IS GOLD “MONEY?” WHO CARES?
Another quiet midsummer’s day. That is, unless you live in one of the world’s rapidly devolving hotspots of social and/or military unrest. Fortunately, Egyptians haven’t yet taken to the streets after having their gasoline prices raised by 80% overnight; and equally relieving, Brazilians took the worst World Cup defeat in history far better than anticipated. However, these are the exceptions; as with each passing day, the global damage caused by Central bank money printing worsens; and sadly, because fiat currency regimes define Ponzi schemes, such damage will increase exponentially until the entire system collapses of its own weight. Today’s principal topic deals with how people have historically protected themselves from such tragedy, and how they will inevitably do so in the coming months and years. In the meantime, a handful of today’s “horrible headlines” to get things started.
1. Today is “Fed Minutes” day, when the supposed details of the infamous June 17-18 FOMC meeting are published. As readers know well, such days have become “key attack events” over the past two years, as TPTB desperately attempt to convince whoever’s still listening that whatever the Fed says is PM bearish and equity/Treasury bullish. However, today will be a particularly difficult task on that front; as indisputably, Whirlybird Janet and Co. were wildly dovish at the June 18th press conference. You know, the one preceding gold’s $45 surge.
Since then, real economic data has been extremely weak, with the only “strength” emanating from the “Island of Lies” (http://blog.milesfranklin.com/island-of-lies) where diffusion indices and headline jobs numbers are fabricated. In fact, just yesterday, one of the Fed’s top “hawks,” Jeffrey Lacker of the Richmond Fed (in fact, the only hawk scheduled to be a 2015 FOMC voter) said he anticipates meager 2.0%-2.5% GDP growth for the foreseeable future, fudged data et al; with “sustained acceleration to over 3%” unlikely. He then spewed typical “token hawk” blather about the need to withdraw stimulus when required, but followed such boilerplate language by stating inflation was tame, with no need to consider tighter policy until it rises above 2.0%. Hello, Earth to Jeffrey! Both the CPI and PCE deflator are running above 2.0% – let alone, the Fed’s own “Survey of Consumer Expectations!”
2. On the topic of said “Island of Lies,” yesterday’s JOLTS survey of job openings and hirings was published yesterday, with a “slightly better than expected” reading. Of course, it was released at “key attack time #1” – i.e., 10:00 AM EST, when global physical PM markets close – to better enable the Cartel to attack gold when it attempted to cross their current “line in the sand” at $1,325 for the umpteenth time (I kid you not, gold is $1,324.90 as I write). The funny thing about this archaic data, which until the Cartel recently recruited it as a “key attack event” was completely ignored, is that, like other government-compiled employment data, it has absolutely ZERO correlation with actual labor market conditions. To wit, whilst “job openings” modestly rose in May, the actual number of employees hired declined by 52,000. Just as the BLS’ “unemployment rate” has been rigged to decline despite plunging Labor Force Participation, NFP payrolls have been rigged to rise despite no parallel movement in JOLTS hirings. And what do you know? Said dislocation commenced directly after the 2008 meltdown, when TPTB realized that rigging everything from economic data to financial markets represented their only hope of “kicking the can” that extra mile – irrespective of how transparent such actions would become. And by the way, what did the benchmark 10-year Treasury yield do directly afterwards? Why, it plunged below the Fed’s “line in the sand” at 2.60%, as global stock prices fell sharply – ominously, led by bank stocks. And oh yeah, as I write, Portugal’s largest bank, Espirito Santo, just defaulted on a bond payment, causing its own bonds to collapse. Nope, nothing to see here.
3. Hamas rockets were launched into Tel Aviv, prompting a major Israeli troop mobilization at a time of maximum Middle East instability. What could possibly go wrong?
4. The ballyhooed outlier increase in April U.S. credit card spending – in today’s warped world, somehow considered a “positive” – completely reversed in May, reverting back to the usual scenario of only non-revolving credit (i.e., subprime student and auto loans) materially rising.
5. German Industrial Production was reported way less than anticipated. Combine that with the miserable IFO sentiment readings published last month, and it becomes crystal clear the economy responsible for 28% of EU growth is dramatically slowing, to a flat-line scenario at best. In other words, get ready for ECB QE.
6. The U.S. government reported that it made at least $100 billion of erroneous entitlement payments last year, including $36 billion to Medicare. No problem, what’s another $100 billion to U.S. taxpayers? And for that matter, have no fears, as what could possibly go wrong when Obamacare takes over the national healthcare system?
7. Tomorrow, India will release its annual budget statement, in which last year’s suicidal PM tariffs and restrictions are expected to be reduced. We’re still reeling at the sheer idiocy of last weeks’ RBI announcement that it intends to swap its supposed physical gold reserves with the Bank of England, in a move likely to accelerate the end game of a “no offer” physical market, just after the last of the Western-owned or influenced reserves have been dishoarded.
Now that today’s “dirty laundry” has been aired, it’s time to discuss why it matters not whether one believes gold (and silver) are money. The key point being that irrespective, the only way to protect financial assets from what’s barreling at us like a runaway train will be through their ownership.
In recent weeks, following gold and silver’s modest rallies of 6% and 13%, respectively, the typical, virulent anti-PM propaganda has been released en masse. This has been the Cartel’s modus operandi for the past 15 years, made easier by the unwitting aid of disingenuine and/or misguided newsletter writers, and compliant MSM parroting. Unfortunately for them, such “support” is waning, as with each passing day, the “superiority” of fiat currencies is being questioned further. Not to mention, nearly all newsletter writers believe the “bottom is in.”
The most recent round of propaganda appears to be focused on convincing the masses gold is not “money” – but instead, a “barbarous relic” paying no interest (not for long, once NIRP is enacted), with no economic function. We have long discussed the fact that only PMs are money, such as in this article (http://blog.milesfranklin.com/the-definition-of-money-2). In other words, it must not only be divisible, fungible, verifiable, and scarce, but serve as a medium of exchange and prove to be a timeless store of value. Precious Metals have unquestionably done this, but modern propagandists try to claim gold is an “archaic” substance with no place in an increasingly complex world. Heck, Bitcoin is often submitted as the new monetary model; when frankly, it possesses less of the aforementioned definitional parameters than even fiat currency.
Since converting essentially my entire liquid net worth to physical gold and silver in 2008-13, I have been repeatedly asked what would catalyze selling these positions – or better put, trading them for items of like value. My stock answer is when a monetary system backed by PMs replaces the dying fiat currency regime, but that is not really the true answer – nor is it for perhaps 99% of PM holders.
No, I am not waiting for a utopian, PM-backed monetary system – much less, a Star Trek world where money is no longer needed. Instead, I am simply waiting for the universal realization that gold and silver are the only assets capable of offsetting hyperinflation. In other words, while future monetary systems are not set in stone, the hyperinflation emanating from this, history’s largest ever fiat Ponzi scheme – is guaranteed. Literally, hundreds of trillions of soon to be worthless fiat – or at best, dramatically devalued – currencies will be competing for the miniscule hoard of available for sale physical PMs; not to be used as “mediums of exchange,” but to save investors from bankruptcy. Perhaps such a process is gradual, but we’re betting it’s more like this (http://www.youtube.com/watch?v=2N8gJSMoOJc). And thus, to the question of whether or not PMs are actually “money,” our answer is thus…WHO CARES?
