The Bernanke Put Begins to Lose It’s Magic – Are Silver and Gold Truly Unnecessary in A Day and Age Where the ECB Might Lower Rates to Negative? – ECB Ready To Move Deposit Rate to Negative – Can the “Bernanke Put” Really Continue to Roil Silver and Gold Markets? – The Warped Logic of Money Printing – Did the Payroll Report and Other U.S. Economic Data Last Week Show Things Are Getting So Much Better As to Justify Selling Off Silver? – Now The Budget Cuts Are Weakening The Economy.
Over the last few years, you have probably heard the phrase the “Bernanke Put” thrown around like so much confetti at a never ending dance party. This is because it has helped to explain why stocks have been on a runaway freight train since the Great Recession moderated back in 2010.
Lately, it has also been abused as an excuse to bash and sell off silver and gold. In this issue, you will see why the mainstream financial media is once again spinning you a yarn when they spoon feed you the line that the Bernanke Put will solve all of the world’s financial problems and save your soul.
The Bernanke Put Begins to Lose It’s Magic
Silver took a significant setback this spot market week that ended Friday, June 7th. The white metal at first gapped up from the prior week’s $22.26 close to $22.60. It then wavered later in the week to finish up the spot market close on Friday at $21.65. This left silver with a disappointing 4.2% drop for the week. It represented a less severe pullback of 2.7% versus the close the prior week on Friday, May 31st.
Silver suffered this setback as the mainstream financial gurus glossed over the fact that the ECB is considering lowering their real interest rates to negative, as they sold you the lie that the Bernanke Put will continue to make precious metals irrelevant, and as they misled you about the ugly undercurrents of the monthly unemployment report.
Are Silver and Gold Truly Unnecessary in A Day and Age Where the ECB Might Lower Rates to Negative?
Mainstream financial media continues to undermine the idea that silver and gold are necessary to protect you against the inside job of central bank malfeasance. Barclays Global Capital is the founder of many of the biggest and best known Exchange Traded Funds and a long time commodities super bull. Yet in just the last week, even they have begun to express doubts about the medium and long term viability of silver and precious metals prices.
They reported dismal Aril net outflows of $8.7 billion for precious metals in exchange traded products. A few weeks before that, Great Britain’s HSBC Bank (the world’s largest bank by balance sheet size), France’s Society General, Switzerland’s Credit Suisse, Australia’s Macquarie Bank, and the U.S.’s very own BlackRock all ganged up on silver at once and tried to destroy the future prospects of the white metal when the proverbial silver chips were down for the count. You can listen to the international gang of thieves, or you can look beyond the curtain to see what is really happening with central bank financial malfeasance.
ECB Ready To Move Deposit Rate to Negative
The truth is stranger than fiction in the all powerful central banking world these days. This past week, the European Central Bank decided to let out an evil genie from the fiscal policy bottle. Mario Draghi, the wily ECB Chief, made a special announcement after he telegraphed that they would keep both deposit rates and interest rates unchanged within the world’s largest economic block. He said that they are “technically ready” to move the deposit rate of the powerful European Central Bank to a real negative number.
A real negative interest rate is a dangerous move into financially uncharted territory.
It means that the bank would charge interest from commercial banks that put their money on deposit with the central bank overnight. In other words, commercial banks will have to pay to keep their money in the electronic vaults of the central bank.
In layman’s terms, this is more “loose monetary policy,” to use the glib words of Mario Draghi and the ECB masters of the universe. The translation – the money printing and flushing away of the financial systems of the world will continue to grow worse with time, not get better!
This is not at all a fiscal or monetary policy environment that would make the precious metals obsolete dinosaurs. To the contrary, silver and gold are more essential than ever before as financial safe haven – safe guards!
Can the “Bernanke Put” Really Continue to Roil Silver and Gold Markets?
Wall Street’s so called smart money managers have continued to trumpet the phrase that the markets simply can not go down anymore because of the famed and now infamous “Ben Bernanke Put.” With this catchy phrase, they actually espouse the idea that Ben Bernanke and his money printing band of merry outlaws at the Federal Reserve will simply provide a floor for stocks at any point that they start to go down.
They do this by printing still more worthless paper greenbacks that are not backed up by anything but thin air (also known as the greatly shaken “full faith and trust” in the credit worthiness of the United States). It has provided Wall Street with all the excuse they needed to once again move away from real, tangible, physical assets like silver and gold and back into the imaginary, shadowy, ethereal assets like risky credit default swaps (CDS’s) and collateralized debt obligations (CDO’s). Between them, these two scary investments were the notorious financial weapons of mass destruction that wrecked the world economy just a few years ago.
The Warped Logic of Money Printing
This has translated into a warped logic that now reigns on Wall Street. The prevailing wisdom is that if the economic data is bad, then stocks go up while silver and gold decline. This is because the thinking is that Bernanke will print more money and risk assets should shoot for the moon (even though when more money is printed, silver and gold should gain in value).
When the economic data is good, then stocks decline and precious metals go up. The twisted reasoning here is that Bernanke will stop printing money and kill the world equities markets. This would create uncertainty and havoc and therefore harm risky assets in favor of precious metals (even though in such a scenario, in theory precious metals could decline).
So bad news is good news and good news is bad news with Wall Street now. What is the world coming to?
Is it any wonder that silver prices declined this past week even though most of the economic news was bad (ah yes, but the lackluster employment report on Friday was hailed as good news, so why did silver not go up then)?
If you are feeling a little dazed and confused by all of this ridiculous and hopelessly convoluted logic, you are not alone. Just remember this key phrase and the whole befuddled mess will at least be understandable to you (even though it is still utter nonsense that Wall Street has sunk to nowadays). Traders have utilized the weak economic data to keep alive their hopes that the Federal Reserve will not put the brakes on its nefarious monetary easing (money printing) in the near future.
Did the Payroll Report and Other U.S. Economic Data Last Week Show Things Are Getting So Much Better As to Justify Selling Off Silver?
Now you understand the bizarre logic of the Wall Street titans these days. This will help you to comprehend how and why the powers that be sold off silver fairly aggressively on Friday. They did this even though the economic news had been fairly bleak all week. With Friday’s unemployment report, they changed their posturing on the precious metals once again. This was because they somehow believed the unemployment report to be positive.
Mainstream financial media continues to try to fight the increasingly negative newswires. Growth estimates from throughout the world were lowered this week. Thursday saw the European Central Bank roll back its economic forecasts for the once mighty Euro Zone.
Analysts had expected Chinese data to be strong, but it came in weak at the end of the week as well. Meanwhile on the U.S. data front, home loan applications cratered 11.5% from the previous week as interest rates rose above 4%. This was the first time that interest rates had spiked so high in a year.
Now The Budget Cuts Are Weakening The Economy
The Federal Reserve released its Beige Book and attempted to gloss over the still souring economic situation. Yet they tipped their hand when they admitted that hiring remains sluggish and the sequestration budget cuts out of Washington D.C. are weakening the economy.
This is particularly true in the defense industry that is so sensitive to government spending. National factory activity manufacturing data declined in May. This turned out to be the first such contraction in six months.
Declining orders from the U.S.’s own deep spending cuts version of austerity were the main culprit. Add to that recession hit European declines in consumer demand as well as softening Chinese demand and you have a potential recipe for worldwide recession.
The data indicates that there will be continuing factory activity weakness in the U.S. Coupled with a significant decline in April industrial production this translates to reduced economic activity from America for some time to come.
The U.S. unemployment report that economists and money managers touted as showing that things are getting better was also a bold faced lie. The unemployment rate actually increased back to 7.6% (though the true U6 government unemployment number is still at 13.6%!). Jobs growth is just not strong enough to keep up with the growing demand from people who need work.
Uncertainty in the World is Bullish For Silver’s Safe Haven Nature
Let’s review the truth for a moment and try to ignore the mainstream media’s fables. Economic data from last week did not show that things are improving for the U.S. or the world for that matter. Silver was still sold off.
Mainstream media told you that the reason lay in investors walking away from safe haven precious metals after the employment report encouraged them to chase high risk assets. The truth is that silver declined in part because of its split personality.
Uncertainty in the world is almost always bullish for silver’s safe haven nature. The declining economic output of the world is nearly always bearish for silver’s industrial use nature. This week, the industrial use side won out in the epic struggle for silver’s price direction. Next week could be a whole different story.