RANTING ANDY – It’s rare that I’m at a loss for words, although in this case the “writer’s block” is being caused not by too little to say, but TOO MUCH.
Generally, my brain homes in on a particular topic, one that is apropos for the moment. However, in today’s environment of perpetual fraud, stupidity, and economic collapse, it is getting to the point where each HOUR I come across a new horror that needs to be addressed. My goal is to EDUCATE and EMPOWER readers to PROTECT THEMSELVES during this critical eleventh hour before total economic annihilation, so I am making sure to discuss as many of these issues as possible.
This week’s events were particularly ominous, as next week commences the END of the summer and the BEGINNING of the final act for the global fiat currency system. During what is typically the second quietest week of the year (the first being Christmas), markets were extremely volatile, culminating in Friday’s catastrophic jobs report, which only avoided a negative print due to 87,000 phantom jobs care of the birth/death model.
To give some commentary on how ridiculously the birth/death model is, its underlying assumption is that people who get laid off from large companies will open small businesses. First off, there is NOT A CHANCE IN HELL that small business is growing while big business is not (I’d argue the contrary), and even less chance that freshly laid off people are risking their limited capital in the dangerous small business realm. Not to mention, thanks to chain stores such as Starbucks, Home Depot, and the like, there are barely any opportunities for “small business” anymore, especially when banks are not lending and consumers have little or no available credit. The fact is, the birth/death model was created a decade ago with the SOLE PURPOSE of goosing employment reports to compensate for the relentless migration of U.S. jobs overseas, a trend which continues today unabated. In other words, U.S. job growth has been NEGATIVE, by my estimate, for close to a DECADE, and will continue to be NEGATIVE into the forseeable future, no matter what silly numbers the government publishes.
Anyhow, data “massaging” or not, the jobs report was so bad that it essentially GUARANTEED an OVERT QE3 announcement following the September 21st Fed meeting, or sooner if the markets continue to collapse, which I would put pretty good odds on. Remember, it is not only the U.S. economy that is collapsing, but that of the ENTIRE WESTERN WORLD, and given that these economies are integrally entwined, there is NOT A PRAYER that ANY country can escape the black hole of economic disaster and accelerating currency depreciation. Heck, even the Chinese Purchasing Managers data is on the brink of going negative, while the vaunted Brazilian economy is now in decline as well, as evidenced by the surprise rate cut that occurred on Thursday (http://www.zerohedge.com/news/barclays-brazil-rate-cut-unexpectedunprecedented).
Enjoy your weekend, as once America emerges on the other side of Monday (Sunday for the rest of the world), it will confront a world of hell that directly contrasts the serenity of a Labor Day barbecue. In other words, just as the lights are turned out on summer homes in the Hamptons (as I did in Montauk during the 1990s), the lights of the grandest stage, i.e. the GLOBAL ECONOMY, will be doing so as well.
If the world can avoid a weekend economic crisis, one may well commence on Wednesday the 7th, when Germany’s courts rule on the constitutionality of the European bailouts thus far approved by lame duck PM Angela Merkel. Not that a specific event is required to trigger a market crash, given how fast the global economy is downward spiraling.
RANT readers know I believe the Euro will be broken up imminently, perhaps in the next 6-12 months as PIIGS economies (and others such as France) collapse under the weight of soaring debt, interest rates, and of course, EVIL credit default swap contracts. Anti-Euro political and social pressure is growing rapidly in relatively healthy Euro nations such as Germany, Austria, Finland, and the Netherlands, to cut the PIIGS loose and avoid further drains on their respective Treasuries.
This is no different than the situation I wrote about in my August 12th RANT, “UNPRECEDENTED”, in which I detailed my belief that financially stronger States will eventually secede to avoid being sucked down the rabbit hole by economic basket cases (such as Michigan, Illinois, Pennsylvania, and Ohio, which have been permanently gutted of their manufacturing bases), welfare states (California, quite possibly the worst managed entity on earth), collapsed real estate carcasses (Florida, Nevada, and Arizona, to name a few), pariahs of the Northeast “Wall Street Corridor” (New York, New Jersey, Connecticut, and Massachusetts), and, OF COURSE, the villainous, scandal ridden “Government Corridor” of Washington D.C., Virginia, and Maryland.
It is a MATHEMATICAL CERTAINTY the Euro will shatter into pieces, and keep in mind it has only been around for a MEASLY 12 YEARS! In other words, it took barely a decade for this doomed expirement to fail, the ultimate example of a collaborative welfare state. Of the 23 Euro nations (http://geography.about.com/od/lists/a/euro.htm), only a handful have histories of responsible fiscal and monetary policies, so it should have been obvious to ANYONE with half a brain that the rest would continue down the irresponsible paths that have characterized their respective histories for, in many cases, centuries. Creating a central currency only accentuated the horrible spending habits of “economic children” such as the PIIGS, who KNEW the Germans, as the richest and most responsible of the family, would continue to bail them out. Actually, economic INFANTS might be a better way of describing how these nations have conducted themselves, and now it’s time to pay the piper.
And pay the piper they will, with HYPERINFLATION. Yes, readers, hyperinflation is not just in store for the U.S., but MANY Western world nations for the sin of pegging their fortunes to the unstable, and massively abused, U.S. dollar and Euro. Given that the U.S. is a more homogenous entity than the Eurozone, and still possesses the world’s reserve currency (but not for long), my money is on the Euro collapsing first, and if the German courts vote NO on Wednesday, collapse it will in September, yielding PLUMMETING stock markets and gold prices ROCKETING well above $2,500/ounce. Even if they vote YES (likely due to heavy political pressure), the German Parliament could initiate the same avalanche on September 29th when it votes on whether they will fund their share of the newly devised EFSF (European Financial Stability Fund), a €4 trillion fund to bail out the PIIGS, created out of thin air with freshly printed currency. I wouldn’t be surprised if the whole system collapses under its own weight BEFORE September 29th (notwithstanding the September 7th German court ruling), but if it doesn’t I assure you it will be well down that path by September 29th, ratcheting up several notches the political pressure for a NO vote by the German Parliament on that date.
Frankly, I find it hard to believe the credit default swaps of the PIIGS will not rocket higher in September, and possibly the U.S. as well given that we have ALREADY BREACHED the new debt ceiling of $14.692 trillion (http://www.zerohedge.com/news/deja-vu-all-over-again-total-us-debt-passes-debt-ceiling-under-one-month-extension)! Yes, while Congress has been on VACATION this month, likely at YOUR EXPSENSE in some way, shape, or form, the initial $400 billion debt ceiling increase has been BREACHED, with absolutely ZERO of the conditions for the next $500 billion increase having even been ADDRESSED from what I see, let alone met. And oh yeah, on THURSDAY Obama is giving an UNPRECEDENTED (there’s that word again), NATIONALLY TELEVISED speech to a JOINT SESSION of Congress to unleash his latest job creation plan (http://www.voanews.com/english/news/usa/Stakes-Are-High-as-Obama-Prepares-Economic-Plan-128933198.html)! Wait a second, more spending, as we surpass the debt ceiling just a month after the U.S. debt rating was downgraded? WTF?!?!
And don’t forget that, if we do not experience an early September global economic collapse, we can look forward to (aside from the September 29th German Parliament vote), the TWO-DAY Federal Reserve meeting on September 20-21 which, in UNPRECEDENTED fashion (this is getting ridiculous already), was extended from one day by KING MORON BERNANKE, to give his team of economic misfits more time to figure out how to formally unleash OVERT QE3 on the world (we all know it has been going on COVERTLY, however the momentum of the global economic collapse has grown so strong that QE3 is going to be forced out into the open). And for the record, per Jim Rickard’s conversation last week with former Fed governor Randy Kroszner, this is what occurs at such meetings:
“I spoke to (Former Federal Reserve Governor) Randy Kroszner, Former Member of the Federal Open Market Committee and he said to me, ‘When the Fed does these meetings they spend about 10% of the time on policy and 90% of the time on communication.’ Now Randy calls it communication or messaging, but I call it propaganda.
How are we going to lead expectations? How are we going to manipulate people? How are we going to get people to believe certain things that may not be true about the state of the economy or inflation? It was supposed to be a one day meeting and they extended it to two days. Well, why would you do that, it doesn’t take two days to have a vote? But it could take two days to agree on the words.
Does everyone understand that NO MATTER WHAT HAPPENS, GOLD and SILVER prices will rocket into outer space this Fall? Yes, I know it’s fashionable, and “best practice”, for even the most bullish, RANTING ANDYESQUE writers to be conservative in their missives, so as not to scare off potential (and current) readers, nor to ruin their credibility with short-term forecasts that prove erroneous. But I am not paid to write, and I am not advising how to PROFIT from what is coming. My niche is to help you PROTECT YOURSELF, and I believe strongly that the point when GOLD and SILVER go “NO OFFER” is rapidly approaching, if not this fall than by the latest the first half of 2012. And when I say “NO OFFER”, I don’t mean you can put in a “market order” at, say, $2,500/ounce and get filled at $2,580. I mean, people will be so fearful, they will become as likely to put their gold up for sale as my wife and I would be to put our dog, the shining center of our family universe, for sale. Either you will have your gold or silver at that point, or you WON’T, and suffer the consequences you will for not having “taken the offer” when you had the chance.
FOR THE MILLIONTH TIME, GOLD AND SILVER ARE NOT “INVESTMENTS” TO BUY AND SELL, THEY ARE MONEY TO BE HELD INDEFINITELY, AND BOTH ARE IN SCARCE SUPPLY, GETTING SCARCER EACH DAY.
Think about how you view your “net worth”, in DOLLARS. Or how much your house is “worth”, in DOLLARS. Or how much it costs to buy a car, in DOLLARS. I want you to substitute the word “DOLLARS” with “OUNCES OF GOLD” or “OUNCES OF SILVER”, as THAT will be how people view their “net worth”, on a UNIVERSAL basis, by the end of this generation.
On that happy note, let’s segue into my next Labor Day weekend topic, GOLD AS MONEY.
Since August 15th 1971, the “Day of Infamy” when Nixon abandoned the last remnants of the gold standard, Americans have been told that gold is nothing more than a useless commodity, a “barbarous relic” that “can’t even buy groceries.” Heck, 40 years later, our esteemed Federal Reserve Chairman said so in front of Congress, in an infamous exchange with, fittingly, Ron Paul when he told the whole world that gold is NOT money. But 6,000 years of history says otherwise, and no major currency has EVER lasted more than 40 years without a massive devaluation, and in most cases complete collapse.
But what’s this? Other “important” Central bankers think otherwise?
First, the warning shot last week from the Russian Central bank, which now intends to offer gold back loans as it reforms its government financing policy….
…and then the BOMBSHELL this past Thursday when none other than the PRESIDENT OF THE ECB, Jean-Claude Trichet (another Bernanke-like monetarist, by the way) said a GOLD-BACKED EUROBOND is being considered. This comment is what initially lit the fuse under gold on Friday, with the STAGE 2 surge occurring AFTER the catastrophic jobs report.
So what does this mean, you ask?
It means the Russians and Europeans are ACKNOWLEDGING THAT GOLD IS MONEY, that’s what it means! They KNOW of gold’s long, glorious history as the ONLY TRUE, LONG-TERM PRESERVER OF WEALTH, and they KNOW that conventional (UNBACKED) bonds will shortly not be accepted from ANY insolvent entity, no matter how much government monetization is utilized to mask this condition. They KNOW gold and silver are reclaiming their rightful thrones atop the monetary world, and are DESPERATE to get as much Precious Metals into their economies as possible before the global currency system COLLAPSES.
Oh, and why we’re at it, how about this HUGE piece of news that emerged mid-RANT (I told you, too many things to write about these days)!
It appears Wikileaks JUST RELEASED a SMOKING GUN document, published in 2009, regarding the Chinese government’s knowledge of U.S. and European government gold price suppression. As always, this HUGE news was unearthed by Zerohedge.com.
The damning commentary is attributed to the Chinese newspaper Shijie Xinwenbao (i.e. World News Journal), published by the Chinese government’s foreign radio service, China Radio International, which reads:
“According to China’s National Foreign Exchanges Administration, China’s gold reserves have recently increased. Currently, the majority of its gold reserves have been located in the United States and European countries. The U.S. and Europe have always suppressed the rising price of gold. They intend to weaken gold’s function as an international reserve currency. They don’t want to see other countries turning to gold reserves instead of the U.S. dollar or euro. Therefore, suppressing the price of gold is very beneficial for the U.S. in maintaining the U.S. dollar’s role as the international reserve currency. China’s increased gold reserves will thus act as a model and lead other countries toward reserving more gold. Large gold reserves are also beneficial in promoting the internationalization of the renminbi.”
So what do you think, readers? Are you going to listen to Quivering Lip Bernanke about his view that gold is not money (http://www.youtube.com/watch?v=2Dj9v9s9buk), or to the Chinese government, the richest and most powerful entity on earth?
Finally, I wanted to discuss an issue I have been following closely for years, the gold and silver OPEN INTEREST on the New York CRIMEX, er…COMEX, futures exchange. For those non-futures traders, open interest means the amount of contracts open at any given time. In other words, if a contract is purchased or shorted, open interest increases by one. Conversely, when the purchased position is sold, or the shorted position covered, open interest decreases by one. In nearly all futures markets, rising open interest is associated with a rising price, while falling open infers declining prices. This has certainly been the case in both the gold and silver markets throughout the entire eleven-plus year bull market…
….until this year….
The first two charts below compare gold/silver prices to COMEX open interest since the Precious Metals bull market commenced in 1999. Through January 2011, following yet another ORCHESTRATED gold and silver Cartel SMASH, the correlation between price and open interest in both the gold and silver markets was extremely high, on the order of 75% in silver and a whopping 93% in gold. The high correlations were clearly tied to rising investment demand for both metals, typical of essentially all commodity markets worldwide.
This brings me to the point of this discussion, the long-debated topic of what the ultimate COMEX collapse will look like when the Cartel is destroyed, which I ASSURE YOU it will be. Of those that agree in this imminent outcome, the majority seem to believe soaring prices will lead to exploding open interest, as investors seek to take the available gold supply from COMEX inventories and traders to make paper profits on surging futures contracts.
However, I have long disputed this assertion, as my belief is the years of cumulative Cartel abuse would eventually lead PAPER traders to abandon COMEX trading, and physical investors to be suspicious that COMEX inventories were actually deliverable, if in fact they even EXIST. A perfect example would be the SUNDAY NIGHT PAPER SILVER MASSACRE on May 1st, when many long futures traders were wiped out by an ORCHESTRATED paper raid, or even last week’s $210, three-day gold Cartel blitzkrieg. When I think of how much I have lost to gold Cartel raids throughout the years (WITHOUT using options or futures), I simply cannot comprehend how much LEVERAGED traders have lost, and thus concluded long ago that these traders would leave the corrupted COMEX market forever, either via bankruptcy or sheer anger.
In other words, I have long believed the price between the PHYSICAL gold market (and even legitimate paper markets, such as the soon-to-be-opened Pan Asian Gold Exchange) would separate dramatically, exposing the COMEX as a phantom market with no relationship whatsoever to the REAL price of PHYSICAL gold. And that goes for ALL fraudulent PAPER gold and silver securities, particularly the criminal ETFs GLD and SLV.
And that’s EXACTLY what’s happening, as today GLD and SLV trade at 3% DISCOUNTS to the price of PHYSICAL gold and silver, while in the REAL world, gold and silver, on average trade at PREMIUMS to the fake paper “spot prices” of 8% and 13%, respectively, my by estimates. In fact, in the same Jim Rickards interview cited above, noted that his high level contacts indicate major investors are fleeing paper securities such as GLD and moving into the REAL, PHYSICAL metal, per below.
“Sure, it’s going to get tighter. I’m seeing a lot of people, they were in GLD, moving to the physical and taking delivery and arranging safe storage.”
To bring the point home, I have done the same price versus open interest comparison for gold and silver since February 2011, when the current, CARTEL-BUSTING bull market upleg commenced.
And what do you know, all of a sudden the historically high correlations have collapsed!
For gold, the 0.93 correlation witnessed from 1999 through January 2011 dropped to 0.49. Moreover, since the “summer doldrums” (LOL) commenced in June, this correlation PLUMMETED to 0.33!
For silver, which is clearly the tighter of the two PHYSICAL markets, and thus most likely to EXPLODE at any time, the decline in correlation is, well, SHOCKING!
From 1999 through January 2011, the correlation was 0.75; however since February 2011 it COLLAPSED to -0.01! Readers, what does this tell you? And what do you think traders and investors will do when silver soars past $60/ounce amidst a global debt/currency crisis?
Do you think TRADERS will rush to the COMEX when the Cartel uses its last bit of ammunition to attack PAPER prices, or CHANGE THE RULES as it has done EVERY TIME it was losing, starting with the Hunt Brothers fiasco in 1980, through the recent INTRADAY gold and silver margin hikes?
Do you think INVESTORS will rush to the COMEX to try and secure the last bits of potentially MYTHICAL gold and silver, which may not be delivered (via CME RULE CHANGES) even if it does exist?
Of course not! They will most likely be scrambling for REAL, PHYSICAL METAL to PROTECT their purchasing power, and if they must buy PAPER gold and silver, it will surely be on other exchange (NOT London, by the way), which are not CRIMINAL ENTERPRISES.
Once this occurs, which I expect within six months, we will no longer see gold and silver’s PRICE DISCOVERY FUNCTION limited to, in essence, a two-hour window at the open of COMEX trading. The COMEX will be irrelevant, as both investors and traders worldwide realize it is a fraud. It may actually collapse via a public force majeur (the most common viewpoint), or, perhaps, will just fade away as it becomes forever blackballed the world round.
As discussed in my August 26th RANT, “The Coming Fall to Remember”, I believe the next four months will ultimately be viewed as an INFLECTION POINT in ALL OF HUMAN HISTORY. This is as strong a statement as I can make, as I believe the GLOBAL CURRENCY SYSTEM is COLLAPSING. The aftermath of the LOSS OF CONFIDENCE IN THE DOLLAR AND EURO will include poverty, social unrest, and new, ultra-draconian government policies, which is why you must act to PROTECT YOURSELF and your FAMILY and FRIENDS NOW!
Other than that, Mrs. Lincoln, how was the play?