Rather than trying to answer various comments individually due to time constraints, let me just jot down some thoughts here.
Andrew: I agree with your assessment completely. I believe I have been saying the same thing for some time now. The problem that we are seeing in regards to gold is the Velocity of Money. We have the gargantuan sums conjured into existence by the alchemists of the Western Central Banks but that money is not turning over fast enough in the general economy. It is going one way and one way only and that is into equities. It is NOT going through the broader economy nor is it changing hands frequently.
The continued weakness in the copper market, along with the other base metals I might add, and the general theme of weakness across many of the various commodity markets, (look at sugar and coffee as an example and now the grains), falling unleaded gasoline prices along with crude oil, etc. is telling us that there is a general deflationary theme at work. One cannot have a growing robust economy in which the price of resources (commodities) is moving continuously lower. The fact that the CCI, Continuous Commodity Index is not moving higher alongside of the equity markets tells me that there is NO REAL GROWTH in the US economy, or some of the other Western economies I might add.
What we are seeing is a freak of nature (created by men) in which growth hormones are pumped into the stock markets FORCING them higher without any true economic growth occurring at the same time. It is like a man shot full of HGH to make him 10 feet tall but who lacks the skeletal foundation to enable him to function normally. Everything about him is unbalanced and unstable. Pull back the HGH and leave him to himself, and he will topple.
Back when things used to make sense (before the Central Banks got involved and destroyed our free markets) a stock market in a strong, robust uptrend signified solid, genuine economic growth, particularly in the manufacturing sector where raw materials are needed. That is no longer the case. We have this freak of nature that goes one way to the point of absurdity driven SOLELY by a speculative frenzy desperate for YIELD in a ZERO INTEREST RATE ENVIRONMENT created by these self-serving Central Bankers, who should damn well know better than this by now.
All we need to do is to use our common sense to consider that if manufacturing is robust, there is a real demand for the raw materials, commodities, natural resources, etc., used to create those goods or products. When I see Dr. COPPER going one way, DOWN, and I see the equity markets going the other, UP, I know something is terribly, terribly wrong.
Just consider what we witnessed when the Fed began its first QE program back in late 2008 after the credit crisis unleashed a wave of deflationary pressures. It seemed as if everything on the planet starting moving higher. It didn't matter what it was. Copper, Crude, Gold, Silver, Grains, etc. all moved up as the stock market moved up. Things seemed to be in sync. Why was that? Because investors began to anticipate an inflationary impulse due to the sheer size of the liquidity being supplied by the Fed. We all assumed that prices would rise because the underlying currency would weaken as its supply was increased. This would feed into an inflationary psyche and create an environment in which consumers would come back and begin borrowing once again, banks would lend, jobs would be created and growth would ensue. Guess what? It worked somewhat in the sense that it kept things from deteriorating further but as far as dealing with what got us to this point in the first place, it did nothing.
So here we are now, FOUR QE's later and a massive version of the Bank of Japan's own version of QE, along with bond buying programs of the ECB and the BOE and yet we still have minimal job creation and only modest to barely perceptible growth. What the Fed is trying to do, along with the Bank of Japan and the ECB and the BOE, I might add, is to drive interest rates to the point of nothing in order to stimulate demand for money or credit. Entice consumers to borrow and go deeper into debt is their recipe for growth. The problem is that requires consumers feel secure about their jobs AND that they have enough disposable income that they are comfortable taking on additional debt. That is not happening. What they have instead created is a nirvana for giant speculators and hedge funds to place huge leveraged ONE WAY bets on rising stock prices.
By the way, as an example of what I am saying here, as I am typing these thoughts, the Dow Jones newswire is flashing comments from some of these monetary masters. Get a load of this if you want to see a perfect example of either an ignorant fool of a Central Banker or one who believe his own BS.
Fed's Evans (Chicago FEd):
"Fed Actions have been helpful to the economy"
"Fed making progress of improving the job market"
"Actual inflation is low"
"Worries of rising inflation overblown"
"Monetary policy should be more accommodative"
and here is the kicker -are you ready....
"Doesn't see ANYTHING that Suggests FED Causing Imbalances"
Yep - SEE NO EVIL, HEAR NO EVIL, SPEAK NO EVIL".
Here is a perfect example of the blind leading the blind. A stock market soaring to new heights almost day after day while the poverty rate in the nation is back to where it was in the 1960's, 43-44 million people on food stamps, 14 million on some form of government disability, a shrinking labor participation rate which is the only thing driving down the farcical unemployment number and a job creation rate that is not even keeping up with the rate of the growth of the population in general... Nope - no imbalance here. Everything is just peachy keen! Idiot....
Think that is not enough? here is another one:
Kocherlakota (Minneapolis Fed):
"Doesn't see signs FED fueling Asset Bubbles"
Here is yet one more (and all of this is taking place on one day, A Saturday at that).
"Asset buying not creating asset bubbles in UK".
Do you see a pattern here? Let me tell you what this means. It means the EXACT OPPOSITE of what these talking heads are out there parroting! Anytime you see a public official denying something, rest assured it is true. The fact that they feel so compelled to go out and talk about this denying these bubbles that they are blowing is because this is what the thinking is becoming. They are using the oldest line in the book of manipulating public opinion:
"Who are you going to believe, us or your own lying eyes?"
Who do these alchemists think that they are fooling at this point? They are doing the only thing that they know how to do and that is to turn paper (lots of it) into money. These demi gods of finance consider themselves to be infallible assessors of their own handiwork much like the one true God who when He had created, rested on the seventh day, surveyed His handiwork and called it good. In His case, it was true. In their case, it is an opiate that solves nothing but merely continues to foster the speculative mania that results from basically free money and NO RISK when it comes to buying stocks.
If and when this massive amount of liquidity ever manages to somehow get into the broader economy and people begin to DOUBT the very integrity of their own currencies, then we will see the VELOCITY of MONEY soar and with it the inflationary nightmare that many fear. That is why these people must continue to obfuscate, deny, dissemble, spin, etc. They cannot let the public lose confidence because confidence, fleeting, effervescent, transitory confidence, is the only thing preventing a run on the currencies of these nations whose Central Banks are engaging in this reckless scheme. I might add here that this is also the reason I believe there is a concerted effort by these same monetary elites to discredit gold. A soaring gold price is a vote of NO CONFIDENCE in the Central Banks.
I want to repeat it here again - this game will stop when the public loses confidence in the currency of its nation. As long as the public is either ignorant of, apathetic towards or oblivious as to the scale of money creation that is being employed by these Central Bankers, they can play their game of demi-gods and spout the kind of idiocy that I quoted above. Look at how fleeting however confidence can be. Cyprus, Greece, Italy, Spain, Portugal, etc... It can happen here and it can also happen in Japan. It can evaporate overnight and when once lost, it is not easily regained.
"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat
Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput
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Saturday, April 13, 2013
Please click on the following link to listen in to my regular weekly radio interview with Eric King at the KWN Weekly Markets and Metals Wrap.