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Friday July 25th 2014

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The Best Laid Plans

On his weekly podcast, Andy Hoffman discusses negative interest rates, 10 year Treasury yield, jobless claims, home sales, Europe, gold and silver.  To listen to the audio, please click below:

Download the MP3 File: The Best Laid Plans

Video: The Best Laid Plans

The End of Gold and Silver Mining

How many reasons to own precious metals- and fear all else-what can I say? I guess we’ll see today, culminating in today’s topic du jour – the increased confidence in our long-standing prediction that not only has global gold and silver mining peaked, but will likely not rebound material even after the Cartel’s inevitable demise.

Let’s start with the so-called U.S. “recovery”; which with each passing day becomes more widely understood to be nothing but a scam fabricated by the propaganda machines in New York and Washington. To wit, when the CEO of Wal-Mart says demand weakness is pervasive and entirely non-weather related – it strains credibility to believe otherwise.  I mean geez, U.S. movie box office sales are down 25% year-over-year and 41% from two years ago!  Yesterday’s news that the IMF downgraded the U.S.’s 2014 GDP growth outlook to a measly 1.7% only solidifies this view; not to mention, its “recommendation” that the Fed maintains zero interest rates well past mid-2015.  Putting the “nail in the coffin,” Caterpillar – the world’s largest construction equipment contractor – just announced its 19th straight quarter of year-over-year revenue declines!

DavidStockmansContraCorner.com

That said, when even the “1%” is suffering, it’s even more damning.  And in no sector is this more evident than golf, where Dick’s Sporting Goods just fired 400 PGA golf pros due to plunging demand.  I’ve been to my local Dick’s several times in recent months; and by and large the golf section is a ghost town.  Not to mention, the golf course I live on; which by my estimation has probably held 75% fewer client-sponsored tournaments this year.  Heck, my good friend in the “golf entertainment” business told me his July business is down 95% this year with the only gig he performed discounted by 60%.  And guess who his lone client was?  None other than the U.S. government!

In the run-up to next Wednesday’s FOMC meeting, TPTB’s best laid “deception plans” have been under siege; as not only are “extraneous” events like the MH-17 tragedy emerging at an alarming pace, but the PPT has inadvertently created a 1999-like equity bubble – whilst Treasury yields plummet to the year’s lows, in what we described as the “most damning proof yet of QE failure.”  Actually the equity bubble is far worse than 1999; as back then, the entire population participated, under the false assumption of a “new paradigm” of economic prosperity.  However, this time around, it is entirely due to Fed money printing and PPT “support” – with only “the 1%” participating.  To wit, recall the incredible charts we published last week of how – thanks to Cartel suppression – gold and silver prices are now dramatically more “oversold” than at any time in history.  Conversely, as you can see below, the S&P 500’s MACD indicator is now more “overbought” than the 2000 peak (and way above the 2007 peak); which frankly, is the most shocking market development of my 25-year career.  Back in 1999, when I was an oilfield service analyst at Salomon Smith Barney, the market was so red-hot my team’s investment bankers were forcing us to focus all efforts on “internet oilfield stocks,” which they wanted to take public at multi-billion dollar valuations.  In fact, the “Bubba to Bubba” report I penned in February 2000 is unquestionably the most well- read piece I have ever written.  That my friends, was a bubble!

Black Graph

Back to precious metals, the current “suppression tactics” are more onerous than anything I’ve experienced in my 12+ years in the sector.  Literally, the “caps and attacks” occur from the second thinly-traded paper platforms open Sunday night to the second they close Friday evening.  Every rally is immediately squelched with “Cartel Herald” algorithms, every “key attack time” utilized, and all “PM-positive” news met with heightened paper selling and accompanying anti-PM propaganda.  That said, PMs are still the best performing asset of 2014, which should tell you all you need to know about the inexorable growth of global demand – principally from the Eastern hemisphere.

In our view, gold and silver fundamentals are by far, the most bullish since their respective bull markets commenced at the turn of the century.  To that end, as we wrote in “That Other Reason to Own Gold,” the outlook for global production may be as dire as the demand outlook is explosive.  We have written ad nauseum of the ugly circumstances that have yielded flat production from $250 gold in 2000 to $1,300 today.  However, said combination of product scarcity and exploding mining costs is accelerating, yielding our belief that regardless of price, production could plunge by 25% or more in the coming five years.

Recall last week’s article from the great Steve St. Angelo describing how the five largest gold miners’ 2013 ore grades hit an all-time low; ominously, during a period of “high-grading” that will only cause grades to plunge further in the coming years.  Since 2005, the average ore grade of these five companies, which cumulatively produce 35% of the world’s gold has plummeted by an astounding 29% to a measly 1.2 grams per tonne – or 1.2 parts per million.  Conversely, the amount of ore processed rose by 28% depicting how the utter explosion of production costs is occurring across-the-board.

Moreover, the new project pipeline is nearly non-existent; as care of depletion, exploding costs, and onerous permitting and environmental issues (not to mention, tragic mine collapses like Utah’s Kennecott), there have been practically ZERO major discoveries in the past decade.  Not to mention, massive cancellations and postponements such as Ecuador’s Fruta Del Norte and Argentina’s Pascua Lama.

2 Gold Graphs

Equally importantly, the junior mining industry – where nearly all major discoveries have traditionally been made – is not just dying, but dead.  The “capital strangulation” the Cartel – and a handful of major Canadian banks – has caused since 2007 has finally reached the “max pain” level; as no doubt, roughly three-quarters of all junior miners have since been bankrupted.  Trust me, I know as from 2002-08 my entire portfolio consisted of junior miners, and from 2006-11 I worked in the junior mining industry.  We discussed this inevitability in last year’s “Junior Mining – and Future Production – Death”; and this week’s announcement that the San Francisco and New York Hard Assets have been indefinitely cancelled “seals the deal” on our predictions.

I have been to all the major North American conferences, and no doubt San Francisco show was America’s largest and best.  With it now gone, as well as the less impressive, but highly symbolic New York show it should be crystal clear that the sector for all intents and purposes is bankrupt.  In Canada, the Cambridge retail mining conferences in Toronto or Vancouver remain on the docket.  However, the same fate will no doubt befall them in 2015 if PM prices are not dramatically higher.

Given exploding costs and “time to production” (from discovery to commercial mining) the financial hell rained down on the industry by seven years of gold, silver and mining share suppression will not be overcome by any circumstance – including the Cartel’s inevitable collapse.  In other words, the “perfect storm” of unprecedented global demand and historically low production is all but ensured; and possibly, far sooner than most could imagine.  Thus, while the “end of mining” may not occur literally, it by all and intents already has practically.

Radio Appearance with John Stadtmiller of RBN – July 22, 2014

Andy Hoffman joins John Stadtmiller of the Republic Broadcasting Network to discuss JPMorgan recent fines, U.S. dollar reserve, London Gold Fix, Germany, Russia, U.S. housing market, gold and silver.   To download the audio, please click on the link below:

Andy Hoffman – Republic Broadcasting Network – July 22, 2014

Peak Madness

Since TPTB realized their fiat Ponzi scheme had passed the “point of no return” in mid-2011, market manipulation has reached heights never before imagined – culminating in last week’s “absolute peak of lunacy,” when Goldman Sachs invoked the long discredited “Fed Model” to predict the S&P 500 would double by year-end if both Treasury yields and corporate earnings utterly implode.  Which, by the way, may well occur if the nearly all-time low in the Baltic Dry Index (including the weakest July in 28 years) means anything.

Zero Hedge

Zero Hedge

In holding the vast majority of my net worth in physical precious metals, it has been extremely difficult to watch gold and silver trashed by fraudulent naked shorting and covert Western dishoarding (to the East) over these three painfully long years.  However, my frustration in the accompanying global propaganda campaign has been far more powerful.  To wit, if Miles Franklin were based in China it would be experiencing record sales due to deep-seated time-honored Chinese knowledge regarding the value of, and urgent need to own precious metals.  Here in the States, however, anti-gold propaganda is so powerful, that most “investors” would sooner believe Goldman Sachs’ ridiculous assertion that gold will fall to $1,050/oz. – despite the most powerful fundamentals of our lifetimes and a mining industry on the brink of collapse.  Even the most powerful technical charts we have ever seen are ignored, such as this astoundingly bullish 43-year MACD chart for gold (silver is roughly the same); in essence, inadvertently created by the aforementioned three years of extreme counter-trend suppression.

Brown Graph

Everywhere we look – political, economic and social – blatant propaganda is prevalent and outright lies the norm.  So much so, that most people don’t seem to care anymore as the brainwashing of “the 99%” has so powerfully overcome their instincts.  For example, I was literally bowled over by the lunacy of the U.S. government immediately accusing the Russians of downing MH-17 – when we had essentially no evidence and no sentient being could proffer a coherent Russian motive.  Just days later, when the Russians published an iron-clad forensic analysis depicting a high degree of likelihood that not “pro-Russian separatists,” but the U.S.-supported Ukrainian government was responsible, the U.S. government suddenly changed its tune.  And thus, less than a week after accusing Russia of genocide, “U.S. Intelligence Officials” – better yet, “on condition of anonymity” – now claims MH17 was mistakenly shot down by separatists, with “no visible link to Russia.”  However, from the other side of their mouths, they claim Russia “created the conditions” for the downing of MH17.  I mean, seriously!  Just how little credibility can the U.S. government have regarding such an incredibly sensitive tragic event with the potential for yielding a global “Archduke Ferdinand Moment?”

And then there’s the insanity relating to the unrelenting propaganda of economic “recovery,” when the aforementioned Baltic Dry Index – and essentially all measures of real activity – state otherwise.  Including, by the way, one of the weakest GDP prints in U.S. history, utilizing the lowest ever price deflator amidst surging “need versus want” inflation.  Let alone, the “dog ate my homework” excuse that “the weather” was responsible despite iron-clad proof otherwise.  Better yet, we are actually seeing the weather excuse now during the summertime despite the warmest global May and June ever.  To wit, no less than the “International Council of Shopping Centers” claims “unseasonably cool weather hurt consumer interest in summer merchandise, despite clearance prices”; ending the statement in true Wall Street-like propaganda form, predicting such ‘pent-up demand’ may “shift to back-to-school shopping.”  Again, these are actual quotes from actual people in positions of authority!

Next up, we have Nobel Prize winning economists claiming history’s largest-ever debt explosion to be a non-event.   Yes, Paul Krugman – i.e., the Jeffrey Christian of economics – actually claimed the Congressional Budget Office’s own government-sponsored forecast that the national debt will reach $52 trillion by 2039 does not connote a debt spiral.  Better yet, his “proof” is the CBO’s simultaneous expectation that interest rates will only rise to 4.1% over the intervening 25 years whilst real GDP growth will average 4.3% (don’t worry, inflation is not possible).  Again, I’m not making this stuff up.  This is an actual Nobel Prize winning economist, regularly quoted in the most “prestigious” media outlets.  Ominously, under such assumptions, if real GDP “only” grows by 3.3% per annum during this period and interest rates do not rise above the aforementioned 4.1% level (well below historical averages), the budget deficit would spiral from $1 trillion per annum to roughly $7.5 trillion.  But don’t worry, this can’t happen, Krugman claims; as if so, “people will fear we’re about to turn into Greece – Greece, I tell you.”  Nuff’ Said.

Even the world’s smartest anti-propagandist website – i.e., Zero Hedge – can’t even get the most obvious manipulation in history correct; such as yesterday, when amidst surging energy prices, plunging Treasury yields, and wildly PM-bullish news in every imaginable direction, it attributed the gold market surge at 8:40 AM EST to the “hot” CPI report at 8:30 AM EST – and the ensuing plunge to the existing home sales “beat” at 10:00 AM EST.  Actually, the headline CPI number of +0.3% – rigged or otherwise – met expectations, whilst the core increase of +0.1% was lower than the expected 0.2%.  And as for the existing home sales “beat,” I’d hardly call 504,000 (seasonally adjusted) sales versus the expected 499,000 noteworthy.  In the big picture, following its usual 8:20 AM COMEX-opening plunge, gold attempted to rally at the only time of day such movement is “allowed” – before being viciously knocked down at the 10:00 AM EST “key attack time #1,” when the global physical markets close.  Better yet, when gold attempted to rally later in the day, take a guess what time it was again smashed back down.  Yep, exactly the 12:00 “cap of last resort” I first described a decade ago.  Sorry to bring this  topic up again, but in my view, such repetition – broadcast daily over the worldwide web – is one of the best methods of spreading truth; and ultimately, ending the price suppression destroying the global monetary system.

2hr Charts

And finally there’s the dissemination of PM-positive, non-PM negative “horrible headlines” that saturate the airwaves each and every hour.  I mean, to see such Western complacency towards gold and silver is utterly astonishing, when in just the past 24 hours headlines emerged such as “Turkish Prime Minister cuts U.S. ties, mulls de-dollarization with Russia,” “Portuguese President admits Espirito Santo failure could be systemic,” “Gaza death toll exceeds 600,” “NY Fed slams Deutschebank (and its €55 Trillion in Derivatives), accuses it of “Significant Operational Risk”; “One week left until Argentine default,” “Market Manipulation Probe Escalates as UK Opens Criminal Investigation Into Foreign Exchange Rigging”; “Venezuela’s Transformation To Socialist Utopia Is Nearly Complete as Its Factories grind to a Halt”; “China’s Clout on Show With BRICS Bank Formation,” “China signs currency swap worth 150 billion yuan with Switzerland,” and “Credit Suisse to Exit Commodities Posts Biggest Quarterly Loss since 2008.”

Fortunately, no amount of money printing, market manipulation, and propaganda can manufacture physical gold and silver which will unquestionably experience exponential demand growth ad infinitum amidst plunging worldwide production.  Richard Russell is dead on in his recent comment that,

It looks as though the U.S. has sold all its gold – and then some – in its frantic effort to keep a lid on the gold price.  Worse, many foreign nations have kept their gold “safe” and stored in the U.S.

-King World News, July 22, 2014

And thus, given the aforementioned laws of “economic mother nature,” it’s just a matter of time – likely, much sooner than most can imagine – before the entire scheme to control perception via market rigging implodes.  Jim Sinclair believes that time is this Fall; and even if he’s wrong, it likely won’t be by much.  And thus, we can only plead with readers to consider protecting themselves during this narrow window of summer doldrums-inspired lethargy – and “peak madness” – before the inevitable “end game” commences.

 

Miles Franklin Q & A: Interest Rates Affect Far More Than Just Derivatives

With the obvious and continuous price manipulation in the paper gold and silver markets, why does anyone use those markets to base the physical price on any more? 

Why doesn’t the physical market make a clean break from the fake paper casino? 

Have two markets: one based on paper for the manipulators to play their games (with no relation to the physical price), and a second that is strictly tied to physical, cash only (no leverage) settlement with only the physical metal?

Thank you for your time

David Schectman’s Answer:

The futures market was originally set up to allow producers (miners) to hedge the price of their “gold in the ground.”  The futures market does serve a purpose.  If a gold mine needs capital for exploration, expansion or for operating expenses, the bullion banks that lend them the funds collateralize the loan with a set price (a futures contract on COMEX) for enough future production to cover the loan.

The problem occurs when non-producers like the six bullion banks (Barclays Bank PLC, ScotiaMocatta, Deutsche Bank AG, and HSBC Bank, JPMorgan Chase Bank & UBS AG) buy and sell contracts with no intention of taking delivery of gold or silver.  That is, for lack of a better word, legalized gambling.  Add to the mix the large momentum hedge funds.  The “paper” gold and silver traded on a daily basis has no relationship to physical metal supply and demand fundamentals.

Recently, there were gold contracts dumped on the COMEX in a matter of a few minutes that were equal to around five times the gold that was available for delivery.  Of course, they were settled with dollars, not with physical gold.

According to Jim Sinclair, there is a move afoot in the Far East to establish gold exchanges that deal only in physicals, and do not allow margin.  Yes, Merril, in the next year you may see the divorce of the paper market and the physical market that you mention.  When that happens, the physical market will set the price of gold and silver, not the paper market.  All of us, who own physical gold and silver and/or sell precious metals, look forward to that day.  It is coming.

Read Ed Steer’s comments in today’s newsletter.  He sheds some light on the manipulation.

Thanks’ for your question

David

I have a question for your Q&A day on Wednesday.

Tell me please how the interest rate, i.e. 10 yr. Treasury Rate effects the derivative market?

Bill Holter’s Answer:

BIG question George and one probably above my pay grade if you want the nuts and bolt internals of the motor.  All derivatives have “interest” rates factored in as a cost to carry or to maturity.  First there are direct derivatives on interest rates themselves, so there is a direct effect.  Next, most all derivatives have a cost to carry or a “spread” if you will that is calculated from the beginning of the contract.  Interest rates are a very big factor particularly in foreign exchange contracts.  If interest rates move in a big fashion during the contract’s life, the original assumptions can be turned upside down and create unforeseen losses (or gains).  If rates move far enough there can be systemic risk if enough losses mount in individual books.  The problem is that everyone does business with everyone else and if there are individual banks or players that are bankrupted then they cannot make good to the “winners” which turn the winners into losers.

This is a very basic primer to a subject that is so complicated that it takes PHD’s in math to create the contracts in the first place.  The problem is that these PHD’s make their calculations with models of “past behavior” i.e. there can never be a hurricane somewhere because it has either never or almost never has happened before.

Of course, interest rates affect far more than just derivatives, everything “financial” in fact up to and including whether or not the U.S. Treasury can make their interest payments.  We may get to see what volatility in interest rates can and will do first hand in the not too distant future?

Hello, for your Wednesday Q&A day:

Would you mind addressing the outrageous statement made by Doug Casey recently that “Gold Manipulation Allegations are Ridiculous”? Link below:

http://www.kitco.com/news/video/show/FreedomFest-2014/722/2014-07-11/Gold-Manipulation-Allegations-Ridiculous—Doug-Casey

I thought Doug Casey was one of the good guys all these days. But is what he saying part of a controlled message: saying the right things most of the times (attacking Federal Reserve, inflation threat) interrupted outrageously? There are many examples of individuals like this, and it becomes a credibility issue for precious metals community. For example:

Jim Rickards – Works for IMF bankers, pushing digital SDR fiat currency for entire planet Jeffrey Christian – Works for World Bank & IMF. What more needs to be said about this fellow?

Bix Weir – Always present on GATA, but claims Alan Greenspan was THE good guy working for gold standard?!

[To be fair, one of Doug Casey's guys Bud Conrad had gone on record few months ago implicating JPMorgan in massive market riggings for many commodities - not just gold or silver. Video link below:

https://www.youtube.com/watch?v=SSeOVf0D-VQ

Andy Hoffman’s Answer:

This question is dead on.  We are not one to question his motives, but the vehement message of “no manipulation” makes not the slightest bit of sense for someone so intelligent and entrenched in the pro-gold camp.  The same goes for Rickards, who clearly has moved far more toward the side of truth in recent years (my guess is he is no longer a political “insider,” and thus is more inclined to tell it like it is).  As for Christian, no one has told as many blatant “mistruths” than anyone I am aware of in the PM world.  No doubt his motives are not based on truth, and given his background at Goldman Sachs, we are not surprised.  Bix is a unique case, as he is not saying Greenspan is “good”; but rather that he was part of some complex conspiracy that I have trouble understanding.  In the end game, Bix says the system is corrupt and one should own physical silver, so outside the strangeness of his message, he’s got the final recommendation right.

The moral of the story here is that, as I have long espoused, the most important research one can do is to find the handful of “good, smart people” that not only speak the truth, but have your best interests at heart.  They can be very difficult to spot sometimes, as within the financial industry, people have widely varied skill sets and motives.  And yes, given he has so many good people working for him, and presumably should be aware of the single most important and obvious aspect of PM trading.

New BRICS Bank Is Big

Bill Holter joins Kerry Lutz of the Financial Survival Network to discuss the new BRICS bank, the U.S. dollar, Germany, the new reserve currency, China, current debt levels, housing prices, GDP, gold and silver.  To listen to the interview, please click below.

Bill Holter – New BRICS Bank Is Big

Passing the Baton

The biggest news last week was that the BRICS bank has been formed and being funded.  Some may argue that the downing of the Malaysian airline flight was bigger but I don’t think so.  From a money and banking standpoint, the formation of the BRICS bank is the BIGGEST news since either 1971 or 1973 when the U.S. defaulted off of the gold standard or when the Saudis stepped up to the plate for the petrodollar.

The formation of the BRICS bank is in direct competition with both the IMF and The World Bank.  Both of these are “U.S.” controlled banks and the currency that they lend to “help” or “save” countries with are dollars.  During our lifetimes these two banks have been the lender of last resort for troubled banks, banking systems and sovereign countries.  Often the loans led to alleviating liquidity problems in the short term but then created bigger problems for borrowers in the long term.

Stepping back to look at what has happened and “why” the BRICS decided to form this bank is an important exercise.  This will allow and facilitate trade between nations without using dollars.  This is important because of the recent “fine” paid by French bank PNB Paribas and the looming fines for both Commerzbank and DeutscheBank of Germany.  They transacted business for customers which broke U.S. sanction “rules” regarding Iran and Sudan.  These fines as I understand it were levied because the money transfers were in dollars.  Anyone even simple minded would understand that to avoid any future “fines,” you just don’t use dollars.  It is this simple and foreigners will now use fewer dollars because they don’t have to use them and it is “safer” for them from a “risk” standpoint.

The BRICS bank has been a long time coming and certainly not done in secret.  This news has been widely known by foreigners in real time.  It has been a different story for Americans.  Mainstream U.S. press has barely even whispered the news yet it is the most important event for at least a generation.  To put it in perspective, this is the nullification of Bretton Woods outright.

I think that it’s important to understand that the action of forming a non-dollar competitive bank could only have been done if “everyone” went along with it.  We have seen in the past what has happened when a country spoke of no longer using the dollar.  Their “ruler” was displaced and the country as in the case with Iraq was bombed back into the Stone Age.  This is now a simple case of all the schoolyard kids lining up against the bully and “saying” (not asking) “what are you going to do about it?”

I have been very boisterous in my opinion that Saudi Arabia would be the final straw that breaks the back of the dollar.  They have had top level talks with both Russia and China with very little comment or “statement” after the meetings.  What was said?  What was decided?  My guess is that Saudi Arabia was “told” what was going to happen.  This is no different than a marriage that breaks up or even when “Mafioso” migrate from a weakening family to one that is strong and getting stronger.  Saudi Arabia will move to the East.

If you recall the movie “Rollover” from 1981 you will remember the scene where Kris Kristofferson talks about the Arab’s selling Treasuries and dollars.  Any announcement by the Saudis that they will accept currencies other than dollars will make “Rollover” come true …exponentially!  I say “exponentially” because the system is now 35 years into the futures and at least $1 quadrillion more bloated with debt and derivatives.  The system will implode and “wealth,” paper wealth will evaporate overnight.  As is said in the movie, “$2,000 gold will be cheap by tomorrow morning,” gold at the time if you remember was $400-$500.

Please understand the “what and why” of the BRICS bank.  The Chinese, Russians and the rest of the world know that the petrodollar system is on its last legs.  The case can even be made that the rest of the world has “carried” the U.S. for a few rounds so that they could get their ducks in a row ahead of time.  The BRICS bank has been put into place because there has to be “something” to “start over with.”  Prior to this bank being formed, were the Western banking system to implode the rest of the world had no alternative.  When I say “alternative” I am talking about no other clearing system and no place to “hide” so to speak.

It is clear to me that the BRICS bank formation and the massive accumulation of gold over the last several years has gone hand in hand.  “The rest of the world” has known for some time that the dollar, the U.S. and the entire Western financial system was on shaky ground and had finite lives.  A plan to distance them from the inevitable was formed and has been carried out.  All that now remains in my opinion is for Saudi Arabia to defect from the U.S. and knock the last remaining leg out from under the dollar.

My opinion as you already know is that within two weeks of a Saudi announcement, our world will change.  The purchasing power of the dollar will crash; this in turn will mean that more dollars will be needed to pay for foreign imported goods.  This will affect you directly when you “shop”… for anything.  The inflation which we have been exporting for all these years will wash back onto our shores.  The “baton” of world reserve currency issuance is being passed right before our eyes.  Actually I should reword this; the baton is being TAKEN from us because we have so badly abused the privilege.

Andy Hoffman on Butler on Business Show – July 22,2014

Andy Hoffman joins Alan Butler from the Butler on Business show to discuss BRICS, the U.S. dollar, Ukraine and the Middle East, markets being manipulated,stocks plummeting, oil prices surging, gold and silver. To listen to the interview, please click below.

Andy Hoffman – Butler on Business – July 22, 2014

 

 

Archduke Ferdinand Moment?

For years, we have highlighted the catastrophic global ramifications of Central bank generated inflation, particularly following the unprecedented post-2008 money printing spree that continues unfettered today.  First to experience its horrific consequences were “Arab Spring” nations whose citizens spend the highest proportion of their incomes on food.  Since those 2010-11 uprisings, the fiat cancer has spread worldwide, catalyzed by dramatically escalated money printing following 2011’s Financial Meltdown II.  Led by the Fed’s QE3, Japan’s “Abenomics,” the ECB’s LTRO and NIRP, and China’s $25 trillion “shadow banking” explosion, the world has been flooded with worthless currency to “save the banks” and promote economic “recovery.” Unfortunately, such goals have decidedly not been met; but instead, surging inflation of food, energy, and other “need versus want” goods.  Consequently, social unrest has spread like wildfire, yielding a series of potentially cataclysmic revolutions and wars.

Late last year, only Vladimir Putin’s masterful diplomatic skills prevented the U.S. from potentially starting World War III in Syria.  However, the “Cold War” has grown more frigid since, care of the expanding Ukrainian crisis we initially discussed in March 3rds “This Is Why We Do What We Do.”  Moreover, the Iraqi societal collapse America caused threatens to explode out of control at any moment; while in Israel, the most vicious fighting in decades is further destabilizing the world’s most historically volatile region.  In the process, crude oil prices have surged to multi-year highs; and following last week’s MH-17 tragedy, the odds of a meaningful energy price decline appear slim.

As for today’s title, it’s appeared in numerous articles over the past week.  However, nothing is more prevalent on our minds, as pertains to the urgency to protect oneself from what may morph into a “worst-case scenario.”  After all, countless major wars have been catalyzed by “black swan” events that could not possibly have been predicted; none more so than the seemingly innocuous event of Austrian Archduke Franz Ferdinand’s assassination in June 2014 – which ultimately marked the beginning of World War I.

In Friday’s “Coincidence,” we didn’t give an opinion of who was behind the MH-17 airline tragedy; but instead, simply presented the available facts.  Typically such events give rise to countless, unsubstantiated theories; and often, the truth is never completely revealed.  However, as time passes, and more and more evidence is presented, said truth typically becomes more visible.

As for MH-17, we are not saying the true story will ever be learned.  However, the initial evidence does not bode well for Western propaganda that the “Russians did it.”  Perhaps they did; but to a man, I can’t comprehend a single reason why they would want to down a commercial airliner carrying Dutch and Malaysian passengers – much less, the motivation for “pro-Russian rebels” to do so.  Irrespective, as further details are circulated – starting with the contents of the “black box,” which frankly, I don’t expect to say much – the potential for the situation spiraling out of control is extremely powerful.  “Official” efforts – both American and Russian – to “spin” or even lie about the truth will be equally strong, as will efforts to stabilize financial markets to “prove” all’s well.  However, in the face of such cataclysmic events, manipulations have always been overwhelmed by reality.  When all is said and done, MH-17 may in fact prove to be the 21st century’s “Archduke Ferdinand Moment”; but even if it’s not, the day of reckoning for the dying fiat currency regime is coming and soon.

Again, the goals of the Miles Franklin Blog are not to conclude what happened, but help you to come to your own conclusions.  Clearly, the initial evidence does not bode well for America’s initial propaganda blitz blaming the Russians; and if additional evidence points in this direction – i.e., the perpetrators were more likely U.S.-backed Ukrainian government forces; global sentiment and economic policy will further isolate the already vilified, financially vulnerable United States of Money Printing.

Yesterday, the Russians released a detailed forensic analysis that strains the credibility of said U.S. allegations including photos showing Ukrainian government forces deploying anti-aircraft BUK missiles.  If so, this is quite damning evidence, so we’ll see how the U.S. responds to the ten pointed questions the Russians have posed.  Ominously, the Chinese government vehemently attacked the U.S. response to blame Russia; and after reading MH-17 commentaries from patriotic Americans like Ron Paul and Paul Craig Roberts, it’s increasingly difficult to believe global consensus will form behind the U.S., to the detriment of the Russians.  And the more anti-U.S. sentiment increases, the higher the likely that the inevitable “end game” commences sooner rather than later.  To wit, when I saw Jim Sinclair speak a month ago, he rationalized his $2,000 gold by year-end prediction with expectations of a “significant attack on dollar hegemony”; which, given the current geopolitical (and economic) circumstances, sounds more probable than possible.

As for yesterday’s financial market “response” to the weekend’s news, what could be more blatant than said “official efforts” to whitewash reality.  Overnight, Treasury yields plunged along with Western equity markets, whilst crude oil prices surged nearly $2/barrel to $105/bbl. as I write Tuesday morning.  However, as you can see, gold’s logical rally was capped by a prototypical “Cartel Herald” algorithm at exactly the 8:20 AM EST COMEX open, “coincidentally” at that same $1,320/oz. “line in the sand” the Cartel has defended since Whirlybird Janet’s massively dovish post-FOMC press conference last month.  Meanwhile, the “Dow Jones Propaganda Average’s” decline was capped at -1.0%, which I long ago deemed the PPT’s “ultimate limit down.”  And voila – following an equally prototypical “dead ringer” algorithm it was nearly turned positive by day’s end!

24 Hour Gold Chart

Dow Jones Chart

This morning, the only “news” thus far is catastrophically bad earnings from global consumer spending bellwether McDonalds; but in true manipulative form, the Cartel attacked first at the ultra-thin “2:15 AM” open of the London paper pre-market session, and again at the COMEX open creating yet another battle for the key round number of $1,300/oz. where significant international buying interest clearly resides.  But wait; just 20 minutes later – at this point, due to no “news” item I can see gold just surged back to $1,313/oz., whilst silver’s ongoing war for $21/oz. continues to rage.

3 Charts

Only time will tell if MH-17 serves as a catalyst for escalated global geopolitical and/or economic warfare.  However, as regards precious metals it matters not; as ultimately, the war between real and fraudulent money always ends the same way.  Worldwide physical demand will inexorably increase no matter what happens in the Ukraine; and as we discussed yesterday, mining costs are rising exponentially.

To that end, let’s end today’s discussion with the ugly charts below, depicting the utter disappearance of gold mining discoveries and simultaneous dramatic increase in the “time to production” of the few viable projects.  Last year, we wrote of the collapse of the only significant gold mining discovery in the past 12 years; and after viewing the below charts, we think you’ll be further emboldened by our conclusion that not only has global gold mining peaked, but will likely precipitously decline in the coming years.

Gold Charts

In our view, the collision between falling PM supply and surging demand will be historic; sadly, amidst a very difficult world where owning gold and silver may represent the difference between “financial life and death.”  Hopefully, you are considering such possibilities as well; and subsequently, acting on them.

Manufactured Collision Course With Destiny

I thought about choosing a topic to write about today and decided that the downing of the Malaysia Airlines plane needs to be discussed because it is being thrown around like a political football. Before beginning to write, I received an e-mail from my mentor in which he said “It is obvious that we are on a manufactured collision course with destiny” which I unfortunately think is 100% correct. I will explain the quote later, first let’s look at the tragic “political football”.
Zero Hedge has written several pieces on the airline missile strike, the latest missive is here http://www.zerohedge.com/news/2014-07-21/russia-says-has-photos-ukraine-deploying-buk-missiles-east-rader-proof-warplanes-mh1 . Please read this because some very interesting points are brought forth. In this, Russia claims to have photos of the Ukrainians deploying their BUK missiles in the eastern part of the country. If this is true, what will happen to global sentiment towards the Ukraine and thus their sponsor the U.S.?
I have had several questions myself along the way where the answers could be very ugly to me (as an American). I first wondered how we knew for sure who pulled the trigger on the missiles within minutes of the plane coming down. I wondered whether the Russian separatists even had any missiles that could down a plane at 33,000 feet since shoulder mounted versions apparently don’t have this type of range. I also wondered how it is possible that “we” don’t have radar tracks or photos of the missiles being launched as we have the technology and satellite ability to decipher whether you had a flour or rather corn tortilla with breakfast this morning.
There have been other alleged “oddities” so to speak such as President Putin’s plane may have followed the same path as the Malaysian Airlines flight did less than 30 minutes later. Also there have been reports that the Malaysian flight’s path was diverted to go north of Donetsk and that possibly 2 Ukrainian fighters were close by or “marking” the flight. These are all speculations and fall into the category of “conspiracy theory” until being proven conspiracy fact.
The West’s press has whipped up anti Russian sentiment into a frenzy and Russia has responded by asking 10 very good, logical and pertinent questions of the West that may or may not be answered. I guess the simplest question of all would be “why are any civilian flights routed here in the first place”? In any case, we have to await answers from the Ukraine and U.S., hopefully they will not defy logic, be embarrassing or answered with a simple “because”.
Here is how I see it and I will lead toward the quote “It is obvious that we are on a manufactured collision course with destiny”. We, the U.S. are the ones desperately looking for some sort of military action …somewhere. We tried in Syria late last year and I’m afraid that this is what we are doing in the Ukraine. As I see it, both China and Russia know and see this. It is my opinion that it is known that the dollar and debt based system is doomed and cannot be reflated again. Wars generally help “reflation” but this time I think it’s different because there is no collateral left to reflate upon. I think that those “running the show” are in need of something to point at so they can say “our policies were working and would have worked were it not for this war”.
I know that my viewpoint may not be a popular one but I have come to these conclusions because current policy in the U.S. could not have come from or been formed by sane people with America’s best interests at heart. I believe that the U.S. had to be “gutted” so to speak if the “one world order” had any chance of succeeding. The problem now is that China, Russia and the rest of the world are in the process of isolating the U.S. because of our radical policies, deeds and business practices. I don’t believe that they have any interest in a “one world order”. It is also my opinion that the rest of the world is very fearful of what the U.S. might do with our nuclear arsenal. Excellent thought and reading on this topic can be read at Paul Craig Roberts website where he fears the same, the U.S. pushing the world into or even starting a nuclear war.
The above said, I believe that China, Russia et al have the ability to pull the plug on the U.S. any time that they’d like. They are the creditors, we are the debtors. They have a banking system and clearing facilities in place so that soon they will no longer “need” us. They have set up markets, trade deals, swaps and credit lines all over the world. It is my opinion that Russia and China would far rather let the West’s financial system tip over and implode on its own rather than “pushing it”. I believe that they are very fearful of a world war and are doing what they can to stay refrained from starting anything but have been preparing for what is probably inevitable.
As I recently showed you, gold is coiled and ready to spring. Whether the cause is global war, a financial collapse or any other number of combinations, gold is set to move higher. Will it be market based or an “official” mark up? It does not matter, what does matter is that the chart is saying that here and now (or VERY soon) gold is going to a much higher level. Another way to look at chart is that something “very bad” is about to take place. Take your pick what it is or where, the bottom line is that we as Americans have lived far beyond our means for as many years as I have been on Earth. Payback is surely coming as it always and inevitably does, “payback” won’t be pleasant. By the way, “payback” could be defined as a “destiny” and it’s looking like ours is being planned and playing out from both outside and within.

Regards, Bill Holter

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