James Kunstler summarized it perfectly. So rather than reinventing the wheel, here’s an excerpt from his Monday commentary:
Jerome Powell [was] wheeled out on CBS’s 60 Minutes Sunday night, like a cigar store Indian at an antique fair, so vividly sculpted and colorfully adorned you could almost imagine him saying something. Maybe it was an hallucination, but I heard him say that “the economy is in a good place,” and that “the outlook is a favorable one.” Point taken. Pull the truck up to the loading dock and fill it with Tesla shares! I also thought I heard “Inflation is muted.” That must have been the laugh line, since there is almost no single item in the supermarket that goes for under five bucks these days. But really, when was the last time you saw a cigar store Indian at Trader Joes? It took seventeen Federal Reserve math PhD’s to come up with that line, inflation is muted.
What you really had to love was Mr. Powell’s explanation for the record number of car owners in default on their monthly payments: “…not everybody is sharing in this widespread prosperity we have.”
And so it went on 60 Minutes on Sunday evening. I strongly recommend reading Kunstler’s entire essay: Ides and Tides…The Fed and the FOMC are not mandated to set monetary policy to stabilize employment and inflation. The Fed’s role is to help the banks maximize profits. That’s it in a nutshell.
The best way to fight and protect yourself from the Fed’s mandate is to own physical gold. Phil Kennedy of Kennedy Financial invited Bill “Midas” Murphy and I to discuss the gold market and where it’s going from here:
Analysts who advocate a monetary policy that targets “low inflation” are the equivalent of chickens in the barnyard rooting for Colonel Sanders to succeed. This idea that a low level of inflation being good for the economy is beyond moronic.
The fiat currency money system era was accompanied by the erroneous notion that a general increase in the price of goods and services is “inflation.” But technically this definition is wrong. “Inflation” is the “decline in the purchasing power of currency.” This decline occurs from actions that devalue a currency. Rising prices are the visible evidence of ongoing currency devaluation.
Currency devaluation occurs when the rate of growth in a country’s money supply exceeds the rate of growth in real wealth output. Simply stated, it’s when the amount of money created exceeds the amount of “widgets” created, where “widgets” is the real wealth output of an economic system.
In ancient Rome, the currency devaluation occurred when the Roman Government began to “shave” gold and silver coins which enabled it to increase the amount of coins produced from mined gold and silver in order to finance Government spending. When spending continued to exceed the amount of currency produced, the Government increased the money supply by diluting gold and silver coins with cheaper and more abundant metallic additives.
In the United States currently, currency devaluation occurs through both money printing, which has been cleverly disguised for propaganda purposes as “quantitative easing,” and by the continuous growth in credit creation. Debt issued behaves exactly the same as printed currency until that time at which the debt is repaid, not by more debt issued, but from money that has been accumulated by the debtor in order to repay and retire the debt.
The U.S. Government has not reduced the amount of debt issued for decades. Apologists will look at the Treasuries outstanding chart on the Fed’s website and argue that the debt level declined ever so slightly in the late 1990’s. But this was achieved through accounting gimmicks, not an outright reduction in Federal debt outstanding.
Notwithstanding this, the total level of debt in the U.S. system has been continuously increasing for many decades. While it’s argued that this is debt and not money supply, it is a fact that debt issued spends just like printed money until the debt is repaid and retired. Thus, currency devaluation has been occurring in the United States on a continuous basis since at least 1913 (founding of the Fed).
Back to the erroneous idea that “low inflation is desirable.” I defy anyone to research this and present a rational explanation that has ever been offered. The best I could come up with is “low inflation is good for the economy.” That is unadulterated ignorance. That phrase means that “it is good for the Government to devalue the currency.” Why is it “good” for a consumer to pay higher prices, i.e. more money for goods and services on an ongoing basis?
Inflation, where “inflation” means the true definition, is a subtle mechanism by which the elitists redistribute wealth. Printing money benefits those who are closest to the money faucet to the detriment of those who are “downstream” from the flow of new money supply (or credit created). The banks are always first in line at the money faucet. The Federal Reserve was erected for that purpose. The creators of the Fed were all owners of the biggest banks in the U.S. at the time plus the political puppets of those owners. Go look up the roster of men who founded the Fed for yourself if you don’t believe me.
After the banks, the Government is next in line. And after that all of the companies that benefit from Government largess. Inflation, even “low inflation” is not beneficial to anyone other than those who are in a position to take advantage of the currency devaluation mechanism. Period. Anyone who tries to argue that “low inflation is good” and that a low inflation target should be a primary goal of the Fed’s monetary policy is either someone who is in position to benefit from that policy (banks, politicians, big corporations etc) or is tragically stupid.
The answer is debatable but it depends on, exactly, to which rates you are referring. The Fed has “raised,” more like “nudged,” the Fed Funds target rate about 50 basis points (one-half of one percent) this year. That is, the Fed’s “target rate” for the Fed Funds rate was raised slightly at the end of two of the four FOMC meetings this year from 50 to 75 basis points up to 1 – 1.25%. Wow.
But this is just one out of many interest rate benchmarks in the financial system. The 10-yr Treasury yield – which is a key funding benchmark for a wide range of credit instruments including mortgages, municipal and corporate bonds, has declined 30 basis points this year. Thus, for certain borrowers, the Fed has effectively lowered the cost of borrowing (I’m ignoring the “credit spread” effect, which is issuer-specific).
Moreover, the spread between the 1-month Treasury Bill and the 10-yr Treasury has declined this year from 193 basis points to 125 basis points – a 68 basis point drop in the cost funding for borrowers who have access to the highly “engineered” derivative products that enable these borrowers to take advantage the shape of the yield curve in order to lower their cost of borrowing:
In the graph above, the top blue line is the yield on the 10-yr Treasury bond and the bottom line is the rate on the 1-month T-bill. As you can see the spread between the two has narrowed considerably.
Thus, I would place the news reports that the Fed has “raised in rates” in the category of “Propaganda,” if not outright “Fake News.”
One has to wonder if the Fed’s motives in orchestrating that graph above are intentional. On the one hand it can make the superficial claim that it is raising rates for all the reasons stated in the vomit that is mistaken for words coming from Janet Yellen’s mouth; but on the other hand, effectively, the Fed has managed to lower interest rates for a widespread cohort of longer term borrowers.
Furthermore, this illusion of “tighter” monetary policy serves the purpose of supporting the idea of a strong dollar and enabling a highly orchestrated – albeit temporary – manipulated hit on the gold price using paper gold derivatives.
To borrow a term from Jim Sinclair, the idea that the Fed has “raised rates” is nothing more than propaganda for the primary purpose of “MOPE” – Management Of Perception Economics. On that count, I give the Fed an A+.
Ding ding ding ding…It was reported yesterday that Trump has appointed the co-author of the book “Dow 36,000,” Kevin Hassett, as the Chief of the White House’s Council of Economic Advisors (LINK). “Dow 36,000” was published a few months before the dot.com/tech bubble burst in March 2000.
Given the irrational semi-parabolic move in the Dow since election night, the appointment of Hassett in the context of his spot in the history of stock market manias is seeded in comedic, if not tragic, irony. There’s numerous similarities between the current stock market and pre-crash moves in 1929, 1987, 1999 and 2007. However, in terms of true valuation metrics, the current market bubble is most similar to the Dutch Tulip Mania.
Jason Burack invited me on his Wall St. For Mainstream podcast to discuss the Fed’s interest rate hike threats, the massive amount of gold flowing from west to east, gold market manipulation and why the current stock market is the most overvalued in history:
The demand for gold in India and China so far this year has soared, a fact which is completely ignored by the western financial media. The ex-duty Indian gold import premiums (approximately $10 earlier this week) are quite remarkable, “as the need to import kilo bars only arises if Indian demand is not satisfied by Dore imports (which had a duty advantage of $15.52/oz this afternoon) and smuggled gold. Reports of apprehensions at Indian airports are continuing to appear, indicating that smuggling has in fact revived” – John Brimelow’s Gold Jottings, firstname.lastname@example.org).
Brimelow also reported that 162 tonnes of gold were delivered into into Shanghai Gold Exchange on Monday this week, preceded by 79 tonnes on Friday. The Friday delivery is the largest by far that I’ve observed in watching this statistic over the last several years.
While the eastern hemisphere is busy converting fiat currency into physically delivered gold, the United States political system is becoming increasingly unstable and unpredictable, as the Trump White House, in an effort to repair the frayed relations with Russia, is under systematic attack from the Deep State. Trump’s erratic leadership combined with the Deep State’s political terrorism will likely spark political and social chaos in the U.S.
The relentless buying strength of physical gold in the east along with the incipient instability of the U.S. are fundamental catalysts to drive the price of gold and silver a lot higher. Furthermore, the emergence of accelerating price inflation thrown into the mix has the potential to create the “perfect storm” for higher precious metals prices.
In an earlier postI explain why now is the time to use the manipulated paper gold price take-downs as buying opportunities. This viewpoint was vindicated during the two-day Fed Chairman staged Congressional propaganda event, which historically is a period in which the banks slam the gold market with tonnes of paper gold in order to prevent the price of gold from signaling a message that conflicts with the economic and financial fairytale artfully spun by the Fed-head (or not so artfully, as it were, in Yellen’s case).
Gold was slammed nearly $20 just prior to and during Yellen’s hot air exhalation sessions on Capitol Hill on Tuesday and Wednesday. The catalyst was a series of paper gold volume surges on the Comex in which the NY Fed and its agent bullion banks drop a payload of gold futures on both the Comex floor and into the CME Globex trading system, targeting the stop-losses set by hedge funds that are long gold contracts. This detonates an avalanche of selling by momentum-chasing hedge fund algos.
Subsequent Yellen’s freak show on Capitol Hill, gold promptly defied the paper market deviance and shot up $21 to a new year-to-date high. If the deteriorating economic fundamentals manage to chew through the safety-net that has been placed beneath the stock market, a real rush into gold – physical and derivative – will be triggered. In the meantime, the nature of the precious metals trading has shifted from shorting rallies and covering those shorts on sell-offs to buying dips and selling rallies. Eventually the hedge fund algos will be programmed to buy dips and aggressively buy rallies. That’s when the real fun begins, especially in the junior mining stocks…
JBGJ regards Indians buying less gold as cash crunch bites primarily as evidence that FOBs (Friends of Bloomberg) are not in gold. If India’s domestic gold market was as weak as presented there would be a significant discount to the world price…In reality the Government has struck a shattering blow at the trust Indians have in holding wealth in any form accessible to the Authorities. When things finally unglue, India’s propensity to hold gold will probably be found to have risen – John Brimelow’s Gold Jottings report – LINK.
Yesterday’s sell-off in gold occurred after the Comex floor had closed for the day. The period of time between when the Comex closes – 1:30 p.m. EST – and the CME’s Globex computer system trading closes for about an hour – 5 p.m. EST – is one of the least liquid trading periods of the 23 hour, 5-day trading week. It makes that period of time susceptible to manipulative price take-downs.
As it so happens, likely not coincidentally, Janet Yellen began speaking about monetary policy at 2 p.m. EST. She stated that the Fed expects a few interest rate hikes per year until 2019. Geez, that would take the Fed funds rate up to maybe 2%? Of course, helped along the by the bullion banks, the hedge fund trading algos grabbed the soundbytes spewing forth from Yellen and concomitantly sold paper gold and bought dollars. The dollar spiked up and gold was taken down to $1200. It traded below $1200 overnight on the “fumes” of yesterday.
Gold, silver and the mining stocks have had a nice move from late December to now. They will not go straight up. Technically the sector was set up to be susceptible to trading activity related to Fed soundbyte propaganda like yesterday. This is yet another buying opportunity. Buy a little every month when the price gets taken down in the paper market. According to the Indian data presented by Brimelow, India is a huge buyer of gold below $1200. China is a steady buyer regardless of the price.
The Trump presidency will usher in a period in which Orwell’s prophecies will shift into overdrive. Popular mistrust of anything and everything Government will accelerate and Big Government’s attempt to counter-act this movement will take place in the form of intensified propaganda and a further reduction in civil rights. Along with this influx of political and media chaos will be an increasing distrust of fiat paper “fake” currency, which means the public will likely buy even more gold and silver than it did in 2016. Note: the U.S. mint sold a record amount of gold eagles in 2016.
In today’s episode of the Shadow of Truth, we continue our discussion of the precious metals sector, including some analysis of the gold / silver ratio:
The more I learn, the more I realize that the Fed is nothing but a criminal enterprise, that the guys at the top know it. Everyone within breathing distance of top slots at the NY Fed is a criminal. Remember, the NY Fed shares space with the Exchange Stabilization Fund/Working Group on Financial Markets even though the latter is formally part of the Treasury. – John Titus, one conclusion from reading the 2009 FOMC transcripts
The only difference between Greece and the United States is that the United States can unilaterally print its own money – money that enables unlimited Government funding and allows the big banks to remain solvent. The actual process of money printing and debt creation is implemented by the Federal Reserve and the Too Big To Fail Banks that operate as agents of the Fed.
John Titus is in the process of producing a video about the criminality of the Federal Reserve and its member banks. His researched is derived from reading several of the transcripts from the 2009 FOMC meetings during the early stages of the QE programs. While the “minutes” of the Fed meeting – released three weeks after an FOMC meeting – summarize the FOMC’s policy stance, the transcripts are the most detailed record of FOMC meeting proceedings. The release of the transcripts is delayed for five years.
What comes out loud and clear from the transcripts is that not everybody is on board with policy decisions. For example the purchase of mortgage-backed assets. There’s lot of uneasiness among Fed members but ultimately they all go along with the plan. I’ve read a lot of transcripts – probably thousands – and what comes out of the Fed transcripts is that the plan has been decided on beforehand. The FOMC meetings are only there to hand down that plan, to discuss the plan, to discuss how to implement the plan and to prop up the idea that FOMC meetings are some sort of democratic process. – John Titus
I asserted in 2003 that the elitists running this country would hold the system up with printed money until they have swept every last crumb of middle class wealth off the table and into their own pockets. “Middle class” for this purpose is defined as anyone who does not have enough cash laying around and the appropriate connections to buy their own Congressman. The cut-off level of wealth for this is probably about $100 million in non-real estate wealth.
I always thought that the means to accomplish this was money printing and devaluation of the currency. But true extraction mechanism is debt. Banks and bankers create debt and make it readily available to their victims. It’s no different that dealing heroin. Get your target addicted and then keep selling it to the victim until it dies.
The bankers gained economic and political control in 1913 when the Fed was founded. Ever since then, there’s been a gradual transfer of wealth from the 99.9% to the .1%. There’s also been a slow, methodical dismantling of the Constitution and Rule of Law. In fact the Fed, the big banks and the big corporations have successfully pulled off a de facto coup d’etat of the U.S. Government.
I don’t consider the U.S. Government to be a sovereign Government because if you look at the sovereign function that a Government performs – money printing for instance – we’ve outsourced that to private banks (the Fed is a private bank). There are hardly any sovereign functions left in the U.S. that are performed by the Government. – John Titus
Once the middle class ran of out real income to continue buying “things” – like houses, cars and consumption gadgets – the banks began to make debt readily available. Ever since Nixon closed the gold window, thereby completely removing real money from our economic system, the level of debt has increased at an increasing rate every decade. Over the last decade the total amount of debt in our system – public and private – has gone parabolic.
Even worse, the system of Rule of Law has been usurped by “Rule of Man.” The elitists running the system are outright criminals who are immune from prosecution. Think about it: Eric Holder as Attorney General -the chief prosecutor in the country – stated that “some banks are too big to prosecute;” the CEOs of the five big banks collectively admitted to committing felonies, yet none were prosecuted; the leading candidate to be the next President – for now – has openly committed felonies and treason. These people and corporations are above the law.
While John Titus is still in the process of researching the 2009 Fed transcripts for his video, he’s already concluded that the Fed is a criminal organization that is orchestrating the takeover of this country and is enabling the process of complete wealth extraction from the middle to class:
The basic point of the video is that the Fed will give as much money as the TBTF banks need in order to stay solvent and pay bonuses. The Fed will also do whatever it takes to remove worthless assets, infected by criminal fraud, from big bank balance sheets. The Fed is also monetizing U.S. debt, which it knew as soon as QE started.
The Fed does these things knowing full well that these acts come at the direct expense of the economy. The logical outcome is what’s happening in Greece, where the powers that be insist that debt–which they know to be wholly fraudulent and which cannot be repaid–be paid back, with blood money if necessary. The mere existence of TBTF banks is inconsistent with any number of things, including the Rule of Law and national and individual sovereignty.
The chief enabler of the Greece-ification of the U.S. is, without question, the Federal Reserves and the psychopaths running it…Our choice is stark: We can hang them for treason, or they will kill us. That process formally began with the 2008 bailouts. – John Titus
Since the end of May open interest has risen 14.23% while gold basis the stock market close has fallen 2.69%. Gold has been battered by a powerful short-selling campaign. MKS Geneva last night furnished the colorful remark: “Shorts grew 12% last week to a new all time high. The position is about 3.6 times the size of the last 20 years average!!” – from John Brimelow’s Gold Jottings Report
The price level and trading activity in the precious metals market – gold and silver specifically – has reached mind-blowing absurdity. Make no mistake about it, the fact that the U.S. mint had to suspend sales of 1 oz Silver Eagles until at least early August is definitive evidence that the natural market function of price as a mechanism to balance supply/demand has been completely destroyed by the western Central Banks using the big bullion banks as their agents of manipulation.
As we already know, the silver open interest on the Comex has soared to preposterous levels to an open futures level which far exceeds the amount of silver produced by mines globally in a year:
As you can see from this graph to the left, the open interest in silver is historically correlated with the directional price movement of silver. This correlation blew up and the amount of paper silver open interest on the Comex began to go parabolic last summer, while the price continued to head south. This is direct evidence that that Comex paper silver is being used to push down the price of silver.
In fact, as we all know from the work by SRSRocco, India finds the price of silver so attractive that it is on track to import a record a amount of silver this year.
The gold paper open interest on the Comex has now begun to go parabolic. As recently as April 3, the total gold paper open interest on the Comex was 382k contracts, or 38.2 million ounces of gold. As of yesterday – July 14 – the open interest in paper gold had soared to 462k contracts, or 46.2 million ounces. This is a 21% increase in the amount of paper gold. In fact, China finds the price so attractive that it is on track to “consume” a record amount of gold this year.
To put the gold paper open interest in perspective, as of yesterday Comex vault custodians were reporting an alleged 482k ozs of gold in the “registered” account and 7.8 million in total gold. The open interest just for the August front-month gold contract is 235k, or 23.5 million ounces. This is 48x the amount of physical gold that has been made available to back the August open interest. The total open interest in paper gold on the Comex is 600% greater than the amount of total gold that could potentially back that open interest.
To describe as “absurd” this imbalance between the paper gold and silver contracts on the Comex and the condition of the global supply/demand for physical gold and silver is an insult the word “absurd.” This is nothing less than complete criminal and fraudulent manipulation of the gold and silver markets by elitists and bankers who are now officially above all Rule of Law.
As my friend and colleague, John Titus, has concluded after pouring over several transcripts from the 2009 FOMC meetings around the time that QE started and which were recently released at the beginning of 2015:
The more I learn, the more I realize that the Fed is nothing but a criminal enterprise and the guys at the top know it. Everyone within breathing distance of top slots at the NY Fed is a criminal. Remember, the NY Fed shares space with the ESF even though the latter’s formally part of the Treasury.
The real underlying issue with this manic and blatant manipulation of gold and silver is yet to be determined. But when Janet Yellen announces that the Fed is on track to raise interest rates this year, when the economic reports released daily show an economy starting to collapse, and when an obscure and opaque “military exercise” across the United States begins on July 15, 2015 – yes, Jade Helm begins today – and the S&P 500 spikes higher while the price of gold and silver are slammed – then you know your system is doomed.
It’s pretty obvious by looking at the numbers above that the bullion banks – JP Morgan, Scotia and HSBC – are using paper futures to loot the gold and silver on the Comex. If that’s not the case then I would urge them to allow us to conduct a physical audit of their vaults. Otherwise please explain how the mint can run out of silver. It’s also quite obvious that the Comex is headed for a force majeur cash settlement of the open interest. There is no other explanation.
Several years ago a good friend and colleague of mine and I both asserted that we would know they’re ready to let the system collapse when they let the Comex default. I would suggest that we drawing close to that time.
When you see that trading is done, not by consent, but by compulsion–when you see that in order to produce, you need to obtain permission from men who produce nothing–when you see that money is flowing to those who deal, not in goods, but in favors–when you see that men get richer by graft and by pull than by work, and your laws don’t protect you against them, but protect them against you–when you see corruption being rewarded and honesty becoming a self-sacrifice–you may know that your society is doomed. – Ayn Rand, “Atlas Shrugged”