first majestic silver

Bank Of England Restarts The Clock On The Fed’s Inevitable QE Relaunch

August 4, 2016

There’s much to discuss, starting with the “powers that be” utter desperation – particularly, the gold Cartel – to stave off “Economic Mother Nature” and the “unstoppable tsunami of reality” as the end game plays out right of its eyes.  For example, just two days after the Monte Paschi “bailout” – that in actuality, won’t occur until year-end, if it can raise €5 billion of equity, and sell €9 billion of bad loans – European stocks are dramatically lower; including Unicredit, Italy’s largest bank, which has plunged nearly 20%; and Deutsche Bank, the “world’s most systematically dangerous institution” – which touched its all-time low stock price yesterday morning, before the PPT pushed it oh so slightly higher (and as I write, it’s plunging towards said “death level” of $12.50/share anew).  In my view, we are at most a few weeks before the real panic sets in.

To that end, watching the Cartel desperately try to push silver below its 50-month moving average of $20.46 ounce couldn’t be more amusing, in knowing they are on the cusp of catastrophic, irreversible failure.  Tomorrow afternoon, at 3:30 PM EST, the COT report – as of Tuesday’s close – will likely depict further growth in the “commercials”’ all-time high silver short position; and likely, gold, too.  Thus, if prices end the week strongly, it could be game over Monday morning.  Which, given the overwhelming, accelerating flow of “PM-bullish, everything-else-bearish” headlines, appears more and more likely with each passing minute.

Like for instance, US Class-8 truck orders crashing to their lowest level since 2010; one day after an abysmal July auto sales report; and three after Ford unofficially declared the fraudulent, sub-prime driven auto “recovery” dead.  Or pathetically weak PMI and ISM service industry reports, depicting the last remaining hope of US “growth” rapidly dying on the vine.  Even mortgage-applications have been free falling, notwithstanding the lowest Treasury yields in US history.  And now that crude oil – and most commodities – are plunging anew, massive global debt defaults are as imminent as they are inevitable.

Said “powers that be” desperately hope to “change their fortunes” with tomorrow’s NFP employment report.  However, the preponderance of evidence suggests it will be a major disappointment – even if the Obama Administration orders it to be goosed to aid Hillary’s election chances, as it was caught red-handed doing before the 2012 election.  That said, the fact that yesterday’s ADP report depicted a decline in goods-producing jobs, while this morning’s Challenger Job Cut report showed a huge surge in layoffs, is going to make it quite difficult – particularly when last month’s comical “287,000 jobs” have negative revision written all over them.  And by the way, worse even than a “bad” report would be a transparently fraudulent one – like last month’s, in which Precious Metals rose despite the so-called massively “better than expected” data.  Which, as usual, was far worse than the transparently rigged “headline numbers,” for those who actually read it.  Frankly, I believe the end of the NFP report as a market moving factor is upon us – and the title of Tuesday’s article, “first Central Banks Die; Now, Government Statisticians. Next Up, the Gold Cartel, “ says it all.  And by the way, how hilarious – albeit, unlikely – would it be if the BLS admits, like the BEA just did regarding its GDP and Personal Income “double seasonal adjustments,” that it’s phantom “birth/death model” no longer works, either?

That said, by far the most PM-bullish news event of the past 24 hours – more specifically, the past hour – was this morning’s “more than expected” Bank of England monetary stimulus.  To that end, “Goldman Mark” Carney was more than happy to have a built-in Brexcuse to rejoin the overt currency debasement party.  After all, it had held interest rates at 0.5% since March 2009; and thus, with the British economy – and housing bubble – collapsing, he was desperate to turn up the printing presses to “max” levels.

Consequently, not only did the BOE lower rates to 0.25%, and dramatically reduce its expectations for the UK economy, but explicitly stated that a move to “around zero” was likely by year-end.  Better yet, in what is being deemed a “surprise” move, the BOE’s cumulative QE program was dramatically increased, from £375 billion to £435 billion, with the entirety of the incremental £60 billion to be purchased in the next six months. Furthermore, following “Goldman Mario’s” Fascist ECB lead, £10 billion will be allocated to corporate bond purchases, atop £50 billion of “traditional” Gilt monetization.

Ah, Mark Carney, who joined the Bank of England in July 2013, “coincident” with the April 2013 “alternative currencies destruction” Precious Metal raids, which started the day after the infamous “closed door meeting” between Obama and the top ten “too big to fail” bank CEOs.  Directly after which, Goldman Sachs issued perhaps the only “aggressive short sale” recommendation in its history, of gold.

Since then, Carney has, like nearly everything else British, done exactly what the U.S. bid it (in this case, the Fed) – by also maintaining the BOE’s rock-bottom interest rate and record-high balance sheet, whilst spewing “tough talk” about how the UK economy was “recovering”; with his proverbial “next move” likely to be a tightening.  In fairness to British citizens, they had no say in the BOE’s destructive, and suicidal, decisions.  Let alone, the fact that they not only defied “back of the queue” Obama by voting to Brexit, but the recently deposed Prime Minister and Exchequer as well.  Sooner, rather than later, Carney will join Cameron and Osborne in exiled ignominy, just like Janet Yellen on this side of the pond.

All “kidding” aside, today’s BOE decision to re-start its rate-cutting cycle after seven years at 0.5% cannot be under-estimated in its impact on the exploding “final currency war,” particularly as it was much more dovish than anticipated.  Essentially, it broke the veneer that “recovery” is occurring anywhere; or that near-zero interest rates – for seven years – necessarily “works.”  More importantly, it “restarts the clock” on the Fed’s inevitable, grand re-entry into the world of overt monetary easing.  Frankly, just as Brexit served as Carney’s excuse, the BOE’s re-launch of aggressive monetary easing will likely serve as Yellen’s excuse, as it was the last remaining Western power to not be engaged in an active easing regime.

To that end, all that remains to be seen is the “spark” to take the final currency war thermonuclear; which could be any of dozens of black or “grey” swan events – like a European (read, Deutsche Bank, Unicredit, or Credit Suisse) banking crisis; the Catalonian secession; geopolitical crises in Turkey, the Middle East, or the South China Sea; a “surprise” Yuan devaluation; renewed “Grexit” fears; a Trump victory – which I believe highly likely; or heck, an ugly NFP report tomorrow, to name but a few.

Either way, the final, cataclysmic plunge is becoming more and more of a fait accompli with each passing day.  To that end, I, more strongly than ever, reiterate the ominous statement I have made since February; i.e., “it’s not possible we’ll escape 2016 without a catastrophic financial event.”  Which is why, more than ever, the urgency to PROTECT YOURSELF from what’s coming has never been stronger – particularly in the monetary realm, where hyperinflationary policy is about to morph from the “exception” to the rule.

Andrew ("Andy") Hoffman, CFA joined Miles Franklin, one of America's oldest, largest bullion dealers, as Media Director in October 2011. For a decade, he was a US-based buy-side and sell-side analyst, most notably as an II-ranked oil service analyst at Salomon Smith Barney from 1999 through 2005. Since 2002, his focus has been entirely on precious metals, and since 2006 has written free missives regarding gold, silver and macroeconomics. Prior to joining the company he spent five years working as an investor relations officer or consultant to numerous junior mining companies.

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