CURRENCY CARNAGE! and Audio Vlog!
by Andrew Hoffman, Miles Franklin
It’s early Tuesday morning; in trading terms, just 48 hours from the ten year Treasury yield’s post NFP surge from 2.12% to 2.25%; supposedly, signaling an imminent Fed rate hike, despite Janet Yellen having delivered the “most unequivocally dovish FOMC statement in memory” just a week earlier. And oh yeah, prompting the brain-dead MSM – as well as Wall Street, and most PM newsletter writers – to spew a mountain of fallacious reasons why gold is headed below $1,000/oz. And lo and behold, not only is it back down to 2.12%, but with yesterday’s blatant PPT stock rebound having been fully reversed already, it’s entirely possible the ten year yield will approach the “one handle” in short order.
As for said sub-$1,000 gold prognostications, they by and large emanate from a wide variety of silly, specious “analytical” constructs. Frankly, the only common denominator of their comically misinformed writings – which some admit, and others pretend to ignore – is decidedly bearish “technical analysis” – be it mainstream or “proprietary”; which, of course, is useless given relentless, manipulative Cartel naked shorting. As always, everyone from the most evil Cartel propagandist to the supposedly “beneficent” newsletter writer, claims to be “short-term bearish, but long-term bullish”; ignoring the fact that not only are Precious Metal fundamentals as positive as at any time in our lifetimes – as both competing currencies and financial insurance policies – but the potential catalysts for a sharp, lasting reversal have never been more numerous, or broad. Throw in the fact that the mining industry, as I have loudly anticipated for some time now, is utterly imploding – as depicted by yet another day of all-out mining stock implosion – and my “2015 prediction” of near-term mining industry paralysis has never been more likely. Or, for that matter, that “peak gold” has arrived; with peak silver right behind it, yielding a potentially dramatic production collapse catalyzed by silver prices way below marginal costs, and imploding base metal production.
Back to the 10-year Treasury yield, I’ve been racking my brain for the past two weeks trying to figure how it could have possibly risen from 1.64% to Friday’s high of 2.25% despite a litany of global economic woes; not withstanding Friday’s comically fraudulent employment report; which in the big picture of things, only added the final 13 basis points, which have already dissipated, to said yield rally. To that end, in this weekend’s “manipulation suicide” Audioblog, here’s what I opined on the topic…
“Watching rates rise following Janet Yellen’s historically dovish statement last week – let alone, an ongoing collapse in global economic data (including ours) and rapidly escalating Greek crisis, it’s hard to make the case that ‘someone’ doesn’t know ‘something’ about very wicked things this way coming. And if that wicked ‘something’ involves higher rates – let alone, if purposefully orchestrated – it will unquestionably take down the entire global economy; most of the global banking system; hundreds of heavily leveraged, derivative-exposed financial institutions and Central banks; millions of insolvent holders of adjustable rate loans; and last but not least, dozens of insolvent, debt-laden sovereign nations – including the United States.”
Long-time readers know I am a scientist at heart, and a strict believer in Occam’s Razor as well. In other words, I don’t really believe “someone” knows “something” – so I simply made that comment as an admission that I haven’t yet figured the true, logical reason. I mean, I’m well aware that Chinese and Russian Treasury selling has accelerated recently. However, such selling would hardly have been enough – unless done covertly, en masse – to have accounted for the ten year yield’s rise from 1.64% to 2.25%. And thus, when I was sent an article yesterday by Mark Grant, a light bulb went off in my head. Not that I know his conclusion to be true, but it makes a heck of a lot of sense.
Which is, that given Monday’s (as in, yesterday’s) commencement of the ECB’s €60 billion per month, (at least) 19 month QE program, the entire “front-running” global investment community is “arbitraging” from a U.S. QE program temporarily on hiatus to the most “sure-thing” investment in history; i.e, European sovereign bond monetization. Hence, this morning’s 5,000 year low in average European sovereign yields, as the “currency carnage” highlighted in today’s article, and acceleration of the horrific global commodity collapse, prompts investors to anticipate ECB “QE to Infinity,” even with yields at or near negative levels. In fact, the hideously “deformed” market machinations of said front-running – to borrow the apt description of the great David Stockman – have so distanced European debt markets from reality, it’s hard to believe they actually represent the debt ravaged, economic monstrosities underlying them. To wit, despite the fact that roughly 20% of all European sovereign yields are now negative, the ECB is literally finding it difficult to find willing sellers, who know full well that at least €1 trillion of non-price sensitive buying is coming; and care of ECB, BOE, and SNB “ZIRP” and “NIRP” policies, there simply is nowhere else to generate “yield.” And thus, why own U.S. Treasury bonds with a Federal Reserve dithering back and forth about potential (mythical) “rate hikes” when you can simply take decades worth of profits, and re-allocate them to said “sure thing” in Europe? Or, for that matter, Japan, which is also amidst 100%+ government bond monetization, “to infinity.”
Of course, said “deformations” of loading a dying Central bank – with a collapsing currency – with zero and negatively yielding bonds of nations with imploding economies; collapsing social stability; and oh yeah, rising political parties seeking to abandon the Euro currency entirely (such as Greece’s Syriza, Spain’s Podemos, Italy’s Five Star Movement, and France’s National Front) is perhaps the all-time “recipe for disaster.” Not to mention, the very act of debt monetization weakens the Euro further – as well as dozens of other currencies either officially “pegged” to it, or otherwise deeply entrenched in its fortune; like the UK Pound and Swiss Franc, for example. Perhaps NEVER in history has a fiat Ponzi scheme been so poorly conceived and constructed as the Euro; which in our view, is not only guaranteed to fail, but perhaps in the next year or two. And trust us, when Greece inevitably “grexit’s” from the Eurozone – which per yesterday’s article, is equally guaranteed – the resulting financial and economic carnage will be a site to behold; perhaps, damaging enough to catalyze “the big one” in and of itself, as I predicted two years ago…
“I have zero doubt that – one way or the other – Greece will eventually exit the EuroZone; potentially, providing the “flash point” catalyzing the end of the Western banking system; and with it, financial Armageddon.”
Speaking of carnage, today’s article refers to the ongoing, global currency collapse I have written of perhaps more than any “newsletter writer” on the planet; not only predicting it in both this year’s and last year’s forecasts, but discussing the “final currency war” more than two years ago; a term, by the way, I’m thinking of patenting. Anyhow, to say the currency carnage has dramatically escalated since year-end is perhaps the understatement of the decade; but particularly since the U.S. government committed the aforementioned “manipulative suicide” by publishing such a blatant fraudulent NFP report last Friday.
To wit, in what I last year deemed the “single most Precious Metals bullish factor imaginable,” toilet paper currencies the world round are now in utter freefall, as the terminal, nuclear stage of said currency war has arrived, in full force. No matter what corner of the planet one scans, currencies are plunging – rapidly – against the liquidity magnet that the world’s unwitting “reserve currency” has become. Unwitting, I note, because the last thing the U.S. government wants – fraudulent “strong dollar policy” notwithstanding – is a strong currency. Remember, the U.S. has more to lose in said “final currency war” than anyone else, given it has already lost the high paying manufacturing jobs it so desperately needs to salvage its dying economy (which, by the way, will NEVER return). U.S. corporate earnings were already declining when the ill-fated dollar surge – and commodity plunge – commenced last Fall; and now, with the horrific translation losses resulting from such, the most overvalued stock market in U.S. history sits on the precipice of an historic collapse. Until, of course, the inevitable “Yellen Reversal” – i.e., overt QE4 announcement – attempts, successfully or not, to hyper-inflate it. Which, if history is a guide, will unquestionably be the Fed’s game plan. Not to mention, the ECB’s, the BOJ’s, and all other Central banks’. And oh yeah, then there’s that matter of the potential “BIG BANG” of an official Chinese Yuan devaluation; which as sure as night follows day, is coming. As I have discussed ad nauseum for the past two months, the higher the dollar rises, the more economic pain is inflicted upon China – whose historic real estate, construction, and credit bubble is bursting, whilst it rapidly loses manufacturing market share to global rivals – particularly Japan, as the Yen dramatically collapses against the dollar-pegged Yuan.
Meanwhile, the deflationary hell I warned of in the “direst prediction of all” is hitting the world full force, with the “oil PPT” on the verge of being blown out of the water in just one short – but concentrated – month. And now, with oil traders grossly mis-positioned with massively long “oil PPT bets” – amidst the ugliest supply/demand fundamentals of perhaps any global commodity – the odds of a WTI plunge below 2008′s lows (in the $30s) appears more likely than ever. Which, given oil’s massive “Achilles Heel” power, may well catalyze “the Big One” all by its lonesome.
As for Precious Metals, I’m not going to harp on the ongoing, historically blatant, desperate Cartel suppression of the past week – notwithstanding today’s rise amidst, what do you know, “deflationary” conditions. However, I’ll simply highlight what I wrote in last year’s “end of the gold ‘bear market‘”; i.e, that around the world, gold is rapidly rising at varying speeds – with the majority of countries amidst rip-roaring bull market phases; including, for example, Brazil, which reached its all-time high gold price this morning. To that end, a Brazilian reader wrote me yesterday, claiming “I bang the table with friends – who are mostly retired financial executives – with memories of the early 1980s hyperinflation, but most don’t recognize gold as a wealth preserver today.”
Well, I can’t say I’m surprised, given that the same misinformed, brainwashed view is shared by countless millions of supposedly “sophisticated” Westerners. That said, one thing “investors” clearly fixate on is rising asset prices; and thus, it won’t be wrong before even the most jaded paper-lovers run en masse to the historical safety of Precious Metals. Just as they did, I might add, during the 2008 and 2011 financial crises. And then, of course, there are the traditional gold-loving cultures; like India, where the Rupee is rapidly approaching 2013′s all-time low; and China, where already all-time high demand will go parabolic as pressure on the PBOC to devalue the Yuan mounts like tea in a steaming tea kettle. Let alone, if a collapsing Euro prompts the 550 million global Euro users to trade their rapidly depreciating scrip for the world’s only real money.
And thus, what more can we say – other than to PROTECT YOURSELF, and do it NOW! Which, as I edit, just became an even more urgent message – as none other than the White House itself just validated what I wrote in “the most ominous quote of the year“; i.e, that it will NOT TOLERATE a higher dollar. In other words, the countdown to the aforementioned Yellen Reversal” just started ticking dramatically faster.
Audioblog #84 Imminent Grexit, Exploding Currency Wars, And The Inevitable Barrick/Newmont Merger