The Phaserl


“Low-Interest Rate People”

by Andy Hoffman, Miles Franklin:

It’s early Wednesday morning, with markets “quiet” ahead of what, in my very strong view will be, per the title of yesterday’s article, the “Fed’s last rate hike.” (ACTUALLY, THEY’RE NO LONGER “QUIET” AFTER THE HORRIFIC RETAIL SALES AND CPI PRINTS THAT JUST CAME OUT – DESCRIBED AT THE END OF THIS ARTICLE – JUST BEFORE I HIT SEND).

The reasons I believe so are explained in said article, so I’m not going to reiterate them here. Then again, it doesn’t take an “expert” to realize raising rates into an environment of “dotcom valuations in a Great Depression Era” is as suicidal. Not to mention, hubristic; as the only reason the Fed is crazy enough to believe such a counter-intuitive action could be pulled off without reeking massive economic – and potentially, financial market – destruction, is the Fed’s misplaced belief it can “counter” such actions by perpetually controlling financial markets, against the desires of millions of market participants, and history’s most egregious mis-valuations. Trust me, people are starting to understand this – as frankly, I am hard-pressed to remember a day, outside of the post-BrExit aftermath – when so many people inquired about immediate gold and silver purchases; and even platinum, per Monday’s “Platinum, the forgotten Precious Metal.

Nevertheless, despite the past week’s relentless Cartel attacks; in my view, to desperately defend gold and silvers’ 5½ year downtrend lines – of $1,274/oz for gold, and $16.30/oz for silver; and 200-week moving averages – of $1,240/oz for gold, and $17.75/oz for silver; and “set the tone” for today’s FOMC meeting – the very strong likelihood, for anyone with an objective view, is be that today will represent a key inflection point in U.S. monetary policy history, given that it’s all but impossible for the Fed to continue to purport “all’s well,” when nearly all economic data is plunging; the fiscal stimulus and tax cuts it anticipated aren’t happening; and financial valuations are at all-time highs.

A record amount of Fund Managers believe equity valuations are overvalued – more so, than even the peak of the late 1990s tech bubble! Throw in the fact that market-based interest rates are near 52-week lows, whilst the yield curve is dramatically flattening, and the case for further rate hikes is essentially zero. Which, I might add, is what the money markets are predicting – giving just 23% odds of a September rate hike, and 38% in December.

By December, I’ll be shocked if negative GDP numbers have not yet been printed; or at the least, that the realization of imminent recession won’t have become mainstream. Frankly, the amount of things that can “go wrong” by then has never been higher – politically, economically, and financial market-wise; from collapsing economies and currencies, to dramatic political and/or geopolitical events; to draconian, fiat-currency destroying decrees, as I predicted in December would be a major 2017 theme. Or perhaps collapsing oil prices, as validated by yesterday’s “death cross” technical breakdown – preceding last night’s crude oil plunge, following another horrific inventory report. You know, the polar opposite of what’s occurring in Precious Metals, and will continue to do so ad infinitum; i.e., plunging supply, and surging demand.

In yesterday’s article, I discussed the economic reasons why today’s rate hike, which is expected with 95% certainty, will be the Fed’s last. However, there are equally powerful political reasons as well – starting with the fact that within the next 12-18 months, Donald Trump will not only have the ability to replace Janet Yellen and Stanley Fischer as Fed Chairman and Vice-Chairman when their respective terms expire, but several other FOMC positions.

During Trump’s Presidential campaign – as is the case with all political hopefuls – he “fibbed” about his true beliefs and intentions. Such as, that the pre-Election unemployment rate was grossly understated – and the NFP jobs report a “big joke”; which he now claims to have fallen to a ten-year low due to his own policies, despite no actual policy having been enacted. Or that he’d “drain the swamp” – before appointing a cabinet of sundry billionaires and crony capitalists; not to mention, former Goldman Sachs employees as Secretary of Treasury, head of the National Economic Council, and head of the SEC. Heck, National Economic Council head Gary Cohn, who mere months ago was Goldman Sachs’ Chief Operating Officer, is apparently Trump’s top choice to be the next Fed Chairman!

And last but not least, that the Federal Reserve had fostered a “big, fat, juicy bubble” – which, after the maniacal, PPT-orchestrated post-Election stock rally, based on a fraudulent meme (“Trump-flation”) that has decidedly NOT occurred, he now claims to be entirely due to his Presidential “success.” This, despite 60% of Americans now “disapproving” of Trump’s actions – not that any other outcome was possible, given the historic economic mess he inherited, and political conflagration his election ignited.

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