Lately it feels like “goldbugs” have been forced to endure the trials of a job. Trust me, no one understands this better than myself, having taken my first job in the mining industry in April 2007, the exact month the TSX-Venture index peaked; and joining Miles Franklin in October 2011, one month after “dollar-priced gold” peaked. I can go on and on about TPTB’s “point of no return” decision in September 2011, when they realized the only way to avoid instantaneous, systemic implosion was unprecedented exponentially increasing market manipulation. Or April 2013, when despite TPTB’s best efforts in the prior two years, gold and silver were on the verge of breaking out anew – prompting the “closed door” meeting between Obama and the top TBTF bank CEO’s preceding the following day’s historic PM raids. Irrespective of your chosen “starting point,” the fact remains that the suppression of gold and silver prices commenced in the late 1990s, when the Robert Rubin-led Treasury embraced then Deputy Treasury Secretary Larry Summers’ “Gibson’s Paradox and the Gold Standard” article of 1988, suggesting that if gold prices were kept low, interest rates could be too. And this, just three decades following the collapse of the most infamous overt gold suppression scheme ever – the U.S.-led “London Gold Pool.”
Today, the need to suppress interest rates – and thus, precious metals – has never been higher, as since the gold standard was abandoned in 1971, and particularly since the financial system broke in 2008, global debt accumulation has surged parabolically. Consequently, both the frequency and intensity of PM attacks has grown exponentially, to the point that it is become a 24/7 operation. Clearly, TPTB are just as aware of the “danger” of freely-traded PMs today as in the 1960s “Great Society” years, the 1970s oil embargo nightmare and the 9/11 aftermath. Only far more so, as the combination of collapsing global economies, exploding debt and burgeoning social unrest have put the very existence of their fraudulent currencies at risk. And thus, relentless blatant “waterfall” paper raids on the fraudulent LBMA and COMEX futures exchanges – as we witnessed morning – have become as commonplace as massive inventory draining physical purchases in the East. Not to mention, the PPT’s stock market supporting “dead ringer” algorithms as we saw in their full glory yesterday, as they relentlessly support the “key round number” of Dow 17,000.
Back in 1971, the U.S. national debt was just $400 billion or 34% of GDP compared to $9 trillion or 62% of GDP in 2007, and nearly $18 trillion or 105% of GDP today. Moreover, if the $5 trillion of debt issued by nationalized economy killers Fannie Mae and Freddie Mac were not considered “off balance sheet,” said debt numbers would be $23 trillion and 135%, respectively – excluding perhaps $200 trillion of “unfunded liabilities” whose relentless growth is fueled by ongoing economic stagnation, unprecedented monetary and fiscal profligacy – and oh yeah, a demographic nightmare that will see 130,000 retirements each month for the next ten years. Excluding, of course, hundreds of thousands taking part-time, minimum wage jobs because they can’t afford to retire. And sadly, that’s just the U.S., as the entire world faces the same exponential debt accumulation, economic stagnation and – for essentially all “leading” Western economies the same “demographic hell.”
Consequently, history’s largest Ponzi scheme has reached the “peak debt” barrier causing each new dollar, yen or Euro printed to detract from economic growth – and simultaneously, create the greatest wealth (and power) disparity ever, as only bankers, hedge fund managers and politicians benefit. Back in my days as an energy analyst, we constantly wrote of the “treadmill” of exponentially increased drilling necessary to simply maintain production. To that end, today’s “depleting” banking establishment requires exponentially increased money printing to prevent instantaneous implosion – in the words of Deutsche Bank’s Jim Reid, “the bubble needs to continue to sustain the current global financial system.” Longer term, dramatically increased drilling has driven the cost of energy production sky high, whilst increased money printing has catalyzed a record global cost of living. Not only that, but when nations are net importers, price increases are exaggerated by sellers’ unwillingness to depart from products in exchange for depreciating currencies. For example, U.S. gasoline prices peaked at $4.10/gallon when West Texas crude oil hit $150/bbl in 2008. However, with crude oil down to $90/bbl today – or 40% from 2008’s highs – the average U.S. consumer is still paying $3.50/gallon today or 15% below 2008’s highs. Funny how things simply “work out” that way, huh?
Amidst said “peak debt,” each successive money printing foray makes the long-term outlook exponentially worse. Consequently, the politico-banker establishment must create new forms of propaganda to justify further money printing – which to the average man, is clearly catalyzing nothing but economic stagnation and a higher cost of living. Consequently, “inflation” indicators like the CPI are rejiggered to eliminate the inexorable price increases that plague our daily lives – which is why John Williams of Shadow Stats’ calculation of 10% annual inflation is so much higher than the 2% level published by the government. Sadly, even “massaged” government numbers translate to four decades of declining purchasing power, surging consumer debt, and half the nation living off entitlements funded by Federal Reserve printing presses.
The MSM, as well as clueless Wall Street analysts and Washington politicians point to money’s plunging velocity as evidence of the “deflation fallacies” their rigged CPI indices attempt to portray. However, the sad fact remains that “deflation” is not possible in fiat currency regimes – particularly of “need versus want” items like food, energy, education and insurance; particularly when bureaucratic governments attempt to manage the production and distribution of such. True, “need versus want, demand is dying.” However, ask the average American, European or Japanese if their cost of living is “deflating,” and we assure you an emphatic “no” will be their universal response. And by the way, we haven’t even mentioned the fact that when a nation does not possess the world’s “reserve currency,” the impact on consumer prices of parabolic money supply growth is magnified – which is why London and Tokyo are two of the world’s most expensive cities, despite being two of the world’s leading economic hubs. Let alone, the hundreds of nations not blessed with being economic leaders, whose currencies on average have lost nearly 40% of their purchasing power in the last three years alone, as they futilely engage in the “final currency war” against the Federal Reserve’s relentless printing presses.
Back to the namesake of today’s article, it refers to the prototypical form of said “deflation” propaganda – or perhaps, plain old clueless financial analysis – from this article, proclaiming “world inflation makes a 56-year low.” According to the below chart, the world CPI proxy’s growth rate is below the 2% level Central banks arbitrarily target – which obviously, goal-seeked government data (in the world’s leading economies) tends to rest at year in and year out. Of course, what the authors don’t tell you is that not only is the data blatantly understated, but that the cumulative effect of all those 2% increases is massive – care of the omnipresent power of compounding.
To that end, we’ve painstakingly created the below graph, measuring the cumulative (massively understated) CPI and M2 money supply figures published by the world’s five largest economies over the past 16 years. As you can see, that “magical” 2.0% CPI level has been consistent throughout – and in fact, is no different than the current “deflationary” level connoted above. Global money supply growth has been four times that level over this period – speaking to said plunge in money’s velocity – but the cumulative effect has been to produce a 240% increase in the money supply and a 35% increase in the CPI. Which, by the way, compares to barely 20% growth in global gold production, nearly all of which has found its way to Eastern hemisphere vaults, never again to see the light of day. And by the way, good luck finding a single person, anywhere, whose cost of living has risen by just 35% since 1998. Heck, here in the United States of Inflation, healthcare spending has risen by 6% annually over that period (with significantly higher rates in recent years), yielding a cumulative 54% increase; whilst milk has risen by 60%, electricity 75%, college tuition 140% and gasoline a whopping 290%.
As they say, “read em’ and weep”; and nowhere is this statement more relevant. Aside from temporary “noise” in selected products – largely of the “want” versus “need” variety – the global cost of living has exploded since the gold standard was abandoned; stair-stepping higher when the global economy peaked at the turn of the century, and turning parabolic following the post-2008 money printing group – which by definition, must continue to grow exponentially. And thus, if you choose to believe Janet Yellen, Mario Draghi and Shinzo Abe regarding the dangers of “deflation,” it will likely result in dramatic, potentially catastrophic real losses to your hard-earned savings. Throughout 5,000 years of human history, only gold and silver have preserved wealth against unfettered money printing. And despite being treated to said “trials of Job” by today’s PM suppression, physical gold and silver holders are sitting in the catbird seat ahead of what will likely be history’s greatest financial cataclysm.