Everything happening today is in some ways interconnected: popularity of ‘non-establishment’ political candidates; ineffectiveness of central bank policy in lifting inflation; economic pessimism; weak capital spending (from handcuffed capitalism); and angst due to perceptions of inequality. Let us explain...
While "greed was good" in the '80s, it appears "gold is good" in the new normal. As much as the barbarous relic is despised by all the mainstream money-peddlers in public (aside from those who have left the familia like Alan Greenspan), it seems to be loved in private. Central banks have been net buyers of gold for eight straight years, according to IMF estimates, the longest streak since the first troops were deployed in The Vietnam War.
As Nate Hagens noted, "people think that the economy runs on money but it runs on energy," and as Art Berman details in the following interview how the current oil price collapse represents devaluation from over-investment in unconventional oil - and most commodities - because of cheap capital, and is simply a classic bubble. "Continued oil prices of $30 per barrel or less are the only reasonable path to higher growth and a balanced oil market," Berman contends, adding that he expects $16.50/bbl - "I think we're gonna get there." Berman concludes ominously, we're not going 'back' to anything - "Normal is over, and there is no new normal yet."
Today's OMFG face-ripping, short-squeezing, broken-bond-market-buying ramp was crucial for many chart-watchers.
It is easy to be diverted, distracted and amused by the antics of the presidential candidates, the pomp and circumstance of awards shows, athletic events, and entertainment news, and the feel-good evangelism that passes for religion today. What is far more difficult to face up to is the reality of life in America, where unemployment, poverty, inequality, injustice and violence by government agents are increasingly norms. The powers-that-be want us to remain divided, alienated from each other based on our politics, our bank accounts, our religion, our race and our value systems. Yet as George Orwell observed, “The real division is not between conservatives and revolutionaries but between authoritarians and libertarians.”
No society wants to admit economic failure or economic sabotage, and this is why the con-game is able to continue in the face of so much concrete truth. Ultimately, the market trends and economic trends will flow into the negative. In the meantime, expect massive market rallies, rallies which will then disintegrate in a matter of days. And, whatever happens, never take what mainstream economists say very seriously. They have failed the public for long enough.
"The world has fundamentally shifted over the last decade, especially since we’ve emerged from the Great Recession... But the professional class has been very slow to understand what is going on, not just quantitatively but qualitatively in a new generational configuration that I call the Fourth Turning. They don’t accept the new normal. They keep insisting, just two or three years out there on the horizon, that the old normal will return – in GDP growth, in housing starts, in global trade. But it doesn’t return."
With so much riding on the American "consumer" - given the collapse of the US manufacturing industry and massive mal-investment over-stocking falsely signalled by The Fed's "help" - one wonders just what happens next as the Services economy begins to roll over and the gap between the consumer and industrial America - which has never, in over 30 years, been wider - converges back to a new normal dystopia.
"I spend most of my time, while looking at current prices, thinking about and trying to live six months to one year in the future.... What I can see now is that US growth is slowing, and that the market is likely to price in reduced monetary tightening." ... but... " The future for me is now more uncertain than at any time I can remember"
In the absence of the gold standard, there is no way to prevent confiscation of savings through inflation.
- Alan Greenspan (1966)
Hong Kong traders are back from vacation, and with few options on the table, they are buying the one asset that provides the best cover to central banks losing faith, demonstrated most vividly by the total failure of the BOJ, and as a result just as Yen soars above 113, gold has taken out the numerous $1,200 stops and is currently surging to levels not seen in almost a year.
"More monetary stimulus, wherever it is in the world, isn’t the answer for a global economy still trying to find a new growth path. Pay attention to bonds and ignore the sirens of the stock market."