When I went all in to Precious Metals in May 2002, the first “guru” I read was Richard Russell. Now 89 years old, the ‘Dean of Financial Newsletters’ is still writing nearly every day. I no longer read him regularly, but his macroeconomic commentary remains the “gold standard” of the industry. He was dead on in predicting both the dollar’s demise and the Precious Metals bull; and as we speak, recommends a portfolio consisting principally of PHYSICAL gold and “just enough cash to carry us through each week” – per thiscommentary from last night.
Back then, he coined the phrase “Inflate or Die” to describe the conundrum underlying the Federal Reserve’s fiat currency Ponzi scheme. Thus, more than a decade ago, he was saying what the entire world is just starting to realize; i.e., the Fed can never taper its money printing activities, lest the system will instantaneously collapse, for lack of “water.” Or as the MSM and Wall Street term it, “liquidity.”
The 2008 financial collapse marked the end of the Fed’s ability to expand the money supply without consequence. Sure, the U.S. (and global) economy peaked eight years earlier. However, system-wide debt was much lower and Central bank balance sheets unencumbered; and thus, managing the 2000-02 “tech wreck” with fresh money printing was no big deal. However, when 2008-09 came around, the “diminishing returns” of such printing were starting to show; and now, five years later, money printing creates nothing but exponential growth in debt, inflation and social unrest. To analogize, the financial drunk was given coffee in 2000, more alcohol in 2008, and crack cocaine today.
Today, nothing less than financial crack – in increasing doses – will prevent the patient from going into convulsions; which is why Wednesday’s FOMC decision to “taper” QE was so suicidal. In their “defense,” what they are actually doing does not even remotely resemble tapering – per what we wrote in “Proof of the tapering mirage.” However, most market participants haven’t done this simple math; and more importantly, the Fed’s message is it could not care less if the dying system it created collapses now.
Following the 2008 crisis, the Fed (and other Central banks’) initial “shock and awe” money printing campaign – both overt and covert – temporarily calmed the markets. However, once the reality of a collapsing banking system sank in, global stocks and currencies started collapsing anew. Consequently, the Fed initiated “Operation Twist” and its European “swap agreements” in Fall 2011 – whilst the ECB commenced its LTRO, or “Long-Term Financing Operations”; and when they failed to calm markets, the Fed initiated QE3 in Fall 2012, just as Shinzo Abe initiated “Abenomics” in Japan and Mario Draghi said he’d do “whatever it takes” to save the Euro. And oh yeah, the most concerted Cartel gold and silver attacks in global history were initiated; which in sum total, accelerated global debt growth, boosted banker “profits” by temporarily pushing stock and bond indices higher, exploded global wealth inequality, crushed real economic growth and hastened the exportation of Fed-generated inflation. And thus, here we are in 2014, with ZERO remaining “ammo” for the Central banks to hold off the forces of collapse. In other words, these “double shock and awe” actions have produced nothing but a year-plus of can kicking; and now, it’s time to “pay the piper” for 42 years of printing money with nothing but the “full faith and credit” of lying, thieving governments behind it.
After a one-day reprieve, in which the PPT generated a “dead-cat” equity bounce and appeared to stabilize global currency declines, they are back today with a vengeance; and on a Friday, to boot. The day’s economic “news” was all horrible, starting with Japanese inflation hitting a five-year high, whilst its auto demand plunged at the fastest rate in three years. And what a shock; Japan alsodisclosed that it became a net gold importer last month, for the first time since mid-2010!
After that, a glimpse at the future – as now communist France announced a 77% collapse in foreign direct investment, to a nearly three decade low; whilst Europe’s largest bankers and creditors held a “secret meeting” to discuss Greece’s pending collapse. And then, the economic coup de grace – when we learned that Amazon.com – i.e., the world’s largest online retailer; and Wal-Mart – the world’s largest retailer – followed Apple and Best Buy’s examples by reporting terrible sales and reduced forward guidance. And oh yeah, for the second straight month, U.S. consumer spending growth dramatically outpaced (non-existent) income growth; yielding a plummeting savings rate and the largest drop in real disposable income in 40 years.
Worse yet for history’s largest “dependency nation”; take a guess what Wal-Mart cited as a key reason for its reduced sales. Yep, you guessed it, the recent reduction in U.S. government food stamps payouts. Yes, essentially the only thing the government has cut is food stamps; not to mention, its refusal to extend long-term unemployment benefits to 1.3 million people, which will likely show up in a plummeting Labor Force Participation rate on Friday. Gee, less food stamps and unemployment benefits – coupled with a collapsing economy, “tapering” of U.S. Treasury monetization, and the commencement of Obamacare. What could possibly go wrong, especially with the U.S. “debt ceiling” requiring an increase by the end of February?
Zero Hedge
Back to the global currency collapse described five months ago in “The most important article I’ve ever written,” essentially no one is being spared. Unless your currency is pegged to the dollar – as the Chinese Yuan was this year, via $18 TRILLION of fresh Yuan printing – your currency is going in the toilet. And worse yet, the entire world are starting to realize the Federal Reserve is its leading cause. Just wait until they understand it was the U.S.’s abandonment of the gold standard that really got the ball rolling; and don’t be surprised if the upcoming anti-America movement is led by a militant Germany – how ironic; now that they realize the U.S. government has pilfered its custodial-held gold. Not to mention, the world’s largest “emerging markets” – like India, whose top Central bank governor this morning blamed the Fed directly?
As we anticipated in our “2014 predictions,” essentially all foreign currencies are at risk of collapse, prior to the “financial cancer” inevitably destroying the disease’s “head” – i.e., the U.S. dollar. This week’s emergency rate increases by Brazil, Turkey and South Africa decidedly failed to stem currency declines; as each is broaching a new low for the move – in most cases, to RECORD lows. And why, you ask? Because dramatically raising rates accomplishes nothing but the further destruction of economies – particularly those already in massive contraction.
Sometimes, pictures speak a thousand words. And thus, we wanted you to see how global currencies have performed since the Fed’s money printing spree commenced in 2008 – with a particular focus on the period following 2011, when the aforementioned “ultra-shock and awe” policies commenced. Below are charts of seven such currencies – utilized by more than one-third of the world’s population – which I assure you, don’t share the Fed’s view that inflation is “contained” and likely to “decline.” First, the Indonesian Rupiah…
…followed by the Indian Rupee…
…the Turkish Lira…
…South African Rand…
…Russian Ruble (just in time for the Olympics)…
…Brazilian Real…
…and, of course, the hyper-inflating Argentine Peso…
But have no fear, as the S&P 500 – that only “the 1%” own -has soared with each successive Fed rate printing acceleration; that is, until NOW…
As for Precious Metals, the END GAME is clearly approaching rapidly, as global physical demand has never been stronger – whilst the global supply outlook has never been weaker (with both metals trading well below their respective costs of production); physical inventories have never been lower; and governments (like Germany) are rapidly realizing what they thought they owned doesn’t exist.
Consequently, the Cartel is digging in more vehemently than ever; by attacking at the 2:15 AM EST open of the London paper “pre-market” every day now; as well as the 8:20 AM COMEX open; the 10:00 AM “PM Fix”; the 12:00 PM EST “cap of last resort”; and the 2:00 PM “crybaby” period. Today, in particular, they are utterly terrified because it happens to be the “First Delivery Day” for the February COMEX contracts; and as of last night, contracts worth 2.2 million ounces were still open, with another 140,000 ounces still undelivered from the December and January contracts. Gold and silver are still marginally higher; but as you can see, the Cartel viciously attacked after the consumer confidence plunge was announced at 10:00 AM EST – following a blatant “Cartel Herald” capping at the 8:20 AM COMEX open; at what do you know, its nearly three month “line in the sand” at the very key round number of $1,250/oz.!
With the global financial carnage just starting, I could not feel more comfortable taking Richard Russell’s advice – by holding PHYSICAL gold and silver, and waiting for the inevitability of his “inflate or die” warning to morph into “inflate and die.”
