Looking back, we may well view this week as a major inflection point in financial history. In nearly 12 years of being “all in” the Precious Metals sector, we have never seen such persistent, blatant manipulation coupled with equally ridiculous – bordering insane – anti-gold propaganda, in many cases from so-called “allies.” In the name of brevity – and couth – I’ll simply state that gold’s “negativity scale” is pegged to the end of the scale; at least, here in the Western world – where a combination of economic desperation, market intervention and brainwashing has tragically dumbed down what were once the world’s most entrepreneurial, forward-looking societies.
Michael Pento says a “zeitgeist” has been fostered by the aforementioned foolishness, in which gold is viewed as only capable of rising if QE is increased. Of course it ultimately will be (and has been behind the scenes); but the fact remains that global QE has increased exponentially since “dollar-priced gold” peaked in August 2011; and thus, we believe this “zeitgeist” is more the result of heightened Central bank price suppression than all the other issues combined.
This is why physical gold and silver supply is all but drained physical demand is at record levels; and COMEX, LBMA and Globex PAPER attacks dramatically more frequent and intense. How else can gold be attacked at the “2:15 AM” EST open of the London pre-market session on an astonishing 158, or 90%, of the past 175 trading days; or silver experience a 2%+ intraday decline on 54% of all trading sessions throughout the past year? Heck, gold has been attacked at 2:15 AM EST on 14 of this year’s 15 trading sessions alone, including today; yet, gold is up 2% for the year!
Why did I title today’s article “where do I start,” you ask? Because lately, I feel like I’m drowning in “horrible headlines”; as the global economy dramatically weakens, political tensions rise, social unrest stirs, money printing, inflation and debt explode. In other words, some days it’s hard to pin down a single topic to focus on, and this is one of them.
However, for the sake of order, let’s start with the first thing on my mind; i.e., INFLATION. TPTB continues to harp on how it’s non-existent; despite the fact the cost of living has never been higher. Not to mention, at a time when real wages – here in the States, and many other dying Western economies – are at multi-decade lows. Consequently, a dearth of high paying jobs, coupled with creeping inflation in items we “need versus want,” is causing the very governments that fostered such conditions to turn to economy-killing socialist policies.
The resulting, massive reduction in the cost of living is why Western birth rates are plummeting; as highlighted by the “demographic hell” unraveling Japan at a terrifying pace. When one considers how many senior citizens will need to be supported by a rapidly shrinking base of (unemployed and/or underemployed) Western youth, it’s easy to realize why governments’ only choice will be further money printing. Which, of course, will only accelerate the inevitable end of the ill-fated, global fiat Ponzi scheme.
In Japan’s case, we have long written of how its unique demographics have given the world a glimpse what it can expect down the road. With the world’s oldest population (except for retirement haven Monaco), Japan’s fiat-created asset bubbles blew up first and subsequently burst first. To wit, Japan’s population is nearly ten years older than America’s; and its equity bubble burst in 1989, compared to 1999 here in the States.
Subsequently, the Japanese government’s response was the same as all fiat-currency-utilizing governments throughout history; i.e., to print more money. In the process, it made Japan the most expensive place to live on Earth, without causing any equity or real estate gains. To the contrary, Japanese markets have barely budged from their all-time lows in nominal terms, while setting new record lows in real terms each year. And now that its population is experiencing a veritable explosion in retirees, selling pressure on JGBs (Japanese government bonds) and U.S. Treasuries is dramatically intensifying. Subsequently, the nation has elected one money printing lunatic after another; in this case, re-electing Shinzo Abe in 2012, after he failed with a similar (but less intense) money printing platform in 2006-07.
“Abenomics” has thus far been a MASSIVE failure, with Japanese stocks barely rising in nominal terms – as the Yen has plummeted; pressuring the Japanese cost of living further and taking Abe’s approval rating to a record low – barely a year after taking office. With the aftermath of the Fukishima nuclear disaster only heightening Japan’s problems, all Abenomics has accomplished is increased Japanese inflation and an intensifying of the “final, global currency war.” Which is probably why still more destructive policies are being implemented, like raising the national sales tax from 5% to 8% in April (and 10% next year), coupled with fiscal stimulus programs funded with additional, printed money.
With debt/GDP above 220% (and rising rapidly), official rates pegged at ZERO (for the past 18 years), and the upward pressure on both as intense as a boiling teapot, it’s only a matter of time before Japan defaults on its obligations – either overtly, or via hyperinflation. And hopefully, it doesn’t instigate wars to divert its citizens’ attention from the financial calamity they face at home; as exemplified by the speech Shinzo Abe gave at this week’s Davos Conference in Switzerland, when he told the world it must stand up to Chinese imperialism – or else, suffer the consequences.
Speaking of China, I’m not sure how vehement we can be of the horrific corporate debt issues it faces; which may well yield a cascading chain of “shadow banking” defaults this year. China’s corporations, with the full approval of its Communist government, added an astounding $14 trillion of debt in the past five years alone, taking the total to an even more incredible $23 trillion. In fact, the so-called “conservative” PBOC printed an awe-inspiring $18 trillion of Yuan in 2013 – i.e., more than twice the $8 trillion of Yen printed by the BOJ; and thus, clearly something is very, very wrong amidst the world’s so-called “engine of growth.”
China’s flailing stock market – which we have written of ad nauseum – clearly senses this disaster; and now that its economy is officially contracting, per this morning’s sub-50 PMI reading, the potential for fear to spread across global economies and markets is palpable. If IBM’s horrific Asian results didn’t get the point across yesterday, perhaps today’s news that even McDonalds’ same store sales declined will do the trick. Frankly, we still rank Europe and India as “most likely to catalyze the big one”; however, with each passing day, the list of potential “black swans” is growing exponentially.
Back to inflation, Argentina’s Merval Equity Index continues to explode higher; just as the Venezuelan Index before it. With the Argentine Peso in freefall, it’s only a matter of time before its government officially recognizes the nation’s runaway inflation – just as Venezuela’s did last night, when it devalued the Bolivar by another 44%; although sadly, the real, black market Bolivar rate is perhaps 600% lower. And thus, our point that early nominal equity gains can quickly turn to massive real losses is made loud and clear; perhaps, even here in the States, where everything from beef, to chicken, to milk prices are hitting new all-time highs.
And then there’s India, where for the past year we have written about the “upcoming Indian catastrophe.” Even its government admits to 10% annual inflation; although in food prices, it’s arguably higher. This year’s massive, overt currency intervention – and maniacal gold suppressing tactics – have only put further pressure on the soon-to-be-voted-out Congress Party; which is exactly why the Miles Franklin Blog has alerted you for the past month that India’s onerous tariffs and import restrictions were on the verge of collapsing. The “black market” has simply become too powerful for it to contain; and after last month’s decisive losses in regional elections, it’s quite possible such tariffs will be entirely abolished ahead of India’s national elections in May.
Thus, we find Zero Hedge is citing unofficial comments this morning – from India’s opposition BJP party – as the “reason” gold and silver prices spiked sharply; in silver’s case, to – yet again – above its seven-month “line in the sand” at the very, very key round number of $20/oz.; and in gold’s case, not only above its two-month “line in the sand” at the very key round number of $1,250/oz., but the key “technical level” of $1,260/oz. In our view, the recent PM surge – amidst the most vicious Cartel capping in memory – is due to a confluence of fundamental, technical and sentimental factors that occurs but once in a lifetime. And given its root cause is the imminent end of an historic, 42-year mad experiment in global money printing, it may well be a once in history event. This is why one needs to listen to the handful of “good smart people” – like us here at the Miles Franklin Blog – who both know what they are speaking of, and have your best interests at heart; and NOT mainstream sellouts that litter the financial landscape.
And one last note – on a day when gold is up exactly its 2.0% “Cartel limit up” and the Dow down exactly 1.0%; i.e., the PPT’s “ultimate limit down.” As it turns out, the 1.4 million people that “unofficially” saw their long-term unemployment benefits terminate on December 28th didn’t actually have them “officially” cancelled until last week, per this week’s collapse in “emergency unemployment compensation.” And thus, last month’s 550,000 plunge in the Labor Force Participation Rate – causing the “unemployment rate” to fall from 7.0% to 6.7% despite an abysmal NFP report – was just the “appetizer” compared to what’s likely on tap February 7th.
To wit, if the BLS correctly subtracts these 1.4 million people from the Labor Force, we may well see the January “unemployment rate” plummet below 6.0%, just as the economy really starts to roll over. Now do you see why the Fed eliminated its 6.5% unemployment rate “threshold” for removing Zero Interest Rate Policy; instead, replacing it with a promise to maintain ZIRP for “at least” the next three years? And why the Fed will do nothing at next Wednesday’s FOMC meeting; with a much greater likelihood of overtly increasing QE in the coming months – let alone, what they do covertly?
We cannot be more vehement that time is running out on the world’s most comprehensive, destructive fiat currency experiment. And thus, if you don’t protect your financial well-being with REAL MONEY now, you may never get the chance. It’s up to you to make what could be the most important decision of you and your family’s life; do you want to be amidst the world’s “next 1%” or “next 99%?” And remember, it will be a far more dangerous, ugly world when the upcoming, inevitable financial collapse occurs; in which maintaining one’s wealth could mean the difference between life and death.