It’s hard to believe the deadly Indian Ocean tsunami that killed 230,000 people was nearly a decade ago; as after all, it was the worst natural disaster of our lifetime. Until then, I knew little – if anything – of the mechanics of tsunamis; but as you can imagine, they received plenty of media attention thereafter. One thing I learned, as immortalized by numerous amateur YouTube videos, was that ominously, the tide recedes as the tsunami approaches the shore – in some case, for several miles due to the enormous suction created by the rapidly circulating waves.
As I watch the PPT take the Dow higher this morning, amidst seemingly endless “horrible headlines” – such as the Chicago Fed National Activity Index falling from +0.16 to -0.39; the PMI Services Index plunging from 56.6 to 52.7; and the Dallas Fed Manufacturing Survey plummeting from 3.8 to 0.3; visions of receding economic waves are filling my mind. The same goes for the rest of the world, of course; albeit, Chinese stocks haven’t been so lucky – amidst their worst three-day decline in four months, following the publication of terrifying data, suggesting its historic housing bubble is rolling over. In fact, the rate of change of global economic activity is plunging as rapidly as at each of the worst periods of the past decade; and sadly, Central banks have no more “ammo” left to fire at it.
Have no fear, they’ll certainly try to “stimulate” with freshly printing money. But sadly, they’ll only make things worse; as when banks simply won’t lend – because they can take the ECB’s unlimited 0.25% funds, via a “back door bailout” with no end in sight – they’ll simply buy the sovereign bonds “guaranteed” by Draghi’s promise to support such bonds with the soon-to-be-fired OMT bazooka.
Like the U.S. government, Europe’s “leaders” continue to publish data suggesting “deflation” is the continent’s greatest fear. However, aside from the fact that such data is blatantly “cooked,” it doesn’t account for the most important factor of all – i.e., price deflation only affects items we “want versus need.” Today, for example, it was reported that the Eurozone experienced negative 1.1% inflation in January; but looking at the below chart of UK fuel prices, it’s hard to see how British consumers are that excited. After all, they’re still paying the equivalent of nearly $10/gallon for gasoline (“benchmark average UK petrol prices remain stubbornly above 130 pence a liter,” according to the Automotive Association of Britain”); and throughout the entirety of Europe, average petrol prices are just 5% lower.
Of course, they’re simply setting the stage for Draghi to not only unleash the OMT – now that the German Constitutional Court essentially gave it the A-OK; and potentially, instituting a hyperinflationary “NIRP,” or negative interest rate policy. Here’s what “Goldman Mario” said two weeks ago; and frankly, I wouldn’t be surprised if “all available instruments” are not unleashed simultaneously with the Fed pausing and/or reversing “tapering,” and the Bank of Japan expanding Abenomics.
We continue to expect the key ECB interest rates to remain at present or lower levels for an extended period of time. Given broad-based economic weakness and subdued monetary dynamics. We remain firmly determined to maintain a high degree of monetary accommodation and to take further decisive action if required.
–ECB.europa.eu, January 9, 2014
As for Precious Metals, which just as inevitably, will break their Cartel shackles and demonstrate what “inflation protection” means – and then some; it appears that what we wrote last Wednesday is already coming to pass.
The new ‘lines in the sand’ appear to be $1,330/oz for gold and $22/oz for silver; and despite my distaste for short-term predictions, I get the impression such hurdles won’t be as formidable as those witnessed for three months at $1,250/oz, and eight months at $20/oz.
–Miles Franklin, February 18, 2014
Sure, the Cartel executed their 26th “Sunday Night Sentiment” attack of the past 28 weeks (does last week’s omission count, given Monday was a holiday?); but once Asia opened, it was all uphill from there. Yes, as I write at 10:30 AM EST, gold is up – what do you know, by exactly its 1.0% “upside cap” level. However, it is well above $1,330/oz., while silver has yet again pushed above $22/oz.
Just as we wrote last week – of the emerging, global, “realization of reality” – the mainstreaming of gold manipulation is gaining a life of its own. Call it the expanding dislocation of paper and physical demand; the German repatriation fiasco; Deutsche Bank resigning from the London Fix under allegations of fraud; or simply, 15 years of unnatural price behavior. Irrespective, the manipulation story is spreading virally; and in a world of seven billion people, with just a tiny amount of available supply, who knows what may happen in the coming months and years?
Just this weekend, no less than the UK’s Financial Times wrote a scathing article on the topic – citing a Fideres study that found “global gold prices may have been manipulated on 50% of occasions between January 2010 and December 2013.” Comically, the article has already been removed from the internet (remember when Bill Murphy’s March 2010 CFTC testimony was “accidentally” cut off, just as he started speaking?). However, not before GATA – and numerous other alternative media outlets – posted it, such as here.
We cannot emphasize more strongly that, all along, the Cartel’s “Achilles Heel” was the inevitable realization that price action has not been catalyzed by real physical supply and demand factors, but fake paper ones instead. Now that this weakness is being exposed, it’s just a matter of time before the scheme implodes upon itself – just as the “London Gold Pool” in 1968, and every other attempt to mask Central bank currency inflation throughout history.
Consequently, are you going to grab a chair before the music stops – and the tide returns? Or will you fight over one with thousands of others – when it’s already too late?