On a day when Precious Metals are finally breaking out – amidst yet another flurry of global “horrible headlines” – we thought the below quote from Richard Russell would tell the story perfectly; of the ugly present, and, ominously, the much uglier future.
I hesitate to say this because it’s so extreme, but I believe the world is in a depression. We’re being lied to by a frightened and desperate government and Federal Reserve. Sooner or later the US public is going to realize we’re in a depression. The government and the Fed will fight the gathering depression with lies and propaganda. To fight the depression, the Fed will open the money spigots wide, creating new trillions of “dollars.”
Some wise investors are aware of all this, which is why gold continues to push higher (over $1300 an ounce today). IF we had the actual gold, I feel that the US would unilaterally raise the price of gold to $5,000 or $10,000 an ounce. The government is not doing this because we don’t have the gold. Once the news of the US gold reserves being depleted is out, this will result in an unbelievable scandal. Once the dollar index closes below 80, the fireworks should start. How many items can the Fed manipulate? Sooner or later the Fed will lose its grip on bonds, the dollar, stocks or gold. I think gold over 1300 suggests that the Fed is losing its grip.
–Dow Theory Letters, February 13, 2014
In those two paragraphs, Russell mentions what we have been speaking of for the past two years – i.e., since the global economy nearly collapsed, amidst summer 2011’s Global Meltdown II. Back then, “dollar-priced gold” surged to an all-time high; silver was on the verge of “the ultimate triple-top breakout”; global equity markets plunged; the U.S. lost its (ridiculously undeserved) triple-A credit rating, amidst an unprecedented “debt ceiling” debacle; and half of Europe was bailed out, yielding worldwide fear levels approaching 2008’s Global Meltdown I. Consequently, TPTB launched history’s most intensive, suicidal scheme of money printing, market manipulation, and propaganda, in a desperate attempt to “kick the can” one more mile; and thus, enable final preparations for the inevitable – perhaps imminent – Global Meltdown III; i.e., the “Big One.”
In doing so, Western Central banks amped up what had already been the most intensive “liquidity generation” in recorded history; by launching the “LTRO and OMT” in Europe; “Abenomics” in Japan; and “Operation Twist,” QE3, and QE4 I in the U.S. Initially, calm was restored; and despite plunging worldwide economies, the printed money pumped into stock markets gave the temporary impression of “recovery.” Not everywhere, of course; as ominously, the Chinese stock market remains near its 2008 lows, amidst history’s most egregious credit bubble. However, most Western stock markets have been lifted by a combination of printed money, concentrated “PPT” efforts, and – still more ominously – blatantly obvious hyper-inflation fears.
Unfortunately, global economic data has continued to weaken – such as this morning’s horrific Industrial Production plunge and 0.3% Euro Zone GDP growth; and sadly, have nowhere to go but down. “Coincidentally,” draconian governmental decrees have become “normal” occurrences – such as yesterday’s announcement by Australia’s Treasurer that bail-ins” are inevitable, following a similar, “leaked” EU proclamation Wednesday; whilst blaring red flags like Obama’s “MyRA” confiscation plan go unreported by a bought-and-paid-for media, and the unsuspecting masses at large. Conversely, global debt, inflation and social unrest have skyrocketed – as per “The most important article I’ve ever written,” the inflation that Federal Reserve-led money printing has exported is causing a chain reaction of collapsing currencies; in the process, unraveling entire societies.
No chart depicts such economic reality better than the one below – measuring CPI inflation in so-called “emerging markets” (EM), compared to developed markets (DM). Of course, part of being “developed” entails more sophisticated methods of masking inflation with fraudulent CPI numbers – as is particularly the case in the United States.
However, that said, clearly the rates of inflation in emerging markets are significantly greater; exacerbated by the fact that greater percentages of consumer income are spent on the rapidly inflating items we “need versus want” – and, of course, the lack of “reserve currencies” that prevent money-printing efforts from being muted, as in the U.S. and Europe.
Hand and hand with rising unemployment and inflation comes social unrest; and thus, it shouldn’t surprise anyone that today alone, major uprisings are occurring – as I write – in Venezuela; Argentina; Turkey, Kazakhstan, the Ukraine and even Italy, where the Prime Minister was forced to resign yesterday. Clearly, a global “realization of reality” is occurring NOW; and pretty soon, everyone will realize what Richard Russell is saying; i.e., the world is in a depression, the gold is gone, and hyperinflation is inevitable. And oh yeah, banks are largely responsible for this mess – per this incredible, must-read article by “Matt Taibbi, America’s greatest journalist.”
As for Precious Metals themselves, clearly something very significant is occurring. As they say, “what won’t go down, must go up”; and particularly in the case of silver, this could not be more true. Finally, it appears the Cartel’s endless $1,250/oz. and $20/oz. “lines in the sand” have been broken” – with both metals advancing strongly, amidst increasingly negative “GOFO” rates; razor thin COMEX inventories; record Chinese demand; and as noted in yesterday’s article, plunging worldwide production.
Not only has GLD inventory been increasing anew – thus, sucking more PHYSICAL metal out of the market; but the premiums on the Sprott and Spicer closed-end bullion funds have suddenly started surging. We have long been wary of these funds due to our suspicion of unrelenting Cartel naked shorting; and, of course, the fact that such “Paper PM Investments” are no substitute for the real thing. However, we watch them very carefully, to see just how powerful retail and institutional PM demand is; and clearly, something very significant is occurring.
As you can see, the Spicer Funds – GTU and CEF – have surged to NAV, or Net Asset Value, discounts of just over 3% in the past week, from closer to 6%-9% discounts last week. More importantly, the Sprott gold fund has nearly reached parity, whilst the Sprott silver fund has jumped to a 2.6% premium. And why does this excite us so much, you might ask? Because when the premiums get high enough, Stefan Spicer and “Admiral Sprott” will pull the trigger on new, secondary offerings – yielding massive, Cartel-killing PHYSICAL purchases on the open market. Each time such a deal has been made, gold and silver prices have surged; and with global physical inventory so tight, particularly in silver – it wouldn’t surprise us if one such deal, from a highly motivated, visibly angered Eric Sprott – caused an historic, PHYSICAL short squeeze; potentially, finishing the Cartel once and for all.
There’s only so long a chart like this can continue to rise parabolically before price follows; and when it does, if you haven’t already secured your metal, you may never again get the chance.
And thus, we couldn’t plead louder to PROTECT YOURSELF, and do it NOW!