The Great Market Deception Steam Rolls On…A Little Longer!

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The Crash of The U.S. Bond Market Will Be The Final Nail In The Coffin – This United States Treasury Sell off is For Real! – The Country Pays Around $223 Billion in Interest On Its Debt – Is the Economic Data Really Improving or Not? – Are Stock Market Prices At All Justified Today or Are They Headed for a Huge Fall to Precious Metals Benefit?

The Great Market Deception Steam Rolls On...A Little Longer!In the last issue, you saw the fiction begin to crack regarding equities and bond markets. This week, that new reality continued to rear its ugly head in markets worldwide. Art Hogan of Lazard Capital Markets stepped out from his traditionally mainstream media environment to make a very profound statement.

“It almost feels as if this is the beginning of the correction… There is uncertainty over Japan and uncertainty over the pace of QE…”

In the silver markets, this translated to some consolidation in prices for the week that ended Friday, May 31st. The white metal gapped up on the spot market open to $22.61 from its prior week close of $22.39. It drifted lower to $22.26 by the spot market close Friday for a decline of 1.5%.

Silver struggled to gain ground as Goldman Sachs attempted to rally all the retail investor suckers into continuing to buy stocks, as economic data demonstrated that it is actually not improving in the U.S., and as the Hindenburg Omen appeared like the angel of death over global markets.

The Crash of The U.S. Bond Market Will Be The Final Nail In The Coffin

Should You Really “Keep Calm and Carry On” Buying Equities over Silver and Gold when the U.S. Bond Market and Interest Rates are in Real Trouble?

You can always count on Goldman Sachs as the world’s largest investment bank to scream “buy, buy, buy” even as they are running for the markets’ exit doors themselves. This past week was an even more stunning example of their say one thing do, do another investment advice approach. On Thursday, they exhorted everyone with the phrase “Keep Calm and Carry on Buying” (equities).

The basis for their argument was that when real interest rates are rising and bonds values are declining, this is supposed to be good for stocks. Apparently the Nikkei Japanese stock market index saw things differently, as investors there crushed the index by a dizzying 15% decline in just over a week!

“This United States Treasury Sell Off Is For Real!”

The upsetting thing about Goldman’s recommendation is that the same week, they issued another memorandum that stated “This United States Treasury Sell off is for real!” In this particular piece, they warned investors to cash out of their U.S. government debt. The day of reckoning has finally arrived. It is in fact not bullish for stocks as they would have you believe. Instead, it will be bullish for the precious metals complex.

The reason for this is not so straightforward as the mass financial media would have you believe. They tout the fact that higher interest rates could be good for the right stocks. They also claim out of the other side of their twisted mouths that such rising rates would kill the precious metals bull markets.

They are ultimately wrong on both counts because of a crucial little detail about which they have neglected to tell you. Higher interest rates, even at a historically normal level of from 5% to 7%, will destroy what little remains of the U.S. government’s finances and fiscal credibility.

In the days under former Presidents George W. Bush and Bill Clinton, the debt levels of the U.S. were at a more sustainable five to ten trillion dollars (only!). Even though those numbers were high, the country’s budget could service a normal interest rate level on its debt if interest rates had risen to historical norms.

The Country Pays Around $223 Billion in Interest On Its Debt

Thanks to the financial ineptitude of the current administration and runaway spending to no real purpose, the U.S.’ fiscal affairs have deteriorated substantially. To give you some idea of where things stand today, at the artificially low interest rates of near 0% that the U.S. government currently enjoys, the country pays around $223 billion in interest on this debt.

With an over $16 trillion in debt, the U.S. will struggle to make even simple interest payments on it at historically reasonable levels of just 5%. This would put interest payments alone at a shocking approximately $850 billion USD, an amount about as large as the entire defense budget in a year!

If the interest rates return to a historical norm of 7 %, then the interest on today’s debt would amount to nearly $1.3 trillion for just one year! Remember that the tax receipts, or income, of the Federal government are maybe $2.5 trillion these days. This means that about half of the entire Federal income would go to cover the interest on the national debt alone!

And this all assumes that the Federal debt does not rise. The Congressional Budget Office estimates that by just 2015 (a mere two years from now), the U.S. Federal Debt will rise to over $19 trillion! That would raise the interest payments on the debt by another third…you can see where this is headed – to national financial ruin.

This new bond vigilante attack on U.S. interest rates bears watching. It is not an exaggeration to claim that higher interest rates could potentially spell the annihilation of U.S. public finances. Shame on Goldman Sachs for their recommendations to buy equities and sell precious metals today! The enormously big brains and power bosses at Goldman know very well that this means a death spiral for equities and bonds. For precious metals, it means a stratospheric surge higher.

Is the Economic Data Really Improving or Not?

The mainstream media continues to cry out that “the economy is really improving.” They have changed their message a little now to say that “it is improving, even if at a little slower pace than we thought before.” If this is true, they argue, than silver and gold prices should collapse. The analysts and economists who are the sworn enemies of the precious metals believe that there is no basis for the bull market run to continue or precious metals prices to even remain “elevated” if there is no inflation and no economic uncertainty.

Enter Another Episode of Economic Reality Check 101

This past week’s economic data continued to demonstrate that the U.S. economy, and also the overall world economy, is not really getting better. This is the tragic case even seven years after the world economy and financial system imploded. For the past week, the data showed that weekly jobless claims were higher than expected.

The important second quarter GDP reading came in lower and weaker than expected. The much touted housing market recovery took a bullet to the head too. Pending US home sales came in lower than expected to make it another trifecta of terrible economic news.

Friday saw still more negative economic reports surface. The all important U.S. consumer spending declined for April. This represented the first drop (in this 70% of all U.S. economic activity report) for about a year. On the back of this news, the dollar sank and gold rallied fairly impressively.

Silver did not follow its big brother gold’s lead this time. It gave in to its split personality side of industrial uses that tend to register lower demand when the economy is declining rather than expanding.

Are Stock Market Prices At All Justified Today or Are They Headed for a Huge Fall to Precious Metals Benefit?

All of this week’s behind the scenes analysis may lead you to wonder how stocks are still going up and precious metals are struggling to regain their once lofty peaks of the past year. The mainstream media continues to tell you that the Dow is headed to 20,000 in the next few years.

Yet every now and then, a voice of reason and rationale speaks out amid the din of this insane and completely unjustified (money printing based) stock market rally. This past week, someone dared to float the following chart to shake up the Wall Street titans whose eyes are blurred to reality by the rose colored sun glasses of unstoppable rally mode.

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