The Miles Franklin Newsletter
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From The Desk Of David Schectman
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"The world will come to an end only once" - Art Cashin
David's Commentary (In Blue):
Greg Hunter interviewed ShadowStats John Williams and Williams told Hunter:
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"What the Fed has done with their easing, according to the Fed, is they created a circumstance of sustainable moderate economic growth. So, they don't need to cut rates anymore. That's nonsense. You don't have sustainable moderate growth. For example, look at this last month, industrial production is in a state of collapse... Manufacturing is negative... Oil production is collapsing year to year as oil and gas exploration has plunged. . . . Retail sales have been overstated in employment... That's going to be revised lower...
We have been getting better numbers as of late, and the economy is still falling off a cliff."
Maybe that explains the Fed's panic moves with $60 billion a month QE, which it says is not QE, and extreme intervention in the repo market where the Fed routinely pumps out tens of billions of dollars in liquidity a night. Williams says, "The system is not stable, and it probably is insolvent..."
"They blew the system back in 2007. They gave up on the domestic economy to save the banking system...
They spent all their resources propping up the banks, and they are still doing the same thing, and it's still costing us in terms of economic growth."
So, the Fed is pumping out billions of dollars every month, and yet, the economy keeps sinking. What does this tell Williams?
"The system is not operating properly. These are stopgap measures, stopgap liquidity that the Fed is putting into the system. If they understood what was going on, they would not be doing that. They wouldn't have to do it. They have lost control of the system effectively," says Williams.
Williams goes on to say, "It tells you the underlying system is unstable..."
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Unstable? It's finished.
As John William said in his interview with Gregg Hunter..."
They've effectively lost control of the system
" -- and since that certainly appears to be the case now, it can't be overly long before it collapses in a heap on its own, or is deliberately allowed to fail. There's no other way out of this...none whatsoever.
I sent a copy of the Williams interview to my friend Lou, who is a wealthy investor whose portfolio is made up primarily of stocks, real estate and cash. He does not own any gold or silver.
He sent me the following Email:
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Should they not have saved the banking system?
They did both. They saved the economy and the banking system.
This is a fluid situation on a daily basis all over the world.
It is a constant work in progress. it's like balancing all things on the head of a pin.
What is Mr. Williams solution?
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I replied:
In a free market system you allow the inefficient, unprofitable and poorly run businesses to fail. They will be replaced by well run profitable ones. The process is called a “recession.” It rids the economy of dead weight and inefficiency.
Sure there would be pain. Life starts out with pain (childbirth), but then you can start over again with a clean slate. That is the problem. The Fed refuses to allow any pain; they refuse to allow the stock market to fall or the economy to contract. But that comes at a price. When the next crisis hits, it will be worse than what we had to deal with in 2007. Why? Because they didn’t fix anything, they just papered it over with trillions of dollars and the problems only got worse. Why do you think the fed is so afraid to let interest rates rise? Why do you think they reinstated QE? What are they afraid of? They’re not fools. They let things get out of hand and are boxed into a corner.
You asked, “What is Mr. Williams’ solution?” At this point, I don’t think he has one.
Lou replied:
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Dave
I am fully aware that what you say makes perfect sense. With that being said, conventional wisdom is always perfect UNTIL IT ISN"T.
There are more ways to skin a cat then one.
I am not smart enough to say definitively which way is the best.
"The world will come to an end only once" - Art Cashin
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I replied:
Art Cashin may be right - and the fact that the Fed didn’t properly deal with the 07-08 crises, which we could have survived, makes the next one more likely to be the last one. That is the point. By not allowing recessions and the To-Big-To-Fail mal-functioning banks to fail insures that the next “crisis” will be worse.
It’s not just happening here; it is also happening in China and Japan and in Europe, where they are keeping Deutsche bank, the largest bank in Germany afloat on life support. Because of a massive amount of derivatives, which inter-connects banks, hedge funds and businesses, the Fed literally can no longer allow any major banks to fail.
On September 15,
2008
, Lehman Brothers filed for bankruptcy Merrill Lynch, AIG, HBOS, Royal Bank of Scotland, Bradford & Bingley, Fortis, Hypo Real Estate, and Alliance & Leicester were all expected to follow. A US federal bailout was announced the following day beginning with $85 billion to AIG.
We can expect the Fed to try. Their only tool is to create more and more money to throw at the problem but this time it will not save the stock market or the economy. It will, however, do great harm to the dollar and, like in 2008, gold and silver will find lots of bids.
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Today's environment is drastically different than it was in the late '70's and early '80s when inflation was nearly out of control. Today, disinflation is the primary challenge central banks face, not inflation.
It's impossible to imagine another Volcker today. Today's markets depend on the artificially low interest rates that the Fed's been generating since 2009. Raising interest rates would devastatingly pop the asset bubbles in stocks and elsewhere.
Remember how markets revolted against the possibility of further rate increases last December, when rates were still under 3%? Imagine 20% interest rates.
But the problems in the economy today are structural, not liquidity-related. Federal Reserve officials have of course misperceived the problem. The Fed is trying to solve structural problems with liquidity solutions. That will never work, but it might destroy confidence in the dollar in the process.
Fiat money can work but only if money issuance is rule-based and designed to maintain confidence. Today's Fed has no rules and is on its way to destroying confidence. Based on present policy, a complete loss of confidence in the dollar and a global currency crisis is just a matter of time. The link can be found
here
.
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At this point, keeping the stock market steady in plan A and plan B. The stock market is the economy. As long as it is going up, or at least not falling, investors have “confidence” that everything is fine. We can overlook a trade war with China, tariffs, the impeachment proceedings and any other so-called “bumps in the road.” But just make sure that gold and silver are held in check. We can’t allow those damn precious metals to send negative signals.
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In the bottom half of the U.S. population, 117 million adults earn an average annual wage of $16,000 a year.
These people are worse off than they were at the end of the last century... and probably worse off than they were when the Fake-Money Era began in 1971.
– Ed Steer
“I’ve said so many times it makes me sick: I don’t believe the numbers anyway. I just look around at the economic malfunction. You know, banks announcing layoffs. The car companies, production’s lousy. The industrial production indexes are weak. The softness around the world is incredible, OK? It’s not just in the United States. The German industrial production was down sharply again in November. Obviously, the Chinese are suffering from this trade war, as are the Americans. But somehow it doesn’t seem to show up in the jobs number. But we have to live through these things. And, of course, the favorite thing is: Knock gold down. ”
– Eric Sprott
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Ed Steer
Like all the other statistics coming out of the U.S. government, those job numbers yesterday were massaged to perfection -- and as Zero Hedge correctly mentions in a story in the Critical Reads section, a lot of those permanent jobs added in November were the GM employees going back to work after the strike.
And as Bill Bonner pointed out in an article [albeit dated] headlined "
America's Hidden Depression
"...rings even more true today than when the article was first posted...
"What we see is claptrap. The dots don't connect.
In a labor pool with barely any increase in average wages, if some wages are going up, other wages must be going down.
And in a country where growth is concentrated in a few urban-suburban conglomerates - Washington, D.C., New York, San Francisco, etc. - there must be a lot of places where people are not drinking cappuccinos, sending their children to private schools, or listening to NPR.
In the bottom half of the U.S. population, 117 million adults earn an average annual wage of $16,000 a year.
These people are worse off than they were at the end of the last century... and probably worse off than they were when the Fake-Money Era began in 1971.
But we'll let you draw your own conclusion."
Then Tucker Carlson of Fox News had a few things to say about how the influence and corruption of Wall Street hedge funds has slowly crept into rural America, now that they've raped and pillaged everything else. The banner headline on the screen reads "
Paul Singer: "The World's Most Feared Investor"
". The
youtube.com
video is datelined Tuesday, December 3 -- and the link is
here
.
Couple the above with the fact that Wall Street, the New York banking syndicate, along with the Federal Reserve have removed all price discovery from any markets that matter...things will continue along until the whole thing collapses in a heap.
And collapse it will. The average person in the street thinks everything is OK, because the government is telling them so -- and the major U.S. stock indices are hitting new all-time highs just about every week. Jobs are plentiful -- and interest rates are low...so what's the worry?
But a lot of them figured out some time ago that things weren't right in this world, even though they couldn't quite put their finger on it -- and the election of Donald Trump was the end result of that.
The problem is that this massive intervention in all market either by willful act, or jawboning, is all "bread and circuses" for John Q. Public...as it was for the citizens of Rome as the Republic fell into ruin. Behind that propaganda is an economic, financial and monetary system that floated off the rails long ago -- and is only kept going by massive money printing/debt issuance.
Not even negative interest rates will save the U.S. now. It has been tried in Europe -- and Japan -- and look where that's got them. As I, along with many others now, have been pointing out for a long while -- and only became crystal clear in September when the Fed announced their "temporary" repo scheme...this is a trap from which there is no escape...none whatsoever. It has become "Print, or die" -- which has immediately morphed into "Print -- and die".
Of course the die was cast the moment that Nixon took the world off of what was left of the Bretton Woods-based gold standard back in August of 1971 -- and we've been slowly circling the drain since. But with the Fed announcement in September, it became abundantly clear to a lot of people that the U.S. financial system had crossed the black hole equivalent of an "
event horizon
" -- and the fate of the U.S...along with the rest of the world was sealed.
Not that it wasn't before, mind you, but the events of September was proof positive that the time between now -- and the "end of all things" is accelerating at Warp speed. We're only one black swan or false flag away from total collapse. It will be too big even for the world's banks to fix -- and they may have no desire to do so. As I keep saying, the end will come by either circumstance...or design...or a combination of both. Since the system cannot be saved, the IMF and other key world central banks, may precipitate the end themselves -- and at a time of their choosing.
Besides the ultimate economic, financial and monetary chaos that will follow this event...what will most certainly return at some point will be a gold-backed currency of some sort. As we have noticed at an ever increasing rate over the last few years, many countries, as quietly as they can, have been buying gold...or repatriating gold they already own, as fast as they can without alarming their citizenry.
And I also suspect that this price management scheme in the precious metals will end in a similar fashion...when JPMorgan desires it...or even more likely, when they're requested to step aside. That will come concurrently with "the end of all things" -- and may even be the event that precipitates it.
At that point, as I and many others have stated in the past..."He who has the gold [and silver] makes the rules."
That will certainly include JPMorgan -- and judging by the amount money going into the precious metal equities, depositories, ETFs and mutual funds over the last fifteen years or so...us as well.
I'm still "all in"
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The following article from Zero Hedge points out that the Fed is doing what the only thing they know how to do – throw money at the problem.
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"When the Fed buys Treasuries, they're increasing the balance sheet. They're increasing the monetary base and effectively its debt monetization." - David Einhorn.
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And the result will be what I mentioned earlier in today’s commentary.
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In many ways that is what risk markets are yearning for: forward expectations of QE. Meanwhile, as we wait the risk is that the Fed’s balance sheet can actually temporarily shrink before growing.
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The Central Banks don’t care. Those with wealth get richer as their stocks continue to rise, thanks to the Fed’s low interest rate policy and easy money. If you own stocks, you are thrilled, but the rest of us fight to survive and we will have to face the result of this financial insanity.
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Once upon a time, it was considered blasphemy by the very serious people, that central banks are directly targeting - and seeking to boost - stock prices. How the times have changed...
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Egon von Greyerz says, “
By 2025 the total financial system will not only be unrecognizable but also a mere shadow of what it is today.
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Egon von Greyer
SELL THE NASDAQ AND BUY GOLD
In the long history of governments and central banks deceiving the people, August 15 1971 was just another date in the calendar. Throughout history, the ruling elite has always cheated the people. But the leaders’ irresponsible actions are always revealed as in the end they always fail.
Still, in modern times August 15th 1971 was a monumental day. That day was not the end of the financial system, and not even the beginning of the end. But it was perhaps the end of the beginning. Historians will recognize this paraphrasing of Churchill after the Allies’ El Alamein victory in 1942.
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Private Safe Deposit Boxes
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Unencumbered / Segregated Storage
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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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