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European Central Bank Slashes Rates to Ridiculous Negative Levels
Special Guest Michael Rivero on Geopolitical Fireworks, Economic Collapse, and Importance of Gold
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Welcome to this week's Market Wrap Podcast, I'm Mike Gleason.
Coming up we'll hear another great interview with Michael Rivero of WhatReallyHappened.com. Michael gives us his candid commentary on a range of issues including how the Syrian refugee crisis could lead to trouble for the U.S. dollar, the likelihood of a coming economic collapse and whether or not it's time to buy or sell precious metals. Don't miss another explosive interview with Michael Rivero, coming up after this week's market update.
Well, it's been quite an eventful week, so let's get right to recent developments. A big market-moving employment number came out today. And market volatility already picked up on Thursday in the aftermath of a mass shooting in California and an interest rate cut in Europe.
The European Central Bank announced a package of new stimulus measures, extending its massive bond-buying program until March 2017. The ECB also cut its already below-zero deposit rate by another 10 basis points to bring it to negative 0.3%. But all this was deemed tepid by markets. Traders had been pricing in an even bigger stimulus program.
The news of a relatively mild easing campaign by the ECB sent the euro soaring against the dollar. The U.S. Dollar Index fell 2.2% on Thursday, one of its biggest single-day declines in recent memory. Global stock markets also sold off, but commodity prices rebounded in dollar terms, with precious metals markets reversing earlier losses.
Gold and silver prices popped this morning upon the release of what was perceived to be a positive employment report by the Bureau of Labor Statistics. Gold comes in at $1,086 an ounce, up 2.5% on the week with all of that gain coming since midday yesterday. Silver flirted with a breakdown below the $14.00 level on Wednesday and Thursday, but prices finished a few cents above $14.00 an ounce on Thursday and have risen sharply this morning. Silver trades at $14.58, up 3.1% for the week as of this Friday morning recording. Platinum prices check in at $882 an ounce for a 5.3% weekly gain, while palladium is currently at $557 per ounce – up just 0.6% since last Friday's close.
On the physical side, low spot prices continue to attract bargain hunters. The latest report from the U.S. Mint shows that the public scooped up 97,000 ounces of American Eagle gold coins in November. That's a 185% surge from October and 62% higher compared to last November. The dysfunctional Mint has now completely sold out of all 2015-dated gold Eagles and will not be producing anymore until the 2016s come out in early January. As of now Money Metals Exchange does still have a small supply remaining of the 2015s.
As for Silver Eagles, sales have already set an annual record at more than 44 million ounces. Of course, the U.S. Mint could have sold way more if it had gotten its act together and produced what the buying public was demanding. This year has seen a raging bull market emerge on the demand side for physical gold and silver bullion. Yet paper spot prices continue to lag as markets trade seemingly disconnected from on-the-ground fundamentals.
Well, ECB officials weren't the only central bankers moving markets this week. On Wednesday, Fed chair Janet Yellen gave a talk and answered questions at the Economic Club of Washington. She reiterated her view that the economy is improving and that she would like to hike rates, though she did not specifically commit to hiking at the Fed's next meeting on December 15-16. The Fed chair did say that the Federal Open Market Committee represents a diversity of views and that we should all feel assured in believing there are differing opinions among those on the committee.
Janet Yellen: I think one of the strengths of the Federal Open Market Committee, and this was built into the design of the Federal Reserve by Congress, is that we've got a range of views at the table. I think falling into a pattern of group-think is a very bad thing that can get organizations in trouble. I will say that the FOMC is an organization that does not suffer from groupthink.
In reality it's actually rather comical to suggest that the narrowly constrained hawkish/dovish debates within the FOMC represent a meaningful diversity of opinion. Nobody who dissents in a fundamental way from the actively managed, centrally planned monetary philosophy that drives the Fed gets on the committee in the first place. One thing is certain, you definitely won't hear Austrian business cycle theory or the virtues of a gold standard being debated at FOMC meetings.
And you won't ever get to know exactly what the Fed does or why it does it. Fed officials guard their privileges of secrecy and bitterly resist calls for an independent audit.
After Yellen's talk on Wednesday, she testified before Congress on Thursday. She urged members of Congress to stop pushing their bill to Audit the Fed – because, she said, it would “threaten the independence of the Fed.”
Fed officials want to have it both ways. They want to portray themselves as open-minded monetary planners who take in a wide variety of opinions. But they want to be able to operate as a closed-off body that formulates policy under a cloak of secrecy and with no external accountability.
Markets that hinge on every utterance and non-utterance from this tiny group of monetary planners aren't truly free markets. But for now, that's the reality of how financial markets function.
Over time, perhaps, the Federal Reserve's undue influence will lessen as global trade increasingly gets conducted with currencies other than the dollar. On Monday, the Chinese yuan officially became part of the International Monetary Fund's currency basket known as Special Drawing Rights. Although not a direct rebuff of dollar dominance, the IMF's move will give China more credibility and more leverage in negotiating international trade deals that bypass the dollar.
And now, for more on the implications of this week's news out China, where things are headed with the Syrian refugee crisis, the likely market response to a Fed interest rate hike and what this all means for the dollar and gold and silver, let's get right to this week's exclusive interview.
Mike Gleason: It is my privilege now to welcome in Michael Rivero, founder and editor of WhatReallyHappened.com. Michael is a talk radio host and a prolific commentator on geopolitical financial markets and many other topics and it's great to have him back with us today. Michael thanks for joining us again.
Michael Rivero: Well thank you for having me again.
Mike Gleason: You specialize in delivering news and commentary people aren't likely to find by watching CNN. Now when we had you on two months ago Russia had begun their intervention in the Syrian conflict, and we talked about how Vladimir Putin was starting to demonstrate some leadership in an attempt to stabilize the situation, and by doing so possibly reducing the flood of refugees into Europe.
Now since that conversation we had the horrific terrorist attacks in Paris with concerns over the possibility of many more of these attacks in Europe. All of that has resulted in a pretty big public outcry about how it may not be such good policy to accept all of these displaced Syrian refugees with open arms. What's your take on this unfolding situation Michael?
Michael Rivero: Well they're trying to sell two competing agendas. One is trying to basically blur all the world's populations together to make it easier to drop the borders and bring about the New World Order, but at the same time they're justifying the wars in Syria and Iraq against radical Muslims who are out to overthrow the governments of the West and establish Sharia Law. There actually is a provision in U.S. immigration law saying that aliens that are affiliated with any group seeking to change the political structure of our country are not going to be allowed in.
But these two agendas are crashing into each other head on, and they're out there trying to say, "Well the attackers in Paris turned out they were all carrying EU passports." There are a lot of people who think this was another in a very long chain of staged false flag attacks to push the war agenda, the terror agenda. And we're now seeing all these competing agendas really getting in each other's ways, which is actually a good sign when they start conflicting like this. It basically tells us the whole situation is starting to factionalize and crumble.
There is apparently one of the many manifestos attributed to ISIS that openly declares using the refugee crisis in order to infiltrate attackers into all these other countries. They're trying to keep up this idea about we just sort of know and believe and trust that all these refugees are harmless even though there's no mechanism for screening them or vetting them.
We know that here in the United States of America we have a parallel with our illegal immigrant crisis, and even the Department of Immigration and Customs Enforcements director is saying 179,000 of these illegal immigrants who've come in across the border with Mexico have prior convictions for violent crime. Nobody knows where they are or what they're doing. Even in the heyday of mass immigration to the United States, you know "Give us your tired, your poor, your teeming masses yearning to be free," they all still had to go through Ellis Island. They had to have background checks. They had to have medical examinations to prevent contagious diseases from coming into the country.
This totally open border policy is causing all kinds of issues for public health, certainly for our already over stressed economy and infrastructure and yes, it is an open invitation for somebody with ill intent to cross across the border, and yet they're still trying to push this open border agenda. Again, they're trying to shout critics of the open border policy down with accusations of racism and "Oh you're unwilling to share the benefits of your life with the rest of the world." We're not really being racist at all.
First of all every country has a right to control who comes in to their country or not in order to weed out the people who should not be allowed in here. If anybody wants to come to the United States and be a citizen and follow the recommended legal procedure to do so, welcome, I hope we live up to your expectations. But this open borders policy in Europe and the United States clearly seems to be all about removing our sense of a national identity or a cultural or regional identity. Literally trying to erase our memory of who we are and where we come from to make us more pliant for this coming global government that everybody seems intent on creating.
I guess the planners of this thought we were all just going to huddle together and listen to the propaganda and hug each other and sing kumbaya, but it's really not working out. There is major conflicts going on in Europe with the refugee problem. Rather than blending the world together it is actually sparked a backlash of serious nationalistic fever in a great many countries saying, "Look, we've got our own problems here in the United States." We can't just try and be savior to the rest of the world here.
One example of course out in California, they're having a severe water shortage. It's partly caused by the fact that two of the state's largest aquifers have become contaminated by fracking waste and they're no longer fit to drink. Another factor of course is that the water delivery infrastructure is in serious disrepair. The aqueducts are leaking huge amounts of water into the desert where it does no good. The water mains under Los Angeles itself are leaking millions of gallons of usable water into the ground, and then when you add another 20, 30 million illegal immigrants who've gone to California. They're drinking water. They're cooking. They're washing. It's making problems worse. We have 94 million Americans in this country who cannot find a job, and adding hundreds of thousands, potentially millions of refugees and illegal immigrants is only going to make the problem worse.
Mike Gleason: Getting back to Russia a little bit and the situation over there in Europe. Do you envision more nations looking to Putin and Russia for leadership, because it looks like Putin is trying to seize on the opportunity created by perceived weakness and policy mistakes by Obama and the U.S. to become a more important global player. Do you see that working for Putin and are those moves by Russia good or bad for American interests?
Michael Rivero: Putin's moves are bad for American economic interest, in particular those of the oil industries, banking and the military industrial complex. But over and above American's very obvious decline is the fact that certainly in Europe where the scars from the first two World Wars are still visible in everybody's neighborhood, they don't really want a third World War, because they understand it's going to wind up being fought on their soil and they absolutely do not want that.
We're seeing more and more countries drifting away from the United States from the U.S. dollar. BRICS is up in operation, they're doing all of their borrowing and banking in the yuan now. The yuan was just accepted as a global reserve currency by the IMF. The primary driving force behind all of these U.S. wars of conquest we've seen over the last fourteen years is an attempt to drag the world back to the 1950s and the days of the Bretton Woods agreement where everybody on the planet had to use U.S. dollars to trade and bank across their borders, off of which the U.S. financial system made a hefty profit. And the world is turning away from that.
Because our financial system and our government became dependent on that dollar hegemony, and the profits it generated, we've allowed our manufacturing to decline both in quality and quantity. Because of the GMO disaster, nobody wants to buy our agricultural exports. So at this point the entire U.S. financial system and the government are dependent on reestablishing this model of everybody in the world having to go through the U.S. dollar for global trade.
To give you two examples, in 2002, Saddam Hussein got permission from the United Nations to sell Iraq's oil for the Euro. At that point Tony Blair and George Bush had a meeting down in Crawford, Texas, and that was followed by all this, "Oh, Saddam has nuclear weapons. He's defying the United Nations. He's threatening Europe with 45 minutes of destruction," and we went into Iraq, killed Saddam Hussein and put Iraq's oil back on the world market only for the U.S. dollar.
Same thing happened down in Libya where Gaddafi was doing very well for the Libyan people. He was building up their standard of living, high literacy, great water works projects, and then Gaddafi shut down the privately owned central bank of Libya, set up a state central bank with a valued based currency, the gold dinar. Then he announced to the world that Libya's oil was for sale but only for the gold dinar. So the U.S. stages another one of their covert overthrows, goes on in there, kills Gaddafi, imposes a new private central bank on the people of Libya. The gold for gold dinar has vanished and Libya's oil is back on the world market but only for the U.S. dollar. So that's really what's driving this all right now.
The world does see the U.S. as weak, if for no other reason, that when a country tries to enforce failed economic policy with weapons of war that does signal a dying regime, a dying system.
Mike Gleason: Yeah, certainly everything we do economically seems to be predicated on the fact that there's so much demand for dollars on the international market, and that may be wavering. There's obviously a lot of head winds here in these conflicts and the wars certainly are a big part of that.
Sticking with goings on across the pond, there's been some very troubling news out of Greece this past week. The government is demanding its citizens start disclosing their private holdings of cash, precious metals, jewelry and a few other items to tax authorities starting January 1st... not just disclosing what they have but disclosing where it's stored. Why are they doing this and what should we make of this?
Michael Rivero: The last official act of any government is to loot the nation, and Greece seems to be setting the stage to do just that. We know that in the United States back in 1933, Roosevelt banned private ownership of gold coins and gold bars. They did exempt family jewelry, but it was all taken away from the American people and we got little tiny stacks of ink and paper to make up for it to save the banks.
Greece is in serious trouble. Now this program of demanding the Greek people disclose their personal holdings of cash in their house, in their cookie jars and their jewelry and gemstones was actually established before the rise of Tsipras and the Syriza party. But it's being implemented and it's basically to allow the government to know whose home to go into when they need to start confiscating anything of wealth to keep the money junkies happy for another week.
Mike Gleason: Very troubling indeed. Now we talked about Russia's potential ascension globally, and you mentioned this a moment ago, but now we have some big news about the Chinese yuan finally being included in the IMF special drawing rights. What are the implications of that?
Michael Rivero: Well the implications are that anybody around the world ... if you take a U.S. dollar and you bring it back to the United States, there really isn't much that you can buy with it that anybody wants. As I said before, our manufacturing has declined in quality and quantity. Nobody wants our agriculture. American's military exports, while still healthy, are being perceived as overpriced and under capable. We're looking at countries, they're getting ready to cancel their contracts with the F-35, and Russia's performance in Syria with much lower cost, obviously superior weapons is starting to draw more of that military business to Russia.
The U.S. is really in a very big mess of its own making, the U.S. government, and yeah, the world is turning away. One of the reasons is really quite simple. Back when the Bretton Woods agreement was signed and most accounts were still being settled if not with actual gold bullion, with boxes of bank notes, and it actually did make sense in that day to have a single recognized global currency.
But in this day of instantaneous electronic global financial transactions the idea of requiring a single currency is obsolete. The IMF has already recognized that. They recognize several currencies as global reserve currencies. This loss of hegemonic domination over the economy by the United States is a serious blow to their ability to tell the rest of the world what to do.
Mike Gleason: We have the Fed scheduled to meet here in a couple of week, and once again there's a lot of anticipation over what they will do with interest rates. Most believe they will finally raise them for the first time in nearly ten years. Do you foresee any economic data coming out between now and then that will give them pause and rethink the idea that the economy is strong enough to actually handle a rate hike, or is it a foregone conclusion that they raise the Fed Funds rate... finally?
Michael Rivero: Well they're caught between a rock and a hard place because until they raise those rates, global trust in the dollar will continue to decline. But if they raise the rates that is going to cause a disturbance in the equities markets on Wall Street, because right now the stock market is sort of being propped up by the availability of this virtually free investment money with which to buy stocks and run the market up and then game it up, sell it out and make a profit and not have to share much of it with the banks.
But every time they've talked about raising the rates you immediately see a dip on Wall Street, and I think if they actually raise the rates significantly it could trigger a Wall Street crash. In fact, Wall Street's having a bad day today, and they're just rigging it up. The sky high numbers on Wall Street are not reflective of the health of the U.S. economy as a whole. If anything, it's a measure of the economic wellbeing of the money junkies, the top one percent or one-tenth of one percent who are still playing in the market.
But anybody can walk down the streets of America and see the retail vacancies, the cracked pavement, the decaying infrastructure and realize our economy isn't healthy at all because all of our money is churning around through Wall Street and Washington D.C. and it's not being recycled back down to the bottom of the economy to keep it going. And that's the missing part that would make the economy healthy.
When the market had it upset back in 2008, the smart thing to do would have been to take the money away from the people who were engaged in the mortgage back security fraud and return it to the American people. If they had done that nobody would have missed a mortgage payment. There wouldn't have been a mortgage crisis. People would have been buying brand new American cars. We wouldn't have had to bailout the auto industries. People would be down in the shopping malls buying manufactured goods. We wouldn't have a retail crisis.
Everything the U.S. government did was bad for the general economy but great for the money junkies. We're seeing basically the continuation of the decline of the United States of America, from a capitalist system into fascism. What's really ironic is that Vladimir Lenin predicted that when Western capitalism succumbed to the inherent failures of the system of private central banking it would inevitably turn to fascism to prolong its wealth and power and privilege.
Mike Gleason: Certainly playing out right before our eyes. It's a very interesting statement there.
Sound money has been a bit of a political issue. Believe it or not several Republican candidates have talked about reforms, auditing the fed, possibly bringing back the gold standard in this country as a way to restrict all of this out of control government spending. Do you think these presidential hopefuls are just paying lip service here or is the idea of a gold backed currency and disgust over mismanagement and corruption at the Federal Reserve going to get some real traction?
Michael Rivero: At my age I've become a horrible cynic and no matter how cynical I get I can't seem to keep up with Washington D.C., but it does seem to me to just be more lip service because we've heard these comments before from politicians. The only one who genuinely seems serious about that of course was Ron Paul, which is why he was so firmly rejected by the party machinery in 2008 and 2012.
We don't necessarily need to go to a gold back standard. Any universally recognized commodity can be the basis of a currency. The real issue is going back to a government issued currency, the system the United States started with. Because it is this government borrowing of money at interest from privately owned central bank that has created this debt crisis. We're always seeing this idea should we raise the debt ceiling or not. That's really not the important question. The real question every American has to be asking right now, in fact demanding of their politicians and media, is why when the Constitution authorizes the government to create an issue, an interest free currency for commerce, is our government continuing to borrow that currency at interest from that privately owned central bank and passing on the interest debt to future generations.
Because you need to understand under that model of private central banking there's a built in trap, because the instant that first pretty printed piece of paper goes into circulation, more money is owed to the private central bank than is actually in existence. And because of that, it doesn't matter how hard the people work, it doesn't matter how much they sacrifice, the debt grows and grows and grows until it collapses the entire system. But it makes a huge amount of money for the owners of those private central banks. It makes a huge amount of money for those members of Congress who are beneficiaries of campaign donations from the private central bank. But it is an unstable system, and it can't perpetuate. Every country with a private central bank gets into this mess because of economic globalization. All the countries with private central banks are getting into that same mess at the exact time.
You know what's really ironic? This nation, the United States, we fought a revolution to be free. Primarily to break loose from this kind of predatory banking by the Bank of England, and then a hundred years ago a corrupted president and a corrupted Congress sold us back into that same system of debt slavery. That is really, I think, the greatest betrayal of the American people in our entire history.
Mike Gleason: Certainly the dollar has lost what, is it 95% of its value ever since that fateful day when they created the Federal Reserve System? Certainly lots of issues have followed that.
Now as we begin to close Michael, for the battered and beleaguered precious metals investor who is looking at a 4 plus year long correction in the metals market now but seeing growing geopolitical tensions worldwide, increasing threats to the U.S. dollar as the dominant global currency, mounting fears of the potential for another '08 style collapse or worse. It doesn't seem to add up, meaning dirt cheap metals prices which usually tend to flourish during uncertain times. Is something going to give, and what do you have to say to that guy who may have bought precious metals but might be on the verge of losing his nerve because it's been such a rough ride these last few years?
Michael Rivero: Hang on to the metals. Hang on to the metals. Okay. In the long run they are the greatest, safest store of wealth. We know that the U.S. Government is lying about the financial indicators. You can't go from 94 million Americans unable to find a job to a 5% unemployment rate without some cooking the books along the way. The same thing is taking place in the metals markets.
We're hearing and insane demand for gold in China and in Russia. We're seeing people reporting shortages and yet the prices are going down. Obviously something is driving the prices down. One of the ways they do that with gold is the gold price is set by blending the physical inventory with the paper contracts, and in order to keep gold prices down all they have to do is print more of those contracts, and right now there are 297 ounces of paper gold out there for every one real ounce of gold.
They're doing this because they don't want people to close their negative interest rates savings accounts and go into metals. They don't want people to dump their stock portfolios and go into metals. You have the problem where these bullion centers like JP Morgan and the New York Federal Reserve who were caught playing fast and loose with other people's gold placed with them for safe keeping. Now they're trying to recover the gold so they can return it to those nations who want their gold brought back home, and they need to buy gold as cheaply as they possibly can.
I would suggest people stay with the metals. Buy the metals. Buy them in small quantities often so that there isn't a record, so that the government doesn't know what you have. Because somewhere along the line we're going to see the government take the dramatic step of banning private ownership of investment metals and together with that, they're already talking about banning cash so that all the money is in the banking system. You've got no way of taking it out. There's no way to do a run on the bank when the bank is failing. The government knows where all the wealth is and they can grab it whenever they feel they need it to try and stave off this final collapse, and all they can do is delay it. The collapse is absolutely assured and guaranteed. They're just holding it all together with bailing wire an duct tape.
Mike Gleason: Well Michael I really want to thank you again for you wonderful insights. It's always very fascinating stuff and I look forward to catching up with you again soon. Really enjoy speaking with you each time we've been able to do that.
Now for people who want to follow you more closely, tell them how they can do that, the site and also the radio program.
Michael Rivero: Well the site is called WhatReallyHappened.com. We've been running it for about 21, almost 22 years now, and I do a radio talk show at the Genesis Communication Network, that's GCNlive.com, Monday through Friday from 3 p.m. to 6 p.m. Central United States time.
Mike Gleason: Well it's truly great stuff as always. The site is very appropriately named as anybody who just heard this interview, WhatReallyHappened.com. You just cut through all the nonsense and I really enjoy the conversation and I hope you have a great weekend. Thanks Michael.
Michael Rivero: Same to you.
Mike Gleason: Well that will do it for this week. Thanks again to Michael Rivero, founder and editor of WhatReallyHappened.com.
Check back next Friday for next weekly market wrap podcast. Until then this has been Mike Gleason with Money Metals Exchange. Thanks for listening and have a great weekend everybody.