Meltdown Warning Signals
“Run for the Hills Now, I’m Doing It.”
Jim Rogers, CNBC.com (07/20/13)
When a Remarkably Successful Establishment (albeit a Rebel within) Investment Guru warns that He and We should “Run for The Hills” it is important to ask why?
Immediately leading up to, and for months after, the 2008-09 Financial Crisis, not only Independent Commentators but also MainStream Media commentators were Warning we were on the verge of Financial Collapse. And some quite reputable independent commentators still are issuing those Warnings.
So it is important to consider what the Main Warning Signals of an Impending Collapse would be, and how to Profit and Protect.
Indeed, we are already seeing some of those Signals sound such a Warning.
Consider the GEAB’s view and timeline:
“Historians will certainly consider the 2008 crisis as a warning shot before that of 2013.”
Global European Anticipation Bulletin, leap2020.eu
“-- end 2013, financial impact: collapse of financial markets especially in the US and Japan. Banks can no longer be saved by the states and BAIL-Ins are put in place;
-- end 2013 / 2014 spreading to the real economy: The financial impasse causes / reveals a major world recession and the reduction of international trade;
-- 2014, social impact: The economic deterioration causes unemployment to explode, in the United States the dollar's decline lowers the standard of living, riots mushroom everywhere;
-- 2014 political crisis: the governments of the most affected countries are under fire for their handling of the crisis, forced resignations and early elections are expected, if not coups;
-- 2014-2015, international management of the crisis: together Euroland and the BRICS impose a new international monetary system and lay down the basis of new global governance;
-- 2015: The least affected regions have exited the crisis definitively;
-- 2018: It will take the United States, the United Kingdom and Japan five years to purge themselves of the crisis with, ultimately, a greatly reduced standard of living and a considerable loss of global influence (resulting from their refusal to participate in the re-casting of global governance on new bases)."
And Goldmeister Jim Sinclair’s comment regarding the foregoing:
“I find no other source with which I agree more than GEAB.
I agree totally with the steps. My timing on the final step is more 2020 than 2018 with the USA, GB, and Japan taking seven years to purge the criminals that have gotten us to this point via OTC derivative frauds.”
“2013 Crisis To Trump 2008”
Jim Sinclair, JSMineset.com, 7/19/13
So consider what might cause this Course of Events to be realized. Two possible interrelated Triggers immediately come to mind. 1.) Major over-indebted Sovereign Nations are unable to pay their debts and thus repudiate them (at least partially) as Greece and Iceland have (de facto) already done. This would start a Cascade of Defaults and 2.) Major Central Banks’ ongoing QE generates visible intensifying Inflation (which exacerbates the debt problem because lenders and the markets consequently demand higher interest rates – Japan’s debt is already over 200% of GDP, e.g., and thus they cannot afford to pay much higher interest payments).
In this respect, one of the necessary conditions already appears on its way to being fulfilled. Threshold Hyperinflation is already with us – though Bogus Official figures seek to hide it.
In the U.S. for example, Real CPI bumped up from 8.99% to 9.38% from May to June 2013 (Shadowstats.com). Other Major Nations’ figures are notoriously unreliable also (e.g. China). (An Argentinean economist personally confided to us that Real Inflation in Argentina is 50% per year, even though the government will not acknowledge it.)
And QE is, if anything, increasing and it is highly likely it will continue to increase as we pointed out in a recent article. And that means Inflation will intensify, and that means increasing interest rates. As rates increase, Debts cannot be serviced and we have Greece writ large. So sudden interest rates spikes (such as we have seen recently in the U.S. 10-year) are one Signal of Impending Financial Collapse.
And there are others.
Another indication of impending Financial Collapse (indeed, probably The Primary Signal) would be a sudden Flight from, and dumping of, the World’s Reserve Currency, the U.S. Dollar.
The Fed’s Ongoing QE will generate such a Flight at some point – the only question is When? But we do not see such a Flight yet because many Major Fiat Currencies are simultaneously being debased by their Central Banks in the so-called Currency Wars. At some point these debasements will begin to be manifested in a spike up in commodity prices.
Indeed, we may already see the beginnings of that in the apparent bottoming of Commodities Prices. The CRB has moved up in the last two weeks. (See Deepcaster’s latest Forecasts.) The $US is still the least dirty shirt in the Fiat Currency laundry because of the (falsely) perceived relative strength of the US Economy.
As to U.S. Treasuries, their strength/weakness will, short-term, continue to be determined by “tapering” talk. If/when The Fed talks tapering, Treasuries will weaken, because Fed buying has artificially supported the Bond Market. Yet, out of the other side of their mouth they signal “more QE,” and that causes Treasuries to strengthen (yields fall).
N.B. : However, continuing Fed-generated QE will likely be useless at some point soon to support U.S. Treasuries. Non-U.S. Central Banks and Big Investors are already dumping U.S. Treasuries by the carload. Thus, at some point even The Fed will be unable to save U.S. Treasuries, which will than tank (Rates Spike).
In fact, they have no choice but to continue QE and that is what will actually happen until Hyperinflation collapses the $US… However, when continuing QE (i.e. Bond Buying) no longer serves to support Treasuries, i.e. to suppress Interest Rates, that will also be a signal that Financial collapse is impending, because that will signal The Fed has lost control of the Bond Market, and Interest Rates in the Broad Economy. That has not happened yet but will. (See our Forecasts.) (Some, including Rob Kirby, whom we respect, reportedly thinks The Fed can control the whole curve indefinitely through OTC Swaps and Forward Rate Agreements. But this omits Real World Developments, e.g. QE generated Price Inflation of Real Assets.) We already saw counterparty defaults on Paper Assets in the 2006-09 Crash, and we will see them again, as The Bond Market Crashes.
In sum, the position of the $US as the World’s Reserve Currency steadily weakens. Now Switzerland has joined the race to be the Yuan Trading Hub for Europe. And Canada pushes to be the Yuan Trading Hub for North America.
And we forecast that the Swiss Central Bank will not be able to keep its Franc pegged to the Euro many months more. If one were to choose a Good relatively “Safe Haven” Currency, the Swiss Franc would be one.
And yet another signal of impending Financial Collapse would be the collapse of one of the world’s too-big-to-fail Mega Banks, all of which are interrelated as counterparties on trillions of dollars of Derivatives and other Instruments. The prime candidate for collapse – Deutsche Bank.
The Fed and Bank of England can protect the American and English Mega Banks to a degree because they can print unlimited money. The Deutsche Bank has no such national currency printer/protection (Yet another Negative Consequence for Nations which relinquish National Sovereignty to Regional or Global Entities!) and DB is under increasing pressure from the LIBOR and other fraud allegations and investigation.
And there are reports DB has sold 60 thousand tons of allocated Gold certificates to clients. But who actually has the Physical Gold and how much do they have?
Other signals of Impending Meltdown would be signals that the Powers-that-be are seriously Distrusting each other, e.g.,
--the Overnight lending rate (i.e., among Banks) spikes
--Major Nations increasingly Distrust each other and/or the Mega-Banks
We have seen this already with Germany’s demand that its Gold be repatriated from U.S. based Fed Vaults, where it is allegedly stored.
--The Politicians who usually do the bidding of The Banking Cartel, begin not to do the bidding of the Banking Cartel due to pressure from their Rioting Constituents.
Another (Technical) Signal of impending Equities and Financial Collapse would be that Equities Prices hit all-time highs at the same time that prices technically hit the top of the multi-year Bearish expanding wedge (Jaws of Death) now forming and simultaneously that while stocks hit that all-time high, the NYSE advance/decline line does not.
This Bearish Divergence would warn that the Great Equities Crash (Wave 4 in our forecast) is about to begin, and that therefore a Financial Meltdown may well occur also. Such a collapse would likely also occur nearly simultaneously with an Equities Crash then also because the entire Financial system is more highly leveraged now than it was before the 2008 Crisis – more unpayable debt, bigger too-big-to-fail Mega Banks, much more Fiat currency in the system, etc. and no Effective Structural Reforms in place.
Today, we are moving toward that Wave #4 Scenario (see Deepcaster’s Forecasts re Timing).
The recent elevated Oil Price (over $100 for WTI and Brent) can be explained by considering the following: that Equities and Bonds are artificially elevated, Fiat Currencies are losing Purchasing Power due to ongoing QE and Currency Wars, and many Commodities Prices are depressed (until just now) due primarily to China’s slowdown, and Gold & Silver Prices have been depressed by The Cartel (Note 1).
Therefore, only Crude Oil seems a reliable store of value to many sophisticated Investors. Thus it is not surprising to us that WTI Crude has already approached the $110 level notwithstanding the Economic slowdown. Part of this strength is due also to QE-generated Real Price Inflation.
Because Crude is essential, with relatively high Inelasticity of Demand, and because it gets used up, it is not easily subject to price manipulation though, for sure, its Price is manipulated to a degree. Thus a spiking Crude Price provides yet another Signal that Hyperinflation is impending and thus that a Crash may be near.
Of course Geopolitical Events (e.g. Wider War in the Mideast) could drive Crude Prices sky high at any time.
We reiterate that, notwithstanding “fracking,” the USA still has to import half its oil consumption, with increasing Import Demand coming from China, the Eurozone, and Japan as well. By the way, given even the most optimistic “Fracking” Production Projections, do not expect the USA to produce more than 60% to 65% of its own oil consumption, unless there is a Major Depression.
Key Point : Both rising U.S. Treasury yields and rising Crude Prices and the Real Numbers already tell us: Inflation is intensifying.
Finally, regarding Gold and Silver Prices as Meltdown Indicators, consider that The Cartel took down Gold and Silver Prices dramatically in mid-April, and subsequently, mainly to protect the $US. But in the last two weeks Gold has risen from the low $1200s to the low $1300s, notwithstanding the fact that the Hedgies have gotten into the habit of selling Rallies.
In our view, the massive and intensifying Physical Demand is the likely catalyst for this development, and the associated strength in the HUI now up in the mid-200s from 200ish.
While The Cartel may be able to take Gold back into the $1200s (and Silver back under $20) it will likely not be able to do so for very many more weeks. The Demand for Physical is simply too great for both Gold and Silver, if even half the stories we hear about near exhaustion of LBMA and Comex vaults containing Physical are true.
Indeed, if the Depletion of Comex Inventories continues, it will have to go to a Cash Settlement Mode (as opposed to Gold Delivery Mode) in the next few weeks. This would launch Physical Gold Prices Sky High.
The Good news is that we expect that that Great Launch will Propel Gold up to $3000/oz with a proportionate rise in Silver beginning at Deepcaster’s forecast launch date. Therefore, prices at current levels still afford a Great Opportunity to buy Physical if one does not own ones full allocation of Physical. And many of the quality Miners are incredibly cheap with the HUI still trading not far above 250.
Skyrocketing Gold Prices are yet another sign of an impending Meltdown. Buy your appropriate Allocation of Physical and Quality Miners Now while they are cheap.
July 25, 2013
Note 1 : We encourage those who doubt the scope and power of Overt and Covert Interventions by a Fed-led Cartel of Key Central Bankers and Favored Financial Institutions to read Deepcaster’s December, 2009, Special Alert containing a summary overview of Intervention entitled “Forecasts and December, 2009 Special Alert: Profiting From The Cartel’s Dark Interventions - III” and Deepcaster’s July, 2010 Letter entitled "Profit from a Weakening Cartel; Buy Reco; Forecasts: Gold, Silver, Equities, Crude Oil, U.S. Dollar & U.S. T-Notes & T-Bonds" in the ‘Alerts Cache’ and ‘Latest Letter’ Cache at www.deepcaster.com. Also consider the substantial evidence collected by the Gold AntiTrust Action Committee at www.gata.org, including testimony before the CFTC, for information on precious metals price manipulation. Virtually all of the evidence for Intervention has been gleaned from publicly available records. Deepcaster’s profitable recommendations displayed at www.deepcaster.com have been facilitated by attention to these “Interventionals.” Attention to The Interventionals facilitated Deepcaster’s recommending five short positions prior to the Fall, 2008 Market Crash all of which were subsequently liquidated profitably.