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.
mmmm…. I wonder… a short while ago when gold had a bit of a surge this website was in its element talking about gold going upwards blah blah blah, now gold has fallen on its arse yet again and this website is talking the same sort of spiel it has been doing for a very, very, very, long time that gold will go up who the hell is falling for this stuff?
Of course its in your interest to talk uo gold as your selling it…
Paul,
Your comments couldn’t be more disingenuine or nasty. Nothing angers me more than those that try to take down those that are there to help them, using mistruths and innuendo. This blog – and what Bill and I have done, for free, LONG before joining Miles Franklin, is one of the true sources of truth in the economic world. You get to read it, for FREE, from the UK, and use the chat room to be bitter. Take out your frustrations on the bad guys destroying the world and suppressing prices – or better yet, ignore our advise, sell your metal, and take your chances in the paper markets.
Excuse me! His comments aren’t disingenuine, you have been promoting gold while it has been going down over the last 3 years, anybody listening to you or your company would be in the red now. The fact you think you’re helping people, like Sinclair, has little relevance when people are buying gold etc. from you at what now looks like a vastly inflated price. If you were truly honest about helping people you would refrain from being a perma bull and present both sides of the argument from those who have been right about the direction of gold, ie. Martin Armstrong, instead of ridiculing him when he is right and you have completely missed the bus.
I can see when the metals do finally rise you will come out and say “There, I told you so!” But fail to comprehend all those who bought at a much higher price than today who are all tapped out and can’t or won’t buy more as we approach the bottom from here….very poor advice from some one whose “fundamentals” have been consistently wrong for along time but continues to say the same thing.
The above poster has it exactly right.
Kerry,
I despise the word “promoting,” from the time I worked in investor relations. I don’t “promote,” but MARKET the services of Miles Franklin – as we are in a highly commoditized industry, and aim to differentiate ourselves. As for gold and silver, I don’t promote, market or otherwise. I simply speak the economic truth, and recommend people respond to it with the only assets that have historically protected people from what is going on today.
As for telling people for the “last three years,” perhaps you don’t realize I (and Bill Holter) were mainstay writers – again, for FREE – on the GATA website daily going all the way back to 2003-04, when gold and silver were $350-$450/oz and $5-$6/oz, respectively. In fact, that is why Miles Franklin hired us!
Anyone that knows me, and has read me for nearly a decade – for many years, as “Ranting Andy” (a name given me by Bill Murphy himself), knows there is not a fake bone in my body. I have helped many, many people; and the fact the gold Cartel has gone hog wild in recent years, as the end of their fiat charade nears, doesn’t make me “wrong.” Go back to my predictions in 05-07 of a housing crash, and 02-03 of the gold bull and dollar bear markets – let alone, the fact that I sold my last internet stock in March 2000 – and tell me if I’m not worth listening to.
As for “telling both sides of the story,” what other side is there? You think gold price is “vastly inflated,” despite trading well below the cost of production? Not to mention, the biggest fiat money printing orgy in history?
And as for Martin A, anyone purporting to be an expert in Precious Metals – and for that matter, markets in general – who doesn’t acknowledge the manipulation that is the most important aspect of them, by far, is not worth listening to, in my view. Let alone, someone with his background.
And by the way, we don’t give “advice” at Miles Franklin, as we are not financial advisors. We simply write of economic truth, and let you decide what to do. Saying we “talk our book” is ridiculous, as we can’t move the market, and it’s not like the “conflict of interest” isn’t obvious. The service is 100% free, and you are free to use it or ignore it. But since you have emailed/commented often, you clearly find it useful. As you should, as it is the best product in our sector, in my view.
Great answer Andy. These Dirt Balls are all over the internet. Many are paid by the TPTB to talk their trash. I so appreciate your very insightful commentary as do all of us looking for the Truth, because the “Giant Squid” owns the MSM. Keep up the great work. Know that your work is counted on by many and again, greatly appreciated.
Much appreciated. GATA lifted my spirits for years each day, and I’m happy to know I’m doing the same for others now.
a
Andy, the “court fools” are out in force while the court (the governments, banksters et al) forces gold, silver, oil, anything that is a normal inflation ruler down, down, down. These naysayers think they are right just because they say what the government wants them to say.
Much like John Law France, or Wiemar Germany, or even Zimbabwe, the naysayers can be confident, even arrogant in their diatribe. Until everything changes because market force, natural law, and truth overwhelms politics.
Jeremy,
Much appreciated. Actually, I take pride in the fact that David, Bill, and myself rarely, if ever, receive negative emails. We simply tell the truth, and don’t “predict” anything other than the ultimate result – which lately, has started to feel as imminent as it is inevitable.
However, after such a vicious Cartel attack, inevitably a handful of non-believers come out to attack the messengers, not the true culprits.
Thx.
a
Andrew,
Thanks for the good work you do here day after day. I myself jumped on the silver wagon at about $13 and kept buying up to about $30. My cost average is now about break even. This brutal non stop attack on the metals is depressing. When I read your articles my spirit is always lifted. My problem now is holding on to what I have without having to sell. I went overboard and have about 95% of my wealth in silver. Even so I am constantly tempted to buy a roll of eagles on each dip.
I am 61 years old and still hope to enjoy my purchases if not I guess my son will get the whole lot.
Yes, I know it’s frustrating. Trust me!
However, there are bigger forces at play here – like the inevitable collapse of history’s largest Ponzi scheme.
I, too, buy on the dips (and surges), knowing full well how the game will end. Hopefully, you won’t need to sell any to pay for things. That is the wildcard we all face, but I am confident (especially in silver) that the physical game will blow up in their faces sooner rather than later.
a
It is clear from the bitter tone of some of the comments here and on other metals blog sites that many people who have purchased PMs do not have a clue as to why doing so is a good idea. I started buying silver in 2010, using a dollar cost average approach. In 2012, I started buying a little gold from time to time, again in small amounts and via the DCA approach.
So, why am I and many others doing this? Is it because we have no investment ideas and want to buy PMs as investments? No, it is not. It is because we are very much aware of the tribulations in the US and world financial markets, the blatant manipulation of all markets, the vast over-printing of paper money, the corruption in the political offices and the banks, the massive debt explosion, and we want to avoid the worst of the financial collapse to which all of these things are pointing.
For me, gold and silver are not investments. They are MONEY and a few other things as well. When I buy them, I am not spending money, I am simply converting paper money with no intrinsic value into REAL money that has a lot of intrinsic value. PMs are a long-term store of value, a way to refuse to play the inflation game that is built into all fiat currencies, a savings plan, and an insurance policy against the sheer idiocy that infests Keynesian economics that all Western governments now use and that has been proved over and over not to work. Currencies that are not well managed always become devalued. Look to Argentina and Venezuela for further confirmation. The US$ will also be devalued, probably by 30-40% once we lose World Reserve Currency status. Merely because these things take a long time to occur and cannot be timed does not mean that they won’t happen. They will, in time. And when they do, those of us with REAL money in our hands will be WAY better off than those who have only dying fiat paper in their bank accounts.
But, life is filled with choices. We can choose whether to hold PMs or fiat paper… for now. Someday we might not have that choice. Study of this critical issue is extremely important to the financial health and future wellbeing of everyone in the world. Read and learn all you can and once you are up to speed on this, choose wisely.
A big thanks and a hat tip to Ranting Andy and the gang at Miles Franklin. Their blogs are a tremendous service to all of us. As Andy says, no one is forcing us to read what they write. We do that voluntarily. We can stop reading their advice any time but it will likely be a big mistake to do so. Personally, I find considerable value in Andy’s, Bill’s, and the other Miles Franklin blog contributors. I read them often and glean valuable insight from each of them… and the price of admission could not be better! 🙂
Thanks so much, and beautifully put! There might be a future in blog writing for you yet.
a
I cannot understand why anyone is complaining that gold and silver are on sale, buy more look long term, a nice retirement nest egg. The govt cannot touch what they do not control. Think of gold/silver as an insurance policy against SHTF with long term growth/savings. I plan to use mine for retirement or SHTF if it happens. Once manipulation stops, and it will once there are physical exchanges that are quoted outside the US, then you will reap the rewards. No one ever made a fortune by being the last in, quite the opposite. remember gold/silver are being produced at or close to cost and that cannot go on forever production will slow.
Scott,
I agree on all counts but one. There is HUGE reason to complain, starting with the fact that 15 years of PM price suppression is what have enabled TPTB to build up massive debts and destroy the world. Secondly, we are supposed to have free markets, but when illegally, and covertly, TPTB buy stocks and bonds and naked short gold and gold miners, they are breaking the law. And for people like us that have been fully invested in the sector for more than a decade, at some point we’d like to enjoy the fruits of our dead on due diligence.
a
I could not agree more, the government looters destroyed the country/world. I cannot remember who said it, but a true statesman worries about the grandchildren, not only his. The self absorbed leaders in power only care about their power and money grab. I always wonder if those in power have silver /gold, or if they think the game will go on for ever. By the way when I said the I cannot understand why one would complain I was only talking of the opportunity to still buy low. Keep stacking or buy productive farmland.
Andy,
Great article and many of us on main street are counting on you and Bill to keep us updated and current.
I feel sorry for the Paul’s and Kerry’s above and say let them keep their fiat paper.
I saw my uncle lose $225,000 in the 2008 market crash and I’ll never put a dime in the stock market ever. I’m 63 and the Wall Street guys will have to find another sucker because it won’t be me.
I bought physical gold and silver as “insurance” and not as an “investment”.
I don’t cancel my life insurance because I wake up feeling great or the doctor gives me a clean bill of health after an annual physical.
I’ll take my chances on my gold/silver insurance and my life insurance and Paul and Kerry can take their chances as they see fit.
Again, thank you. You are doing what you do for the right reasons and the ongoing education you are giving can be accepted or rejected.
My house chooses to accept you and Bill’s educaion.
I couldn’t have said it better myself.
Thankfully, mining shares were “allowed” one final surge in 2009-10 before being – in the large majorities’ cases – permanently destroyed. That allowed me to recoup a decent chunk of my own massive 2008 losses, before deciding to permanently avoid the stock market in lieu of physical au and ag.
a