State of the Union: Things still appear on the surface to be okay economically. The stock market has been going back up, interest rates are still very low, unemployment is still low according to official statistics, the official government/mainstream rhetoric is that the economy is still recovering although the government/Fed remain vigilant to protect us from any unforeseen economic weakness, and the U.S. dollar is still the undisputed king despite recent weakness. But is that all there really is to it. If you pull back the covers, what do you really see? About 46 million on food stamps, about 97 million not participating in the labor force with continued announced layoffs of large numbers in various economic sectors, about 18 trillion dollars in accelerating sovereign debt compared to just about 9 million in 2008 with no end in sight, 180 trillion dollars in unfunded liabilities (social security and medicare primarily), and a quadrillion or so dollars of derivatives contained in our major money center banks (they are off-balance sheet items so I cannot say they are on the bank’s books) waiting to blow up.
This does even mention the perpetual warmongering by our government and its Military-Industrial complex that disrupts and largely destroys any semblance of normal life throughout large parts of the globe. The U.S. government via its long established departments and agencies causes large scale destabilization throughout the world running up huge costs in both the monetary and civil society realms. The only reason the U.S. people keep believing in this heinous, evil, criminal system is because large numbers in the U.S. still perceive the system as being beneficial to them without caring or looking outside there tunnel vision focus. Many, if not most, are seeing evidence of the crumbling walls around them but believe if they just keep doing their prescribed part and supporting the system that they will be saved from the worst of it.
Well, if you keep believing in an evil, criminal system and even worst, actively support it, you become part of this heinous system, but you will not be saved from its collapse. Your leaders have no ability nor no inclination to stop economic debacle that is on the horizon. The serious corruption of the U.S. government and its economic system began about 100 years ago with the creation of the Federal Reserve central bank. When you give a government and that country’s major banks a monopoly to create money out of thin air, you have egregiously rigged the balance of power and wealth towards those who hold that monopoly.
This rigged game also quickly becomes a zero sum type game where the relative few who benefit do so at the expense and to the detriment of the population at large. Without this rigged, zero sum, funny money induced game, the economic pie can keep increasing in accordance with the productive and creative abilities of the general population within reason. The gatekeepers of this rigged game prohibit any real reformation of this rigged game because they stand to lose too much in the process. This funny money rigged game is highly unstable which is why the big banks have to be in partnership with the government so they can be bailed out when things go wrong, as they often do at the end of these artificially induced money bubbles.
Small and medium sized businesses along with individuals have to pay the price of their very serious economic miscalculations with bankruptcy. But the favored banks and corporations are saved from that consequence for the good of the country or the system. This highly unstable system, even with large amounts of inside information, does not do well over time with any reasonable amount of competition so it does what it can to inhibit and even prohibit competition in the economic arena. But what you end up with is a hollowed out economy that neither provides its citizens with meaningful, productive work nor its long-privileged parasite class with productive areas to further plunder.
This debt/credit based game requires ever more unrealistic growth to keep its house of cards from collapsing. This system is not based on reality but on benefitting the big bankers and those in government who can extend their power through the creation of money out of thin air. This all comes at the expense of the citizens which is becoming more and more evident as this system has reduced once vibrant, healthy economies to shambles in many cases or just a feint shadow of its former self in others. This system focuses on continually funneling money and power to the self-appointed rulers and economic elites while furthering impoverishing and enslaving the citizens in their own lands.
The system also makes damn sure that the people at large are not taught how this purposely designed system really functions and what its real goals and outcomes are. This system ignores the quality of life aspects for the country or region at large and is focused on increasing the money and power of those at the top of the pyramid – big government, big banks, and big corporations.
The top of the system can be called fascism or corporatism, and in general collectivism embodies all elements that particularly include the general populations and how they are indoctrinated to think about things in general. But at the bottom is the ability to create money out of thin air. Without that, everything falls apart. Because then you do not have the money to buy off the general population, to set up the huge infrastructure that this system needs to perpetuate itself, the huge amounts of money that go to warmongering and related destructive activities, the huge amounts of money that go to government to reward themselves with nice pay, benefits, and to build up their agencies, to the big banks to invest and control industry and the economy at large, to the large favored corporations who recycle some of that money to politicians and government.
When the value of a paper currency loses its value, then much of this edifice built on artificial money goes away. That is the point we are now reaching with the peak debt situation our country is at. Some other countries have already realized this as they have constructed an alternative monetary network and platform that completely by passes the U.S. dollar. This will go into full operation when the dollar loses enough value to make the current system inoperative in conducting normal business and required activities.
Concurrent to this currency collapse event, will be the announcement of the already constructed money replacement system. I call this money instead of currency because the odds favor that the new system will be backed by gold based on all the gold that China, Russia, and some other countries have been buying over the last several years. Money is backed by something of real value, currency is something created out of thin air by a cabal of government and bankers, usually to further their aims at the expense of those outside the cabal. The dollar has been showing continued weakness since 1 Feb 2016 and there is no reason to expect a change in this pattern. Gear up for stormy weather ahead.
The major market indices continued to power ahead with surprising strength at this stretched juncture in the rally. Three key major indices did not keep pace with the general market, the Dow Transportation Average, KBW Bank, and PHLX Oil Services indices all lagged this week. This type of divergence is often seen at intermediate turning points after a relatively long run in one direction or the other. The 7.5 week U.S. stock market rally has been led by an upsurge in the oil price and the price of U.S. crude oil declining this week does not bode well for the rally continuing without a rest first. You also like to see major banks participate in any rally which they did not this week. All things considered, I would expect a rest for a couple of weeks in this area. We have earnings season getting ready to start which is adding some uncertainty, the share buybacks are temporarily curtailed during earnings season, the tax payment deadline is now upon us, and after a 7.5 week rally we are ripe for a brief respite in further upside stock market action.
I think the most likely course after a brief respite here is continued movement to the upside for the U.S. stock market. I expect the U.S. dollar to continue declining which will continue to push the oil price higher and with the U.S. stock market now linked to the oil price, it too will continue higher powered by the commodity related stocks.
Precious Metals: Gold and silver look to be at the turning point that I have been calling for over the last few weeks. This should be the final push down on the precious metals price indices as the U.S. stock market bull has been going on for seven plus years and has little in the way of real economic fundamentals supporting it. Commodity prices have started to show strength in 2016 reflecting the weakness of the U.S. dollar but the Powers That Be cannot afford for the gold price to continue higher if they want their rigged game to continue for a while longer. So it is time for them to pummel the price of gold into submission again via paper contracts on the COMEX and the London markets. This will continue until the dollar loses enough value to cease functioning as a useable currency. This will probably happen in combination with the absence of available gold for sale at cheap prices for large buyers. That is when the precious metals prices will explode to the upside but we are not there yet. This will mean the government, its currency, and our current economic system has failed us. It also means the U.S. government or the U.S. in general will no longer be the sole occupier of the catbird’s seat in world economic, political, or military affairs going forward.