First off, I just want to thank you for the outpouring of support
following Friday’s article, “Truth – and Passion – at a Premium.” Hands
down, in more than a decade of writing free missives – and certainly, my 3½
years at Miles Franklin, it was the most universally positive feedback I’ve
received – including “special guest” responses from fellow freedom fighters
Chris Duane and Brother John F.
Clearly, the Cartel’s recent, heinous machinations – not just in Precious
Metals, but across the entire spectrum of so-called financial “markets” –
have elicited as much angst, anger and frustration across the real money
community as any before; and no, I don’t think it’s a coincidence that
Friday’s comical COMEX-opening slam – immediately following horrific PMI
Manufacturing, construction spending, and motor vehicle sales – occurred on
the four-year anniversary of the May 1, 2011 “Sunday Night Paper Silver Massacre.” Nor, for
that matter, the Thursday’s COMEX-opening smash following abysmal personal
income and spending data, and Wednesday’s clockwork post-FOMC raid, despite
the Fed being as unequivocally dovish – and “unexpectedly” so – as possible.
Let alone, as the FOMC statement was published simultaneously with one of the
ugliest GDP reports in years.
Throw in the fact that simultaneously, the “Greek Tragedy” is
rapidly moving toward its final act; China’s economy is collapsing so rapidly
– per the 77% year-over-year shipyard order plunge announced Friday –
that the PBOC floated a QE “trial balloon”; and despite the “bullishness” of
Thursday’s “island of
lies” jobless claims plunge – which, as I have noted countless times, has
correlated perfectly with the plunging labor participation rate – the dollar
just completed its biggest monthly decline in four years. And thus, in
response to a specific newsletter writer that recently predicted gold would
decline because the dollar was on the verge of a major rally, I yet again
must point out that the only factor that currently matters is the
Cartel’s machinations – which ultimately, will fail spectacularly, no matter
whether the dollar is rising, falling, or flat.
In fact, TPTB’s market manipulation has become so pervasive – and mind-boggling
– it’s becoming painful to turn on my screen each morning. To wit, the “oil
PPT” is pushing oil prices higher – and inflating the shale dotcom bubble
further – as oil fundamentals collapse; whilst the “copper PPT” is supporting
“Dr. Death” amidst equally dire copper fundamentals. And of
course, whilst the gold Cartel attacks Precious Metals prices every second of
every day, the “President’s Working Group on Financial Markets” unwaveringly
supports the “Dow Jones Propaganda Average” with “dead
ringer”, “hail mary,” and countless other blatantly transparent algorithms –
yielding record equity valuations amidst the worst economic data since the
2008 financial crisis. Not to mention, flat out declines in corporate
revenues and earnings. Heck, the Atlanta Fed’s real-time GDP “Now-Cast” –
which predicted the first quarter’s 1Q growth rate of 0.2% to a tee, now
forecasts 2Q growth of a way below consensus 0.8%. Of course, the one market
“they” are losing control of – in my view, due to accelerated Chinese selling
– is Treasury bonds, where rates have been rising despite the Fed all but screaming
“ZIRP to Infinity.”
Fortunately, the walls are finally starting to close around the monsters
perpetrating this economic and inflationary hell on the world – as with each
passing day, destructive Keynesian monetary policy is being further
denigrated, en route to the decisive “death of Fed (and other Central bank) credibility.” To wit, in
last weekend’s MUST HEAR audioblog, I couldn’t have hit the title on the head
better than “Earth to Janet, No One is Listening” – as just
this weekend, her damning comments from a December 2008 FOMC meeting enabled
the whole world to realize her true feelings about the inability of money
printing to solve financial and economic problems.
“As Japan found during its quantitative easing program, increasing the
size of the monetary base above levels needed to provide ample liquidity to
the banking system had no discernible economic effects aside from those
associated with communicating the Bank of Japan’s commitment to the zero
interest rate policy.”
And don’t forget the most inept Central bank on the planet – the Swiss
National Bank – who in my view, took that infamous title from the Bank of
Japan when it convinced the Swiss population to vote “no” on the “Save our
Swiss Gold” referendum under the guise of its need to maintain the Franc/Euro
peg – only to have it blow up in its face within weeks, causing massive
financial losses and a permanent loss of face. To wit, we learned this week
that not only does the SNB still hold massive foreign currency holdings –
most likely, still dominated by the dying Euro; but in lieu of purchasing the
time-honored safety and insurance of gold, they have become one of the
world’s largest taxpayer funded “hedge funds” – buying up more than $100
billion of global equities, at all-time high valuations. No, nothing could
possibly go wrong here.
Those horrors aside, it’s time for me to discuss – or better put, “rant” –
about a topic that disgusts me as much as market manipulation itself. Which,
of course, is the canard-of “deflation”; which not only cannot occur
in a fiat currency regime, but is decidedly not doing so today – particularly
in the lives of the seven billion people that don’t use the world’s “reserve
currency” (the average currency has plunged 40% since the Fed commenced
“Operation Twist”, QE2, and QE3 in 2011). Not that the Miles Franklin Blog
hasn’t discussed this topic ad nauseum for years, but the topic recently
resurfaced – like a cancerous tumor – when the “deflation boogeyman,” Harry Dent, claimed gold would plunge
due to this mythical phenomenon.
This weekend, my Mom came to visit from New York. Whilst here, we had
several conversations – and at times, disputes – about the cost of living.
Following these discussions – with someone decidedly not amongst the
financial community – my view of Americans as “frogs in a boiling pot” of
simmering inflation couldn’t be stronger. Truly, the average person –
certainly in the States, and likely many other nations – has no idea why the
cost of living continues to surge; and certainly, no understanding of the
virulent, irreversible forces of money printing.
Over the past year, I have written endlessly of the countless items rising
in price – some more than others, some faster than others – which is exactly
why real household income has been declining for four decades. Which, by the
way, even my non-financial mom understood well. However, she was literally
dumbfounded when I told her the litany of “need versus want” prices at or near record prices – including
food staples like milk, beef, pork, chicken, shrimp, eggs, cheese, and many
fruits and vegetables; shelter costs, including both house prices and rents;
utilities; tuition; and even water. Not to mention, all types of insurance –
in large part the direct result of ZIRP policy (and litigiousness), which
forces insurance companies to raise premiums to offset the impact of lower
interest income. Not to mention, inflation in the form of relentless tax
increases – such as the all-time high level of U.S. property and sales tax
revenues; fee increases everywhere from airlines (baggage fees, no more free
food); to car registrations; athletic league costs; and essentially all bank
transactions, to name a few I can personally identify with. Throw in
“creeping” premiums on everything from gym memberships; to ADT security;
cable TV; and internet usage, to name a few, and we’re taking some serious
cost of living increases. Heck, even as the Fed has kept rates for TBTF banks
at essentially zero for seven years, average credit card APR’s have hit a
17-year high of 15%! And I won’t even go into the cost explosion in areas
where the “1%” that receive the bulk of the Fed’s largesse reside – like New
York and Washington, DC, for example; which is exactly why people are
flocking en masse to states (like Colorado) with lower costs of living, and
fleeing from such high cost states.
That said, she couldn’t be more aware of the behaviors Americans
are cumulatively taking to offset the inflationary impact of the end of
income caused by permanent ZIRP – and soon to be NIRP – policy. Such as, for
example, the frantic search for credit cards paying an extra half-percent of
cash rewards (I recommend Chase Sapphire, Capital One Quiksilver, and
Citibank Double Cash); explosive traffic growth at “dollar stores” like
Family Dollar and Dollar Tree (although shoppers need to realize product
“shrinkage” causes many dollar store items to be rip-offs); thrift stores
like TJ Maxx, Home Goods, and Ross; and transactions on Craig’s List. Heck,
this weekend was my neighborhood’s annual garage sale – and my god, I have
never seen such activity – and planning – in eight years of living here!
As I’ve discussed for years – and particularly, recent years – “all economic data are lies.” However, no lie
is more pervasive – although “unemployment” and “GDP” are certainly in the
ballpark – than the “sub 2%” inflation the relentlessly rejiggered CPI
purports, care of “substitution”, “hedonistic adjustments,” and countless
other statistical gimmicks. Consequently, the Fed is able to eternally print
money, under the guise that its 2% target is never reached – as if they
wouldn’t just raise the bar if it ever got there, as they did when they
eliminated the 6.5% “unemployment rate” threshold.
In fact, it’s outright insulting that the BEA (Bureau of Economic
Analysis) claimed first quarter deflation of 0.1% – which was clearly
done simply to keep the real GDP rate positive. And no, falling gasoline
prices – which have since rocketed higher – did not cause the cost of living
to decline; particularly in an historically bad economy, where said taxes,
fees, and “premium creep” have become mainstream corporate and municipal
“profit enhancement tools.” As you can see below, aside the bottom of the
2008 crisis, the only time the GDP deflator has been negative was a
brief period in 1949. As for the “deflation” the Fed is so terrified of, take
a gander at the (massively suppressed) CPI itself; which not only has
relentlessly risen since the Federal Reserve was (deceivingly) created in
1913, but exploded since the gold standard was abandoned in 1971.
In the big picture, the only things as certain as death and taxes are ZIRP
and QE to infinity in the terminal stage of a fiat currency regime; as well
as exploding gold and silver demand – and care of
two decades of price suppression, collapsing PM supply.