It’s Monday morning, and hallelujah – we not only did we not see a “Sunday Night Sentiment” attack for the first time in 40 weeks – as early attempts were rebuffed at the likely new floor level of $1,300/oz. but no “2:15 AM EST” raid occurred either. Quite shocking and laughably, even the typically fantastic Zero Hedge attributed gold’s strength to “Ukraine fears” – as if the expanding instability in that dark corner of the Earth is “new news.”
So here we are, just days after another Fed “tapering” lie, COMEX options expiration, and the most blatantly fabricated NFP report in U.S. history; and lo and behold, PMs are trading higher. Given their ragingly strong fundamentals, this should surprise no one with even a mild understanding of the reasons for – and mechanisms of gold and silver price suppression. However, what really is puzzling and alarming to the highest order – is the fact that despite increased “tapering” – in our view, a lie to start with particularly given “Belgium’s” sudden Treasury buying surge; is the fact that Treasury yields, amidst a so-called economic “recovery,” have plunged to seven-month lows.
Bloomberg put out a story this morning that new pension rules will yield dramatically increased Treasury bond demand in the coming years. However, its logic couldn’t be more ridiculous – in claiming:
Pension plans, which oversee $16.3 trillion, are shifting into longer-term Treasuries to lock-in last year’s stock gains by matching assets with their future liabilities as funding deficits narrow.
–Bloomberg, May 5, 2014
In other words, selling stocks to buy bonds and yet, not a peep about how doing so would crush the stock market; much less, the fiduciary madness of purchasing Treasury bonds near record low yields, amidst record money printing, surging real inflation, and exploding Federal debt. Granted, the fact that the Fed suicidally bought up a third of the entire Treasury market has tightened supply somewhat; but at such extremely overvalued levels, one would not expect such moronic “investment decisions” by the nation’s largest fiduciaries – particularly given the sea of sovereign red ink anticipated in coming years. But alas, this is the bubble world the Fed has created which will continue in all its glory, until eventually it catastrophically collapses.
In many ways, Friday’s comical NFP report represented an inflection point in TPTB’s war against reality. It was inevitable they’d eventually overplay their psychotic game of money printing, market manipulation and propaganda; and watching the Fed clearly attempting to push rates up may just well be the denouement of this suicidal exercise. To wit, they no doubt anticipated the benchmark 10-year Treasury yield to jump back to the middle of their “managed” 2.6%-3.0% range when the BLS published the “huge” 288,000 job number. However, once the market realized just how fabricated the data was – and how ugly the internals underlying it – rates instead plummeted; and by late afternoon, were on the verge of breaking below the seven month-low of 2.60%. Eventually, the Fed lost this game, as the “quintuple bottom” at 2.60% was broken with rates this morning falling further to 2.57%, and appearing likely to fall much lower.
And why, you ask, is such lunacy continuing? Yep, expectations the Fed will not only end its “tapering” pretense in the near-future, but increase QE as it becomes painfully clear no recovery is present; nor ever was, or will be until the cancerous fiat currency regime, once and for all dies. Sure, the Cartel took some solace in capping Friday’s gold rise at exactly 1.0% at exactly the 10:00 AM EST close of the physical markets, at exactly $1,300 with a prototypical “Cartel Herald” algorithm – replete with late day “walk down” to $1,299. However, this morning’s increase – albeit, again capped at exactly 1.0% – negates that “victory”; and given the above, may well mark an upsurge in global physical demand, well above and beyond last year’s historic levels.
The fact is, Central banks the world round have created bubbles in the world’s ugliest most toxic assets via “promises” to support insolvent entities from “too big to fail” banks to sovereign Treasuries themselves. To wit, we have long documented how several PIIGS’ sovereign yields are now, insanely, below those of U.S. Treasuries care of Draghi’s July 2012 promise that the ECB would do “whatever it takes” to save the Euro. Ultimately, the largest bubbles of all are the currencies themselves which in due time – perhaps much sooner than most can imagine – will collapse like the 599 before them. David Stockman, a former Budget Office Director in the Reagan Administration, recently wrote a series of fantastic articles discussing such, like this one – describing the sorry state of the American consumer, per below…
Time wrote at the end of January:
Too many of us are living paycheck to paycheck. The CFED, or Corporate Federation of Enterprise Development, finds that 44% of Americans are living with less than $5,887 in savings for a family of four. The plight of these folks is compounded by the fact that the recession ravaged many Americans’ credit scores to the point that now 56% percent have subprime credit.
–Davidstockmanscontracorner.com, May 1, 2014
…and this one depicting the abject failure of Japan’s “Abenomics” – per below…
In a survey of 1,000 consumers on March 29-30 by broadcaster Fuji News Network, 69% said they had not made any special purchases ahead of the sales tax rise, and 77% said they didn’t feel an economic recovery was under way.
–Zero Hedge, May 2, 2014
However, the most damning of all – inspiring today’s article – was this dire depiction of the ongoing Chinese economic collapse, per below…
The borrowing, building and speculating mania in China has obviously gotten so extreme that even the new regime in Beijing has been desperately trying to cool it down. But this will end up as a catastrophic failure—not the ‘soft landing’ brayed about by Wall Street bulls who do not have the slightest comprehension of the difference between free market capitalism and the phony ‘red capitalism’ that has been confected by the party-controlled apparatus of the massive, intrusive, bureaucratic and hierarchically-driven Chinese State.
Davidstockmanscontracorner.com, May 2, 2014
Essentially, it describes the unprecedented real estate and construction speculation the Chinese government has fostered via unfettered money printing and lack of regulation of “shadow banking” lending. To the end of siphoning every imaginable job from the West, the Chinese government has indeed succeeded. However, in using such destructive fiscal and monetary policies – ironically, not much different than those employed by its Western peers – it has created the largest economic bubble in human history. We discussed such madness in March’s “Most Terrifying Article We’ve Ever Read” – as well as the terrifying ramifications of the PBOC’s decision to allow the Yuan to further weaken in April’s “Chinese financial torture. However, given the importance of this potentially world-destroying event it makes sense to explore the issue from Stockman’s unique angle as well.
And given the universal “karma” of writing of the TRUTH, take a look at the Chinese news that emerged simultaneously; starting with a leaked recording from the Vice-Chairman of Vanke Group, China’s largest real estate developer – in which he stated:
It is a dangerous bubble, and already deflating’. China has reached its capacity limit for new construction of residential projects… and I don’t see any possibility for a rise in home prices.
–Blogs.telegraph.co.uk, May 2, 2014
The below chart depicting parabolic growth in Chinese housing inventory confirms his fears, nearly doubling in the past two years…
…and this morning, China’s Manufacturing PMI contracted for the sixth month in a row at just 48.1 making an utter mockery of the government’s 7.7% GDP growth projection made just two months ago. But the real shocker was news that Chinese home sales collapsed by an astounding 47% from a year ago, and an otherworldly 65% in “tier-2” cities…
- 1st-tier city sales fall 40% y/y
- 2nd-tier city sales drop 65% y/y
- 3rd-tier and 4th-tier city sales decline 32% y/y
And thus, if anyone continues to harbor belief that somehow, somewhere, a miraculous economic “recovery” will save the day, it’s time to embrace the “realization of reality” rapidly sweeping the planet. China has been the “world’s growth engine” since Western economies peaked at the turn of the century but sadly, as you can see such “growth” was largely funded with the same debt, money printing, and lax regulation that destroyed the United States, Europe, and Japan. The “China Syndrome” is now melting down and with it, TPTB’s last remaining prayer of salvaging its failed gambit of unprecedented money printing, market manipulation and propaganda.
Under such a scenario, how can anyone not consider protecting their net worth with at least a modicum of “financial insurance”; i.e., real money? To wit, gold and silver are decidedly NOT “investments”; but instead, the only assets known to have survived through 5,000 years of recorded history – as opposed to fiat currencies, none of which have survived more than 50 years without either collapsing or significantly devaluing. With global economies plunging, money printing, inflation, and social unrest surging and debt levels of all kind rising parabolically, it’s only a matter of time before the dollar-based standard dies as well – and with it, the “Cartel’s” ability to artificially suppress gold and silver prices.