SD Outlook: Govt & Fed are desperate to maintain the ‘strong economy’ narrative. Can they keep it going, and why does it matter? Here’s some insight…
The government and the Fed are desperately trying to maintain the narrative.
What narrative is that?
Oh, take your pick, but it is basically this narrative:
- The US Economy is booming
- The US is an island of growth in a sea of Stagnation
- The job market is red-hot
- etcetera, etcetera, etcetera
How do we know that the government and the Fed are desperate to maintain that narrative?
Well, let’s look at just one day during this week’s economic events calendar:
“X” marks the spot where the government is desperate. You see, the narrative we are told and expected to believe is that retailers saw strong December sales. I mean, forget the fact that anecdotally, kids aren’t asking for footballs and trinkets for Christmas anymore – nope – they’re goin’ all-out asking for iWatches, Oculus Rift Virtual Reality doohickeys, “Visa” gift cards, and myriad gifts, which, each unto their own require a few Benjamin’s.
I have said, however, that it is very likely that the economy is already dead, so with the convenience of the government shutdown, the December Retail Sales report will not be released this week, and maybe not ever.
You can maintain the narrative much easier if you don’t let the public see the collapse.
What about the Fed?
Well, not to be outdone, Fed boy-wonder Neel Kaskari will be giving a speech on the same day, a speech, overtly narrative-supportive, that’s titled “Ten Years After the Global Financial Crisis, the System is Safer”.
You can maintain the narrative much easier if you simply jawbone the markets while your apologists, enablers and propagandists appear to eat-it-up as if you could not only do no wrong but also know no wrong.
Now, I’m not sure exactly why there is so much desperation to maintain the narrative?
The cynic in me thinks the government and the Fed are desperate to maintain the narrative to make sure that the crash in the markets and the collapse of the economy cause the most devastation to the most amount of people.
The next question is how do they change the narrative?
I think they change the narrative on a dime.
The only question is if they change the narrative both at once, or if they each change their tune individually and play the blame game.
I think the government and the Fed may change the narrative on a dime, at the same time.
Well, everybody is expecting the government, and surely President Trump, to blame the Fed for the problems in the US economy.
Everybody else, and when I use term everybody, I’m talking about the mainstream, is looking for the Fed to cast the blame for the economy on an incompetent government.
But if it’s all WWE Wrestlemania, which I think it is, then the President and the Fed are simply playing their roles.
So think about this: If the government and the Fed change the narrative at the same time, and together, then they could both blame some “unforseen” event, independent of blaming each other. The government and the Fed could even come together to work on solving the problem.
Additionally, in changing the narrative together, maximum pain will have been brought onto the masses – that is to say, we could get a market crash, the economic collapse, and both the Fed and the government would not be blaming each other, but blaming the “event”.
Is this the last week they’re able to control the “everything is awesome” narrative?
It may be.
That said, the longer the government and the Fed maintain the current narrative, the more devastating the coming financial misery will be.
This is why gold & silver have stood their ground.
You see, the bankers, the bankers turned politicians turned bankers again, and the lawyers turned cabinet appointees turned Wall Street lawyers again, all along, have found good times investing over the last 10-years because in their quest to soak up all the wealth through their overt, matter-of-fact financial repression, all the wealth they could have soaked up has now been completely soaked up. Furthermore, those who came along for the ride, that is, the sheeple and those not part of the “club” as Carlin would say it, are all-in on the stock & real estate markets because they have assumed the government and the Fed will have the market’s back, forever.
As such, all those corrupt, dirty bankers, lawyers and politicians will also make money off of the collapse when the narrative changes, by shorting the market, scooping up real assets for pennies on the dollar, by currency swaps because they know what currencies are in the chute to weaken, and by all of those dirty, corrupt insider tricks they will be playing.
They will also make money off of this by going long gold & silver, because as the mainstream desperately tries to preserve wealth as the stock market is crashing and as the economy is collapsing, said mainstream will finally make the true flight to safety into gold & silver and bid up prices.
So here we find ourselves in mid-January. The government and the Fed have maintained the narrative, and now they are desperately trying to maintain it. When they can no longer maintain the narrative, that’s when the change their tune.
This week will be a critical test of maintaining the narrative.
And if they can’t maintain it, or even no longer want to because of changing their tune?
It looks like we’re seeing some of the last days with the gold-to-silver ratio above 80:
The GSR arbitrage is a long-term play.
Taking advantage of the arbitrage requires holding the silver until the ratio is extreme in the other direction.
That could be years, but to me, it’s worth it.
Gold is tightening its consolidation:
Gold’s consolidation is generally above $1290, and it looks like the base gold is building will help gold to punch through $1300 with authority.
Gold needs to do that.
Silver is also consolidating:
Notice what silver is not doing, however, as shown by the blue arrows.
Silver is not budging or being beaten into submission like silver brutally has been beaten for the last 52 weeks.
Silver is standing its ground.
I have been saying that I think the downside is limited, and I also think there is a wave of buyers waiting, buyers who would pounce on silver should the price dip below $15, which is why I don’t think price will go that low.
Palladium looks like it wants to consolidate again:
Palladium is looking somewhat like the bullish “flagpole” formation, so those who are into the technical analysis will be watching to see of the pattern plays out.
Platinum really needs to hold here:
I didn’t draw the trend-line on the chart, but if I did, if would start around December 10th, when the subtle bull trend began.
So far, it looks like the trend-line is holding as support.
I have been talking about the inverse head-n-shoulders with crude oil:
The work on the second shoulder has begun.
I need to do some more research, but apparently there are gasoline/diesel shortages across many states in Mexico.
Why does that matter?
Well, it matters in that we keep hearing we have a glut in oil, but there are refined gas/diesel shortages in Mexico?
OK, “Hey Half Dollar, everybody knows they have shortages because of all the theft of gasoline by the cartels!”.
Yeah, that’s one of the things I did hear.
I’m just not so sure.
The Mexican Army is used for internal purposes (as will be the US Army sooner or later), so if the Mexican government really had a problem with gasoline theft, they could just put the Army at strategic points along the logistics chain to nip the theft problem in the bud.
Some may think it has to do with a lack of refining capacity, but since I’m no oil expert, I don’t know one way or another.
What I can deduce, however, is that we currently have very low oil prices, and in many oil producing nations, such as Mexico, there are big problems with the economy in general, and there are unique, specific problems relating to oil.
Venezuela is in a similar boat as Mexico.
Iran is in a similar boat as Venezuela.
And so on and so forth.
If the dollar is turning down, which I think it is, and with all of this volatility and turmoil in oil producing nations, and with everybody already so bearish on oil, that is exactly why I think the shocker with oil will be to the upside.
Let’s see if copper can’t get above its 50-day moving average this week:
Regardless, this bottom-bouncing isn’t helping the cartel right now, because most silver production is mined as a by-product of base metals, such as copper, so if the copper miners are not incentivized to mine copper, then physical silver doesn’t get to market. In other words, in order to suppress the price of silver, the cartel needs to be supportive of copper.
That’s just one of the reasons why I’m bullish on copper.
The US stock market has only been down on one day since the new year:
In understanding the narrative I was explaining at the beginning of this post, it will be important to keep a close eye on the stock market to look for indications that the narrative is changing.
What would be the indications?
The stock market, as represented by the S&P 500 above, begins to turn down and sell-off again.
The “fear gauge” may be anticipating that change in narrative:
If so, I’d look for the VIX to pivot here and start heading back higher.
Granted, if the VIX starts heading higher and the stock market starts heading lower, I’d be looking for more short-term drops in yield:
The benchmark US Treasury does look like it wants to rollover here, and if so, that supports my “changing narrative” argument.
And then there’s the “sucker’s rally” in the US dollar:
I think the cartel would want to run-up the dollar to tag the 50-day, and then see the dollar begin its decline again. Even if we don’t get the sucker’s rally, however, once the dollar begins its decline again in earnest, that is when I’d be looking for the narrative to change.
What will cause the narrative to change?
That is the $64,000 question.
I’m not sure.
On Friday I speculated it could be the Southern border crisis that is used as cover to crash the markets and the economy.
But for our purposes, that is, for the purposes in understanding the markets and the economy, it is not so much what causes the change in narrative, but rather, that we’re able to recognize that the narrative has changed.
Because that is when the markets and the economy really get moving.
And that is exactly why gold & silver are waiting in the wings.
– Half Dollar
About the Author
U.S. Army Iraq War Combat Veteran Paul “Half Dollar” Eberhart has an AS in Information Systems and Security from Western Technical College and a BA in Spanish from The University of North Carolina at Chapel Hill. Paul dived into gold & silver in 2009 as a natural progression from the prepper community. He is self-studied in the field of economics, an active amateur trader, and a Silver Bug at heart.