The Canadian dollar, gold, silver, copper, oil and gas are down dramatically as we on into Q2 of 2014. Under the media-ballyhooed but nonetheless fake recovery of the U.S. economy, the Canadian economy exhibits symptoms of anemia.
Hundreds of mining and exploration companies out there are still inching forward in the various endeavours while the majority of them adopt a position best described as “fetal”.
There are only two things that could happen that might cause a reversal in mineral commodities: 1) The futures market loses its ability to supress the gold and silver prices, causing the release of pent-up demand for the metals from legions of gold-bugs who are waiting for something that looks like a bottom to arrive; and/or 2) Confidence in the U.S. dollar finally collapses, and the pent-up demand for gold thus catalyzed exerts its obvious influence.
Are either of these two events likely to transpire in 2014?
I think not. At this point, it looks like the soma party in the U.S. is poised to continue, with Japan, China and Europe all joining in. Real improvement in the global economy in the form of legitimate demand growth is not forthcoming. Instead, there is rampant money printing by the U.S., Japan, China, the UK and others means artificial demand manifestation that suffocates prices and accretes assets to banks and funds while robbing opportunity from genuine entrepreneurs.
The $85 billion (now $55 billion) a month in Agency Mortgage Backed Securities and Treasuries that swells the balance sheet of the Federal Reserve beyond $4 trillion continues, albeit at a slower pace. Those purchases are materializing as Tier 1 capital on bank balance sheets, which means each of those dollars is expanded by up to 12 times through the marvels of fractional banking and interbank lending. Thus, interest rates are kept low, and economic liquidity is kept high. All this amounts to so much misery being in good company.
The problem compounding faster than the fractional banking-fuelled market liquidity is that the capital is only flowing so far down the food chain from top tier financial institutions, as massive capital positions such a multi-billion dollar hedge, bond, and mortgage funds prefer hybrid engineered financial products (that come with a government subsidized price floor) over riskier real investment in the economy. Thus while quantitative easing can be pointed to as the source of higher financial performance in the top layer of the economy, the money doesn’t get invested in corporations or public infrastructure and so no jobs materialize. In very real terms, the people at the top end of the economic food chain are creating money for themselves, while our real economy incrementally continues to contract. It’s the rich getting richer, while the poor remain so.
What can we do about it? With all the hot money expanding into synthetic assets such as Credit Default Swaps, Exchange Traded Products, Futures and other derivative instruments, we find ourselves stranded among our valuable mineral deposits whose value is destroyed by U.S. and global elite counterfeit wealth. Really, oligarchs in Russia, the United States, the UK and Asia should be in prison, and the entire US Executive Body sentenced to life terms for crimes against humanity.
It is the demise of American Democracy and the rise of Global Oligarchy. The National Security Agency has already replaced the KGB as the most pernicious snoop into its citizens lives, and given the advances in technology, the lives of everyone on earth. Under the pretence of Homeland Security, all opposition to The Man can now be vaporized by NSA malicious code, and its authors tracked down by cellphone and killed by drones. I’m not suggesting this is imminent. But I do believe it is inevitable. How do you think those who control the military complex are going to respond as population explodes and available food and arable land become scarce? Are you more Hellen Keller or Henry Kissinger in your views about humanity’s essence?
But what is most alarming to me and what would appear to be a rather scant minority of financial observers around the world is that Oligarchy – whereby the resources of any given country are controlled and profited from by a privileged few – is becoming the new global default form of government in an increasing number of countries. China, Canada, the United States, the United Kingdom, Russia, Brazil, South Africa and Australia are all major economies that are increasingly under the control of fewer and fewer companies. Among them, they are carving up the world’s resource assets, and creating an extreme divide between themselves and the rest of the world, enforcing and advancing their dominance through the duplicitous fabrication of cash and credit to the detriment of every real asset.
Gold and silver are significant casualties of this financial elite who understand that the currency you can fabricate at will is more valuable to a criminal enterprise than one with such pesky limitations as natural supply constraints.
While Goldman Sachs shill Jeffrey Currie manipulates markets with impunity from his pulpit, he provides the media narrative to justify the downward price movement of precious metals, which behind the scenes are driven by exchange traded products darkly traded and irreconcilable forward contracts (futures) trading.
Investors of the mom and pop variety, of which there are but a smattering left compared to 5 years ago, are still in the cross-hairs. Successfully frightened away from gold and silver and the companies exploring for them, we now enter a sort of 1999 part 2: Mining’s in the crapper, gold is tumbling, mining shells are acquiring technology companies, and the liquidity machine is at full tilt. We are being led to the 2014 slaughter under the mantra of Twitter and SnapChat and a multitude of other technology deals that will continue to fly as long as the U.S. funny money press keeps on cranking.
Ersatz US Statistics and the Recovery Illusion
Eric Sprott, one of Canada’s more erudite market commenters, recently opined in an article that U.S. labour statistics were skewed because of the way employment market participants are accounted for. In a nutshell, after you’re deemed to have stopped looking for work because your benefits of run out and you haven’t found a job after two years, you’re no longer counted among the unemployed. That’s how the U.S. is able to demonstrate a falling unemployment rate amid rising unemployment in various markets. A much more accurate statistical accounting of the labour pool is maintained by John Williams over at shadowstats.com. His analysis continuously challenges the output of the various government statistical reporting agencies, and consistently demonstrate defects in methodologies that typically result in of bad stats and overstatement of those considered positive.
Conspiracy is the Precursor of Crime
We’ve become accustomed to seeing anything that proposes a theory of malfeasance or criminal manipulation in financial markets on the part of banks and government dismissed as “conspiracy theory” over the course of the last decades. Yet, since the financial crisis in 2008 has undermined the reliance on upward-bound asset prices to obscure manipulative crimes-in-progress, so many of our erstwhile conspiracy theories are turning out to be accurate depictions of such crimes underway.
If I was to catalogue the list of convictions obtained in the last five years of major financial institution employees, (who are invariably the sacrificial lambs for their employers), I would likely need to run this newsletter to an additional 100 pages or so. But I’ll leave that to the mainstream media, and just assume that even the most skeptical reader of financial news is now more amenable to the idea that our world financial system is rife with corruption, manipulation and duplicitous regulation.
A new class action lawsuit against the London Gold Market Fixing Ltd. by New York resident Kevin Maher, who says he bought and sold gold and gold futures and options, alleged the banks overseeing the benchmark – Societe Generale, Deutsche Bank, Barclays, Bank of Nova Scotia, and HSBC – colluded to manipulate it.
Maher is bringing the suit as a class action, on behalf of himself and other investors who held or traded gold and gold derivatives that were settled based on the gold fix, or who held or traded COMEX gold futures or options, from 2004 to now. And you thought the gold price wasn’t manipulated!
