Buckle up, my friends. It is hitting the fan, and doing so now. Based on the past four years of manipulative infamy, I know it seems like TPTB will always be able to reverse the potentially cataclysmic “tectonic market shifts” I warned of last weekend. However, “Economic Mother Nature” always wins in the long-run, no matter how powerful the “weapons of mass financial destruction” utilized against her; such as the heinous, economy-destroying derivatives and algorithms utilized to control financial markets. Ironically, those same weapons used to usurp Economic Mother Nature have now been pointed directly at TPTB’s head – as nothing will be more lethal to their plans of maintaining the dying status quo than rising interest rates. Not just due to the catastrophic economic damage they’ll reek on history’s largest debt edifice, but the trillions of dollars’ worth of derivatives holding rates down.
Actually, I take that back. There’s something far more immediate, and direct, that will destroy such efforts; likely, not only causing worldwide interest rates to surge, but equities to plunge; physical Precious Metals to sell out (I’ll expand on that momentarily); and currency and commodity markets to become so volatile, they destroy whatever remains of the weakest global economy since the Great Depression. Only back then, there was essentially ZERO government debt in the world, care of the gold standard – since abandoned by greedy, sociopathic governments – that maintained financial order, enabling business cycles to cleanse the economy of impurities, and roar back from recessions stronger than ever.
And that is…drum roll please…the first major debt default; which, when it inevitably occurs, will catalyze a cascade of defaults along the daisy chain that is the incestuous, insolvent global banking system. And not just banks, insurance companies, and the entire scope of financial companies dependent on historically low interest rates; but Central banks, sovereign governments, and all level of municipalities; such as, for instance, America’s “next Detroit” – i.e., Chicago; and the hideous stepsister Uncle Sam stupidly supports – i.e., Puerto Rico.
As of this morning (Tuesday), it appears that first default is upon us. Which, what a shock, is Greece, just as we all knew it would be. To wit, we were all surprised when last night, Yanis Varoufakis cockily announced Greece had made its €770 million payment to the IMF – given no new funds have been borrowed, and Greece’s cash reserves below €90 million. Well, as it turns out, he was lying; as yes, Greece “technically” paid the IMF back – but only by tapping €650 million of funds available via an IMF “emergency program” which must be paid back within one month. In other words, the IMF borrowed from itself to pay Greece’s debt – which not only constitutes a “technical default,” but one month from now will be official. And the irony of it all is that Greece is still trying to get the IMF to lend it €7.2 billion under its current bailout authorization; contingent, of course, on the same austerity reforms that four months ago were demanded, and as we speak not even close to being considered. And thus, when the “four month extension” of Greece’s current bailout ends next month, they will not only have defaulted (certainly “technically,” and likely officially as well), but any hopes for the €50 billion bailout they so desperately need will be dashed. Heck, the IMF is already claiming it wants no part of a new bailout; which, by the way, mirrors the desires of the vast majority of Greeks. Which is probably why the IMF spent last weekend devising a “contingency” plan for an upcoming Greek default – as well as the “Grexit” we so vehemently guaranteed two months ago; and heck, two years ago.
Consequently, the aforementioned “tectonic shift” – of exploding global interest rates – is again spreading like wildfire; with yields everywhere from Japan, to Germany, to the States hitting multi-month highs. Clearly, even the world’s top propagandists will have difficulty attributing this horrific, potentially catastrophic phenomenon to “Fed rate hike fears”; as not only has global economic activity plunged to 2008 crisis levels – including in the “de-coupled” United States of Economic Data Rigging – but the Fed has not communicated such dovishness since commencing QE3 in late 2012. In fact, if Treasury yields move much higher, you can bet your bottom dollar (pun intended) the Fed will not only be “QEing” covertly, but overtly via the QE4 launch we all know is coming.
And for all those propagandists – and misguided newsletter writers – claiming the dollar index would surge due to rising rates, it has plunged 6% in the past month, even with the Euro on the verge of implosion; Japan claiming even the thought of an end to Abenomics would be a “nightmare scenario”; and China essentially telling the world its own “QE to Infinity” initiative is forthcoming. Not to mention, for those claiming such a scenario would be “deflationary,” not only are oil and copper prices rising, but Precious Metals have resiliently stood their ground against the most blatant, heinous Cartel attacks in memory. Not that much of what goes on in the commodity pits, aside from PMs, isn’t comically manipulated – such as the “copper and oil PPTs” I have railed bout for some time. However, on balance, despite industrially-sensitive commodities like lumber, iron ore, and steel collapsing due to imploding global economic activity – gold and silver are hanging in like champs. As let’s face it, even the world’s most powerful, “well-armed” Cartel can’t prevent physical PM supply from plunging, and demand surging. Which is exactly what is occurring – in large part because of said manipulation. Which not only have caused gold and silver valuations to fall to their lowest valuations in recorded history (relative to fiat currency outstanding, production costs, inventories, and physical demand), but financial asset valuations to hit all-time highs – exceeding equity valuations at the internet mania peak, and real estate circa 2007. Not just here in the U.S., but worldwide.
Before I get to today’s topic, I want to return to said “weapons of mass financial destruction” – as ironically, none other than Barclays, kingpin of not only the hideous LIBOR-rigging scandal, but the London Gold “Fix” scandal, is complaining of the “price action in physical commodity markets, where differentials are signaling oversupply, but paper futures markets indicating all is rosy.” Barclays is specifically referring to the horrific fundamentals for – what do you know – oil and copper. But clearly, the bigger issue is that physical commodities in general – like Precious Metals – have been blatantly rigged in paper markets, yielding physical supply/demand dislocations that must eventually correct. Hey Barclays, do you mean movements like these gold and silver farces yesterday, with no other market budging? Or, for that matter, this morning’s blatant “bond PPT” and stock PPT manoeuvers? LOL, one day soon – perhaps, very soon, the Precious Metal “waterfall decline” will be a relic of the past; replaced with gap ups – often in Asia, before the Cartel awakens; a total lack of offers; and eventually, no COMEX itself.
Which brings me to today’s topic; dove-tailing perfectly with yesterday’s “what to do with one’s money” – in which I discussed the difficulty of investing capital in a world where “cash” is devalued daily; financial institutions pay zero interest – and on a daily basis, fight systemic insolvency; whilst rigged financial markets trade at record valuations amidst an historically weak economic backdrop, leaving only highly illiquid assets and “alternative investments” to choose from. And oh yeah, Precious Metals – trading at record low valuations, amidst the best imaginable fundamental backdrop; at prices below the cost of production.
Which is why this morning’s news that a Picasso painting sold for $179 million – blowing the roof off the previous art auction record of $142 million, set two years ago for a Francis Bacon painting – is so apropos. Moreover, a Giacometti sculpture sold for $141 million – attesting not only to how bubblicious the rare art market has become, but just how much fiat currency has been funneled by global Central banks into the hands of the “1%” – at the expense of everyone else, who have nothing to show for it but a soaring cost of living; with the added insult of Central banks claiming more money printing is required, to offset the so-called “deflation” rigged economic data purports.
Meanwhile, Precious Metal prices are being blatantly suppressed in a world where physical demand is surging. To wit, essentially permanent gold backwardation in London; supply set to dramatically decline; and inventories on the verge of disappearing – per the ongoing run on COMEX registered gold; which as you can see, dramatically accelerated last week, to the point that record low inventories have been reached.
This trend is less pronounced with silver – but either way, in the past month, 15% of the COMEX’s registered (available to purchase) silver has been withdrawn, and a whopping 67% of the COMEX’s registered gold since late last year. Do I believe these numbers, you ask? Well, as a rule I don’t believe anything the “CRIMEX” publishes. That said, unless the Cartel is crazy, they certainly wouldn’t want the world to believe a physical metal run is occurring. Which clearly, appears to be the case; and not just at the COMEX, but the London Bullion Metal Association (LBMA); the Shanghai Gold Exchange; and even the Federal Reserve itself. Not to mention, the U.S. government; which probably leased out most – if not all – of Fort Knox’s reserves long ago. Which is probably why they haven’t been audited in six decades.
Doing a bit of elementary math, the amount of registered COMEX gold – hence, all that supports history’s largest financial Ponzi scheme – has fallen to a piddling $443 million at current prices, and $969 million of silver. In other words, a paltry $1.4 billion of metal is all that stands between the most explosive, globally cataclysmic default in history; which even the Greeks could probably buy if they “max out” the IMF’s printing press generated “emergency funds.” Not to mention, the world’s 1,700 individual billionaires, and tens of thousands of corporations, institutions, municipalities, and sovereign wealth funds. As well as the Chinese population, which in the first quarter alone, withdrew $24 billion of physical metal from the Shanghai Gold Exchange. Heck, even here in the Propagandized States of America, where PM sentiment has declined to multi-decade lows, U.S. Mint gold coin sales have totaled $1.1 billion since the beginning of 2014.
Bill Holter, who we heartily congratulate in his upcoming venture with Jim Sinclair, last month asked “why no upside Cartel?” – in pondering what we have all considered for years. Clearly, the fear of being “Hunt-ed” by the government-operated CFTC is part of it; but the bigger picture, assuming these numbers are true, is that once that supply – and thus, the COMEX – is taken out, the fiat currency-dominated status quo that supports the power and wealth of the “1%” will be forever gone. And as I wrote in last week’s “when will we learn of China’s massive gold hoard,” said status quo destruction will swamp the collapsing Chinese economy as well; which is why they, too, are reluctant to end the paper gold Ponzi scheme unilaterally.
Russia, you ask? The Arabs? Terrified citizens strangled by inflation? Yep, the list of potential game changers is a mile long – getting longer with each passing day. But clearly, the collapsing global economy – as well as most currencies; and said dislocations of physical supply and demand are making it painfully obvious the “end game” is closer than ever. In other words, the dominoes are rapidly falling; and whilst today, the unending supply of fiat toilet paper has been maniacally funneled into “other” assets classes like stocks, bonds, and fine art, the “once and future kings” of the monetary world are waiting patiently in the wings – for history’s largest wealth transfer.