In July 2014, WTI crude prices peaked at $105/bbl. Three months later, they had fallen to $81/bbl, prompting me to publish “crashing oil prices portend unspeakable horrors” on October 15th. In it, I espoused that there is no way the global economy – already on death’s door – could survive the implosion of the world’s most important commodity. For that matter, commodities in general are by far the world’s largest business – with countless corporations, municipalities, and sovereign nations dependent on their sale for financial survival. Throw in the fact that the aforementioned, historic currency bubble had saddled all such entities with unprecedented, patently unpayable debts, and the prospect of an implosion of their biggest revenue producer was, well, “unspeakably horrible.” Throughout history, major wars have been fought over far less; and thus, the prospect of an unparalleled, globally consuming commodity crash certainly doesn’t inspire optimism.
Two months later, at the December 17th, 2014 FOMC meeting – with WTI crude trading at $56/bbl – Whirlybird Janet infamously proclaimed low oil prices to not only be “transitory,” but likely a “net positive” for the economy; equivalent to, LOL, a tax cut for consumers. Well, as it turns out, the oil price plunge was far from transitory – with WTI crude plunging as low as $37/bbl in August 2015, and as we speak, despite the newly-formed “oil PPT’s” blatantly obvious efforts, trading at $46/bbl. Not only that, but the global economy has dramatically plunged, with U.S. retail sales leading the way; whilst worldwide debt loads have exploded higher; the average currency has plunged more than 25%; and geopolitical and social unrest has exploded. And this, despite unprecedented Central banking “stimulus.” Let alone, historic, blatantly transparent market manipulation – with Eastern Central banks clearly joining the same hyper-manipulative path of destruction Western Central banks took four years ago.
Of course, it’s not just oil that’s been freefalling in the commodity realm, but essentially all commodities. To wit, the commodity and infrastructure oversupply created by decades of money printing, interest rate suppression, and Wall Street financial engineering has been so prodigious, even most agricultural items are in freefall mode, despite an exploding global population and equally explosive money printing. For that matter, I have practically screamed of the upcoming farming crisis – as farmers have never been saddled with so much capacity; overpriced farmland; and Wall Street-fostered debt. To wit, the collapsing CRB Index; down 30% since I penned “unspeakable horrors” a year ago, and 17% since JY’s “transitory” comment – having briefly touched its 40-year low of 185 in late August.
Certainly, the most recent reports that “data dependent” Central banks have in hand – such as Friday’s catastrophic September NFP employment report; this morning’s hideous plunge in Europe’s September composite PMI; and this morning’s plunging U.S. PMI Services and ISM Non-Manufacturing indices won’t help matters. Of course, what they will “help” is the inexorable march toward hyperinflation – both here in the United States of “Recovery” and overseas. To wit, today’s “quotes of the day” comes from none other than the “vampire squid” itself – Goldman Sachs. Which, following the aforementioned, disastrous European PMI reading, espoused “the initial credit impulse from Mario Draghi’s QE is now long gone; and thus, Europe will soon be forced to contemplate even more easing.” And not a few hours later, “shockingly” proclaimed, regarding the Fed’s likely policy trajectory, that it sees a “higher probability of liftoff in 2017, than 2016 (or 2015)!”
Watching said “manipulation operatives” do their thing – like Friday’s “miraculous” stock recovery – in their misguided belief that fake market surges can trump real economic plunges – is truly a site to behold. Let alone, the MSM’s complete abandonment of commentary regarding the collapsing global economy. That said, the headlines that did make news this weekend couldn’t be scarier; quite obviously, evidence that the “unspeakable horrors” discussed last year are starting to take shape. Last weekend’s Spanish “Catalan-astrophe” depicts the aforementioned explosion of social unrest – as I predicted in last year’s “revenge of the people.” And this week’s heightened fears of a potentially globally-consuming military confrontation in – of all places, Syria – is equally terrifying in terms of the potential ramifications.
Frankly, after more than a year of rhetoric regarding Syrian President Assad and ISIS – of which, America has taken turns labeling as “friends” and “foes” – I have not a clue exactly what we fear over there. Certainly, it has nothing to do with oil – as not only does Syria not possess any, but with prices so low, it makes little sense to fight wars over it. Some might speculate America would foster a Middle Eastern war with the hope of a surge in oil prices, in order to save the collapsing shale oil industry. That said, Janet Yellen said low oil prices were desirable; and of course, the odds of Middle Eastern war providing a boon to economic activity are not just zero, but below zero. Sure, Russia might economically “benefit” from surging oil prices. That said, there is no guarantee such an event would happen, even if war were to erupt in Syria. And as noted above, the net negatives to even Russia of a Middle Eastern war would far outweigh the positives.
And thus, I ask, why is this conflict escalating so rapidly – to the point that Russia is actively engaged in Syrian airstrikes as we speak? Clearly, as the veritable “king” of human rights violation, Russia is not there for humanitarian purposes. For that matter, why is Iran “readying a massive Syrian ground invasion?” And why is Saudi Arabia “mulling the launch of a regional war?” Could it be the simple, “Occam’s Razor”-like explanation that, well, “crashing oil prices portend unspeakable horrors?”
At this point, I have little interest trying to figure it all out; other than to point out, yet again, how volatile global geopolitics have “coincidentally” become since commodity prices – and generally speaking, worldwide economic activity and financial markets – started plunging a year ago. As noted above, major wars – and twice, World Wars – have been started for less. Which frankly, scares me far more than anything in the financial world. Which is why, yet again, we cannot warn more shrilly of the need to PROTECT YOURSELF, and do it now. And if said “protection” involves the purchase of Precious Metals, what better time to do so than when prices have been suppressed below the industry’s cost of production; amidst an environment of record demand, vanishing inventories (in silver’s case, yielding product shortages as we speak); and the worst production outlook in decades?
Heck, this weekend alone, we learned that a whopping 66 tonnes of gold, or $2.4 billion, were withdrawn from the Shanghai gold exchange last week alone – putting China on pace to not just break, but shatter its all-time high gold consumption record. And this, compared to the paltry $185 million of “inventory” on the COMEX paper exchange that “sets” global prices.
Better yet, in one of the biggest bombshell announcements the MSM has ever ignored, Chinese President Xi Jinping, this weekend, confirmed what the Miles Franklin Blog has purported all along; i.e., Chinese gold reserves are likely far, far larger than reported. To wit, in a statement that one would have to be ignorant, “prejudiced,” or otherwise severely “comprised” to see any other way than as being focused on gold, Jinping confirmed the practice of holding the PBOC’s reserve assets within multiple Chinese entities, in claiming “some assets in foreign exchanges were transferred from the central bank to domestic banks, enterprises, and individuals.”
I sincerely hope your personal due diligence process takes particular account of this information; as trust me, where there’s smoke, there’s fire!