It’s early Tuesday morning, following a very pleasant holiday weekend. And yet, it took mere minutes for such bliss to be ruined – by not just the gold Cartel, but a global political, economic, and monetary system so rigged, deformed, and destructive, it pains me to even consider the nightmare its inevitable implosion will engender. Heck, even Citigroup’s Head of Global Strategy admitted so much this week; albeit, without touching the bigger issue of Central bank-led market manipulation.
“If there were any lingering doubts, this week’s gyrations demonstrate it is central bank liquidity, not fundamentals, driving markets. Almost all fixed income investors we meet bought into this idea some time ago. In equities, there are still a few holdouts – but the longer downward revisions to earnings estimates are met with record highs in markets, the more widely accepted the idea becomes.”
And not just market-wise – where real losses will not only be catastrophic, but historic – but socially; as sadly, despite an era of unprecedented technological innovation, humanity’s greatest traits are slowly but surely being replaced by greed, complacency, and sloth. To wit, today’s “top story” on Yahoo!; easily, one of the world’s most widely read news agglomerators.
Interestingly, the article that put me in this dour mood has nothing to do with gold and silver. But instead, the malicious avarice that utterly destroyed the music industry over the past two decades; starting with Napster, which was destroyed by its criminal activity; and ending with iTunes, which has permanently destroyed the music industry’s creativity for a few dollars of profit.
To wit, since Napster “invented” digital piracy at the turn of the century, music sales have plunged by an incredible 50%; and this, amidst the most maniacal global money printing orgy of all time. Consequently, albums are no longer even made, in lieu of “singles” that generate essentially no revenues for the bands that publish them – force them to exhaustively tour to eke out a living; even when their members are in their 60s, 70s, and in the late, great B.B. King’s case, 80s. Not to mention, at ticket prices so exorbitant, they’re almost impossible for the average person to afford. Saddest of all, and most damning of a “capitalist” system void of ethics, arts appreciation, or regulation, is not so much the collapse of music industry revenues, but output (i.e., creativity); as since Napster started poisoning the world in 1999, the amount of songs produced has collapsed by an astonishing 63%!
But don’t worry, all’s well. So long as Central banks can blow unprecedented financial bubbles – in which only the “1%” participate, yielding the largest wealth disparity the world has ever known – what could possibly go wrong? To wit, China’s PBOC has so badly mismanaged its mimicking of the Fed’s money printing lunacy, it has created an equity bubble so large, it makes the late 1990s internet mania appear tame by comparison. Let alone, as 1999 represented the peak of global economic activity, expectations, and “99%” wealth; as opposed to today, where not only is the world at its low economic point of our lifetimes; with the “99%” poorer, and more hopeless than ever; but its absolutely weakest economy is China. Which this morning, amidst a backdrop of collapsing commodities, currencies, and political stability, saw its stock market exceed 100% gains year-to-date – led by the IPO of a piddling company that was 826x oversubscribed! No, nothing could possibly go wrong here; or, for that matter, with any of the historic economic, financial, and monetary bubbles exploding the world round.
Again, it’s not just the financial realm where said deformations are pulling the proverbial rubber band to record tensions – but the political and social realms as well. Just look at last week’s British election – following which, a 2016 referendum for the UK to completely exit the European Union appears a fait accompli. Far scarier still, this weekend’s Spanish elections dealt a mortal blow to the status quo – essentially assuring 36-year old “anti-austerity” demagogue Pablo Iglesias will be elected President in December, from a Podemos Party platform that didn’t even exist 16 months ago. And this, with Greece a mere ten days from an interest payment even its own financial leaders admit it can’t make; let alone, its politicians, which this weekend came within 20 votes of formally defaulting before said payment even came due. And with this payment coming right down to the wire – not to mention, the “four month bailout extension” that expires in less than four weeks – Greece’s leaders cancelled a Euro Group debt negotiation session that was scheduled for today. Greek bond yields are surging to multi-month highs; but far more ominously, so are the rest of the “re-awakening PIIGS” – particularly, Portugal, Spain, and Italy.
Meanwhile, the commodity crash that commenced last Fall; which we vehemently warned would portend “unspeakable horrors” – particularly in the oil market so many sovereign nations depend on for political and financial stability – has unequivocally re-emerged as a front-and-center economic threat. Last week, I discussed this horrific turn in “just when you thought the worst had passed”; specifically, how in recent months, blatant paper support of widely-followed “industrially sensitive” commodities, like crude oil and copper, was masking the relentless decline of nearly all others.
That said, oil and copper have decidedly resumed their inexorable bear phases; which frankly, could last for years. Moreover, crude oil’s precarious situation could dramatically escalate next week; as ironically, the same June 5th representing the current “best bet” for Greek default will also host a “make or break” OPEC meeting – in which anyone with half an unbiased brain realizes will result in not only a lack of production cuts, but a powerful OPEC stance on the topic. Meanwhile, the dollar index has again exploded higher, as we predicted two years ago in anticipation of a global liquidity vacuum as the “big one” struck economies and financial markets like a tsunami.
In fact, not only are “commodity currencies” like the Australian Dollar, Canadian Dollar, South African Rand, Brazilian Real, and Russian Ruble plunging anew – essentially, offsetting all the Cartel’s paper gold attacks in local currencies; but so are all others – led by the Japanese Yen, which this morning, breached the powerful six-month support level of 123/dollar, putting the 2002 low of 135/dollar firmly in the cross-hairs. Remember, Japan not only has the most onerous debt load in global history, but the worst demographics as well. Which is why, two years ago – just as Abenomics was being launched – I suggested the Yen’s all-time low of 360 yen/dollar – “coincidentally,” achieved just before the U.S. abandoned the gold standard in 1971 – was eminently possible, per the below commentary from April 2013.
“The Yen’s five-month plunge stalled out at the 98-99/dollar level last month; and since then, my bearishness regarding Japan’s future has increased exponentially. It has been my belief that once resistance at the VERY, VERY KEY ROUND NUMBER of 100 was broken, it could yield a multi-year Yen avalanche; yielding dramatic inflation for the “poster child of monetary easing” – representing a ‘template’ of what the ENTIRE WORLD is about to undergo.”
Well, two years later the Yen is down another 25%; and whilst the Japanese cost of living has exploded to an all-time high – as its economy has collapsed to a level not seen in decades – the Bank of Japan not only claims “deflation” to be the nation’s biggest issue, but even considering an end to Abenomics is a “nightmare scenario.” And this, as nearly all major economies are actively stepping up the “final currency war” we warned of 2½ years ago; which inevitably, must end in destruction of the entire global fiat Ponzi scheme.
Last week’s news that the ECB is expanding QE barely a month after its commencement; and China’s commencement of a QE scheme disguised as a municipal bailout program; demonstrates just how rapidly this “war” is going nuclear. Which is why the Fed’s relentless insistence it is “considering” interest rates increases – despite across-the-board horrific economic data – such as this morning’s declining PMI Service Index, stagnant Richmond Fed Manufacturing Index, and plunging durable goods orders and Dallas Fed Manufacturing Index – is dramatically exacerbating the very dollar strength it so vehemently fears; which, by the way, we equally vehemently warned of four months ago. Mark our words, the “Yellen Reversal” – in which Whirlybird Janet is forced to admit the Fed’s failure by launching QE4 and/or NIRP – is far closer than most can imagine; and when it inevitably arrives, the global political, economic, and social landscape will experience unprecedented levels of destabilizing upheaval. And frankly, the only reason it hasn’t been announced yet is the Fed’s fear of the complete loss of credibility it will likely entail – which is why it works so maniacally to manipulate every financial market and economic data set imaginable.
Which brings me to the question all oppressed truth seekers – and particularly, gold and silver “bugs” – have pondered since TPTB went “all in” on printing money, manipulating markets, and spreading vicious economic and monetary lies in mid-2011. That is, “when will it end?” Or better put, when will the abject misery, torture, and angst of watching financial markets moved violently against their underlying fundamentals; Central bankers lauded for destroying the world; and politicians rewarded for advancing a cancerous status quo, where the vast majority of their constituents’ lives are destroyed; end? Much less, the aforementioned, hideously deteriorating social landscape – and demoralization of the masses?
In the case of gold and silver, the answer is far simpler – as inexorably, the balance between physical supply and demand will tighten until either a 2008-like shortage occurs; prices explode; or both. Sooner or later, the dichotomy between “record high PM demand and record low sentiment” we discussed yesterday will resolve in favor of the former – likely, more soon than late. That said, the hideous political, economic, and social ramifications of the aforementioned financial and monetary “deformations” will remain with us for years – if not decades; as the unwinding of history’s largest fiat Ponzi scheme will be among the most painful, life-changing events in global history.
Will it be a so-called “black swan” event that craters the entire, poisonous House of Cards – like, for instance, the “nuclear attack” ISIS is reportedly planning? Or, for that matter, a plain old Greek “Grexit” – which everyone with a half a brain knows is coming? I certainly don’t know, that’s for sure. However, if there’s one thing I am sure of, it’s that if you pull a rubber-band too far, it eventually snaps.