Central Bank Hubris That Would Make Icarus Blanche

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Published : June 29th, 2017
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Category : Opinions and Analysis

In Greek mythology, hubris is defined as excessive pride or self-confidence, in defiance of the gods, which ultimately brings about one’s demise.  Synonyms include arrogance, conceit, self-importance, egotism, pomposity, superciliousness, and superiority – with some of the most famous mythological examples being Phaethon, Narcissisus, Arachne, and Cassiopeia; and in modern times, Richard Nixon, Tiger Woods, and Mel Gibson.  However, the “poster child” of hubris, in my view, is Icarus; who, in defiance of the warnings of his father, flew too close to the sun – causing his waxen wings to melt, and his flight of fancy to end in death by drowning.

Much of what I describe, on a daily basis, regards the hubris of political, monetary, and corporate personalities – who, through either luck or skill, were put in positions of awesome power – principally “armed” with lethal Central bank printing presses.  The “hubristic” decisions they have made have resulted in disaster; sometimes for them personally; but usually, the “99%.”  Today, everything I discuss relates to these decisions; which have not only caused massive economic, monetary, and social destruction already – but will unquestionably cause far more before all is said and done.  All of which, will have dramatically positive ramifications for history’s most reliable and – care of unprecedented manipulation, undervalued – safe haven assets; i.e., physical gold and silver.

Starting with, perhaps the most vile, disingenuous crony capitalist in U.S. history; who ironically, was not only one of the world’s biggest silver investors less than 15 years ago, but is the son of perhaps the most famous “goldbug” to ever serve in Congress.  That goldbug was Howard Buffett, a four-term Republican Congressman from Nebraska; and said crony capitalist is his son, Warren – who deemed derivatives “weapons of mass financial destruction” just before “helping” the U.S. government bail out Goldman Sachs’ and General Electric’s bad derivative bets; and even the Canadian government, via last week’s nonsensical, out- of-left field “investment” in the “Countrywide Capital of Canada,” Home Capital Group.

Yesterday, this self-righteous, heavily compensated political mercenary, took his hubris to a new level – and playing field, given his admission that he understands nothing about the healthcare industry – in claiming the U.S. is ‘so rich, it can afford single payer healthcare.’  This, on the same day that not only was the latest – and potentially, final – version of the no-better-than-Obamacare Trumpcare bill mercifully shot down by Senate Republicans; but we learned that due to the surging deductibles Obamacare has caused – let alone, the more than doubling of premiums since Obama set foot in the Oval Office – 68% of U.S. hospital patients couldn’t pay the resulting bills in 2016, up from “just” 49% in 2014.  I mean, just how many nation-destroying schemes can this horrible, evil man support – all, in the name of personal enrichment?

Next, we have the State of Illinois – which, like the “territory” of Puerto Rico (which ironically, now that it has declared bankruptcy, wants to become a U.S. State), ran up bills in a manner even California and New Jersey blanche at – to the point that a summer bankruptcy announcement is all but guaranteed; with the timeline to its “death spiral” commencing on July 1st.  When, after it fails to enact a budget for the third straight year, S&P (and likely Moody’s) will downgrade it to junk status, causing interest rates in the Illinois “banana republic” (as described by Governor Bruce Rauner) to explode, in a State with a $7 billion budget deficit; $15 billion of unpaid bills; $154 billion of debt; and $250 billion of unfunded liabilities – including the Chicago Police Pension Fund, which will likely go bankrupt next year.  No wonder there are thousands of Cubs hats littered throughout the Denver area, as people are leaving the political and economic disaster Illinois is becoming en masse; which I assure you, many other States and municipalities will shortly become, too.

Speaking of derivatives, I didn’t think it possible that the kings of dead derivative purveyors, Bear Stearns and Lehman Brothers, could be “topped” in the reckless financial engineering realm so soon after the worst -derivative-fueled – financial crisis since the Great Depression.  Unquestionably, all major banks are more exposed to toxic derivatives than in 2008 – like Italy’s Monte Paschi and Spain’s Banco Popular, which both recently collapsed.  However, the rest have done a better job – with the government’s expert “guidance,” of course – of masking it.  Except, that is, the largest bank in Europe, Deutsche Bank; which according to the IMF, is the world’s “most systematically dangerous.”  And thus, just one month after officially admitting to have rigged – read, suppressed – paper Precious Metal prices for years, it couldn’t be more fitting – or ironic – that Deutsche Bank may be facing additional, significant derivative losses.  Gee, I wonder why the Bank of International Settlements, in its Annual Report released yesterday, warned “the end may come to resemble a financial boom gone wrong – just as the latest recession showed, with a vengeance.”

Then there’s the NSA, or “National Security Agency,” whose unconstitutional “job” of spying on everyone from foreign leaders to domestic “Joe Sixpacks,” has dramatically weakened America’s international – and domestic – reputation.  How hubristic that the latest vicious, global ransomware attacks – based on protocols that can easily be mutated, yielding the potential for massive future thefts – were found to be rooted in NSA-created software?  It kind of reminds me of Skynet in the Terminator, in the ultimate incidence of unintended consequences.  At least Skynet was created with benevolent intentions – before ultimately turning on its creators, and destroying the planet.

Next up, we have the soon-to-be-rendered meaningless – if it survives as a functioning entity at all – OPEC.  Which, per last month’s “OPEC, like the London Gold Pool, proving Cartels always fail,” is losing credibility as rapidly as its dying “leader,” Saudi Arabia (i.e, “my newest most likely to catalyze the Big One.”)  Frankly, the hubris it has demonstrated in trying – along with its “oil PPT” partners in the U.S. government – to usurp Economic Mother Nature by propping paper oil prices up, amidst the historic glut yesterday’s API inventory report highlighted in spades, is awe-inspiring – and thrilling, given the guarantee that the horrific failure their hubristic actions is yielding, will be EXACTLY what the (also U.S. government-led) gold Cartel experiences; likely, sooner rather than later.

And then there’s the extremely broad, potentially world-destroying hubris of America’s “foreign policy” – be it under “wolves in sheep’s clothing” like Bill Clinton; “connected” fools like George W. Bush; “Nobel Peace Prize” winners like Barrack Obama; or clueless, self-aggrandizing crony capitalists like Donald Trump.  I mean, to think what kind of damage has already been done – and likely, will be a lot worse in the coming years – in Syria and North Korea alone is unfathomable; all in the name of “looking Presidential,” damn the horrifying consequences.

All that said, what matters most to me – and you, as readers of the Miles Franklin Blog – is the hubris directly relating to money; be it fraudulent scrip – like the fiat currency Ponzi schemes terminally infecting the global economy; real, time-tested money – like physical gold and silver; and Bitcoin, Precious Metals’ “twin destroyer of the fiat regime.”  And nowhere is “powers that be” hubris more prevalent – and dangerous – than in the monetary world; where recently, Central bankers have acted so “hubristically,” even Icarus himself would blanche.  Not that this concept is new to long-time readers, as I have for some time spoken of how Central bankers have become so confident in the ability of their myriad market manipulation operatives to make it appear they are in control; irrespective of the real world carnage their policies are quite obviously causing; they no longer care how moronic they sound; how contradictory their statements are; or how much damage they are cumulatively causing.

As for basket cases like the Bank of Japan – which is doing exactly what the others are now doing, but started earlier (and thus, is far further along the inevitable, parabolic debt curve they all face) due to Japan’s unique, horrifying demographics – I’m not going to spill anymore “digital ink” on what is rapidly morphing into a Banana Republic Central bank, in an increasingly second world nation.  Likewise for the Swiss National Bank – via its blatant lies to the Swiss citizenry regarding the gold it sold at the lows; the Franc/Euro peg that nearly destroyed it; the world’s highest “first world” inflation rate; and its historically reckless decision to invest massive sums in historically overvalued stock markets.  And I’m not going to touch the BrExit-embroiled Bank of England either – whose daily flip-flops regarding whether it will ever escape the zero bound are becoming as legendary as George Bush’s “read my lips, no new taxes.”

No, I’m going to focus on the world’s two most “systematically dangerous” Central banks – which recently, have gone so overboard in the hubris department; causing so much current and future economic damage; not to mention, the irreversible destruction of their reputations; even I am having trouble discerning what on Earth they are thinking.

It was just last week when “Goldman Mario” Draghi “took Central bank credibility to an all-time low” (and gold Cartel vulnerability to an all-time high); when, a day before the ECB meeting, he floated a “trial balloon” that the it would raise its inflation expectations; but instead, dramatically lowered them, with ZERO suggestion that its historically hyperinflationary monetary policy would be altered for the foreseeable future.  And yet, less than a week later – i.e, yesterday – he reversed his stance 180 degrees again; in not only stating the factors currently suppressing inflation are “temporary” (like the Fed’s fallacious, two-years-running belief that low oil prices are “transitory”); but that generally speaking, “the threat of deflation is gone.”  This, as the CRB commodity index was plunging to nearly its lowest level since the 2008 financial crisis, one day after the biggest taxpayer-funded bank bailout in Italian history!

In response, despite the comically stupid “hawkishness” the equally hubristic Federal Reserve governors and Presidents were spewing, the Euro surged to a 52-week high; which conversely, caused the dollar index to plunge to a new post-Election low (remember “Trump-flation,” which was supposed to be great for the dollar, and terrible for gold?).  Proving, in spades, that what I’ve exhaustively described in my now five-part “if a nuclear bomb destroyed Europe” article series, the dollar index is a completely useless metric, particularly regarding the Precious Metals outlook.

As for the Fed, at this point, it couldn’t be clearer that they are displaying their hubris more blatantly than even the ECB; in literally, putting the financial lives of hundreds of millions of Americans – and billions of others – in jeopardy with their insane, contradictory, and comprehensively destructive statements and actions.

Frankly, it’s difficult to believe they are not attempting to destroy Donald Trump; as raising rates into a collapsing economy – albeit, to the historically low level of 1%, with no likelihood of a further increase until at least December – is akin to financial suicide; particularly, in a nation featuring unprecedented, parabolically rising debt and historically overvalued – in large part, due to Fed monetization – financial assets.  Not to mention, the most overvalued real estate market, by every metric imaginable; which recently, has experienced massive declines in housing starts and building permits; not to mention, this morning’s equally massive declines in mortgage and refinancing applications and the Pending Home Sales Index.  I mean, when the only thing supporting “dotcom valuations in a Great Depression Era” is Central bank money printing and monetization – both overt and covert – why would you even joke about draining the hyper-inflationary punch bowl?

And yet, despite the “good cop” pleadings of the Chicago, Minneapolis, and Philadelphia Fed Presidents that deflation is a major threat – and thus, further monetary “accommodation” is required; the “top three” Fed officials – Janet Yellen, Stanley Fischer, and Bill Dudley – all suggested yesterday, in no uncertain terms, that the Fed intends to pop the equity bubble with tighter monetary policy.  But don’t worry – as in perhaps the most hubristic Central banking statement since Ben Bernanke said the subprime crisis was “contained” in 2007; or better yet, Neville Chamberlain’s 1938 prediction of “peace in our time”; Janet Yellen yesterday espoused that, because the banking system is so sound, we will not likely see another financial crisis in our lifetimes.  Not her lifetime, but ours.

Again, they haven’t done anything yet; as 18 months after said “tightening cycle” has commenced, amidst the weakest U.S. economic activity since the 2008 crisis, the Fed Funds rate is still 1%, and its balance sheet still $4.5 trillion.  However, speaking so “hawkishly,” in and of itself, has caused rates to “surge” – which I put in quotes, as the benchmark 10-year yield simply rose from its post-Election low of 2.12% to 2.24%, well below the 2.50% level I called as the top back in January.  Which “counterintuitively,” has caused the dollar index to plunge – as noted above, to its lowest level in nearly a year.  Stocks fell sharply yesterday – albeit, with the losses mitigated by blatant PPT support – whilst gold recovered most of Monday’s “flash crash” raid; and this morning, those same “counterintutive” trends – of a plunging dollar, surging rates, weak stocks, and rising Precious Metals, were occurring until the Cartel’s “key attack times” arrived.

Just after the COMEX opened, I kid you not, an ECB governor said “market reactions aren’t always understandable” – and thus, that Draghi’s comments were

totally” in line with recent (hyper-inflationary) ECB policy.  It was, of course, exactly 10:00 AM EST – i.e., the Cartel’s historic “key attack time #1”; and thus, gold was attacked, despite this blatantly inflationary, wholly unexpected, uber-dovish statement!  Better yet, for those still believing the aforementioned B.S. about the dollar index/gold connection – what was intended to cause the dollar to rise (due to the Euro falling) didn’t in fact occur; as after the ECB comment, the Euro rose, the dollar fell, and U.S. rates continued to rise.  I.e. the exact same conditions that caused gold to rise yesterday and this morning!

Throw in the fact that the horrific Pending Home Sales Index was also published at 10:00 AM, and consider the fact that as I write a half hour later, the Dow is surging with interest rates; whilst the dollar is plunging, as yet again the Cartel blatantly defends its  paper gold “line in the sand” at $1,250/oz.  I mean, you simply can’t make this stuff up!  And for the coup de gras, as I’m about to start editing, Bank of England Governor Mark Carney, who just last week warned of the dangers of deflation – simultaneous with again maintaining the BOE’s 0.25% interest rate – “out of left field,” warned, ultra-ambiguously so; that for no particular reason; “some removal of monetary stimulus is likely to be necessary.”

For most people, in today’s historically rigged markets, it is nearly impossible to separate the noise from the “message.”  Even for me – as frankly, I’ve never seen such chaotic, hubristic words and actions from the Keystone Keynesians destroying the rapidly deteriorating global economy and monetary system at a “hyper-inflating” rate.  Consequently, I believe the historically undervalued gold, silver, and platinum markets have essentially ZERO material downside risk – YES, I SAID THAT; with the potential for a significant upside revaluation in the coming months.  To that end, I equally strongly believe that the forces driving this inevitable – and likely imminent – “flight” from fiat currency, will cause demand for all “alternative currencies” to dramatically rise; such as – yep, you guessed it – Bitcoin.  In other words, the “Central bank hubris that would make Icarus blanche” is setting the current monetary sytsem up for an unprecedented disaster; and the new – and very old – ones, for an equally unprecedented “growth spurt.”

Data and Statistics for these countries : Canada | Georgia | Italy | Japan | Jersey | Saudi Arabia | Spain | Syria | All
Gold and Silver Prices for these countries : Canada | Georgia | Italy | Japan | Jersey | Saudi Arabia | Spain | Syria | All
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Andrew Hoffman was a buy-side and sell-side analyst in the United States (including six years as an II-ranked oilfield service analyst at Salomon Smith Barney), but since 2002 his focus has been entirely in the metals markets, principally gold and silver. He recently worked as a consultant to junior mining companies, head of Corporate Development, and VP of Investor Relations for different mining ventures, and is now the Director of Marketing for Miles Franklin, a U.S.-based bullion dealer.
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