Traditionally, metals markets are supposed to be a solid fundamental signal of the physical and psychological health of our overall economy. Steady but uneventful commodities trade meant a generally healthy industrial base and consumption base. An extreme devaluation was a signal of deflation in consumer demand and a flight to currencies. Extreme price hikes meant a flight from normal assets and currencies in the wake of possible hyperinflation. This is how gold and silver markets were originally designed to function – however, welcome you to the wacky world of 2013, where bad financial news is met with the cheers of investors who believe stimulus will last forever, where foreign investors dump the U.S. dollar in bilateral trade while mainstream dupes argue that the Greenback is invincible, and where everyone and their uncle seems to be buying precious metals yet the official market value continues to plunge.
Is this weird? As Bill Murray would say: “Human sacrifice! Dogs and cats living together! Mass hysteria…!”
The reason our entire fiscal system now operates in a backwards manner is due to one simple truth – every major indicator of our economy today is manipulated by our central bank, which uses its printing press to prop up everything from equities to treasuries to municipal bonds. They openly admit to it. They are proud of the fact. They swagger about as if they are the heroes of the day. They act as if we should be thankful. But what is reality here?
First, let’s lay out some very straightforward undeniable facts about our economic situation that no one with any intelligence could argue against:
Fact #1: Our Economy Is Supported By Federal Reserve Stimulus
For the past few years, the Fed has created dollars out of thin air to fill the debt void in corporate banks, in U.S. Treasury Bonds, in city and state municipal bonds, in stocks, and even in foreign banks in the EU. Former Federal Reserve Chairman Alan Greenspan and current branch head Richard Fisher have both admitted in mainstream interviews that stock markets are essentially sustained by the central bank, and that this has been done to give people the psychological illusion of economic health. This stimulus has been relatively constant in one form or another, from TARP bailouts to QE1 to QE3. Fed interest rates on bank lending have been artificially reduced to near zero, meaning international banks can borrow money from the Fed (which it creates from thin air) at almost no extra cost. The fiat is flowing nonstop.
Fact#2: Our Economy Is Addicted To Stimulus
Anytime the Fed suggests it might end or “taper” stimulus measures, the stock market takes a dive. Anytime there is a semblance of good economic news, the stock market takes a dive. Anytime conscientious government representatives (what few there are) suggest that uncontrolled Fed printing is dangerous and should be stopped, Fed or Treasury officials claim that without such stimulus measures, everything will collapse.
Anytime there is detrimental economic news in the mainstream, the stock market rises as investors take bets that the Fed will continue stimulus for just a little longer. I think it is safe to say that it is a fact that our financial culture has become utterly addicted to money printing from the Fed.
Fact #3: Stimulus Has Done Little Or Nothing To Improve Our Economic Situation Since 2008
Where are the tangible benefits of the Fed printing bonanza? Yes, our debt crisis has been stretched out for a few extra years, but has it been solved? Of all the trillions in national debt accrued through government spending, where has the money actually gone?
Have lending standards been relaxed, and are private loans (not corporate loans) anywhere close to pre-2008 levels?
Have real jobs with sustainable incomes actually been created? Or, have millions of full time high paying jobs been replaced with low hour low pay wage slave jobs? Is the Labor Department counting temp-jobs with three month turnovers created by big box retailers like Walmart as real jobs? (Hint: The answer is yes.)