The ECB just announced their own version of US style QE, and the news is big….USD $1.4 trillion in QE between now and September 2016.
As I’ve been predicting, “the ECB will surpass $1 trillion in QE before all is said and done”…and low and behold, they went big right out of the gate.
You know what this means, yes? Like the US FED, it is now a near certainty that the ECB’s QE program will surpass $2 trillion by the end of 2016…because once central banks start down this path, they ALWAYS play “go big or go home”.
Folks….central banks don’t like to lose…especially in today’s “I’m gonna get mine…hyper politically motivated banking world”. As I’ve been saying, this news will be big for stocks globally and it will drive stocks higher in the US as well.
Also, and its broken record time again, this news is INCREDIBLY bullish for precious metals and the miners…oil of course as well. Gold is trading through $1300/oz and silver is up even more…last trade now at $18.35.
With the world soon to be awash in fresh central bank fiat money (ECB QE), we can expect to see shadow investment groups plow investment capital back into oil…their new pseudo currency shortly. Will oil scream back to $100 barrel? Well, yes eventually...and likely much more (on the back of coming currency inflation). But in the short term, we are only interested in what happens over the next few weeks/months.
By the way, if my prediction for higher oil is wrong, it will tell us something very, very important. If oil ceases to move with hundreds of billions in fresh quantitative easing, it will be direct evidence that QE is in fact no longer working. Remember, according to central bankers and the worlds financial leaders, our biggest problem is “deflation” rather than “inflation”. This is hogwash of course…we see direct evidence of inflation all around us in the things that we are forced to buy on a daily basis (food, rent, electricity, etc).
Instead, when you hear the powers that be warn about the dangers of deflation, just know that they are actually talking about the velocity of money and more specifically, the velocity of debt. Without increasing levels of money supply (m1, m2 and m3) and fresh debt origination/liquidity, the banking/monetary system as we know it is doomed to implosion. This is why you will continue to hear “deflationary concerns” from our criminal cabal of bankers…all the while, fresh trillions in fiat currency are being printed and distributed globally…which is the very definition of “actual” inflation.
As I’ve written since 2009, Central Bank easy money, fiat currency printing is merely a sugar high, and once they stop IV’ing it directly into the body, withdrawal symptoms kick in HARD. For the millionth time (it feels like), let me repeat this most important point: Until the world experiences a systemic financial collapse…complete with stagflation/hyperinflation and a global currency/equity/debt implosion…central banks globally will continue with their Frankenstein creation called Quantitative Easing.
But we aren’t there yet. Instead, central bankers throughout the world are gearing up for further rounds of massive and coordinated global QE. Soon, we will see announcements from Europe, Japan, China, Russia, etc…and yes…we will hear FED Chair Janet Yellen say the same thing; “unfortunately, the world’s economies are not yet to the point where we can cease QE and begin raising interest rates.” It’s coming…only a question of when, rather than if.
Of course, we know that in the long term, QE will fail...it’s phony, it’s manipulative and it’s Keynesian monetary policy at its core...meaning one thing...it's nothing more than a temporary sugar high, destined for total and complete failure.
But what if you're a committed liberal/progressive, Keynesian believer...you might say "But Kip, it sure seems to have worked so far. I mean, the US stock market has doubled since QE in the US began, so it must have done something right."
To that I would say "to the naked eye this might be a fair point. Yes, QE has helped stock prices to move higher, but lets not forget that the pre-crash 2007 high in the Dow was just over 14,000. With trillions in QE from the FED (beginning in 2009), it took a full four years to simply reclaim those pre-crash levels. Sure, the Dow has tacked on another 3500 points in the past two years, but at what cost?
We know that the real unemployment numbers are at minimum 14%, based on a labor force participation rate that reveals more than 93 million Americans have left the labor force forever. And of course we know that the middle class is being destroyed, with the ranks of the poor exploding higher, as evidenced by the 50 million Americans on food stamps…our modern day soup kitchen/bread line….and disability claims that have swelled to levels never before seen…more than 11 million in the US that will never work again, but that will remain on taxpayers payrolls til death.
History will be the ultimate decider on this issue, as always. However, as history has shown time and again, Keynesian monetary policy has 100% of the time resulted in failure, with the largest failure (before now) being the decade long Great Depression…which ended only because of WWII…the savior for massively failed monetary policy (regardless of what FDR revisionist historians might try and tell you).
Folks, I tend to watch and read pretty much everything that is said or published about the markets, and have yet to see anyone make the case that I began making after QE ended in the US and oil started its collapse. The point I’ve been making is that in June 2014 the FED announced that their massive bond-buying program (QE), which was responsible for massive money printing and debt purchases (more than $3.5 trillion) would end in October ’14. And, when did oil prices start dropping like a rock?? You got it…in the same month they made the announcement that they would officially be ending QE…June.
From the beginning of QE (2009), oil had become a pseudo currency for the ultra elite…a place where the wealthiest shadow banks and hedge funds could park money, leverage it up 30-50 times and then invest in stocks, bonds, derivatives and real estate. This has been a massive component of THE investment theme for these past 5-6 years. But now of course, QE in the US is over (well, officially anyway), and oil has fallen a shocking 60%...since that exact announcement from our FED.
KNOW THIS: THE BIGGEST WINNER IS….
Precious metals have now started their bull market of bull markets. Question; why do you think gold/silver are ramping higher while oil is collapsing? During the entire cycle of the past decade or so, oil and gold/silver have moved in the same direction, whether up or down.
But take a look at what’s happened since November ’14, which is when the collapse in oil prices really kicked in. Since that time, gold has jumped 15% to $1300/oz, while oil has dumped more than 40%...all the way to $45/barrel, where it trades this morning. This is a monumental divergence! It’s also making gold/silver THE smart money trade of trades.
Keep this fact in mind: As the first “major” move higher in miners kicked in (December 2008), the miners jumped 141% in less than 18 months.
Now…with a return to stagflation/hyperinflation…which I see happening inside of 24 months in the US (it’s already starting in Europe, China, Russia, Venezuela…just to name a few), the corresponding move higher in gold/silver will shock most of the so-called experts….just not us. As gold rockets to $10,000/oz and silver screams past $150/oz, mining stocks will help many reading this right now to add millions to your investment accounts.
The VRA Trading and Investing System will tell us exactly when to act on our new positions…keep some powder dry and be ready to act (both stocks and options).
Until next time, thanks again for reading.
Kip