by Andy Hoffman, Miles Franklin:
There’s barely a week left in 2016, and it’s hard to believe I’m actually looking forward to it ending. After five miserable years of unprecedented Precious Metals suppression – going back to May 2011’s “Sunday Night Paper Silver Massacre” and September 2011’s “Operation PM Annihilation I,” when the powers that be nearly lost control of financial markets entirely; and consequently, passed the “point of no return” when the “evil tripod” of money printing, market manipulation, and propaganda became a 24/7 operation; great strides were made in this year’s first half – with gold and silver rebounding, in the wake of the BrExit, to as high as $1,375/oz and $21/oz, respectively.
Alas, said powers that be took this “affront” by “stair-stepping” their ultimately unsustainable manipulations when the Trump election, and Italian referendum, unleashed the worst bond market crash since the early 2013 “taper tantrum” – when U.S. Treasury yields surged from 1.7% to 3.0%; and the worst currency carnage since the second half of 2014, when a dollar index surge from 80 to 100 coincided with a catastrophic plunge in the CRB commodity index, from 315 to 215.
Two years later, the dollar index – whose “strength” I mocked in yesterday’s “demystifying Precious Metals Propaganda,” is at a 14-year high of 103; whilst the CRB Index sits at 190 – below its 2008-crisis low of 200, having traded as low as 155 earlier this year, before the “oil PPT” commenced its own, unprecedented combination of lies, propaganda, and market manipulation to simply push oil back to $50/bbl. A level, I might add, that is still unprofitable for the vast majority of global oil production, sitting tenuously atop the worst fundamentals in crude oil history. Which, when OPEC and “NOPEC” fail to come through with the “production cuts” they supposedly agreed to, will unquestionably lead to a further plunge in the world’s most overvalued commodity. Other than base metals, that is – whose historic bubble appears to finally be deflating; whose undeserved strength masks continued weakness in the vast majority of global commodities – such as key agricultural staples like rice, corn, and wheat, which are collectively killing the historically overleveraged (like everything else these days) farming industry.
Sadly, the global political, economic, and monetary environment is far worse than in 2011 or 2014 – with trade data at its worst in decades; currencies, their lowest levels ever; debt, of all kinds, parabolically higher; and leadership changes, towards more nationalistic, anti-free trade regimes, the rule rather than the exception. Aside from the U.S., where the Fed’s record $4.5 trillion balance sheet and 0.5% interest rate are considered, LOL, the Central banking cabal’s most “hawkish,” essentially all Central banks – other than those whose currencies are literally hyper-inflating – are at their most dovish states ever – with the ECB’s balance sheet on track to surpass the Fed’s $4.5 trillion in 2017; whilst the Banks of Japan and Switzerland overtly monetize stocks (as opposed to the Fed, which does it covertly); and the Bank of England expanding QE despite a collapse in the Pound to its lowest level in the nation’s multi-century history – in a desperate, and certain to be futile, effort to prop up the massive London property bubble its own suicidal policies created, creating massive inflation for the UK’s masses, for the benefit of the “1%” owning such properties.
The greatest economic bubble of all-time, CHINA, is rapidly deflating, prompting its government, two weeks ago, to admit in a state-owned newspaper that “China’s economic downturn is just now beginning, and will last a long time”; and that “China has passed its economic boom period, in which many problems were hidden, but now will gradually surface.” To that end, the Chinese government bond market is crashing; and the Yuan, in response to the aforementioned economic crash and the surging dollar it is pegged to, has been devalued to its lowest level ever – on the cusp of plunging below the key 7.0/dollar level that will surely yield a dramatic explosion in already surging capital outflows. In turn, catalyzing the massive capital controls that have Bitcoin surging to record highs; which shortly, will yield similar movements in gold and silver, as the massive physical premiums currently being paid in China – and India – for actual physical metal inevitably lead to acute shortages, in a world where supply is already dramatically declining.
Speaking of India, there’s that little old thing called the “war on cash” that exploded onto the global scene this Fall. Which unquestionably will be a major 2017 theme, as well as other draconian decrees that will exponentially worsen the aforementioned, generationally negative political, economic, and monetary trends – including the “war on gold” that will inevitably fail as miserably as attempts to suppress Bitcoin usage are doing so now; as if you simply hold your unencumbered metal, you will unquestionably win their war against the immutable forces of supply and demand; as inevitably, even the Fed will be forced to go “all-in” printing money and monetizing bonds – and perhaps, stocks trading at all-time high valuations, amidst all-time low fundamentals – as the inexorable forces of “Economic Mother Nature” inevitably win the day.
The “Trump-flation” rally, which has taken the “Dow Jones Propaganda Average” to record highs whilst the vast majority of global asset markets have plunged, is simply a bubble waiting for a pin. And with each passing day that the world realizes NOTHING will change for the better with Trump in office, that pin comes closer to arriving. Potentially, as soon as March, when the debt ceiling reality smashes headlong into the half-baked fantasy of “hope and change” that will spur no more hope and change than Obama eight years ago – at a time when the nation’s economic state is far worse; its debt load two times higher; and interest rates rising.
My strong belief is that Europe represents the greatest near-term risk to global political, economic, and monetary stability. That is, unless a renewed dollar surge forces China to unleash the “cataclysmic, financial big bang to end all big bangs” devaluation first – which may well happen. To that end, if you thought the BrExit and Italian referendums were shocking political events – the former, catalyzing a dramatic financial crash (until the PPT was able to rescue it); and the latter, a plunge of the Euro to fresh 14-year lows; just wait until the radically anti-Islam, anti-Germany Geert Wilders is elected Holland’s Prime Minister in March; whilst the equally anti-EU Marine Le Pen is elected France’s President in May; and likely, similarly anti-Euro parties in Italy – when snap elections are inevitably held; and Germany, where the next Prime Ministerial election is scheduled for October. This, as the ECB’s maniacal monetary policy – ironically, destroying the Euro despite Draghi, four-and-a-half years ago, claiming he’d do “whatever it takes to save it – is now expected to yield nearly a trillion Euros of additional asset monetization; likely, including stocks as well as bonds.
However, Europe’s most likely “flash point” will be the dying banking systems of PIIGS nations like Greece, Italy, and Spain. Which, in turn, will cascade onto “stronger” nations like Germany (read, Deutsche Bank) and France, whose banks are heavily leveraged to the PIIGS – via the ownership of massive bad debts, and derivatives thereof – as history’s largest, most destructive fiat Ponzi races through its hideous terminal stage. In Greece’s case, the long-awaited GrExit is virtually assured; whilst in Spain, the Catalonian secession will likely smash that dying PIIGS’s banking system like a runaway train. And then there’s Italy – which along with the likely election of the violently anti-EU Five Star Movement party to power, is dealing with the implosion of its hideously insolvent banking system now – as evidenced by the inevitable “bailout” of its third largest bank (despite bailouts being strictly prohibited by the EU, whose updated “template” favors bail-ins), Banka Monte dei Paschi.
Just yesterday, Italian Finance Minister, Pier Carlo Padon claimed the “Italian banking system is solid” – mere hours before the Italian Parliament passed legislation enabling it to increase the already skyrocketing national debt by an additional 20 billion Euros, to bail out Monte Paschi by assuming its debts and taking an equity stake of up to 70%. This, when it was once and for all understood that the fabled five billion Euro share offering it had sought had not a chance in hell of occurring. Which I assure you, will not instill “confidence” in the Italian banking system when it occurs, no matter how much propaganda is spewed to yet again attempt to convince the unwashed masses that the situation is “contained.” As if 20 billion Euros can staunch the 360 billion Euro bad debt wound Italian banks admit to – let alone, in a rising rate environment that is unquestionably raising that level materially.
Under such circumstances, we enter 2017 – with the Euro, and nearly all fiat currencies already at, near, or well below previous all-time lows; and bubbles from China to the U.S., and nearly everywhere in between, on the verge of popping. And whilst this is occurring, the Cartel’s most desperate offensive yet has pushed gold and silver prices back to levels last seen nearly a year ago, when the vast majority of the global mining industry was on the verge of collapse. This, as demand is arguably higher than at any time in history; supply tighter; and the reasons to own Precious Metals more urgent than at any time in modern history. To which, I can only urge you to take advantage of whatever “lull,” if any, the slow holiday period provides you to set your financial house in order, including the purchase of physical gold and silver at such historically “subsidized” prices.
P.S. Egads! As I was about to hit print, November Durable Goods orders came in at a much worse than expected -4.6% month-over-month print, whilst jobless claims unexpectedly surged. But don’t worry, “confidence” is surging, as Donald Trump will solve all of our problems!
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