first majestic silver

Unrelenting "PM-Bullish…Everything-Else-Bearish”

December 30, 2016

It's my last article of what I believe is the penultimate year of survival for history's largest; most destructive; and for the first time, global, fiat Ponzi scheme.  Fittingly, on this typical quiet week of paper-thin holiday trading, the headlines are exploding with potentially cataclysmic, "PM-bullish, everything-else-bearish" items.

For the first time since 2011 - when on Labor Day Eve; coincident with the Swiss National Bank committing to their ultimately fatal, hyper-inflationary decision to peg the Franc to the Euro; the Cartel passed its "point of no return" when "dollar-priced gold" hit an all-time high of $1,920/oz; and subsequently, went all-in suppressing prices on a 24/7 basis - gold and silver prices will end the year higher than when the year started.  Including, in many cases, dramatic gains - depending on which currency you're measuring prices in.  Not to mention, surging physical premiums in the world's two largest gold consumers, China and India.  This, despite one of the Cartel's most vicious  paper attacks yet, in erasing roughly two-thirds of the year's dollar-priced gains after Donald Trump won the U.S. Presidency; i.e. one of the most "unexpected," and decidedly PM-bullish, events imaginable.

You'd never know it from the level of over-the-top, anti-gold propaganda emanating from the mainstream media - which proved during the election cycle, once and for all, that it is no longer a meaningful part of the 21st century landscape; and thankfully, will be dead and buried in short order; And nowhere more so than from the historical "leaders" in anti-gold propaganda...Barron's, which this week published "the end of a golden era"; and London's Financial Times, which today published "gold - for whom the bell tolls."  That said, this is par for the course from what I've observed over 15 years in the Precious Metal sector, as the "evil Troika" of Washington, Wall Street, and the Mainstream Media do everything in their power to milk the world dry, by maintaining an unsustainable status quo that has created the worst economic imbalance, debt infestation, and wealth disparity plagues in modern history.  Which thankfully, is on its last legs - as this year's dramatic political, economic, and monetary events prove in spades.

Everywhere one looks, the lies, fraud, and deceit are in full frontal view - which is exactly why anti-establishment, status quo-destroying elections have become the rule rather than the exception.  Today alone, former Argentine President Cristina Fernandez was indicted for corruption; Israeli Prime Minister Benjamin Netanyahu appears on the verge of being investigated for fraud and bribery; near-U.S.-President Hillary Clinton's email scandal has been revived by a Federal Appeals Court; and a massive accounting scandal rocked one of Japan's largest corporations, Toshiba, putting it on the verge of bankruptcy.
Meanwhile, Barack Obama is revealing his true colors on his way out, in antagonizing everyone from Russia to Israel; whilst Donald Trump's tweets morph from the truth crusader he appeared to be on the campaign trail, to the egomaniac boardroom executive the "Celebrity Apprentice" made him famous for.  This, as he appoints a Cabinet of multi-billionaires, making a mockery of his claims that he supports the common man, intending to "drain the swamp."

Meanwhile, one week after Italy's third largest bank was "nationalized"; by a bankrupt sovereign government, of a collapsing trading bloc ran by megalomaniacal, sociopathic, unelected politicians and hyperinflationary money printers; it was revealed that global debt issuance hit an all-time high of nearly $7 trillion in 2016, supported by record Central bank monetization and the record low interest rates such policies engendered.  That is, until the 35-year, Federal Reserve led bond "bull market" abruptly ended this Fall, putting the unprecedentedly fraudulent global economy on the edge of ruin - led by the criminally insolvent "financial sector" responsible for so much of the world's ills.

The deleterious effects of rising rates are visible everywhere - from plunging automobile demand (and surging loan delinquencies); to expectations of a financial sector earnings bloodbath; the "coincidental" blow up of companies like Toshiba; crashing New York City condo construction; yesterday's "unexpected" plunge in the U.S. pending home sales index; and imploding Boeing airline orders, to name but a few.  To that end, if there's one chart that depicts how far the global economy has degraded - this, before interest rates bottomed this Fall - this is it.  And trust me, given the current environment of rising rates; plunging currencies; heightened political uncertainty; record, parabolically rising debt; and historic industrial overcapacity, the outlook for the coming years could not be uglier. 

In India, an unprecedented "cash ban" by the nation's lunatic dictator has erased decades of political and economic progress in the world's second most populous nation, setting the stage for a police state; an historic economic catastrophe; and potentially, a bloody revolution.  This, in a nation whose currency, the universally-despised Rupee, was at an all-time low before the arbitrary, completely unjustified cash ban was initiated.  Which equally sadly, will likely prove the "test case" for an explosion of similarly draconian capital controls worldwide, as said "powers that be" do everything in their power to maintain the dying status quo, and milk as much of the "99%'s" wealth as possible before they are inevitably, unceremoniously ousted by "Economic Mother Nature" and the "unstoppable tsunami of reality."  And in Modi's specific case, hundreds of millions of enraged Indians.

Meanwhile, the fate of the global monetary system lies in the hands of one solitary chart - depicting the most likely catalyst of potentially historic political, economic, and monetary chaos.  Which is, the exchange rate between the "offshore" (i.e., unofficial, speculatively-traded) Chinese Yuan - which sits precariously above the key psychological level of 7.0/dollar, amidst an environment of exploding Chinese capital outflows; as the Chinese government admits its economy is dramatically weakening; with $31 trillion of cumulative debt; the world's largest real estate bubble; and who knows how many trillions of "shadow banking" debt on the verge of default.

The "cataclysmic, financial big bang to end all bangs" I warned of 15 months ago - just before the PBOC commenced a devaluation that has already reached  nearly 15%, en route to much larger levels; is upon us, waiting for a tiny spark, of any kind, to ignite. 

Under these circumstances, history's largest bubble (U.S. stocks) and "anti-bubble" (Precious Metals) have been inflated and deflated, respectively - under the guise of a fraudulent, ad hoc created "Trump-flation" meme that will rapidly dissipate once he formally takes office next month - starting with the March "debt ceiling" debates that will make it painfully clear that not a thing promised or hoped for will come to fruition.  Moreover, if rates and/or the dollar continue to rise; let alone, if China launches the aforementioned "nuclear" option of a one-time Yuan devaluation; the historic House of Cards could collapse "at one fell swoop."  To that end, is it possible that, as I wrote yesterday, gold and silver prices have bottomed in late December for the second straight year?  Only time will tell, but with prices at historically suppressed levels, amidst an environment of surging physical demand; razor thin above ground, available-for-sale inventory; and dramatically declining production, the odds could not be higher.

In my final paragraph of 2016, I'd like to thank you for reading and listening to my commentary for the five years I've been at Miles Franklin - and longer, for those going back to my GATA and Torrey Hills Capital days.  And to request, given all the free information we have provided, that if you are considering the purchase, sale, or storage of Precious Metals, you simply give Miles Franklin a call at 800-822-8080, and give us a chance to earn your business.  In fact, 2016 has been a banner year for Miles Franklin.  First, in completing its 27th year in business without a single registered complaint.  Next, in launching a new website - featuring, for the first time, online purchasing capability.  Third, adding Vancouver and Toronto to our Brink's Canada segregated storage network. 

Thanks, and may you have a happy, healthy, and prosperous 2017!

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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