Sorry for the harsh title, but at the Miles Franklin Blog, our aim is not to be “politically correct,” but to protect you from the inevitable collapse of the world’s largest Ponzi scheme; i.e., the global fiat currency regime that commenced when the gold standard was abandoned in 1971. For years, we have characterized this oppressive financial regime as an incurable cancer; which unfortunately, spreads with the virility of the Ebola virus. In other words, the worst of all medical scenarios, all wrapped up in one.
Initially, this disease infects the “weakest links” in the chain; in an economic sense, nations with the most undeveloped, unstable political and financial systems. In other words, those lacking the ability to temporarily mask the symptoms of their money printing are by “exporting” the ensuing inflation to others. As holder of the “world’s reserve currency,” the U.S. has been able to export more inflation than any other nation; which is why it appears to be in “relatively better” economic condition than most and why essentially every currency has significantly declined against it, since the Fed embarked on its suicidal “Operation Twist” program in late 2011 (as discussed in “The most important article I’ve ever written). For now, the fact that real wages are at a 40-year low; real unemployment at Depression-era levels; high paying jobs permanently lost and income inequality at unprecedented levels; as a handful of government-supported oligarchs rule an increasingly dumbed down, financially-broken populace is considered immaterial – as not only does the U.S. have the world’s most widely used currency, but the most powerful market manipulation and propaganda schemes as well.
Unfortunately, as sure as death and taxes, this particularly virulent financial cancer ultimately works its way up the totem pole; starting with “low hanging fruit” like the “fragile five,” and eventually killing off the head – in this case, the U.S. dollar; and with it, the entire, globally-tethered banking system. From 2008-11, TPTB fought a long, drawn out battle with this self-induced malady, finally persuading it into “remission” after injecting tens of trillions of dollars of printed money into the global economy; including a final, “dose-dense” treatment of “QE3” in late 2012, coupled with Japan’s “Abenomics,” Europe’s “Outright Monetary Transactions,” and other, equally intense Central bank monetization schemes. Unfortunately, as is the case with actual cancer, it often comes out of remission more intense, and lethal, than before. Which is exactly where we stand today; and why yesterday, we wrote that “looking back, we may well view this week as a major inflection point in financial history.”
Last month, we saw an all-out effort to push equity indices to record highs; across numerous nations, many of which are experiencing collapsing economies, surging inflation and intensifying political tensions. Remember, the Federal Reserve is owned by TBTF banks, which care only about maintaining a status quo in which their bonuses and ability to effect political policy are maximized. Ditto for the ECB, BOE and other major Central banks; despite the fact that such “structure” is not as obvious. Anyone watching CNBC cover this week’s Davos, Switzerland economic boondoggle – where “elite” bankers and politicians discuss ways to maintain this power structure – should realize this; just as anyone who worked on Wall Street (myself included, for 15 years) knows “bonus season” is more important than the lives of billions of ordinary citizens.
Adding to the ridiculous PPT and “POMO” operations utilized to goose the “Dow Jones Propaganda Average” into year-end, was the bankers’ “bonus” of clobbering PAPER gold and silver prices to multi-year lows in nominal terms; and perhaps, all-time lows in real terms. This is why the mining industry is on the verge of implosion; and likely, due to the exodus (and aging) of key personal, along with mine shutdowns and an utter collapse in exploration spending, will not materially recovery for years to come – i.e., just as governments start expropriating and windfall taxing them.
Amidst this unprecedented market manipulation, the Fed announced a meaningless, token “tapering” of its gargantuan QE monetization scheme. Last week, we proved QE was already far larger than announced – as could anyone doing the math; but irrespective, relentless propaganda was utilized to further foster the lie of economic “recovery.” And by the way, how can a “recovery” have not turned into actual expansion after four years; let alone in Europe and Japan, where GDP growth is still close to zero, and in the former case, official unemployment remains at an all-time high? Heck, check out these statistics about the horrific labor situation in Spain, where its IBEX stock index is up a comical 33% in the past seven months. Gee, I wonder what it will do next.
Unfortunately, in announcing said “taper,” the hibernating “bond vigilantes” were awakened; forcing interest rates higher and threatening to destroy the global economic landscape – already hanging by a thread – with the instantaneous power of an atomic bomb. In “3.0% – ‘Nuff Said,” we described why TPTB must allow reality to be seen ASAP, in order to push rates back down – and thus, “kick the can” yet again. The WALL is already in sight – at which point, there is no more road to kick the can down; but rest assured, they’ll keep kicking until they hit it – if only to prepare themselves for what’s coming. This is why the COMEX “commercials” are holding their most bullish PM positions since the bull market commenced 13 years ago; why PHYSICAL inventories have been drained worldwide; and why 2013 worldwide gold and silver sales reached all-time highs.
And here we are in January – just three weeks after the MSM trumpeted a (fraudulent) “goldilocks” scenario of rising GDP, falling inflation and economic stability – with global financial markets in turmoil. Thailand and the Ukraine are on the verge of collapse; the Argentinian Peso and Venezuelan Bolivar are dramatically devaluing; and “fragile five” currencies like the Turkish Lira, South African Rand and Brazilian Real in freefall.
To wit, in our “2014 predictions,” we forecast that multiple currencies would experience dramatic declines relative to the dollar, as well as an expansion of global social unrest. It has taken but weeks for this to occur; with an even more dramatic, ominous twist to boot. Yes, the dollar is rising against said “third world” currencies; but simultaneously, it is plunging against major currencies like the Euro, Yen and Pound. In other words, foreign exchange chaos is ensuing; and thus, given the suicidal, but politically expedient policies emanating from the “final currency war,” it appears highly likely that money printing pressures everywhere – from the Fed, to the ECB, BOJ and BOE, among others – will increase exponentially. Heck, just this week the Bank of England did exactly what the Fed did last month; as when the UK’s own, fraudulent “unemployment rate” fell toward the BOE’s 7.0% ‘ZIRP termination threshold,’ it simply eliminated the threshold; like the Fed, instead promising to maintain zero interest rates indefinitely – in a clear attempt to weaken the Pound and prevent instantaneous financial collapse.
As I write, global equity indices are plunging – none more so than the Nikkei, which was boosted entirely by the plunging Yen, resulting solely from Abenomics. You know, the same plunging Yen that has caused surging Japanese inflation, near zero GDP growth and record low approval ratings for Shinzo Abe. However, what’s even more alarming is that the same issues that dominated the 2008 financial collapse – i.e., Global Meltdown I – are moving back to the fore, such as exploding credit default spreads. As one might expect, Argentina, Venezuela, Turkey and South Africa are collapsing the most; and eerily, all four nations’ stock indices are near multi-year (or record) highs. What does this tell you of the odds that hyperinflation will break out, potentially now?
We have no way of knowing when and how “the Big One” will commence; but we do know it’s on the horizon, moving at tsunami-like speed. Remember, John Williams anticipates hyperinflation to hit American shores in 2014; and as we wrote earlier this month, we have a difficult time arguing with his logic. Any number of “black swans” could catalyze the inevitable collapse of confidence in doomed fiat currencies like the dollar; be it an imploding global economy, expanding capital controls, heightened “QE” measures, surging political tensions, or proliferating “shadow banking” issues. Or perhaps, something as simple as the upcoming U.S. “debt ceiling” debate – now that Obama told Congress the government will run out of money by the end of February, absent a new debt ceiling increase. However, it’s definitely coming; and when it does, it will be too late to PROTECT yourself if you haven’t already.
As for Precious Metals, they are again fighting their “death match” with TPTB; one they will inevitably win, and big. Yesterday, gold rose by exactly its 2.0% “Cartel limit up” level, while silver managed to again push above the most insane “line in the sand” – at the very key round number of $20 – we have ever seen. Meanwhile, the Dow’s losses were stopped at exactly the 1.0% “PPT ultimate limit down”; and as we headed into today – a crucial Friday, ahead of what could be an extremely nervous weekend – this WAR has moved into second gear.
As I write at 11:00 AM EST, the Dow is again down exactly 1.0% (really, we don’t make this stuff up); whilst PAPER gold and silver are fighting valiantly against the forces of evil, which desperately hope to avoid two straight violations of “PPT Rule #1”; i.e., “thou shalt not allow PMs to surge whilst the Dow plunges.” Note the 15th “2:15 AM” attack in this year’s 16 trading days; as well as blatant “Cartel Herald” caps at the round number of $1,270/oz. – which just happens to be a key technical level; and in silver’s case, the utterly incredible WAR going on at $20/oz…
…seen in greater detail here, coinciding perfectly with the “key” 50 day moving average of $19.94 (which I facetiously call “key,” as it is simply being utilized by the Cartel in an attempt to induce “black box” sales of PAPER silver, in many cases “naked”)…
Frankly, this historic battle between “good” and “evil” goes all the way back to last summer; which even the most technically un-savvy should realize has created an utterly MASSIVE support level. Not only has silver survived eight months of blatant attempts to push it materially below $20/oz., but the cost of production is anywhere from $22/oz. to $30/oz., depending on the company and the specific metric utilized. Moreover, silver sentiment has fallen to all-time low levels; creating a potentially violent bullish scenario, in which a “perfect storm” of fundamental, technical and sentimental factors coalesce.
This is why – among countless other reasons – we believe the “risk/reward” potential of silver at these prices has never been better; particularly given that ultimately, it’s not its price that will matter, but how many ounces you own. Consequently, our final 2014 “prediction” was that the gold/silver ratio will decline – perhaps significantly – as the Cartel inevitably loses its grip on the “Achilles Heel” of its suppression scheme; i.e., the miniscule global inventory of above ground PHYSICAL silver.
To conclude, after a year of government-induced “dormancy,” it appears the global “financial cancer” has reawakened – with a very strong possibility of catalyzing a 2008-style contagion. Only this time, governments themselves will be in the markets’ crosshairs, having sacrificed their balance sheets – and viability – to “save the world” five years ago.
If this is indeed “the Big One,” the timeframe to PROTECT oneself may run out very, very quickly. Hopefully, you have spent the past five years preparing for the inevitable, global currency crash; and if you haven’t, what are you waiting for? All aspects of one’s life should be considered; but when it comes to the financial aspect, only PHYSICAL gold and silver have maintained their purchasing power throughout similar crises – and likely, will benefit more than any other asset class from what’s coming. Whether or not the “greatest wealth transfer in history” occurs – from those holding fiat-currency denominated wealth to those holding real assets – we don’t know, but we suspect it will. Either way, the odds of surviving what’s coming will increase exponentially if you limit your exposure to the financial cancer enveloping the world; i.e., the destruction of fiat currencies.
Andrew C. Hoffman, CFA
Marketing Director
Miles Franklin Ltd.
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