It’s Monday morning, and all I can say is this. If George Lucas, Steven Spielberg, and Gene Roddenberry combined their brainpower, and enhanced it with “mental steroids,” they couldn’t come up with a fictional story this insane – much less, a factual one. Watching this madness, I sometimes wonder why I was blessed cursed chosen for the role of truth teller in a world gone mad – and lament how, generally speaking, I have been made to suffer such angst, frustration, and misery as a “reward” for making correct choices. Regarding the former, I really can’t complain, as I love what I do for a living – both professionally and spiritually, and am appropriately prepared for what’s coming. As for the latter, with each passing day it becomes increasingly apparent how difficult life is for everyone – from the poorest pauper, to the world’s richest and most famous. In other words, nothing in life is easy. And when it comes to the unprecedented, but inevitable, collapse of history’s largest Ponzi scheme, the road to “success” was bound to be paved with land mines.
I mean, consider that after five years and €240 billion of bailouts, Greece’s economic and social environment has descended to, or below, many of the world’s most notorious “third world” nations. And this, largely due to the machinations of the “Troika” – i.e., the ECB, IMF, and European Union; which cumulatively, have milked every ounce of financial blood – and dignity – from one of the world’s oldest, proudest cultures. Doing so, I might add, with the aid of none other than Goldman Sachs; who, for the “trivial” amount of $500 million, hid the majority of Greece’s debt “off balance sheet” to enable acceptance into the Eurozone. How ironic, thus, that the ECB’s current head is Mario Draghi, a former Goldman Sachs partner, who actually believes that diluting the Euro – and Greece – into oblivion is the best way to “save” it?
Since 2010, Greece’s economy has fell into “ruins” (no pun intended) – with its hopelessly insolvent banking system amidst an historic, ongoing run; and a political situation so fragile, the “Golden Dawn” neo-Nazi party was becoming a major destabilizing force. Six months ago, the decidedly “anti-Euro” party, Syriza, swept into power – with its charismatic, yet naïve leader, Alexis Tsipras, becoming Prime Minister on a platform of ending the bailouts that have crippled the Greek economy; and more importantly, ending the Troika “austerity” demands that have not only obliterated Greece’s economy, but hope for a future recovery. And all the while, sucking every last penny produced by Greek blood, sweat, and tears, to pay off the very loans purported to “save” them. To that end, Tsipras played the role of demagogue well; arrogantly “negotiating” with Europe’s warlords, including the German menace still despised for occupying, and looting, Greece during World War II. Consequently, 2012’s “bailout #2” expired in February, forcing the “Troika” to extend it to late June. However, by late June, said “negotiations” had not only gone nowhere, but noticeably regressed; to the point of both sides openly insulting each other, with no common ground for a new bailout deal – particularly in light of the Greeks having just voted Syriza into power, to prevent such a scenario.
At the end of June, even the bailout extension expired, yielding a €1.8 billion default on interest payments owed to the IMF – which as I write, has expanded to €2.3 billion, with another unfunded €3.4 billion owed next week. Still, the sides were no closer to a deal; and with the prospect of Greece descending – albeit, from an already horrific state – into financial chaos, Tsipras called a national referendum, asking the Greek people if they wanted to take that next, “Icelandic step” forward, or plead with the despised Troika for more aid (which, of course, would be “provided” by Mario Draghi’s printing press). And in doing so, he passionately supported the “oxi” contingent, claiming Europe was out to “humiliate” Greece.
Against mainstream, propagandized “expectations,” the people voted dramatically against a new bailout, by a whopping 22 percentage point margin, last weekend. And yet, just two days later, Tsipras announced he was in fact – unilaterally – groveling to the Troika for a new bailout; clearly, terrified that the next step, of “Grexit,” would lurch Greece into anarchy. Apparently, he thought the “yes” side would win the referendum; and when it didn’t, he panicked. However, at this point, trust on both sides of the negotiating table had been destroyed. Not to mention, any remaining belief that a new “bailout” could buy anything but a few more months’ time.
To that end, as late as yesterday (Sunday) afternoon, discussions of said “new” deal – which frankly, was no different than the one the Greek people rejected – were dead in the water. Consequently, the German-led Troika gave Greece 24 hours to accept an even more draconian deal if Greece wanted a third bailout and the ability to remain within the Eurozone. Heck, even the amount of the bailout was in flux yesterday, as Tsipras’ initial request for €53 billion nearly doubled to €86 billion in a matter of hours, once Greece’s banking system implosion was analyzed more thoroughly.
And then, for the coup de grace, following a 17-hour Sunday night session – in which Troika representatives and mainstream publications alike disclaimed a total lack of trust in Greece’s leaders, a deal “framework: was miraculously agreed upon. Subject, of course, to approval by the Troika, the Greek Parliament, and each Eurozone nation. And oh yeah, the actual terms of said deal being hashed out – most of it, in the next 48 hours. And from the looks of it, this deal is absolutely horrifying for Greece – including not only a list of “austerity” demands eerily similar to the hundreds of “prime directives” jammed into Robocop’s brain< in Robocop II, but the establishment of a €50 billion “liquidation fund,” in which the Greek government must post airports, airplanes, infrastructure, and bank assets as “collateral” in the event of further defaults. And oh yeah, essentially all of the €86 billion “bailout” will go right back into the hands of the Troika; with nearly a third expended immediately to not only pay the Troika back, but prevent hopelessly insolvent Greek banks – which may still enact depositor “bail-ins” – from collapsing.
In other words, five months after Syriza was elected to end austerity – and one week after the Greek people vehemently supported this sentiment – far more austere terms than ever before discussed was agreed upon. Assuming it’s ratified – which appears likely, after listening to gold Cartel “founding father” Larry Summers claim “no contingency was available to deal with a Grexit” – Greece’s debt/GDP ratio will rocket from 170% to 200% (and 130% when “bailout #1” was announced in 2010), under the most onerous “austerity” demands to date, amidst the worst global economic environment in generations. Not to mention, a likely sociopolitical maelstrom in Greece, where the people will undoubtedly revolt against Syriza and demand new leadership – all whilst the Greek economy sinks further into their European-manacled miasma. Talk about a loss of trust! And not just for the Central bankers responsible for this hell, but politicians – like Tsipras – who directly and indirectly fostered its creation.
Trust us, this will NOT end well – as not only is “Economic Mother Nature” on the verge of victory, but last week’s “OXI” vote will undoubtedly embolden similar anti-Euro movements in Spain, France, Italy and others, particularly after seeing how Greece’s “leaders” sold them out. And as for gold and silver, which were attacked – as always – on Sunday night; at the 2:15 AM EST London open; the 8:20 AM EST COMEX open; and all other times they attempted to rise; what more can we say about multi-year lows in paper prices, amidst record physical demand; stagnating (soon to be plummeting) supply; and rapidly vanishing inventories? Much less, when silver Eagles sold out at the U.S. Mint following record investor buying, yielding surging physical premiums and delivery times? And oh yeah, surging U.S. silver imports – clearly, into the coffers of “big money” outlets that refuse to report their actions.
Funny, the far bigger story this weekend – as let’s face it, a new Greek “bailout” will only buy a few months of can-kicking – was the imminent announcement of an historic extortion peace deal with Iran, perfectly reflecting just how out of touch political “leaders” are; Obama being the poster child, in playing 27 holes of gold Saturday whilst the fate of Europe hung in the balance. To wit, in his quest to solidify the Democrats’ chances in next year’s Presidential and Congressional elections, he turned 180 degrees on his “red line” threats of just two years ago; instead, choosing to extort Iran into halting its nuclear weapons research in return for the right to end the sanctions that have crippled its oil export capability for years.
To that end, Iran’s economy is so weak right now, they are in essentially the same position with America’s “coalition of the willing” as Greece is with the Troika. In other words, if it simply agrees to be “America’s b—ch” for awhile, it can export oil anew, no matter how humiliating the experience, or sacrificial of its national defense. Apparently, said deal will be announced later today; and when it is inevitably ratified, Obama (and Hillary Clinton) will take credit for plunging gasoline prices – whilst comically acting as if this ugly extortion deal is the diplomatic equivalent of Jimmy Carter’s miraculous Camp David accords.
That said, as I wrote back in October, “crashing oil prices portend unspeakable horrors; and that, when WTI crude was still $81/bbl, compared to $52/bbl today. Since then, the global rig count has plunged, U.S. GDP growth turned negative, and essentially all economic data, rigged or otherwise – such as last week’s explosive rise in the inventory/sales ratio – has confirmed that the recession that started seven years ago is accelerating; not just here, but everywhere (read, Greece, China, Puerto Rico, etc.). Thus, this oil agreement could serve as a death blow to the global economy, as crude oil sales are easily the number one source of sovereign revenue. Let alone, in America, where $500 billion of junk bonds and leveraged loans underlie the world’s highest cost producers – who, I might add, will see the last of their above market hedges expire in the coming months. To that end, oil exploration and production is not only responsible for a third of all U.S. corporate capital spending, but has been the only industry to report positive net job growth – aside from “waiters and bartenders” above 55 years of age -since the 2008 financial crisis. Of course, aside from the odd snippet here or there, I have seen essentially ZERO coverage of this potentially cataclysmic event for the U.S. economy – in many ways, equivalent to NAFTA’s “giant sucking sound”; but dozens about Greece.
Here in the States, Whirlybird Janet’s semi-annual “Humphrey-Hawkins” economic testimony before Congress is scheduled for Wednesday morning at 10 AM EST. In February’s “H-H” testimony, on a stage the Fed typically never uses to update policy guidance, she nonetheless delivered the “most unequivocally dovish FOMC statement in memory.” And since then, not only has the U.S. economy imploded, but so has that of the entire world. Not to mention, as the Greek, Chinese, and Puerto Rican dramas – among others – intensified; commodity prices plunged to nearly the 2008 lows; and the majority of global commodities declined against the dollar, further damaging America’s manufacturing competitiveness. Not to mention, sovereign debt markets have undergone dramatic, “tectonic shifts” that threaten to blow the global economy sky high; as amidst said economic deterioration, yields on benchmark sovereign bonds like the U.S. 10-year Treasury have inexorably risen; albeit, in the 10-year’s case, blatantly capped at the key round number of 2.5% – just as it was 18 months ago at 3.0%. Thus, I can’t wait to see what word-smithing tightrope walking she attempts Wednesday, given that just last week, she warned of how tenuous the ever-elusive “recovery” has become.
Regarding today’s title, not only have central banks in general lost their credibility, but none more than the Fed – per the title of countless other Miles Franklin Blog articles, such as the “death of Fed credibility” and “laughable FOMC statement sets new Central Bank Credibility low.” And following this weekend’s horrifying demonstration of political betrayal – on both sides of the European negotiating table – the odds that the inevitable, all-consuming loss of political, economic and financial confidence (you know, the only thing supporting history’s largest fiat currency Ponzi scheme) occurs have never been higher. Which is why, particularly in light of the extremely visible shortage of physical silver – which I spoke of at length in last weekend’s “special podcast” with Miles Franklin’s President, Andy Schectman – the time is NOW to protect yourself from what’s coming.