Gold and Silver – Skating on the Thin Ice

The essence of propaganda consists in winning people over to an idea so sincerely, so vitally, that in the end they succumb to it utterly and can never escape from it.”
-Goebbels

Central bank induced inflationary bubbles have succeeded in stoking yet another round of irrational exuberance. Or rather, what sadly boils down to ignorance and hope.

And behold once again the build up of short interest in real money as cracks in the thin ice become more and more obvious.

For gold and silver, a true conception of market risk by a mere cluster of new investors would trigger the final separation of futures from the spot price. 

Massive and unprecedented intervention has resulted equally sensational imbalances that upon closer inspection, reveal the cracks and the thin ice holding confidence together.

Sadly, the mainstream investor is not betting against the Fed this time around. Indeed, many have unflinching faith in their monetary masters.

Of course, the major problem, now midway through 2016, is that global central bankers do not have things under control.

Far from it.

It is fascinating (and mesmerizing) that complex systems can function as long as they do so without breaking. Part of it is has to do with greater fools willing to stay in the system just long enough to “profit”.

The suppression of interest rates has resulted in three asset bubbles this time around: Bonds, equities, and housing.

Ordinarily, interventions like this would put severe pressure on the underlying currency.

A rapidly devaluing currency would make the interest rate suppression a fruitless exercise.

Herein lays the 'grand motif for putting down the alternatives – gold and silver. And with this, the inherent value of anything is questionable. 

Of course, this is not how investors view the world on the surface.

Everyone wants to be a trader. And a fool and his money are soon parted via the proxies who hedge the metals on rigged futures exchanges. 

With long term interest rates pegged at essentially zero, and no end to equities rallies, the allure is too much for the dollar-bug wanna-be trader.

Many see this period as the most glorious period ever in financial market history.

In spite of massive monetization, nationalization of GSE’s, multiple QE programs, gigantic expansion of the welfare state, and infinite borrowing and trade deficits.

The perception of low to no inflation by official measure provides cover for not normalizing interest rates sooner, rather than later.

Jobs, livelihoods, and industries depend on this.

This is how the average investor views events.

Most folks are missing the reality when it is right in front of them. We trust that the ice can hold. 

It is an unintended consequence of manipulation.

A perfect example of how behavioral finance replaced the way an underlying economy might normally respond.

And we are all more 'fragilized' to risk.

Inflation is alive and well to anyone who breaths. Food, energy, education – off the charts.

Unemployment benefits, social security, and food stamps.

Debt loads are at all time highs. Public, private, and especially students.

By almost every measure, the underlying economy is weak. Workforce participation is abysmal, inflation adjusted wealth has been stagnant for decades.

Back to the Future

And here we find ourselves today with the quasi-nationalized (too big too fail) hedgefund-banks sitting out on a limb as the only (barrier) 'short' to a stark reality. 

A reality that few will see, until it is too late.

With 545 Million paper ounces against the flow of less than a billion physical ounces of world annual production, silver shines as the great loadstar toward safety. 

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