Ranting Andy: The Titanic Moment
Sure as night follows day, and spring follows winter, the GREATEST BUBBLE OF ALL TIME is bursting, as I have vociferously forecast all year. And what more fitting day for it to occur than my birthday?
Per yesterday's RANT, "LESS THAN ZERO", the Fed's pathetic statement will likely serve as an INFLECTION POINT IN WORLDWIDE FINANCIAL HISTORY, representing the moment it's EXTEND AND PRETEND policy of PRINTING MONEY to BAIL OUT EVIL BANKS lost ALL effectiveness. Moreover, as the only thread holding Europe together has been its ability to access the Fed's unlimited printing press (since European interbank lending has dried up, with major corporations and sovereign nations WITHDRAWING FUNDS), they are now DONE as well.
Several commentators, such as myself, have forcefully stated we would exit the eye of the hurricane as soon as Fall arrived. I could not have been more adamant if I tried.
And now it's here, the TITANIC MOMENT referenced above.
Not hitting the iceberg (September 2008), not the Eureka moment when the crew realized the ship would sink (August 2011), but the moment when the ship actually goes under (notice how fast the pace accelerated). From my perspective, the Federal Reserve's powers are officially DRAINED, NEVER to be able to mislead public PERCEPTION ever again. The common man is seeing it for the FRAUD it is, led by a MORON, and not only COERCED, but actually OWNED by EVIL BANKS such as Goldman Sachs and JP Morgan. Too bad they won't make it through the storm either, particularly when PUBLIC RAGE is eventually directed at them.
Yes, the Fed will make a more formal, $500 BILION- $1 TRILLION QE3 announcement later this Fall, when market hysteria SURPASSES that of the BOTTOM of the 2008-09 meltdown. But all that will do is engender a scenario like the one in the brilliant seven minute video below, "The Day the Dollar Died," in other words the commencement of hyperinflation. In the meantime, Quivering Lip Ben will be forced to watch the carnage from his ivory tower in Washington, pondering why his monetarist 'Helicopter Theory' didn't work.
Meanwhile, the European banking system has ALREADY plummeted nose-down into the North Atlantic, or perhaps the Mediterranean, if you will. The ONLY difference between Europe and the U.S. is that the dollar is still the world's reserve currency (not for long), while the Euro is not. The Fed has held the rest of the world hostage with their dollar reserves for the past decade (as its value has precipitously declined), but that game is about to end, perhaps by year-end, and if not in 2012 the latest.
In fact, the game could very well end before the end of September, and that is no small claim. DESPERATION is in the air, per the rumor below that the $500 billion (UNLIMITED in practice) joint dollar borrowing facility created last week by the Fed/ECB/BOE/SNB is going to slash its "borrowing rate" to essentially ZERO, essentially turning it into another TARP facility, not just for U.S. banks, but ALL TBTF banks (not the small ones, of course, which will be fed to the wolves).
This too WILL NOT work, as the problem, for the MILLIONTH time, is NOT liquidity! It is solvency, and ALL MAJOR WESTERN BANKS are BANKRUPT! And I'm not talking "bailout and re-organize" bankrupt, I'm talking Lehman Brothers bankrupt, as in GONE FOREVER, including all employees and depositor funds. Yes, the Fed and ECB will try to keep favored ones alive by merging them into each other (ala JP Morgan/WAMU/Bear Stearns and Bank of America/Countrywide Credit/Merrill Lynch), or even taking some onto their own balance sheet (ala Fannie Mae/Freddie Mac), but I don't expect ANY of those options to work this time around, and CERTAINLY not the free-money TARP-like bailouts with government stake purchases (a la Citigroup, AIG, and General Motors).
The real problem is the FED'S MONEY WILL NO LONGER BE GOOD, not to corporations, sovereign nations, and eventually to individuals as well when hyperinflation commences in America. Moreover, if that's the case, certainly the ECB's EUROS won't be either, yielding imminent collapse of the Euro currency in the very near future, and with it massive hyperinflation, social unrest, and likely WAR on the other side of the pond.
Now that the Fed's bailout powers are essentially GONE FOREVER (and don't be fooled when the market jumps upon it's IMMINENT $500 BILLION – $1 TRILLION QE3 ANNOUNCEMENT, which will this time OVERTLY target the STOCK MARKET. From where I stand, all that will do is advertise to the world that the U.S. has officially become a third-world country. RANT readers should know this occurred LONG AGO from a financial perspective, but now the rest of the world will realize this as well.
TPTB (The Powers That Be) are purely reactionary in all matters economic, and thus swimming around frantically searching for a life preserver. The above rumor will turn out to be true, but just like the Fed's "Operation Twist" announcement yesterday, will have no impact at all, other than to make more urgent the rest of the world's efforts to get OUT of fiat currency and INTO REAL MONEY, i.e. gold and silver.
Given this reactionary nature, they will now look to the ECB's bastardized EFSF (European Financial Stability Facility) for salvation, a 100% PRINTED-MONEY TARP initiative to bail out ALL European TBTF banks, whom are collectively joined at the hip via cross-investment and layered credit default issuance. Just ONE WEEK AGO, the Germans were acting high-and-mighty about how they wouldn't bail out Greece or Europe's weak sisters (not that Germany is so strong itself), but in the blink of an eye decided that kissing Greece's arse had become an act of "National Security." Despite massive dissent among the German people, all of a sudden its politicians strongly support expanded EFSF powers, per this article from yesterday.
TPTB will attempt to rally the market with the "good news" that Germany's Parliament supports such expanded powers for the EFSF, BRIEFLY playing on assumptions that its new
"empowerment to buy sovereign bonds in the primary and secondary market, offer precautionary credit lines, and create a bank- recapitalization facility" will translate to a new, TARP-LIKE, MULTI-TRILLION increase in bailout money. But that bailout will likely never come, unless the stock market sufficiently crashes, pushing the European banks to the brink of closing the doors. Which would likely yield a similarly hasty HYPERINFLATIONARY STIMULUS ANNOUNCEMENT by the ECB.
In fact, I wouldn't be surprised to see the ULTIMATE SUNDAY NIGHT SPECIAL later this fall, when the markets open Monday morning to the announcement of a JOINT, MASSIVE, MULTI-TRILLION TARP/EFSF fund by the Fed, ECB, BOE, SNB, and BOJ to BAIL OUT EVERYONE WITH UNLIMITED, PRINTED MONEY.
This of course would commence the GLOBAL CURRENCY COLLAPSE I have warned of for so long, likely when PHYSICAL gold and silver finally go NO OFFER, as in NOTHING available to buy at ANY price.
Finally, I wanted to discuss the gold and silver crashes this morning, for the most part just more of the same manipulation we have seen for the past decade. Per my September 7th RANT, "DEATH STAR ATTACK....", there is not a doubt TPTB KNEW exactly what I KNEW, i.e. the system would collapse right after Labor Day, and thus intensified their attacks on gold and silver to levels even I have never seen in 91/2 years of watching gold and silver (of course, my motto re: gold manipulation has long been "each day is worse", so this should not be a surprise). The sudden $50 gold smashes, which take place in a matter of MINUTES, have occurred at an accelerating frequency in the three weeks since Labor Day, and frankly the fact that gold stayed above $1,800 and silver $40 as of last night is a tribute to their resilience. Not to mention, premiums have clearly been expanding for PHYSICAL versus PAPER; for example, the premium to NAV (net asset value) of the Sprott Silver Bullion Trust surged to nearly 23% this week, and I believe such premiums will increase further in the coming weeks.
When REAL GOLD FEVER hits, it will be 100% about FEAR, contrary to the belief by many PM market investors (particularly those that finally entered on the HUI breakout last week) that it will be about GREED. That not-so-subtle issue will be the most important difference, among many others, between the 1970s and today. Back then, the economy was troubled, but widespread fear of a global collapse was not an issue, nor was viability of the dollar, pound, or yen. Today, the ENTIRE GLOBAL FINANCIAL SYSTEM will collapse, engendering the END of the 40-year dollar-based fiat currency system. People will be buying GOLD and SILVER to PROTECT THEMSELVES FROM RUIN, NOT to make a "profitable investment." GOLD and SILVER are MONEY, and before long billions of people worldwide will learn this the hard way.
Now, back to today specifically
Superficially, the crash in gold and silver prices started EXACTLY, TO THE MINUTE, at 8:20 AM EST when the COMEX opened, a typical Cartel tactic to inspire fear among gold traders and investors, particularly, in this case, to get them to think "oh no, this is 2008 again." Of course, that notion is silly, as both gold and silver are near all-time highs, and both ROCKETED HIGHER in August due to the EXACT SAME BROAD MARKET FACTORS! Worldwide recognition of GOLD and SILVER as CURRENCIES has exploded in the past three years, and BOTH have reached ALL-TIME HIGHS against essentially EVERY MAJOR WORLD CURRENCY.
But aside from the typical Cartel manipulation, which has reached SPIRITUAL levels in its quest to put off commencement of the END GAME GOLD EXPLOSION, I believe a number of European Central banks are leasing PHYSICAL gold into the market to pay off debts, particularly those to creditors (i.e. the Chinese) who WILL NO LONGER take Euros or dollars for payment. No way they would actually SELL the gold and report it to the IMF, as the citizens of those nations (France? Italy? Greece?) would probably lynch them if they found out. So lease it they are, putting further pressure on gold and silver prices this morning. Combine this with Cartel NAKED SHORT SELLING of PAPER gold and silver (COMEX FUTURES, GLD/SLV), and of course terrified traders who are long such PAPER garbage, and you get a major sell-off.
However, I ASSURE YOU that FAR LESS PHYSICAL gold and silver has been sold than the prices imply, and that EVERY SINGLE OUNCE is being gobbled up by FEARFUL investors worldwide, from individuals to institutions to Central Banks themselves, PARTICULARLY those of China, India, Russia, and the Middle East.
If you own PHYSICAL gold and silver, your brokerage account and bank statement is unchanged today, but ANYTHING else is plummeting, which is why only PHYSICAL gold and silver can save you in these darkest of times. PAPER forms of gold and silver, such as the closed-end funds CEF, GTU, SVRZF, PHYS, and PSLV will eventually be big winners, but only if your brokerage account survives to withstand the 2012-13 ECONOMIC TSUNAMI. As will selected PM mining stocks, once the FEAR subsides and calm is restored. However, WHEN will that occur? And until then, are you PROTECTED?
PHYSICAL gold and silver, FOOD, ENERGY, and OTHER ITEMS OF REAL VALUE are the only items that matter during an economic collapse, and the current situation will historically be remembered as the MOST CATASTROPHIC ECONOMIC EVENT OF ALL TIME!
PROTECT YOURSELF NOW, AND I MEAN TODAY, AS WASHINGTON, WALL STREET, LONDON, AND THE EVIL POWER CENTERS OF THE WORLD WILL NOT BE ABLE TO STOP THE DAM FROM COMPLETELY AND UTTERLY SHATTERING.
Andrew C. Hoffman, CFA