Oil, Greece And The US Fed
Honestly, there’s no better way of describing the “final phase of manipulation, corruption, and lunacy” of history’s largest Ponzi scheme like being in the twilight zone; and for gold and silver holders, a “financial concentration camp.” Day after day, the global political, economic, and financial situation sinks deeper into an abyss it can never escape – at least, until said Ponzi scheme spectacularly implodes. And day after day, we’re forced to listen to liars, thieves, and morons forwarding their sociopathic, destructive agendas whilst the “99%” are punished – via inflation; draconian government; economic imbalances sure to impoverish them for generations; and the suppression of Precious Metal prices, preventing those wise enough to see reality from protecting themselves. Fortunately, “Economic Mother Nature” never loses, and this time around will be no different. That said, if it’s truly “darkest before the dawn,” we could all use a pair of infrared, truth-seeking glasses – as right now, I can’t see a thing.
It’s Wednesday morning, and the Fed is about to embarrass itself yet again – in publishing a moronic “policy statement” in which 100+ taxpayer-funded lackey desperately redline the FOMC’s January 28th statement to find the right balance of gibberish to assuage the all-mighty, PPT-protected stock market. Not a single thing matters to them except the stock market, as the banks that own the Fed will gladly sell their mothers for higher stock prices – as well as 320 million U.S. citizens, and 7.3 billion global denizens.
Of course, “Economic Mother Nature” has her own designs – and clearly, she is decidedly winning the war against money printing, market manipulation and propaganda. Frankly, there are too many horrible, expanding economic deformations for TPTB to stabilize at this point – like holes in the dike; but for all intents and purposes, all one really needs to pay attention to – for now – are the three most prominent. Which are, the collapsing commodity complex – particularly, the world’s most important economic and geopolitical commodity, crude oil; the upcoming, “guaranteed Grexit“; and of course, the Fed itself, which has boxed itself into an historic corner, with no chance of escape.
To start this vile, nauseating day – in which Whirlybird Janet will demonstrate her idiocy in full force at a 2:00 PM EST press conference – what better way to depict just how doomed Europe is than violent protests at the opening of the ECB’s new office building in Frankfurt? Yes, in Germany, which has benefited more from the ECB’s destruction of Europe than anyone else; which in the face of a collapsing Germany economy, has enabled “one percenters” to unjustly enjoy record high stock and bond prices. Clearly, the “99%” not privy to free money and government supported financial markets aren’t happy – and given the theme of said protests is “anti-austerity,” it appears the thousands in attendance favor a break-up of the Euro, which is exactly what is going to happen. And no, it won’t take “years”; as right now, Greece is literally on its last legs. If they can’t cobble together a measly €2 billion by Friday, the game ends this weekend; and even if they do, how much more obvious could it be that Greece is dead broke?
In yesterday’s article, I listed some of the horrifying quotes from key figures on both sides of the bargaining table – indicating ZERO progress has been made; nor is it likely to be. And today, none other than “Mr. Bail-in” himself, the President of the Euro Group Jeroen Dijsselbloem, had the gall to insist on capital controls to “save” Greece, prompting the Greek government’s top spokesperson to reply “It would be useful for everyone for Mr. Dijsselbloem to respect his institutional role in the euro zone. We don’t easily understand the reasons that drove him to make statements that don’t fit the role he’s been entrusted with. All the rest are fantasy scenarios. Needless to say, Greece won’t be blackmailed.”
Yes, all will be fine. Riggggghhhhtttttt. And oh yeah, take a look at the “most important stock in the world” – of the “world’s most insolvent financial institution” – the National Bank of Greece, this morning; down 13%, to nearly its all-time low, as news of the IMF calling Greece “the most unhelpful client in our 70-year history” emerges. Yes, my friends, we are on the precipice of an historic event; which will tear Europe – and the world – apart like none ever seen. That is, until Chinese inevitably de-pegs the Yuan from the dollar.
Meanwhile, the expanding commodity collapse is taking on epic proportions – with the CRB Index now just 1% from 2008′s spike lows. And this time, there will be no spike upwards – as care of the historic overcapacity fostered by four decades of money printing and financial engineering, commodity prices, in real terms (that’s my hedge against potential hyperinflation), are doomed to remain low for years. And no commodity’s fall from grace will have bigger ramifications – on global economies and geopolitical stability – than crude oil, which we loudly warned of in October’s “crashing oil prices portend unspeakable horrors,” when WTI crude was still $83/bbl.
To that end, the “horror” is just starting; as after last night’s unfathomably ugly API (American Petroleum Institute) inventory report, WTI crude is down to $42.20/bbl – nearly $2/bbl below January 29th‘s lows. In fact, the 10.5 million barrel inventory build was the largest weekly increase since 2001, and the three million barrel increase in the Cushing storage terminal’s inventory makes recent predictions of storage being 100% filled by summertime significantly more viable. Last weekend, I trumpeted the death of the blatantly obvious “oil PPT” after just one month of furious algorithm buying; and if this morning’s EIA (Energy Information Administration) report validates the API data – which it typically does – don’t be surprised if a “three handle” is reached in the coming days, en route to new multi-decade lows in the low $30s.
As we watch this historic train wreck in real-time, consider that energy not only accounts for one-third of all S&P500 capital spending, but – even according to the BLS’ cooked data – energy is the only sector to have produced positive job growth since 2007. Let alone, the only sector to produce high paying jobs; which frankly, could all disappear in the next year or so. Not to mention, the already insolvent financial institutions that underwrote $500 billion of junk bonds and “leveraged loans” to soon-to-be-bankrupt shale producers. Just yesterday, energy-related credit risk hit its highest level of the year; and already, bankruptcies are starting to be announced. Just wait until a few months from now, when several dozen shale bankruptcies are announced each week.
Which brings me to the “linchpin” of the global economic collapse, the Federal Reserve itself. Never has an institution wrought such political, economic, and social misery on the world – “achieving” in 100 years what all other institutions combined have “accomplished” throughout history. And yet, they haven’t even “come close” to their potential – which they surely will when the inevitable “Yellen Reversal” heralds the onset of QE4; and with it, guaranteed hyperinflation for the entire world.
Following Whirlybird Janet’s surprise revelation of the “most unequivocally dovish FOMC statement in memory” to Congress two weeks ago – in which she essentially said rate hikes have ZERO chance of occurring – the global economy has rapidly deteriorated, with commodities hitting new 2015 lows; the dollar hitting a 12-year high; and U.S. economic data – fraudulent NFP report notwithstanding – collapsing so rapidly, the Fed’s own, “upwardly biased” tracking model estimates 1Q GDP will be essentially ZERO. Oil prices have gone into an accelerated freefall, and the benchmark 10-year Treasury yield – as I write Wednesday morning – is on the verge of plunging below 2.00%, versus 2.26% after said fraudulent NFP report was released eleven days ago. Which is why it is so incomprehensible that the “buzz” on the Street – and particularly, the pied pipers at CNBC – is that the Fed will remove the word “patience” from its policy statement this afternoon.
I mean seriously, even the “theater of the absurd” couldn’t come up with a comedy – or tragedy – this capable of “suspending disbelief” so thoroughly. Not that such childish wordsmithing matters in the first place, but is it really possible the Fed would again try to ignore reality so unabashedly? And this, just two weeks following said “most unequivocally dovish FOMC statement in memory?” To that end, tell me what you think – of which MSM “top story” this morning is more incredulous; Chinese stocks hitting seven year highs amidst an utterly imploding economy (see this morning’s news of the largest ever Chinese home price plunge), on “bets” that the PBOC will print more money; or the “certainty” that the Fed will remove the word patient?
I mean, who is so “certain” of this (inconsequential) action in the first place? And given said Congressional testimony just two weeks ago – and the aforementioned economic collapse since – what on God’s Earth would cause a sane person to assume the removal of “patient?” Let alone, as even the slightest hint of “hawkishness” will unquestionably cause the dollar to EXPLODE higher – destroying U.S. corporate earnings (already forecast to decline this year) and manufacturing competitiveness to weaken further. And this, just one week after the White House itself issued, for all intents and purposes, a “warning” that the surging dollar is harming the U.S. economy.
Ladies and Gentleman, the “end of the era of Central banks” is upon us – and the only thing separating us from that time is the final death of the Fed’s credibility; which, most likely, will occur when “last to go” markets like the “Dow Jones Propaganda Average” and paper gold and silver can no longer be manipulated to mask the expanding, horrifying truth. Or heck, it could be as simple as confidence being lost in the Fed’s ability to “stabilize” the economy, when enough people realize how dead wrong it has been on absolutely every imaginable forecast; and how horrifyingly damaging its policies have been.
To that end, I’ll leave you with the most damning last words ever spoken by a Fed Chairman – or for that matter, any Central banker (and that includes Mario Draghi, in July 2012, promising to do “whatever it takes” to “save” the Euro). This, from Whirlybird Janet herself, at the December 28th FOMC meeting – when WTI crude oil was still $54/bbl.
“The Committee expects inflation to rise gradually toward 2% over the medium term as the labor market improves further, and the transitory effects of lower energy prices and other factors dissipate.”
I’m still trying to figure out what “other factors” she is referring to; but with oil prices in freefall, the PPT printing negative 0.5% in February (even excluding oil prices); and the Labor Participation Rate at a 38-year low as the U.S. enters an official recession, methinks the “medium term” she is referring can only be referred to from the perspective of the Earth’s age. As in, the difference between the Triassic Period and the Jurassic Period – as opposed to the Triassic and Cretaceous.
Again, it all comes down to confidence; and once Central bank credibility is fully lost – which frankly, could occur any day now, the ability to manage perception with market manipulation – particularly by suppressing the value of REAL MONEY – will be, for generations, decidedly OVER. Which is why it has never been more imperative to protect yourself with the time-honored value of gold and silver, as history’s largest fiat Ponzi scheme implodes.
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.