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2.5%-Nuff Said, Part lll-Why Rates Will Never Be “Allowed” To Rise

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July 14, 2017 - 3:08pm

It’s Friday morning, on what could be a key inflectionary day in monetary history.  Which is quite the extraordinary statement, when considering that mere minutes ago, I was, for once, having trouble formulating the day’s principal message.  That said, when I looked through my notes – of the past 24 hours’ articles; and comments I jotted down about various topics; two charts caught my eye – which subsequently, catalyzed the revelation of why rates will never be “allowed” to rise.  That is, until the bond vigilantes inevitably arrive to overwhelm government “monetizers”; in the same manner that soaring physical gold and silver demand will inevitably – and likely, simultaneously, overwhelm the naked paper shorters.

First, a chart depicting the U.S government’s record monthly outlay in June – of a whopping $429 billion, yielding a $90 billion monthly deficit.  Which, I might add, was attributed to “higher subsidy costs for student loans; and to a lesser extent, housing guarantees.”

This, as a potentially bloody “debt ceiling” debate looms mere months away, with the “official” debt being temporarily, artificially held at $19.9 trillion, atop $5+ trillion “off balance sheet.”  This, as $100+ billion of “unfunded liabilities” lurk in the background like time bombs.  Not to mention, the debt that will be required to fund bailouts so large, they’ll make TARP look infinitesimal.  Like entire cities – like Chicago and Hartford; States – like Illinois; and “territories” – like Puerto Rico.  And keep in mind, the Federal government not only has no budget in place, it hasn’t even proposed one for the 2018 fiscal year – which commences October 1st, just in time for said “debt ceiling” debate.

Next, this chart from Bank of America – which itself could be titled Nuff’ Said, in depicting roughly half of all global bond market movements are now attributed to Central banks.  A number which, is unquestionably, vastly understated – given how obvious it is that the Fed “monetizes” as many bonds covertly, as it does overtly (in artificially maintaining 1% interest rates, and reinvesting the proceeds of maturing Treasury and mortgage-backed bonds).  I mean, who do you think bought the hundreds of billions of Treasuries sold in the past 12-18 months by the Chinese, Russians, and Saudis?  “Retail investors?”

Not to mention, stocks – given how the “dead ringer” algorithm utilized on the “Dow Jones Propaganda Average,” which I first wrote of five years ago, is focused around 10:00 AM EST; i.e., when the Fed’s “open market operations” occur.  As it did in prototypical fashion – yesterday.  This, whilst Precious Metals – particularly silver, the world’s most undervalued asset –  were slammed, one day after Whirlybird Janet’s shocking mea culpa that the Fed Funds rate “would not have to rise much further to get to a neutral policy stance.”  I.e., one of the most dovish – not to mention, unexpectedly dovish – Central banking statements in memory; so much so, yesterday’s Audioblog was titled “ding dong, the Fed – and the Precious Metal ‘bear market’ – is dead.”

Then again, I cannot tell you how many times Precious Metals have been capped following extremely “gold-bullish” events, like a terrorist attack or dovish Fed pronouncement – only to surge shortly afterwards, once Wall Street and the fake news media “report” on how the event was “gold bearish.”  Let alone, when the industry is already amidst an extremely bullish fundamental environment – like now, per these shocking charts of the utterly massive gold and silver buying occurring in India (remember last year, when we were told Narendra Modi’s “cash ban” would become a “gold ban” as well?).  Let alone in today’s case – as at 3:30 PM EST, the weekly COMEX COT report may well reveal massive covering of “commercial” (naked) shorts.  Which, if that’s indeed the case, could easily incite significant speculative buying.  And by “significant,” I mean it’s entirely possible that, amidst perhaps the most bullish gold and silver fundamentals since citizens were first allowed to buy them in 1975, said “commercials” may finally start to realize that the inevitable end of their two-decade paper charade is nigh.

As for today’s principal topic, it’s a follow up to the four related articles I have written over the past three-and-a-half years; in each case, correctly calling the interest rate top – using the benchmark 10-year Treasury bond as a proxy.  I.e., January 2014’s “3.0%, ‘Nuff Said”; May 2014’s “2.6%, ‘Nuff Said”; January 2017’s “2.5%, ‘Nuff Said”; and February 2017’s “2.5%, ‘Nuff Said – Revisited.”  In each case, the reason for my belief was the same; i.e., that at rates any higher, what’s left of the dying fiat-Ponzi-supported economy will be instantaneously obliterated.  To that end, note how the “maximum allowable rate” has declined during these three-and-a-half years, despite the Fed claiming it intends to tighten monetary policy due to the “strengthening” economy.

Which amazingly, has produced the weakest ten-year GDP “growth” stretch since the 1930s, despite the most upwardly rigged GDP data in U.S. history.  Not to mention, the last two quarters were the worst since early 2009 – with data like today’s horrifying June retail sales report indicating that if real accounting were utilized, we’d be mired deep in the recession that must inevitably be reported – potentially, in the second half of this year.  I mean, essentially every piece of hard data has been negative this quarter – and yet, the Atlanta Fed is somehow projecting 2% GDP growth!  At this rate, it won’t be long before not only is the Fed completely ignored, but government-published economic data.

Well, that’s enough for now – on a week when I have poured my heart and soul out, writing and speaking the TRUTH; and subsequently, imploring you to not only PROTECT your portfolio from the monetary carnage to come, but CAPITALIZE on some of the most attractive investment opportunities – of historically suppressed Precious Metal prices – of our lifetimes.

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About Andrew Hoffman / Media Director

Andrew C. Hoffman, CFA is the Media Director at Miles Franklin Ltd. Call 877-685-4705 or email ahoffman@milesfranklin.com, visit www.milesfranklin.com

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