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GREXIT Guaranteed!

March 10, 2015

Fifty years ago this weekend, the first U.S. Marines landed in Vietnam; the result of the so-called Gulf of Tonkin attacks – that in hindsight, were likely just as fraudulent as the Bush Administration’s claims that not only did Iraq possess weapons of mass destruction, but directly funded the 9/11 attacks. I’ve spent two decades reading about the horrors of Vietnam, and truly believe it was this fool’s errand, initiated by sociopaths with little regard for the value of human life, that truly marked the beginning of the end of the American empire. By the time the last Marines ignominiously left ten years later, 58,000 American troops were dead, 300,000 were wounded, and the war was lost. Meanwhile, Communism never took over the world as advertised by the propagandists; and care of massive war spending requirements, the U.S. abandoned the gold standard in 1971, sentencing countless billions – present and future – to death by inflation. And worst of all, when our soldiers returned after a decade of horrifying war – many of them disabled and traumatized – they were treated as criminals and outcasts by an ungrateful government, and society at large. And thus, let’s all take a minute to salute not only our Vietnam veterans, but the countless hundreds of millions that sacrificed their lives for causes real and fabricated, throughout the course of history.

That said, let’s get back to the incurable financial trauma caused by said gold standard abandonment. Which, by the way, should decidedly NOT be blamed solely on the Nixon Administration. And no, I’m not just referring to Lyndon Johnson’s budget-busting “guns and butter” spending, but the fact that all Bretton Woods signees sat back and allowed the U.S. to renege on its obligations – based on the same selfish political reasons. In other words, it was a group effort to inflict future generations with inflationary cancer; and thus, all the world’s “leading” Central bankers are to blame.

As for said “cancer,” it has clearly metastasized throughout the entire world; not coincidentally, entering its terminal stage shortly after the global financial system permanently broke in 2008. More specifically, it was the mid-2011 “global meltdown II” – when European sovereign bonds collapsed, and the U.S. was stripped of its triple-A rating – that catalyzed the real money printing explosion – yielding a torrent of Western inflation exportation that has caused the average global currency to plunge by 40% since. Or in the case of the “fragile five” nations, where a quarter of the world’s population resides, their average currency collapse has been closer to 50% – and counting. Not only that, the monetary tsunami – which frankly, started at the turn of the century, when the global economy peaked – was accompanied by the invention of financial “weapons of mass destruction” – like derivatives – that have caused just as much damage as the military, if not more. And no, it’s no coincidence that the Glass Steagall Act was repealed in 1999, coinciding with the financial sector commandeering Congress with lobbying rivaled only by the defense and healthcare sectors.

Combined, said money printing and financial engineering has created a virulent, cancerous combination of inflation and deflation that cannot, and will not, be stopped until history’s largest, most global fiat Ponzi scheme eventually implodes; which we assure you, it will, just as all 599 previous fiat currency regimes have. In “the direst prediction of all,” we discussed how these two vitriolic forces combined to create historic industrial overcapacity that will unquestionably yield massive deflationary pressures for years – if not decades – to come. And as for monetary inflation, “QE to Infinity,” on a worldwide basis, is mathematically guaranteed. To wit, 21 separate Central banks have lowered interest rates since year-end alone – and given the rapid pace of global economic collapse, and nuclear acceleration of the “final currency war,” we could not be surer that this is just the beginning.

Regarding the former, we can’t help but fixate on the ridiculously obvious launch of the new “oil PPT” last month – which relentlessly supports paper oil prices in a manner as blatant, and heavy-handed, as the gold Cartel suppresses paper Precious Metals. This (Monday) morning alone, it has on three separate occasions attempted to push WTI crude above the key psychological level of $50/bbl; but each time failed; as unlike the tiny, opaque gold and silver markets, crude oil markets are as large as they are transparent. In other words, whilst PM investors are kept in the dark about gold and silver inventories and flows (aided by fraudulent Central bank accounting rules); and supposed Precious Metal “experts” publish at best misinformation, and at worst propaganda of the true supply/demand balance; crude oil supply, demand, and inventories could not be more transparent. Not to mention, when the Baltic Dry Index plunges to an all-time low, and tankers visibly sit in the Gulf of Mexico seeking ports to offload unwanted crude cargoes.

Better yet, the paper buying machinations of said “oil PPT” are causing massive distortions the entire market can see – and understand – as discussed here and here. In a nutshell, physical crude oil supply is swamping paper buying as we speak, making it likely that our expectation of a renewed oil price plunge commences shortly. And given that plunging crude is just as powerful an “Achilles Heel” of the TPTB’s attempts to maintain the status quo as rising gold and silver prices, don’t be surprised if the “end game” of collapsing economic confidence – and currencies – accelerates dramatically. We weren’t kidding when we said “crashing oil prices portend unspeakable horrors” – even for low-cost producers; and the scariest part of all, is that we wrote that article back in mid-October, when WTI crude was still $83/barrel.

Of course, plunging crude prices are a trivial matter compared to the epidemic of collapsing currencies we predicted more than a year ago – yielding political, economic, financial, and social havoc the world round. And nowhere more so than in Europe, as a whopping 550 million people currently use the Euro, or currencies “pegged” to it. Let alone, the countless billions whose economic fates are tied to a healthy Europe; and of course, supposedly “TBTF” financial institutions with soon-to-be defaulted PIIGS loans. To that end, it is nearly two years since I espoused “I have ZERO doubt that – one way or the other – Greece will eventually exit the EuroZone; potentially, providing the ‘flash point’ catalyzing the END of the Western banking system; and with it, FINANCIAL ARMAGEDDON.” And here we are in March 2015, despite Mario Draghi’s best “whatever it takes” efforts, on the cusp of the end of the Euro.

Two weeks ago, I said the Greek “deal” was not a deal at all, but a pathetic ruse that “not only didn’t fix anything, but barely kicked the can a few feet.” Well, those few feet have apparently been used up already; as this weekend, the “countdown to Grexit” accelerated dramatically – to the point that it won’t be long before the entire world realizes not only its inevitability, but imminence. Given that Greece now appears likely to run out of funds within a week, with the Greek populace on the verge of revolution, it is entirely possible said “Grexit” occurs by month’s end; let alone, the so-called four month extension period granted in last week’s supposed “deal.”

If you recall, said extension was contingent on “troika” – now “institution” – approval of Greek financial reform proposals; which comically, were hastily, ambiguously written by the Eurogroup itself, in a desperate eleventh hour attempt to avoid Greek default. Well, it’s barely a week later, and Greece has finally presented some actual details; which, as it turns out, are so comically childish, ECB governing council member Luc Coene said this weekend, “when I hear certain declarations of the Greek government, I ask myself ‘what are they still doing in this mechanism’?” Let alone, another Eurozone official’s claim that “it’s quite hilarious, if it were not so tragic, that this is what a government in an industrialized country comes up with.” Such as, for instance, a Greek proposal to hire foreign tourists to act as wired “tax spies.”

Consequently, it is all but assured said proposals will be rejected at today’s Eurogroup meeting, yielding a very real possibility that Greece will not receive a scheduled $7 billion bailout payment; and thus, debt default by week’s end. And no, it certainly didn’t help the situation that Greece’s Interior Minister, whilst submitting such proposals, claimed “we are war with our lenders – but in this war, we won’t proceed like happy scouts ready to follow bailout policies.”

Worse yet, both Prime Minister Alexis Tsipras and Finance Minister Yanis Varoufakis this weekend suggested – or better put, threatened – electoral referendums to resolve said issues, including a potential referendum regarding Euro currency membership itself. That is, if angry Syriza followers don’t overthrow Tspiras first, paving the way for the neo-Nazi “Golden Dawn” party to take power. In other words, in the words of ECB Executive Board member Benoit Coeure, “time is running short for Greece”; and likely, the Euro currency experiment itself, as it becomes painfully clear that the horrifying political, economic, and financial specter of “Grexit” is guaranteed. Or, at the least, the post-2011 “eye of the storm” created by Mario Draghi’s “whatever it takes” policies of unprecedented money printing, market manipulation, and propaganda. Ironically, “whatever it takes” to save the Euro involves diluting it with trillions of freshly printed units; and more ironically, ECB QE hasn’t even started yet. Yes, it is actually scheduled to start today, after the Euro has already plunged to an eleven year low.

And last but not least, we can’t emphasize enough what we have long written of the supposed “strong dollar” – which is only rising due a “flight to liquidity” by a world rife with fear that that the “big one” has arrived. Contrary to propagandists’ claims that a soaring dollar index is “PM bearish” – which we long ago quantitatively disproved – the unabashed currency debasement of the Euro and Yen could not be more PM bullish. In fact, we deem such currency volatility and debauchery the “single most Precious Metal bullish factor imaginable.”   To that end, using an extreme example, “if a nuclear bomb destroyed Europe” – thus, causing the Euro to go to zero, and the dollar index to infinity – do you think it would be gold and silver bearish, or bullish?


Courtesy of Courtesy of

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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