – itself, holding a gargantuan, $4.5 trillion balance sheet – representing the largest, lowest-quality fixed income “hedge fund” in history – considering raising rates for the first time in a decade, as part of an inexorably destructive, but desperately hopeless, and historically perverted, “face saving” exercise. And by the way, when the Fed did last raise rates in 2006 (only to take them back down a year later), not only was its balance sheet one-fifth its current size, but the U.S. national debt was more than $10 trillion less. Not including, of course, the $5+ trillion held “off balance sheet” from nationalizing Fannie Mae and Freddie Mach; and tens, if not hundreds, of trillions of geometrically rising “unfunded liabilities.” In other words, to quote Mark St. Cyr from this weekend, “the world sits atop a tinderbox fueled by the monetary policies that created them, awaiting a match that could set it off in a blaze of who knows what. All in short order.” And I assure you, if Whirlybird Janet and company are insane enough to attempt a rate “lift-off” under such conditions, it will crash back to the Earth as rapidly, and forcefully, as the Republic Transport at the end of Attack of the Clones.
But wait, what’s this? It appears the Fed is desperately trying to “adjust market expectations” – per this, for all intents and purposes, mea culpa from its mainstream media “mouthpiece,” Jon Hilsenrath of the Wall Street Journal, this weekend. Not that they said so directly, but by having Hilsenrath publish such a dramatically dovish article, mere days from a so-called rate hike – you can bet they are as terrified by the global financial market contagion they have created as of “losing face” by not raising rates. Too bad they don’t realize it was their own hyper-inflationary policies of the past 15 years that are the true problem; NOT the prospect of a minuscule, immaterial quarter-point rate hike. From ZERO, I might add.
“Any number of factors could force the Fed to reverse course and cut rates all over again: a shock to the U.S. economy from abroad, persistently low inflation, some new financial bubble bursting and slamming the economy, or lost momentum in a business cycle which, at 78 months, is already longer than 29 of the 33 expansions the U.S. economy has experienced since 1854. In short, the age of unconventional monetary policy begun by the 2007-09 financial crisis might not be ending.”
Is it too late to renege on the misguided, suicidal “December rate hike or bust” campaign – with so many lies and market manipulations already invested in it? Of course not; as per what I have maintained forever, the only thing the Fed cares about is the financial markets it and its government and Wall Street partners rig on a 24/7 basis. Thus, if they cannot reverse the financial market bloodbath by Wednesday afternoon, you can bet your “bottom dollar” they’ll change their mind – using every imaginable excuse other than their own abysmal failures. Which, in and of itself, may well commence the aforementioned “oblivion” event – as it would permanently destroy whatever remaining “credibility” they still had, even in the eyes of the Wall Street and MSM lackeys that depend on their hyperinflationary largesse to maintain the status quo they alone benefit from.
And this, with physical Precious Metal demand – irrespective of the historic, merciless paper manipulation occurring as we speak – at all-time high levels, particularly at the epicenter of global currency devaluation, China. Let alone, as the mining industry is operating at steep losses that will certainly cause unprecedented mine shutdowns in short order – ensuring collapsing production at a time when above-ground inventories are unquestionably at all-time lows, and demand all-time highs.
Tonight, I’m looking forward to the one-time, never-again-to-be-broadcast podcast by the great David Stockman – whose “Great Deformation” thesis is the basis of my own, historically bearish economic outlook. He believes the upcoming Fed rate hike – assuming it actually occurs – will represent the end of three decades of bubble –financing and market valuations, yielding an historic economic collapse that, frankly, has already begun. In other words, the “imminence of oblivion” has arrived; and for those that haven’t yet taken steps to protect themselves, we can only warn, as vehemently as possible, that Precious Metals won’t be available when the herd wants them.