October 22, 2019
The Miles Franklin Newsletter
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From The Desk Of David Schectman
There is a looming shortage of silver and the price is about to go up, according to Eric Sprott
 
"Gold is a trust anchor. With shares, bonds and other securities: there is a risk to everything. If things go wrong, prices may fall. But, crisis or not, a gold bar always holds value. Central banks such as DNB have traditionally had a lot of gold in their house. Gold is the ultimate 'nest egg': the trust anchor for the financial system. If the entire system collapses, the gold stock provides a collateral to start over. Gold gives confidence in the power of the central bank's balance sheet. That gives a safe feeling." --  Dutch Central Bank
 
The economic, financial and monetary headwinds are getting stronger with each passing day -- and there's no chance that they're going to get better...at least not in my lifetime. So 'da boyz' have their work cut out for them. – Ed Steer
 
The fact is, since the FED doomed us all to a great monetary collapse, the only option left is to keep injecting money into the system. By doing so the collapse may be delayed for another quarter or another year. That’s all we have left to hope for. However the plan must then also involve steady rate cuts or the interest payment burden from the skyrocketing debt load will blow everything to hell. – Mexico Mike
David's Commentary (In Blue):

Last Thursday I wrote how difficult it was to put down our Bichon, who was our buddy for the last 16 years. I’ve been writing the Miles Franklin Newsletter for over 25 years and I received more Emails from our readership on this article than on any topic I have ever posted. Would it surprise you to know that 44% of Americans have a dog? No wonder my story hit home with so many of our readers. There was a common theme in the Emails I received.  Everyone wrote that they had gone through the same thing themselves. Americans love their dogs. I want to thank all of you who were thoughtful enough to send me an Email. That was very kind of you.  The house still feels empty and I miss her a lot. There is a word for this – it’s called The Blues.
 
When I got up at 5 a.m. this morning, I poured myself a cup of coffee and went downstairs into my music room and cued up one of my favorite songs. It’s called Someone Else’s Blues by David Bromberg. It’s an interesting song with witty lyrics, lyrics that describe how I was feeling. Mind you, my life is pretty darn good. I have a fantastic wife, and loving, successful children. My business is doing great, Susan and I are healthy and I should be smiling 24/7. Yet when I woke up this morning I had the blues.  Here are some of the lyrics from Bromberg’s song that hit home…
When I woke up this morning, everything seemed all right.

My woman called me from New York City. She said, "Darlin', did you sleep well last night?"

She told me I got three checks in the mail. Hallelujah! I got a refund on my union dues.

But when I woke up this morning, I musta had someone else's blues.

I swear I don't know why. I don't know why I feel this way.

Well, I got, I got someone else's blues in the midst of an almost perfect day. 

I don't owe anyone any more money. All my cavities are filled.

If I pull my hand outside my pocket too fast, I might drop a couple of fifty-dollar bills.

I got more dope than I can smoke. I got more chicks than I can use.

Somehow when I woke up the morning, I guess I had somebody else's blues.

I swear I don't know why. I don't know why I feel this way.

You know I got someone else's blues in the midst of an almost perfect day.
Could it be that I have a case of the Shuggie blues?

The following article is music to my ears. And I believe it. I have been telling you for the last couple of years that the gold/silver ratio, which is currently 86.51 to 1, greatly favors silver.  I have repositioned my portfolio according.  My portfolio has 100 times as many ounces of physical silver than ounces of gold.

Eric Sprott speaks with his wallet. He is one of the world’s most knowledgeable precious metals investors and following his lead is quite frankly, not a bad idea. I have a large position in American Creek, a gold and silver exploration company in Canada that Eric Sprott has taken a $2 million dollar position in. I wrote a bit about it a couple of weeks ago.
There is a looming shortage of silver, says Eric.
Kitco News
Eric Sprott has information: Silver is going up
 
by Anna Golubova

Be ready to be surprised when it comes to the precious metals market, said Eric Sprott, billionaire precious metals investor and founder of Sprott Inc.

The world is getting used to gold and silver at their new price levels after a summer rally and more surprise could soon be in store for the precious metals sector, said the legendary investor during  Sprott Money’s Weekly Wrap-Up  on Friday. 

“We are in pretty good shape for metals doing quite surprising,” Sprott said.

At the time of writing,   December Comex gold  was trading at $1,487.40, down 0.45% on the day and  December Comex silver  was at $17.57 down 0.02% on the day.

One of the things working in favor of the precious metals sector is a looming shortage of silver.

“There is going to be a shortage of silver. We get information from dealers looking for supply and paying premiums, which is almost unheard of. And when I look at the amount silver going into ETFs and going into India, there is no way that there is not going to be a shortage,” Sprott highlighted.

On top of that, there is “a huge problem” happening under the surface — the ongoing bank liquidity crisis and how the Federal Reserve is responding to it.

“There’s something happening underneath the surface where bank illiquidity is encountering a huge problem, and we are not being told. Who knows what’s going on behind the scenes? The most likely thing is somebody has blown up their derivatives book, and all the banks are calling in loans to other banks for fear … of the domino effect.

The repo market has come under tremendous stress,” Sprott said.

The problem became visible to investors in mid-September when the repo rates surged close to 10%, he added.

“The fact that they let it happen. The fact that they weren’t aware that it was happening. So there’s this huge illiquidity situation in the banking business which they thought they solved,” Sprott said.
Meanwhile, Ted Butler pointed out that according to his calculations, JPMorgan now has approximately 159 million oz. of silver in their warehouse and although he can’t prove it, he estimates that they also control another 100 million oz. in other COMEX warehouses, which brings their total to more than 82% of total COMEX inventories. They have a decade-long history of never, ever losing on a silver trade. That goes beyond “luck” and reeks of manipulation. The very fact that they own more physical silver than anyone in the world and are continuing to buy more, is all that you need to know - It is for me.  Just remember what Jim Sinclair, “Mr. Gold” says about silver. “Silver is gold on steroids.” I just received my third quarter distribution. I am going to buy more physical silver.

Market wise, nothing significant is happening. Everything from the dollar to the stock market to the precious metals are range-bound. The only excitement is in the political arena and I can’t see a way that it will work out well, no matter how it resolves itself. The major themes I write about are all intact. Gold and silver are too cheap. Stocks are overpriced. The dollar is overvalued and is fending off (for now) attacks on its Reserve Currency and Petro Dollar status. 

Don’t lose your focus on the big picture. This is just the calm before the storm. 

Egon von Greyerz sums it up as follows: 
Better get prepared : There is nothing governments can do, than to continue debasing currencies.  Inevitably, gold will reflect that in a major way

Egon von Greyerz
NEGATIVE RATES ARE KILLING THE WORLD  

“BREXIT, is in the last innings, UK will get out”  – This is how Egon von Greyerz starts the interview with Eric King of King World News. Egon goes on to say that in the long run the  EU will dissolve , country after country, until it  finally collapses  under its own weight.
Egon further expresses his concerns about the  FED’s emergency liquidity intervention , which has resulted in the  relaunch of QE.  Banking pressures are not only limited to the US, it’s a global phenomenon. Looking at Europe , German, French and Italian Banks have been extremely fragile for a very long time. 

Besides that:

  • The Paper shufflers: Gold ETF holdings have spiked with virtually no physical demand.
  • In the long run gold fundamentals know only one way: UP.
  • Gold has broken its 2011 highs in virtually every single currency. $ 2’000, $ 3’000 and $ 5’000 are just starting numbers.
  • Central banks support gold on a daily basis, by continuing to debase currencies.
  • People going to lose a major part of their wealth, caused by an implosion of bubble assets such as stocks, bonds and properties.
  • Shortages are starting: As indicated by Perth Mint’s Silver delays.
  • In this vicious debt cycle, central banks have only one option left: Debase currencies and create an inflationary nightmare.
  • Europe, Japan or America, they all must print unlimited money for the banking system to survive.
  • Negative rates are killing the world: No savings possible, only money printing and skyrocketing deficits are guaranteed.
  • It’s inevitable: A paradigm of overspending and living above your means will end.
  • Better get prepared: There is nothing governments can do, than to continue debasing currencies. Inevitably, gold will reflect that in a major way.
The Fed is the root cause of most of the issues that we are facing. Their approach to every slowdown, or crisis, is to print more money and kick the can further down the road. They are resorting to the same old tactics, but are calling it a different name. It's just plain old Quantitative Easing but instead they are calling it “Repo Issue/QE 4/POMO”. A horse by any other name is still a horse. Their “new” policies are a repeat of what got us to this point in the first place. This will not end well.
 
The folks at  Zero Hedge  put it this way.  
Why are banks still so desperate for liquidity even though the Fed has now made clear the Fed's balance sheet will expand to accommodate all reserve needs, and why do they so stubbornly refuse to approach the inter-bank market for their funding needs?  
What do they know about the banking system that we don't?"
 
Shhh! Don't tell Congress that the Federal Reserve is back to electronically creating money out of thin air to throw at a liquidity problem (of an, as yet, undetermined origin) on Wall Street. And be sure not to mention that the Fed's balance sheet has shot up in a period of just 42 days by $253 billion. And, of course, don't remind Congress that before the last Wall Street crisis was over the Fed had secretly, with no oversight from Congress, piled up a $29 trillion tab to bail out Wall Street - a fact it fought years in court to keep under wraps.
 
On September 4, 2019, the Fed's assets on its balance sheet stood at $3.761 trillion. As of October 16, that figure is $4.014 trillion, edging closer to the $4.5 trillion peak it reached in 2015 following the worst Wall Street crash since the Great Depression.
 
Here's the simple and accurate way to look at this: the Federal Reserve Bank of New York is the regulator of the Wall Street bank holding companies which have never stopped functioning as casinos since the crash of 2008 because Congress did not have the guts to write legislation that would genuinely reform Wall Street. The Fed was a failed regulator in 2008 and it's an even bigger failed regulator in 2019. To compensate for its own hubris, the Fed simply pumps out electronically created money to prop up a banking structure that is as doomed today as it was in 2008.
 
Corporate media is part of this hubris by failing to put on the front pages of newspapers the fact that the Federal Reserve is back to bailing out Wall Street.
 
This commentary appeared on the  wallstreetonparade.com  
LeMetropole Café summarizes it up as follows…
There will not be any rescue now from the debt Ponzi that we are all subject to. There is no easy fix, and no soft landing. Keep this in mind as one FED official after another slithers out from under a rock to tell us how they are going to make everything good. As they hand out free money to their cronies and tell everyone else to eat cake. This will not end well. Prepare now and take this delay as a gift to make ready. Be your own central bank and hold precious metals for a rainy day. There will not be a bail out for us.

LeMetropole Cafe
 
More Lies
Shortly after the first bailout for the financial sector was rolled out, one of the memories that stands out for me was the intensity of the rhetoric such that the failure to act would have doomed our economy. I also recall watching the DOW crashing by historic point swings and reading headlines of various worldwide institutions on the brink of collapse.

And the posture of contrived sincerity as Hank Paulson reported that AIG would be fully bailed out, to save the system we were told. 

My feeling at the time was it was all a crock of shit. Finding out later on that Paulson himself was a beneficiary to the tune of hundreds of millions of dollars from that bailout, and that senior banking co-conspirators reaped huge bonus windfalls while most Americans were left swinging in the wind, was another indication how corrupt the financial system has become. TARP and several rounds of QE have done nothing for the country.

There is no recovery from this. The economic policy elites had a choice to make: Save their own asses, or save the system. There was a fork in the road, and one path led to a painful recovery with hardship for all and substantial losses for the big banks. The alternative was a patch job to print money from thin air and paper over the losses, while insisting the entire exercise was for the benefit of Main Street. From the moment they chose to put their own interests first, the eventual outcome has been cast in stone. We are all going down with this ship.

At the time I was on a mine tour with a group of wealthy investors from Atlanta, and I stated how disgusted I was with the bailout. This was not a popular opinion for this group, and one by one they told me how the aftermath of letting the banks crash would have been way worse for the country. And therein lies the lesson. The further up the money ladder one may climb, the more in line they go with the ruinous decisions of the FED. At the end of the day people talk the talk about making the right choices for the country, but all they really want is that free lunch and for the party to continue.

Here we are today, teetering on the brink of yet another systemic crisis. The solution? Yet another round of money printing and bail outs for the banks that got us into this mess. And what do we have to show for it all? 

Meanwhile, this morning I read that Ester George of the Kansas City Fed Bank believes that the economy does not need another FED rate cut. First off, the economy is already in serious trouble and a recession is on the way that will likely evolve into a worldwide depression. But that is not why there is going to be several rate cuts in our immediate future.

The fact is, since the FED doomed us all to a great monetary collapse, the only option left is to keep injecting money into the system. By doing so the collapse may be delayed for another quarter or another year. That’s all we have left to hope for. However the plan must then also involve steady rate cuts or the interest payment burden from the skyrocketing debt load will blow everything to hell.

The embarrassing charade of having one FED official or another appear to make soothing statements one day, and shortly after issuing contradictory guidance, has been underway for a long time. Its all part of the circus, and the financial media plays along in breathless anticipation, hanging on every word. But the reality is very simple and these sanctimonious elites are going to ride herd on this economy as they drive us all over the cliff.

As a final point, Bernie Madoff played a similar game. With full knowledge that his Ponzi was doomed to collapse, he carried on ripping off those that trusted him right to very end. We all desperately want to believe the easy decisions will end well and tolerate the rampant corruption going on all around us as long as we believe that a few crumbs will be left over for us. 

There will not be any rescue now from the debt Ponzi that we are all subject to. There is no easy fix, and no soft landing. Keep this in mind as one FED official after another slithers out from under a rock to tell us how they are going to make everything good. As they hand out free money to their cronies and tell everyone else to eat cake. This will not end well. Prepare now and take this delay as a gift to make ready. Be your own central bank and hold precious metals for a rainy day. There will not be a bail out for us.
Ed Steer has a lot of worthwhile things to say today…
Ed Steer
 
Well, this repo issue/QE 4/POMO...whatever you want to call it...hasn't gone away -- and is growing in size at an alarming rate. The liquidity issue that's being faced by the banks and others has blown out rather quickly.
 
Or as Bill King asking in his daily  King Report  every day for the last couple of weeks..."The Fed is in some stage of panic over something that is not entirely clear."
 
But whatever it is, it's yet another sign that the current financial system is dire straits -- and only one credit/derivatives accident from a melt-down.
 
I sent the article off to Jim Rickards for his comments -- and this is what he had to say..."Right. They see the meltdown coming and just want to be able to say, "I told you so." They're not actually doing anything about it."
 
My reply to him was..."I concur -- and also get the feeling that it will melt down by design, rather than by circumstance." He never replied to that.
 
The other straw in the wind this week was the absolutely incredible comments coming out of the Dutch Central bank on the subject of gold. It has received wide distribution on the Internet -- and rightfully so. I had the quote in my Thursday missive...but here is again.
 
"Gold is a trust anchor. With shares, bonds and other securities: there is a risk to everything. If things go wrong, prices may fall. But, crisis or not, a gold bar always holds value. Central banks such as DNB have traditionally had a lot of gold in their house. Gold is the ultimate 'nest egg': the trust anchor for the financial system. If the entire system collapses, the gold stock provides a collateral to start over. Gold gives confidence in the power of the central bank's balance sheet. That gives a safe feeling."
 
Then there was this commentary from Bank of England governor Mark Carney at Jackson Hole this summer -- and I'm borrowing it from Mike Kosares at the  usagold.com  Internet site....
 
"Bank of England governor Mark Carney, in something of a shocker, told the recent Jackson Hole central bankers' conference that the world's reliance on the U.S. dollar 'won't hold' and needs to be replaced by a new international monetary and financial system based on many more global currencies," according to a Financial Times report. The greatest impact of Carney's bombshell, though, came not from his opinion on the look and feel of some futuristic global monetary system. It came instead from his seeming tacit approval of the escalating movement to dethrone the dollar as the world's reserve currency in the here and now. A good many in that audience were no doubt surprised - even rattled - by Carney's remarks.
"Something is going on," said St. Louis Fed President James Bullard in a Financial Timesreport, "and that's causing I think a total rethink of central banking and all our cherished notions of what we think we're doing. We just have to stop thinking that next year things are going to be normal." To which FT added: "Interest rates are not going back up anytime soon, the role of the dollar is under scrutiny - both as a haven asset and as a medium of exchange - and trade uncertainty has become a permanent feature of policymaking."
 
"[H]istory," Carney concludes, "teaches that the transition to a new global reserve currency may not proceed smoothly. Consider the rare example of the shift from sterling to the dollar in the early 20th Century - a shift prompted by changes in trade and reinforced by developments in finance. The disruption wrought by the First World War allowed the U.S. to expand its presence in markets previously dominated by European producers. Trade that was priced in sterling switched to being priced in dollars; and demand for dollar-denominated assets followed. In addition, the U.S. became a net creditor, lending to other countries in dollar-denominated bonds." In other words, it laid the foundation for the so-called American Century that followed."
 
There are other straws of course, but the ones above are the biggest ones -- and the closest together. Without doubt, something is definitely going on behind the scenes -- and there now appears to be some real urgency to it.
 
The financial Frankenstein system that we are now buried in, is so large, incestuous, inter-entwined -- and unstable, that saving it in any form is no longer an option. Any hope that a slow unwind is possible disappeared well before the meltdown of 2008/9, Long-Term Capital Management, or the crash of 1987.
 
And as Jim Rickards said above..."[The IMF] see the meltdown coming and just want to be able to say "I told you so." They're not actually doing anything about it."
 
The new monetary system that arrives from the ashes will be almost unrecognizable from the one that exists now -- and the chaos and confusion as we change from the old to the new, will be considerable. You can also rest assured that the powers-that-be will put that crises to good use.
 
But there should be no doubt in anyone's mind that gold will be at the center of it -- and at a price that we now consider fanciful. And since that will certainly be the case, one can only fantasize as to what the price of silver will be. But whatever it is...it will, without question, be equally shocking -- and in the process, become the new gold.
 
I'm sure that Jamie Dimon, along with a host of other deep state players, has been aware of that for a very long time. Right now we appear to be in some sort of 'care and maintenance' phase until this event manifests itself.
 
And as I said to Jim Rickards -- and to you as well on many occasions in this space...the meltdown will most likely come by design, not by circumstance...although the latter may be used to precipitate the former.
 
That's why I'm still very comfortable with being "all in".
Who owns the most silver? Who is the biggest silver short on the COMEX? It’s one and the same….
 
JPMorgan's COMEX silver stash is now up to 159 million troy ounces. I mean, that’s a LOT of silver. Could their plan be to hold the price down by shorting silver and then accumulate as much as possible at the lowest price? I think you could build a case on that.
The International Monetary Fund's Global Financial Stability Report concluded that "Policymakers urgently need to take action to tackle financial vulnerabilities," It’s a little late for that, don’t ya think!
 
The International Monetary Fund has presented us with a Gothic horror show. The world's financial system is more stretched, unstable, and dangerous than it was on the eve of the Lehman crisis.
 
Quantitative easing, zero interest rates, and financial repression across the board have pushed investors -- and in the case of pension funds or life insurers, actually forced them -- into taking on ever more risk. We have created a monster.
 
There are "amplification" feedback loops and chain reactions all over the place. Banks may be safer -- though not in Europe or China -- but excesses have migrated to a new nexus of shadow lenders. Woe betide us if this tangle of hidden leverage is soon put to the test.
 
That broadly is the message of the International Monetary Fund's Global Financial Stability Report, always a thriller but this time almost biblical. "Policymakers urgently need to take action to tackle financial vulnerabilities," said the fund's directors piously. It is a bit late for that, my friends.
 
Even a moderate shock would cause company "debt-at-risk" -- that is, where the debtors do not earn enough to cover interest payments -- to spiral up to $19 trillion. This is a staggering 40 percent of corporate liabilities.
 
The tally includes a future cascade of "fallen angels" now perched at BBB ratings just above junk. Such firms will be squeezed mercilessly by tumbling earnings and soaring risk spreads in a downturn.
 
There's nothing new here, but when the IMF spells it chapter and verse -- and Ambrose is all over it like white on rice, you know how serious it really is. All we can do is wait in quiet desperation for the day of denouement. This  absolute must read  commentary by Ambrose is posted in its entirety on the  gata.org  Internet site . 
The Fed’s solution is to inflate the money supply and to lower interest rates. It can only end one way. Here is Bill Bonner’s take on the Fed’s policies…
"The Federal Reserve will soon resume purchases of short-term US Treasury bonds to expand its balance sheet in hopes of preventing a repeat of the recent disruption in overnight "repo" markets, chairman Jay Powell said on Tuesday."
 
Well, the good news is that if inflation is what they want, inflation is what they'll get. But not necessarily the tame, friendly, housebroken inflation they are hoping for.
 
The monetary inflation that the Fed is pushing now will be followed by fiscal inflation (bigger deficits).
 
But fiscal inflation will lead to consumer price inflation, the kind that lowers the value of money, increases the prices of goods and services, and wreaks havoc on just about everyone.
 
 
We've seen how both Trump and Warren, the Federal Reserve, Congress, Krugman, Summers, the powers that be, and all the ships at sea are committed to inflating our way out of the debt trap.

Just yesterday, Jerome Powell, top honcho at the Fed, reaffirmed the bank's readiness to pitch in as needed. The Financial Times reports:
 
"The Federal Reserve will soon resume purchases of short-term US Treasury bonds to expand its balance sheet in hopes of preventing a repeat of the recent disruption in overnight "repo" markets, chairman Jay Powell said on Tuesday."
 
Well, the good news is that if inflation is what they want, inflation is what they'll get. But not necessarily the tame, friendly, housebroken inflation they are hoping for.
 
The monetary inflation that the Fed is pushing now will be followed by fiscal inflation (bigger deficits).
 
But fiscal inflation will lead to consumer price inflation, the kind that lowers the value of money, increases the prices of goods and services, and wreaks havoc on just about everyone.
 
This commentary from Bill showed up on the  bonnerandpartners.com  Internet site early on Wednesday morning EDT --
Like I said, the dollar is being attacked and Russia, China, Iran and other countries are joining forces to bring it down.
 
After repeated warnings over the past couple of years, Turkey and Russia have signed a pact to increase use of the ruble and lira in cross-border payments, with Turkey signing on to Russia's alternative to SWIFT, the international telecommunications protocol used by banks and central banks the world over.
 
Though SWIFT is an international cooperative owned by its members, with more than 10,000 banks worldwide relying on its system for handling sizable inter-bank transactions, the safety of the network was brought into question after a series of cyber attacks in 2015 and 2016 resulted in the theft of $101 million from the Central Bank of Bangladesh.
 
For the first time since SWIFT's launch, the hacks stoked doubts about the system's safety, and prompted many U.S. rivals, including Russia, to ramp up work on their alternatives to SWIFT.
 
In addition to Turkey, China and Russia have signed agreements to bolster trade between the two countries, including settling a larger percentage of their bilateral trade in rubles and renminbi. For China, bilateral trade with Russia grew from $69.6 billion in 2016 to $107.1 billion last year. China is Russia's biggest partner for imports and exports.
 
There has also been talk about India joining Russia's SWIFT alternative as Washington continues to threaten New Delhi with sanctions over its decision to purchase Russian-made missile-defense systems.
 
According to Reuters, Russian Finance Minister Anton Siluanov signed the agreement with Ankara on Tuesday. The agreement, signed on Oct. 4, will encourage the two countries to start using Russia's system in mutual settlements.
 
As Putin warned, American sanctions against Russia are a "colossal strategic mistake" and eventually risk undermining the dollar-based hegemony of the global financial system.
 
This news item put in an appearance on the  Zero Hedge  website at 4:15 a.m. EDT on Wednesday morning -- and I would have included it in yesterday's column, except it was posted on the ZH website about ten minutes after I filed Wednesday's column. 
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About Miles Franklin

Miles Franklin was founded in January, 1990 by David MILES Schectman. David's son, Andy Schectman, our CEO, joined Miles Franklin in 1991. Miles Franklin's primary focus from 1990 through 1998 was the Swiss Annuity and we were one of the two top firms in the industry. In November, 2000, we decided to de-emphasize our focus on off-shore investing and moved primarily into gold and silver, which we felt were about to enter into a long-term bull market cycle. Our timing and our new direction proved to be the right thing to do.

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