It’s Monday morning, and the Fed’s blatant attempts to prop the world’s most important interest rate, the U.S. 10-year Treasury yield are becoming as laughable as they are desperate; and as the entire world will shortly see, futile. To wit, after multiple attempts to push it above Friday’s manipulated 2.50% close, it is now trading at 2.47%, en route to multi-year lows in the coming months. The Ministry of Economic Lies says U.S. GDP grew by “4%” in the second quarter marking a multi-year high point. However, in reality, the below graph of the plunging 10-year yield despite massive covert Fed support is a far better depiction of the true economic trend.
Per the title of last weekend’s audio blog, the Fed is on the cusp of its “naked emperor moment” – as despite history’s most concentrated campaign of money printing, market manipulation and propaganda. The universal recognition of unmitigated Central bank failure has become as imminent as it is inevitable. As the Miles Franklin Blog has long expected, Western interest rates are headed the way of the Japanese Government bond – i.e., straight down to zero – as the entire world anticipates “QE to Infinity.” That is, until the inevitable currency collapse hits – at which point, only real items of value like gold and silver will outperform the ensuing hyperinflation.
As Bill Holter notes this morning, the U.S. has the most to lose from the oncoming global economic collapse. Thus, it will fight this inevitability – which it was most responsible for fostering – to the death. And we do mean death, as history convincingly demonstrates what dying empires have done to avert such painful realities. However, the sad fact is that the entire world will suffer greatly starting with “weak links” like Argentina and Portugal, and eventually the holder of the “reserve currency” itself.
Take Japan, for example, which should have served as a giant economic warning system to the world. As we have discussed ad nauseum, the Japanese population is the world’s oldest; on average, nearly a decade older than other Western nations. Consequently, its fiat bubble inflation and crash occurred a decade earlier, in 1989, yielding the same horribly flawed monetary policy decisions we have seen since America and Europe’s bubbles burst in 2000. With Japanese debt to GDP up to an astonishing 240%, its government must keep interest rates at zero permanently – which is why JGB’s not only yield zero, but trade with non-existent volume despite being the world’s second biggest bond market. Japan’s saving culture – along with zero interest rates – sheltered its economy from all-out collapse throughout its two “lost decades.” However, the ironically-timed 2011 tsunami marked the end of such “stability” – as at that point, the inevitable freefall commenced. April 2013’s introduction of “Abenomics” – i.e., doubling the money supply in two years’ time – was the final straw, particularly when combined with the onerous sales tax increase imposed to “pay for” it. As you can see below, Japan’s “Misery Index” comprised of (government massaged) inflation plus unemployment has rocketed higher; and as we learned this weekend, initial expectations for 2Q GDP “growth” are negative 6.5%. And no, that’s not a typo. This is why the Bank of Japan recently commenced outright overt purchases of Nikkei equities; an action that, like Abenomics, will only yield heightened inflation and wealth inequality. I mean, seriously, “What could go possibly wrong?”
In Europe, we learned this weekend that Portugal’s largest bank, Banco Espirito Santo will be bailed out; er, “nationalized.” In other words, a bankrupt government bailing out an insolvent bank – with the funds, of course, coming from overt ECB money printing and covert Fed “swap agreements.” Only this time, it is widely anticipated that such costs will not be borne by taxpayers (other than a marked decrease in their ability to borrow), but depositors, via a Cypress-like “bail-in.” At this point, it is mind-boggling how anyone would maintain significant balances in the insolvent Western banking system – which not only pays you NOTHING for your risk, but sometimes charges negative interest rates with the possibility of catastrophic failure or bail-in omnipresent; and frankly, likely. To that end, “barbarous relics” like gold and silver actually yield more than bank accounts! Again, what could possibly go wrong?
Over the weekend, the litany of PM-positive, economically-negative “horrible headlines” was as powerful as at any time in memory. In the Gaza strip, the casualty tally has exceeded 10,000. In the Ukraine, the propaganda war has reached epic proportions; and in Iraq, ISIS has captured the nation’s largest dam yielding the possibility of Baghdad’s water supply being cut off. Regarding the latter, keep in mind that OPEC anticipates 60% of its incremental oil supply over the next five years to emanate from Iraq; and if doesn’t, the odds of a dramatic price spike will rocket higher.
Throw in France seeking to enlist other nations in protesting America’s recent draconian fines of European banks – on charges of “money laundering,” India and Russia negotiating to “de-dollarize” their trade, and California’s drought reaching desperate levels – likely, yielding dramatic produce price inflation in the coming months; and it becomes increasingly clear TPTB’s efforts to maintain the dying status quo are reaching their limits. Listening to Obama’s former chief economist warning Americans to “ratchet down wage expectations” whilst MSM propaganda tries to convince us otherwise, such desperation could not be more obvious.
With most Western financial markets at historical highs – due entirely to Central bank money printing and market manipulation, global economic activity at post-2008 lows as debt and inflation surge, and the historical “barometers of bad tidings, gold and silver suppressed below their respective costs of production, what could possibly go wrong?
I’m sure it’ll be fine… /sarc
Andy, I’m confused about the 10-year Treasury yield. If the Federal Reserve has truly been tapering its purchases of Treasuries, the 10-year yield should be rising as bond prices fall due to lower demand. If the Fed has scaled back its purchases, where is the demand for Treasuries coming from? Am I missing something?
Exactly! They only “taper” when the markets move in their favor, as nearly all they do is covert. The fact that yields are falling – despite the propagandized “recovery” is what I cal the most damning proof yet of QE failure” (/the-most-damning-proof-yet-of-qe-failure).