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By: Jim Willie CB
www.Golden-Jackass.com
Hat Trick Letter
The widespread profound and recognized global recession, complete with
numerous icon corporate failures, will lead the US Federal Reserve to return
to unlimited Quantitative Easing with a Zero Percent chaser. The Jackass
calls it a return to Infinite QE Forever at the Zero Bound. Not only is the
double step of return to QE with a sequence of interest rate cuts urgently
necessary, but the financial markets are demanding it. In fact, they are
holding the USFed hostage, as the venerable august body is backed into a
policy corner. This time seems different. For ten years, the USFed has relied
upon coordinated policy with the Euro Central Bank, having used all the most
extreme measures, yet has a systemic failure on its hands. Witness extreme
monetary policy failure. The systemic failure is both financial and economic.
The bond purchase program wrecked the bond market by driving away legitimate
investors, while the ultra-low interest rates wrecked the economy by
distorting asset allocation. The central bank is backed into a corner like
never before. Their tightening procedure over the last three years is a
monumental dismal failure. They cannot return to normalcy. In fact, quite the
opposite. They must resort to permanent hyper monetary inflation. They must
return to Infinite QE Forever. They must also move the interest rate
toward the zero bound. Who knows? If they charge a small fee with negative
bond yields in dozens of nations for sovereign bonds, maybe these master
idiots at the controls will pay us to borrow money. They urgently need the
participants within the economy to get busy, to conduct business, and to pay
taxes.
The firm Jackass belief is that for every dollar (100 cents) offered in
new debt, the economy gains around 20 to 30 cents of new business activity.
The primary effect of the last several years has been to avert a USGovt debt
default and to pump a grand stock market rally despite the worst recession
since the Great Depression. Of course, the dutiful government stat-rats lie
though their keyboards (teeth) about the GDP growth, about the price
inflation, and about the jobless rate. For about 10 consecutive years, the
GDP has been running at around minus 3% to minus 5% in a vicious ongoing
recession. They lie on price inflation by about 5% at least on a constant
basis. The bond market crisis has begun, and it will develop into full
blossom. The USFed must act, to add bond purchases and to cut interest rates.
But these policies are exactly what caused the problems. They have two
choices: to permit the system to collapse, or to buy a couple more years with
more continued levitation. The Wiley Coyote moment is here, and offering some
hydrogen balloons to the mangey animal is the only option. This bond market
crisis is upon us. It is what the Jackass has called the Systemic Lehman
Crisis, certain to be at least three times worse than in 2008. All the
subprime bond errors have been repeated on a global scale. The USTreasury
Bond is the new global subprime bond. It is being rejected.
Debt saturation is the story of this era. The QE over the last seven years
has ruined enormous capital, while the low rates have misallocated that
capital. The USFed is responsible for destroying both the financial structure
and economic structure for the nation, as well as for the Western world. Now
they are desperately asked, cajoled, and urged to provide the framework for
recovery. They have produced a dead end. The irony is thick, while the
stupidity is vast.
FALSE ADULATION, FAUILTY THEORY
The public and investment community have shown incredible ignorance and
absent foresight. Harken back to 2003 and 2004, when the exalted shaman Sir
Alan Greenspasm declared the end of financial crises, due to the wonders of
off-loaded risk with derivative contracts. Just four years later the subprime
mortgage crisis emerged, to ruin his legacy and lay waste to his empty
claims. Move to today. The Modern Monetary Theory claims to have removed the
risk of debt default and to assure the means through hyper monetary
inflation, to produce prosperity without crisis. WRONG AGAIN!! We as a
nation and as a Western people have learned nothing from the Lehman bust
(more like a Goldman Sachs murder), learned nothing from the monetary and
credit excesses, learned nothing from the stock boom & bust cycles, and
still do not perceive the urgent need to rebuild the US industrial base.
Instead we call upon more easy money, new heretical dogma, and a continuation
of financial pump prime episodes. This will end badly. Furthermore, the Gold
price has sniffed out the radical desperate changes, which will not result in
any solution whatsoever.
INFINITE Q.E. FOREVER AT ZERO BOUND
It is next. It is unavoidable. It is urgently demanded. It is no solution,
but it fits well within the sick twisted Rubin Doctrine. He espoused the
principle to buy another few days even if assuring ruin next week. Rubin
corrupted everything he touched, and was the architect of the Clinton Admin
falsified economic statistic movement. The USFed is backed into a corner.
They must expand the bond purchase program, and must reduce the interest
rates. Even JPMorgan analysts have echoed this intractable situation, which
seems more like blackmail put against the USFed than a policy shift.
The US Federal Reserve hints at the rapid return to ZIRP, working toward
the call of Infinite QE Forever. The reversal of monetary policy, away from
tightening, and back to full bore easing with zero rates, will combine with
expanded bond purchases. The new monetary policy will mark a major turning
point for the USDollar, the USTreasury Bond, and the perceptoins of the
USGovt debt structure. The turning point will be extremely negative, with
horrible global press toward the King Dollar, and a ruinous reputation for
USGovt debt. The Gold price will rejoice, rise, then soar.
Zero Interest Rate Policy will return, since the movement toward normalcy
has failed. As the USFed climbs into the Infinite QE Forever policy
chamber, the entire global financial system will abruptly change gears, and
the Gold price will react favorably. The hyper monetary inflation
framework is unavoidable for many reasons. The QE Forever feature of monetary
policy is fixed and understood. Next comes the Infinite QE part, as lower
interest rates will be accompanied by monetization of major corporations, for
national security reasons.
A)The entire Quantitative Easing (QE) put into action by the USFed in 2012
was designed to stimulate, but the only benefit came from avoiding a
USTreasury Bond default. The bailed out the Wall Street banks. The funds were
preventing from entering the business sectors, as Main Street has languished
and fallen into an even worse recession. In February, Chairman Powell clearly
indicated that QE bond purchases will become a permanent fixture at the
USFed. Now the only option left is hyper inflation with Infinite QE
Forever, coupled with zero percent rates. The Gold price will rejoice.
B)The USEconomy embarked on a disastrous course 20-30 years ago, expecting
financial engineering to bear fruit. It brought disaster and bankruptcy, ruining
the Greenspan Legacy. The failure has occurred on the global geopolitical
stage, as the USGovt attacks its enemies and badgers its allies to remain
within the King Dollar Court. Now the only option left is hyper inflation
with Infinite QE Forever. The Gold price will rejoice.
C)The debt burden for the USGovt has gone completely out of control,
surpassing $21 trillion quickly. Worse, the over $1.3 trillion in fiscal
deficit combines with the over $1 trillion in trade deficit, so as to put the
United State on display as the next Third World nation on the map. A Balance
of Payments Crisis has begun, certain to blossom. The USGovt must finance its
debt, and will do so by purchasing its own debt. It is essentially a hidden
monetization of debt by means of the derivative tools led by the Interest
Rate Swap contract. The deficits must be funded. Now the only option left
is hyper inflation with Infinite QE Forever, using these nefarious
engineering tools. The Gold price will rejoice.
D)The United States cannot halt its wars, and is obligated to feed the
military industrial complex. Such is the epitaph on the national tombstone,
endless war. It is possible that eventually the USMilitary will wage war
against our own allies, but surely in a hidden manner, laying blame on
Russia, China, or Iran. The costs of military forces with weapons is
enormous. The USGovt budget for military purposes is greater than the
military budgets for the rest of the globe combined. The benefit is negative,
as the economies are destroyed while the costs add to the USGovt deficits.
Most of the missing $21 trillion is directed at the Pentagon, where not a
single audit has been completed in 40 years. The deficits must be funded. Now
the only option left is hyper inflation with Infinite QE Forever, coupled
with zero percent rates. The Gold price will rejoice.
E)Prized stalwart corporations next will falter, bleed red ink, and seek
support. Start with Boeing and Wells Fargo, each showing signs of terminal
business. Boeing has suffered grounding of aircraft, flawed design, canceled
orders, resulting in magnificent quarterly loss. Wells Fargo has likely
suffered massive Chinese fund withdrawals, while at the same time pilfered
client accounts. The bank surely does not receive the same pampered attention
as those located in South Manhattan. Next might be one or two Wall Street
firms to approach financial failure, like Bank of America or Citigroup. The
energy sector exposure is gigantic, led by the shrinking shale sector. The
Jackass expects the USGovt, in concert with the USFed, to monetize these
dying firms, under the national security pretext. The deficits must be
funded. Now the only option left is hyper inflation with Infinite QE
Forever, coupled with zero percent rates. The Gold price will rejoice.
The reaction by financial markets around the globe to Infinite QE Forever
endorsed by the USFed, joined by the Euro Central Bank, will be a powerful
upward move in the Gold price. It might be accompanied by a big hit to the
USDollar, but that is not certain. The lower volume of global payments in
trade, based upon the USD, will result in more weakening of foreign
currencies, while resulting in a higher USD exchange rate versus those other
currencies. THE ONLY CERTAINTY IS A MUCH HIGHER GOLD DEMAND, AND RESULTANT
HIGHER PRICE. The Jackass expects discontinuous upward leaps in the Gold
price in the next several months and couple years. That means big jumps
overnight, like $100 or maybe $200 per ounce price movement in the Gold
price. These jumps will come later on.
QUICK GLOBAL BREAKDOWN SIGNALS
Numerous are the signals, from the United States and many countries, from
several sectors. Consider some diverse miserable indexes, which lead the
person with any remaining intelligent brain matter capital betwixt the ears
to conclude the global economic condition is very bad. Let the pictures tell
the story. The US Federal Reserve and Euro Central Bank will react with
Infinite QE Forever, move toward the 0% rate. At the same time, they will be
compelled together toward monetizing certain icon companies.
Note the miserable USEconomic cyclical growth estimate of minus 4.4% from
a Wall Street source. Morgan Stanley Research is highly respected. The
graphic shows the 12-month moving average, a smoothing method. The USEconomic
recession will soon be recognized, even by the corrupt stat rats in the
USGovt. This is a leading indicator, with negative signal.
 
Japanese machine tool orders are down 38% year over year. The Japanese and
Germans are global leaders in this niche. This is a leading indicator, with
negative signal.
The Singapore electronics exports are in sharp decline. The economic
recession is global. This is a leading indicator, with negative signal.
Global manufacturing is in a crisis mode, seen in the Global PMI index. In
all, 14 straight months in decline, and 17 of the last 18 months. The
downturn is worse than in 2008. Expect global stimulus very soon, but
initially maybe recognition of the widespread recession. Confirmation comes
from Germany. The German flash manufacturing PMI slumped to a seven-year low.
Their index fell to a reading of 43.1 in July, from 45 in June, according to
IHS Markit. Any reading below 50 indicates contraction. These are concurrent
indicators, with negative signals.
More confirmation from the USEconomy. The Empire State manufacturing index
saw a calamitous decline, the largest monthly decline ever seen. It covers
the New York State region. The US manufacturing surveys paint a worrying sign
of marked declines. Also the Richmond Fed unexpectedly crashed to lowest in
over six years as order backlogs disintegrated. It covers the Virginia region.
These are concurrent indicators, with negative signal.
The USEconomic inventory levels continue to rise, as new order data begins
to enter negative ground. The bloated inventories mean very mild new order
activity in the near future, as they must be drawn down. As an example,
orders for heavy trucks plunged by 69% in June, after plunging by 71% in May.
The distribution supply sector is in terrible shape as a result. Consider a
nugget, a strong signal of negative type. The company MMM is a basic consumer
product firm with diverse conglomerates. They announce a profit decline of
39% amidst lower global sales. These are concurrent indicators, with negative
signal.
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