PRE-FOMC NOTES – SOMETHING’S GOTTA GIVE!
by Andy Hoffman, Miles Franklin
It’s the eve of the much ballyhooed FOMC meeting, and TPTB’s desperation to paint false economic pictures has never been greater. Incredibly, the Fed somehow believes the world trusts in its ability – and that of all Central banks – to guide us to prosperity, despite the fact that its post-2000 machinations directly caused the even worse 2008 financial crisis; whilst its post-2008 money printing orgy, mimicked by its Central banking pals the world round, has put the planet in perhaps its most precarious financial predicament since the dawn of mankind.
Due to the “demographic hell” that has given it a population ten years older than the global average, Japan has been the “poster child” of the what money printing causes. In other words, depicting the direction all the world’s economies will be taken by their Central banks until hyperinflation inevitably consumes them. To that end, below is a chart of what QE and ZIRP “accomplish” – in enriching the “1%” that receive the “free money”; impoverishing the rest; and putting the nation’s very financial existence at peril. In Japan’s case, the nation’s biggest ever trade deficits – despite a 50% plunge in the Yen, which was supposed to increase manufacturing market share; its highest inflation indicators in years, despite the historic global plunge in commodity prices; Shinzo Abe’s lowest approval rating yet, which somehow enabled him to be re-elected; a debt/GDP ratio approaching a world-leading 250%; and yet another in a serious of debilitating recessions. Which is why – ironically on the eve of the FOMC meeting – S&P downgraded Japan last night from AA- to A+, enroute to its inevitable junk rating.
Wherever you look – from the BRICS; to the “Fragile Five” nations where a quarter of the world’s population resides; to the collapsing European “union”; to the United States of World Destruction itself, the story is the same. Frankly, even the most jaded “powers that be” apologists – including the MSM they control – are having a difficult time pretending otherwise; as unequivocally, the world is in its weakest economic position in generations, amidst its worst ever financial position. Throw in the most strained geo-political environment since World War II; and the highest level of social unrest of our lifetimes; and it’s not difficult to realize “something’s gotta give” – as the “end of belief Central banks can save us” has clearly arrived. And perhaps as early as this week, “Economic Mother Nature” and the “unstoppable tsunami of reality” will let Whirlybird Janet and her insane economy destroyers know it.
As we head into what may well be the Fed’s final act of economic suicide, the machinations to “prime” rigged markets have never been more blatant; from the “dead ringer” algorithm that supported yesterday’s comical “Dow Jones Propaganda Average” surge following horrible retail sales, industrial production, business inventories, and Empire State Manufacturing data (and this, despite a simultaneous explosion in interest rates, likely due to relentless Chinese Treasury selling); to last night’s prototypical “Hail Mary” rally on the Shanghai Exchange – which after two days of big losses, wasn’t “telling the story” TPTB desired, said “powers that be’s” desperation could not be more evident.
Simultaneously, gold and silver prices were suppressed by the ubiquitous “Cartel Herald” algorithm at EXACTLY the 8:20 AM COMEX open.
Which is quite ironic, given that just yesterday, we learned that not only did COMEX gold and silver inventories continue to plunge, but JP Morgan itself is down to a measly 10,777 ounces of registered – i.e., available to deliver – gold inventories. Yes, the big, bad COMEX exchange – home of the “New York Gold Pool,” which “sets” paper prices with relentless naked shorting – is down to a measly 163,000 ounces of deliverable gold, worth an essentially infinitesimal $180 million. And its de facto “government representative,” JP Morgan, has just $12 million worth.
And yet, published Chinese and Indian demand – excluding unreported Beijing Free Trade Zone imports, and the massive Indian black market – has been nearly 16,000 tonnes since 2008 alone; i.e., 500,000 ounces. And since China and India consume roughly half the world’s gold, total global demand has likely been more than 1,000,000 ounces over this period. Of course, per the steep upward slope of the below chart, “Chindian” demand is at its all-time high level, growing at an accelerating pace since the financial system broke in 2008. And the same goes for silver demand, which not only has grown at a far more explosive rate than gold, but is screaming “supply shortage” – as retail supplies sell out, and physical premiums surge.
I mean, the below two charts alone – of exploding Indian silver demand (again, excluding the massive black market, the result of onerous import tariffs imposed in 2013) – should tell you all you need to know about the true state of the silver market. And perhaps, just perhaps, the fact that the Indian Rupee – in a nation of 1.3 billion fiat currency hating citizens – is at an all-time low as we speak, has something to do with it.
Heck, just last night I received the following email from a reader in said “Land of the Setting Sun” – which frankly, could just as easily have come from dozens of other countries whose currencies are being actively, aggressively destroyed by Central banks, many to all-time low levels. Yes, something’s gotta give – and regarding physical Precious Metals, that “something” will inevitably, perhaps imminently, occur no matter what the Fed does.
“I’m in Japan now on business. Demand is high here for the gold Canadian Maple Leaf, and an ounce costs about $100 more than the price at which I could buy it in the U.S. I think I’ll sell a lung before I part with any of the little precious metal I have.”
Back to the Fed, even I’m in awe of the propaganda that continues to purport economic “recovery” despite boundless evidence to the contrary – from collapsing commodities; to imploding currencies and sovereign finances; to (hideously massaged) GDP figures themselves. Let alone, the continued confidence that the Fed will raise rates amidst a global cataclysm of debt; a surging dollar; plunging financial markets; and oh yeah, the fact that the Fed’s own, massively leverage balance sheet would be destroyed by such a suicidal act. Earlier this month, I referred to a potential rate hike as the “only financial event that could be as cataclysmic as a significant Yuan devaluation”; and last night, the great Simon Black of Sovereign Man took that argument a step further, in this must read article.
And yet, as mortgage applications hit the wire with a second straight massive weekly decline – “coincidentally,” as rates rose; Hewlett Packard joins yesterday’s combined Unicredit/Deutschebank 33,000 job layoff announcement with 30,000 fresh pink slips of its own; quasi-U.S. government backed Puerto Rico gets ready to officially default; an imminent “debt ceiling” increase will add close to $1 trillion to the nation’s published debt burden; this morning’s CPI reading was “unexpectedly” negative; global trade bellwether Fed-Ex reduced its earnings outlook; rumors of dozens of imminent shale oil bankruptcies intensify; and oh yeah, Greek snap elections this weekend threaten to further destabilize Europe, Yahoo! Finance writes “low risk of recession reassures investors” – whilst CNBC espouses “the U.S. will likely get a rate hike tomorrow,” as “one former policymaker-turned-bank chairman, Axel Weber, claims the U.S.’s recent positive economic data showed a rate hike was due.” And this, as everyone from the IMF, to the World Bank, to the OECD (this morning), to Goldman Sachs itself beg and plead the Fed to back off!
In other words, the lunacy is coming to a head – perhaps, according to Maestro Greenspan himself, in the “next few months.” Yes, “something’s gotta give” – and when it comes to PROTECTING YOURSELF from the hyperinflationary hell 100+ Central banks are about to unleash, if you haven’t “hedged” your portfolio with the “anti-fiat currency” gold and silver represent beforehand, it will be decidedly too late.