History’s Largest Bubble, And Anti-Bubble

It’s T-minus two days until the Fed is forced to address the historic political, economic, and monetary collapse it’s created, in trying to maintain the unprecedented overvaluation of “history’s largest bubble” (financial assets) and under-valuation of “history’s largest anti-bubble” (precious metals), when the 100-plus taxpayer funded Keynesian lackeys it employs publish a one-page “word cloud” Wednesday afternoon, depicting their current course of action (a pathetic 25 basis point rate increase, when the “bond vigilantes” have executed a 75 basis point increase in actual markets); and more importantly, their “plan of action” going forward.

In other words, the classic “damned if you do, damned if you don’t” scenario; as if they don’t acknowledge surging rates – and thus, inflation expectations – with materially hawkish commentary, all remaining “credibility” will be lost.  Conversely, if they are stupid enough to try and act “tough” by proclaiming “all’s well” – and thus, that multiple rate hikes are imminent; they will unquestionably crash the stock and bond markets, whilst catalyzing a parabolic dollar surge that will all but destroy not only U.S. corporate earnings, but countless currencies; many of which, like the Euro and Yuan, are sitting, as we speak, at the precipice of massive, multi-decade technical breakdowns.

Which in turn, will catalyze terrifying capital flight, surging worldwide inflation, and exploding social, political, and geopolitical tensions, at a time when they are already at their highest levels in generations (as epitomized by Trump antagonizing China this weekend by speaking directly to its political and economic archenemy, the “Republic of China” (i.e., Taiwan).  Let alone, “final currency war” responses – from both Central banks and corporations alike; both of which, will be horrifically damaged by surging interest rates and a rising U.S. dollar.  Not to mention, as global debt levels are going parabolic, in concert with the surging interest rates (10-year Treasury yield above 2.5% as I write) that will unquestionably serve as their death knell.  In turn, mortally wounding flailing banks like Italy’s Monte dei Paschi, which appears certain to be nationalized by year-end – starting a chain reaction of bail-ins; bailouts; and derivative explosions the world round .  All this, as the “Dow Jones Propaganda Average trades” at its highest valuation – on essentially all metrics – in its 120-year history; amidst an environment of the lowest-ever economic growth; weakest-ever corporate balance sheets; worst ever consumer demographics (on this, Harry Dent is dead on); and a new, anti-establishment government with little care for political conventions, and even less for amiable negotiations.  Throw in the increasingly Orwellian nature of the “fake news”; “rigged markets”; and soon-to-be “cashless society,” and you have an environment ripe for the collapse of said bubbles, and the dramatic inflation of said “anti-bubble.”

Consider that this weekend, Saudi Arabia had its “whatever it takes” moment – in literally, showing the entire world just how desperate it is to goose oil prices higher – per the comically fraudulent, and transparent, actions it took to manipulate them higher (at least, for the short-term, until said fraud is inevitably called out).  Which was, to not only pretend non-OPEC nations like Russia and Mexico agreed to last week’s proposed 600,000 barrel per day production cut (when Mexico last week said it would not cut, and Russia still hasn’t defined the parameters of its contribution), but claiming Saudi Arabia would cut “substantially more” than what it agreed to last week, after two-and-a-half months of bitter wrangling with OPEC rivals like Iran and Iraq.  This, mere days after Saudi’s former oil minister admitted OPEC typically cheats on such agreements (historically, to the tune of 40%); not to mention, the fact that non-OPEC nations like Russia have historically cheated by more than 40%.

And why did they do this, you ask?  Simple, because empirical data shows Chinese demand is declining, due to a combination of a weakening economy and the fact that its strategic petroleum reserve has, for all intents and purposes, been filled; whilst simultaneously, November data showed that OPEC produced “significantly” more than the baselines used for last week’s production cut parameters.  Well that, and the fact that Indian demand is – and I’m not exaggerating – in FREEFALL after Narendra Modi’s catastrophic “policy error” last month, which has unquestionably doomed the world’s second most populous nation; and until last month, the world’s fastest growing oil consumer; to years, and potentially decades – of political, economic, and social turmoil; potentially, of the violent type.  This, with the Rupee that India’s billion-plus gold-loving, fiat-currency hating citizens are being forced to hold is already at an all-time low; whilst the suicidal Reserve Bank of India is amidst a rate cutting cycle, that will only accelerate further, given the collapsing Indian economy.  Heck, FoxConn, which manufactures iPhones, laid off a whopping 25% of its Indian labor force this weekend, after seeing Indian iPhone orders plunge by, I kid you not, 50%!

As for said “anti-bubble,” I’ve been a student of monetary history for 15 years now – and NEVER before, even in 2008, have I seen Precious Metals do egregiously undervalued relative to supply and demand; the short- and long-term production outlooks; and the amount of fiat currency units in existence.  Let alone, the amount not currently accounted for, and how many more are likely to be printed in the coming weeks and months.  At least, that is, in U.S. dollar terms, given that in essentially all other currencies, gold is in a raging bull market.  Let alone silver, which is vastly more undervalued than gold, trading 70% below its price of 5½ years ago – when the U.S. national debt was $6 trillion lower, before most Central banks went berserk printing money.  Not to mention, as care of the horrific Deutsche Bank rigging evidence uncovered last week (read this, ASAP), the entire world will shortly realize prices have been manipulatively suppressed below their true equilibrium value.

Not only is silver at multi-month lows whilst money printing explodes, political instability surges, and global trade plunges, but it has been pushed down whilst base metals have been goosed to bubble-like valuations.  Not to mention, as unquestionably, physical silver demand is exploding in places like India, where fears of potential gold importation restrictions have terrified Indian citizens flocking to silver; and China, if rumors of restricted gold import quotas (to slow capital flight, given the ongoing Yuan devaluation) are true.

But most of all, because only gold and silver have proven to be stores of value throughout history; to date, with no peer.  Which I assure you, will not be diminished amidst the greatest fiat Ponzi scheme collapse in history, no matter how much governments try to manipulate, regulate, or confiscate.  To that end, for anyone “worried” about gold importation or ownership restrictions, I’ll remind you that black markets for contraband materials always thrive when demand is greater than supply – just as they have been in India since onerous 10-plus percent import tariffs were enacted three years ago.  Which unquestionably will occur now, given how terrifying India’s monetary and political outlook has become, essentially overnight.  Which reminds me of the geneticist in Jurassic Park who claimed same-sex dinosaurs couldn’t possibly reproduce; to which, Jeff Goldblum’s Dr. Malcolm character responds simply, that “life finds a way” – in this case, a matter of hundreds of millions of Indians’ financial life or death.

Last but not least, I want to re-address the dangers of the inevitable – and in many places, imminent – introduction of a “cashless society.”  Which, when it occurs – and I’m going to boldly say that MAJOR steps in this direction will occur in 2017, likely in MAJOR “civilizations” like the U.S., Europe, and Japan – will permanently put your monetary fate in the hands of a handful of “0.1%’ers” who have proven to be your mortal enemy; permanently destroying all financial privacy, and giving them the ability to steal your hard-earned savings at will, via negative interest rates; arbitrary “fees”; bail-ins; bank freezes; and of course, hyper-inflation.  To that end, just this weekend, Venezuela joined the cashless society fray by banning the nation’s highest denomination note; and shortly, many others will do the same – including the U.S., the second financial market control is even moderately lost.  To that end, it’s in many ways starting already, given my experience at the Disney on Ice show I attended yesterday (I won’t even discuss how expensive it was); when in the parking lot, I kid you not, paying with a credit card was $5 cheaper than paying in cash.  In other words, a beaurocratic order was mandated to the Pepsi Center facility to discourage cash usage, even though cash processing costs are considerably less than those of credit.  To that end, don’t say I didn’t warn you, when 12 months from now everyone will be – likely, by political necessity – demanding credit as well; potentially, in concert with the very same type of “cash ban” the world is currently mocking in second world nations like India, and third world hells like Venezuela.

While I am not sure what the catalyst will be for the bursting of “history’s largest bubble,” and inflation of “history’s largest anti-bubble,” I could not be surer that it is coming shortly, even to the world’s most manipulated markets, like paper gold and silver and the “Dow Jones Propaganda Average.”  David Stockman believes this week’s Fed meeting will do the trick, whilst I’m happy to just sit quietly with my physical gold and silver, waiting for the inevitable, as Jim Rickards puts it, snowflake that starts the avalanche.