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It’s the Inflation Stupid!

by Andy Hoffman, Miles Franklin:

It’s Wednesday and whilst I know where today’s article – as well as the global commodity, currency, and financial markets – will end, it’s difficult to find a single topic to start with, given the myriad “horrible headlines” worthy of discussion. But since, ultimately, I seek to inform you about Precious Metal prices, I’ll start with the past two weeks’ “trading,” and what it portends.

Going back to last month’s BrExit referendum – whose “PM-bullish” political, economic, and social ramifications will be felt for years to come – the stock market’s “gut reaction,” rightfully so, was to sell off; as did currencies, commodities, and every “risk” asset imaginable. Conversely, Precious Metals, Bitcoin, and sovereign bonds surged – the former two due to real safe haven status; and the latter, the artificial safe haven status created by the front-running of ZIRP, NIRP, and QE “to infinity” policies.

That said, when essentially every major – and minor – Central bank says it’ll do “whatever it takes” to prevent stock market declines, they mean it. Which is why, despite horrible headline after headline – spanning essentially all imaginable political and economic topics – not only have “last to go” markets like the “Dow Jones Propaganda Average” recovered pre-BrExit losses, but incredibly, surged to new all-time highs.

Then again, not all markets shared in such Central bank orchestrated spoils – which is why, when the Japanese Nikkei didn’t joined the stock-goosing party (as god forbid, the Yen appreciated by 3%), Ben Bernanke, in the first “official” assignment he’s had since leaving the Fed two years ago, traveled to Japan to help Shinzo Abe launch a $100 billion “helicopter money” policy. This, despite two dozen prior rounds of failed monetary easings – over two decades, and two Abe Prime Ministerships. Not to mention, a day after Precious Metals exploded higher on the all-time most fraudulent NFP “jobs” report – proving, once and for all, that not only the voting public, but Wall Street itself no longer believes the BLS’ lies. Or, for that matter, that there’s a chance in hell the Fed will, or logistically could, raise rates again. Which, I might add, as discussed in Monday’s Audioblog, don’t have the slightest historical correlation to Precious Metal prices anyway. Certainly not today, when interest rates are overtly suppressed, and Precious Metal prices covertly so.

At the time of Abe’s helicopter money announcement, COMEX “commercial” naked shorts had reached all-time, “off the charts” levels – amidst the most wildly bullish Precious Metal fundamentals imaginable. Thus, it truly looked like the inevitable “end game” of Cartel destruction was nigh. For the prior two months, my counter-trend belief that PMs would continue rising with “commercial” shorts was correct, and I truly thought we were on the cusp of the long-awaited “commercial signal failure.” Not that the imminence of such an event would change my long-term strategy of accumulating PMs – on both dips and surges; as ultimately, I know prices will rise due to inexorably tightening physical markets, and unrelenting monetary inflation.

However, even I could not foresee the lunacy of the past week-and-a-half, in which PPT-supported markets have ridden the aforementioned wave of “whatever it takes” liquidity to their strongest “winning streak” in 3½ years; with U.S. indices – amidst relentlessly “horrible” headlines, and off-the-chart valuations – hitting new all-time highs. Heck, until this morning, the Nikkei was up all seven days following the helicopter money announcement, depicting just how deluded – and PPT-supported – the “all-important” stock markets, which principally benefit the “1%,” have become.

Conversely, Precious Metals have been capped with a level of viciousness even I’m having trouble recalling; and not until about an hour ago, when in the ultra-thinly traded COMEX “pre-market,” silver, in typical Cartel fashion, was “waterfall declined” by $0.30/oz, were the manipulators finally able to push silver materially away from the key round number of $20/oz. Remember, as I have noted ad nauseum in recent weeks, the number the Cartel is so deadly afraid of is $20.50/oz, as it represents silver’s 50-month moving average. Which surely, if breached to the upside, will set off a blizzard of “buy stops” so powerful, it would likely break the Cartel’s back, once and for all. Alas, they averted their destiny yet again. However, given the dire, rapidly collapsing state of the global political, economic, social, and monetary situation, such egregious market dislocations won’t last for long, in my very, very strong view.

I mean, just yesterday, the stock of Deutschebank, the “world’s most systematically dangerous institution,” again stuck out like a sore thumb – per what I wrote in yesterday’s “lower highs,and lower lows” – plunging 4% on a day when most bank stocks were relatively flat. And that, before Standard & Poor’s reduced the outlook on Deutschebank’s credit rating – which sits precariously, one notch above junk status – from “stable” (LOL) to “negative.” And this morning, with the German stock market up 1.5% – this, one day after an utter collapse in the widely watched German ZEW sentiment index – Deutschebank stock is unchanged. I mean, talk about a blaring red signal, of major, disastrous import. Yet, care of the PPT’s market-goosing, PM suppressing activities, no one seems to care…today.

In fact, aside from, LOL, the Yen being modestly lower, there’s not a shred of news that even the most jaded market apologist can point to as a reason why PMs would be lower, and stocks higher. To wit, crude oil prices – which have been the primary contributor to surging bond defaults and plunging currencies (so much so, that an impromptu “oil PPT” was obviously formed to support prices) have plunged to a new multi-month low; in turn, catalyzing a renewed plunge in “commodity currencies” the world round. And oh yeah, the Euro – which is about to plunge below the key 1.10/dollar level, enroute to its multi-decade low, set last year, of 1.04/dollar; and eventually, its all-time low, well below parity – as well-founded speculation of the end of the Euro accelerates. Which in my view, care of last month’s political “shot heard round the world,” the BrEXit, has become a fait accompli.

To that end, now that both Euro and Pound-priced gold are nearing their all-time highs – despite the maniacal price suppression centered around the “London Fix” (you know, the one Deutschebank admitted to manipulating for the past 15 years), doesn’t it seem a tad ridiculous that PM prices would waterfall decline when hundreds of millions of Europeans are watching their currencies collapse? Let alone, as the ECB is trying to destroy the Euro; with the BOE close on its heels, per Chief Economist Andy Haldane’s comment this weekend that that it intends to “promptly and muscularly” ease monetary policy at its upcoming August meeting. In other words, the 0.5% interest rate they’ve maintained for the past eight years is “not enough monetary cowbell”; so zero, or perhaps negative, rates are in the cards.

Deutschebank’s downgrade; French terrorism; the accelerating collapse, and bailout demands, of the dead-in-the-water Italian banking system; martial law, and violent anti-West saber rattling, in Turkey; Venezuelan hyperinflation; Japanese helicopter money; an accelerating Yuan devaluation; rising South China Sea military tensions; plunging oil prices; collapsing currencies; and careening U.S. economic and investor sentiment (the latter, despite record high stock markets); are just a few of the “PM-bullish, everything-else-bearish” headlines in the news, in just the past few days alone! And yet, we’re to believe this has catalyzed the Dow’s longest winning streak (eight straight up days, and 13 of the past 15) since early 2013; whilst Precious Metal prices, in prototypical Cartel fashion, are relentlessly pressured. I mean, just how dumb do “they” think we are? And regarding the latter, how long do “they” think it will be before such ridiculous paper suppressions will result in another supply-draining physical buying surge – in markets that are already historically tight?

That said, in a world where propaganda, economic data cooking, and market manipulation relentlessly weigh on our world view, let’s not for a second forget the principal reason Precious Metals are not only massively undervalued today (particularly when considering the maniacal, unprecedented price suppression), but have been countless dozens of times throughout history. Which is, in borrowing from Bill Clinton’s simple, but wildly successful 1992 campaign slogan that “it’s the economy, stupid!” – which essentially, Donald Trump is running on today. I.e., “it’s the inflation, stupid!.”

Overseas, this concept is far easier to understand in today’s U.S. dollar-anchored fiat Ponzi scheme; as given its, albeit weakening, “reserve currency” status – that, and the aforementioned gold and silver price suppression – safe haven flight to the dollar’s liquidity has caused U.S. inflation to rise more slowly then in the rest of the world. Where incidentally, it is surging, for the converse reason. Trust me, when the Euro, Pound, and Yuan are sitting at multi-year lows – with the Yen bucking the near-term trend (despite being 50% lower than its pre-Abenomics high) only due to unwinding of the “carry trade,” which has equally devestating consequences with an outright Yen plunge – there’s a lot of inflation the world round. This, without considering the plunge in the South African Rand, the Brazilian Real, the Russian Ruble, Mexican Peso, Canadian and Australian dollars, Nigerian Naira, and countless other “commodity currencies.”

Irrespective, I dare anyone living in the States to claim “deflation” to be an issue – particularly in light of the fact that despite record stock prices, multi-year low economic sentiment abounds. Not to mention, the explosive popularity of anti-establishment candidates like Donald Trump and Bernie Sanders. I mean, even the government admits rental prices are not just at record highs – but surging to such levels; which tends to have an impact on a nation where home ownership rates are at multi-decade lows.

Or how about insurance prices, of all kinds – yet another hideous ramification of zero interest rates, which has caused insurance companies to ratchet up premiums, to recoup the lack of yield in their bond portfolios. And then there’s the giant pink elephant in the room – of the (sadly, not understated) parabolic rise in healthcare costs, in a nation where a combination of hideous demographics and Obamacare (i.e, the worst piece of legislation in U.S. history) will combine to not only morph cost increases from parabolic to hyperbolic, but catalyze a complete lapse to European-style socialism – in which income tax rates, on average, exceed 50%. I mean geez, I will be purchasing dental insurance for the first time this week – as quite obviously, dental price inflation has exploded so rapidly, it’s becoming just as necessary to protect against catastrophically priced major procedures, as major medical procedures. And yet, even the explosively rising cost of such policies still only compensate you, at most, for 40%-50% of such procedures (after deductibles), with 18-month “waiting periods” from the time you start paying premiums, to the time insurance companies will actually pay out benefits!

Yes, my friends, “it’s the inflation, stupid!” And if you don’t realize – and soon – that not only are all fiat currency regimes Ponzi schemes that must grow larger to survive (with hyperbolic money printing), but in the final stages of such schemes, you are likely to lose most, if not all of the purchasing power of the “money” you spent your life saving. Regarding financial markets, whether or not such purchasing power will be lost via hyperinflation or crash is still uncertain, although I think the former is far more likely. But as for real money- i.e., physical PMs – “crash” isn’t even possible, as the already historically scant physical supply will run out long before the Cartel has a chance to “cover its shorts.”

Read More @ MilesFranklin.com

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