“DEFORMATION” – Continued

April 9, 2015

It’s Wednesday, April 8th – and mark the date; as for the first time in years, a specific article topic didn’t “come to me” in the past 24 hours. Not that there aren’t countless things to speak of – as usual, supporting the Miles Franklin Blog principal theses since the turn of the century. And yes, there is certainly a common theme to today’s headlines, which I’ll tie together shortly. However, in a world where honest media coverage has all but died – and frankly, alternative media has weakened, too – coming up with “new material” on “quiet” days has become slightly more challenging.

As we patiently – and fearfully – await whatever semblance of stability the global economy still holds to collapse, we are being forced to watch an absurd psychological horror show of lies, deceit, and thievery. A handful of people are destroying the lives of billions, and the vast majority are standing by watching – many, without a clue (yet) as to what’s happening. To think, for example, that Shinzo Abe called a Japanese “snap election” four months ago, and was re-elected by a landslide, should tell you all you need to know about the Twilight Zone world we currently live in; and why, per last week’s must listen Audioblog, “deformation explosion,” it’s inevitable – and perhaps, imminent – that the laws of “Economic Mother Nature” will re-assert themselves, in epic fashion.

In said Audioblog, I discussed the myriad ways in which four decades of the world’s first global fiat currency regime – and more specifically, the 15 years since “peak debt” was reached, and seven since the system permanently “broke” – has caused gross “deformations” of the global economy; which, with each passing day, worsen as the fiat regime’s terminal phase accelerates. Moreover, such deformations have been detrimentally “enhanced” by the advanced financial engineering tools created by Wall Street’s mad scientists – and turbo-charged by the overt and covert market manipulation of its government “partners”; essentially, creating a Central bank funded casino that benefits only those privy to the scheme, at the expense of all others. This is why CNBC’s ratings are at an all-time low with stock markets at record highs; and why Congressional and Presidential approval ratings are near record lows with supposed “unemployment” at multi-year lows as well.

Today alone, as we await publication of the doctored “minutes” of the Fed’s March 18th meeting, said “deformation list” is as long as it is broad. To that end, I guess I do have a key theme after all – even if it is simply a continuation of what I discussed last weekend. For instance, how surreal is it that Greece is all but crowing about its ability to scrounge enough nickels together to make its €450 million interest payment to the IMF tomorrow – largely, by looting public pension funds; when for 22 months between December 2012 and October 2014, the Fed printed that amount every six hours. Or better yet – thanks to PBOC money printing, lax regulation, and Communist “encouragement,” Chinese households have added an astonishing $9 trillion of debt since the 2008 financial crisis; i.e., €450 million every three hours. The following week, an additional €2.4 billion comes due; of which, only a miracle will provide. And by the way, for those thinking Alexis Tsipras’ meeting with Vladimir Putin this week will somehow save Greece, the last I looked the Russian economy – and currency – didn’t appear so healthy themselves.

And yet, care said deformations of financial markets – in this case, the ECB’s “whatever it takes” QE,

which ironically purports to “save” the Euro by devaluing it – European markets are eerily calm, even as Germany reported a massive, “unexpected” decline in factory orders. Better yet, not only did Switzerland become the first nation to ever issue 10-year sovereign bonds at a negative yield, but Spanish Treasury bill yields have turned negative as well. Yes, Spain – where its real estate market sits at 12-year lows, and its unemployment rate at 24%; whilst a province (Catalonia) that accounts for a quarter of the nation’s GDP seeks to secede; and the Syriza-like Podemos Party is the front-runner to win the Presidency in December – the “front-running” of the ECB’s suicidal, hyperinflationary monetization policy is causing investors to pay the Spanish government for the privilege of owning its debt; which, as we speak, is crossing the deadly 100% of GDP level – which in reality is 3% higher, given that Spain last year “recalculated” GDP to include illegal, non-taxpaying “production” from drug dealing, prostitution, and weapons sales.

Meanwhile, the historic deformation of the oil markets continues unabated, with last night’s massive 12.2 million barrel increase in API crude oil inventories – just validated by an equally massive EIA build minutes ago – representing the largest weekly build in 30 years; in turn, causing the key Cushing storage hub to be filled to a record 90% of capacity. Following in the footsteps of the great David Stockman, my January 2nd article, the “direst prediction of all” placed blame on the historic oil (and generally speaking, commodity) oversupply on Central bank money printing – aided and abetted, of course, by the aforementioned “weapons of mass destruction” created in Wall Street’s derivatives and securitization labs. And as they say, when it rains it pours – which is probably why it’s so ironic that the U.S. is choosing to ease its Iranian sanctions now. As for the recent WTI crude surge, from last month’s low of $42/bbl to the still horrible $52/bbl today, I’d attribute a third to the blatant actions of the newly formed “oil PPT” – which I’ve discussed ad nauseum in recent weeks; a third to the “deformed” perma-optimism that has been engendered by years of market manipulation; and a third to the slight chance that the Yemeni revolution breaks out into a broader regional conflict. That said, with each passing day the level of oversupply is increasing, making it more and more likely that not only will the Cushing terminal be filled to capacity, but the world’s desperately cargo-seeking tanker fleet.

Here in the United States of Deformation, we’re told to be excited by yesterday’s increase in the “headline number” of the only economic data series less reliable than the NFP employment report; i.e., the JOLTS survey of job openings and hirings. Like the NFP “unemployment rate,” the JOLTS survey has completely decoupled with reality since the government started “massaging” data post-2008. Then again, all one needs to do is actually read it to realize how bad its internals actually are. As in, whilst the eternally ambiguous “job openings” category increased, the more relevant “hirings” category plunged; at a rate last seen in…drum roll please…late 2008.

Better yet, the exponential growth in U.S. consumer debt was reported to have continued; albeit, as the more telling revolving debt category crashed. And how can that have happened, you ask? Simply, because taxpayer government funded, undischargable, non-productive student loans – of which the majority are in default or effective default – are going parabolic; as are subprime auto loans, care of “government influenced” channel stuffing and predatory loan practices that have “2008 redux” written all over them. Thus, as we head into today’s fraudulent FOMC “minutes” publication, yesterday’s three-year Treasury auction produced the lowest yield in more than a year. In other words, “front-running” QE4; i.e., “the most damning proof yet of QE failure.”

Actually, the “deformation” that ultimately catalyzed the theme of today’s article was the process I

am going through in renewing my homeowners’ insurance policy. To wit, I purchased my home in May 2007, on the eve of the worst financial crisis of our lifetimes – when, by the way, the Fed Funds rate was 5.25%, compared to ZERO today. Since then, I have not had a single homeowners’ claim; and last I looked, the actuarial odds of such claims haven’t materially changed, if at all. Which makes it so “strange” that my initial annual premium was $760, and this year’s renewal premium is $1,750. This, my friends, is the beauty of “ZIRP” – or Zero Interest Rate Policy; which has not only inflated financial bubbles of epic proportion, whilst destroying the economy and yielding gargantuan debt accumulation, but eliminated the principal savings tools of everyone from wage earners, to retirees, to insurance companies. And thus, care of ZIRP, homeowners experience massive premium inflation because their insurance providers must recoup the loss of interest income caused by Fed monetary policy. Which, by the way, is no different from any other institution – particularly, public institutions accountable to shareholders – that traditionally receive significant interest income from their cash holdings. Such as, for instance, utilities, healthcare providers, and universities. In other words, irrespective of the inexorable cost push of business in general, there’s a common thread between surging prices of homeowners insurance, health insurance, utilities, and college tuition – which sadly, is the Federal Reserve.

As for the “Achilles Heel of the Financial World” that physical gold and silver are – i.e., the biggest deformation in financial market history – my good friend Steve St. Angelo has provided further, damning evidence that U.S. “reserves” – i.e., Fort Knox – if not gone, are significantly depleted. In his latest piece, he calculates a massive 446 tonne U.S. gold deficit over the past three years, which can only have been supplied by surreptitious dishoarding of official reserves. Or private reserves, if there were any to speak of; and given that Miles Franklin, one of the nation’s largest bullion dealers, has seen a mere trickle of PM sales over the past 15 years, it’s highly unlikely said deficit was supplied by any other than the U.S. government itself. Which, in time, we assure you, will be well understood – when the same shortages that occurred in parts of 2008, 2011, 2013, and 2014 become pervasive, and unrelenting.

And last but not least, what better “social deformation” than Maestro Jr. himself, Helicopter Ben Bernanke, having the gall to title his upcoming memoir, “the Courage to Act?” Frankly, the only such “courage” I can see is the fraudulent naming of this book – in describing the ultimate act of cowardice, by destroying the “99%” at the expense of the 1% that control him, by simply pressing the “print” button on his keyboard. In time, Central banks will not only be broadly vilified, but completely destroyed as well. And when they are, it will be people like Ben Bernanke who will be remembered as their profession’s greatest failures.


Courtesy of Courtesy of http://blog.milesfranklin.com

Andrew ("Andy") Hoffman, CFA joined Miles Franklin, one of America's oldest, largest bullion dealers, as Media Director in October 2011. For a decade, he was a US-based buy-side and sell-side analyst, most notably as an II-ranked oil service analyst at Salomon Smith Barney from 1999 through 2005. Since 2002, his focus has been entirely on precious metals, and since 2006 has written free missives regarding gold, silver and macroeconomics. Prior to joining the company he spent five years working as an investor relations officer or consultant to numerous junior mining companies.

Fed has done all it can to fix US economy's non-structural issues, now it must hike rates