Abandon Ship - Its Every Man for Himself
By: Captain Hook
Monday, February 9, 2015
The following is commentary that originally appeared at Treasure Chests for the benefit of subscribers on Monday, January 26, 2015.
It's important to understand all this before we go on to talk about how is change is in the wind right now, even as the European Central Bank (ECB) has just instituted a new Quantitative Easing (QE) program in the Eurozone (excluding Greece); this, where it should be noted former Bank of England head Mervyn King commented recently that QE does not work, because it didn't in the States according to Alan Greenspan. It's amazing these guys will only tell the truth once they are out of office - no? Why is this the case? Answer: By design, QE is not aimed at enriching the middle class because this would bring on uncontrollable inflation outside of asset prices, which would not be the prescription for central authorities and their increasingly enriched corporate masters. (i.e. think oligarchs.)
It must be remembered the aim of central banks is to do whatever is best for the larger banking community (meaning the too big to fail mega-banks these days), whose interests are directly aligned with the larger bureaucracy due to incestuous relations that range from currency creation mechanisms to political contributions from the largest lobby in the world - the mega-banks and their ilk. Funny thing is though, because the life cycle of these characters raping and pillaging the globe is now fully mature, the ship appears to be taking on water with calls beginning to come in to break up the biggies before it's too late. Of course Jamie Diamond's ego would never allow for that, so he will likely go down with the ship eventually.
Be that as it may, it's important to notice we are rapidly approaching a point where like the Titanic, despite what appeared to be a situation that was totally under control, and that the best minds of the time were on the job, Mother Nature struck out at the arrogance of man pushing beyond his boundaries to teach a lesson - a lesson that is still revered symbolically to this day.
Certainly the Swiss National Bank's (SNB) decision to break its peg to the euro ahead of the ECB's QE announcement is a shot across the bow in this regard, sending the message 'we know that in the end it will be every man for himself', so they capitulated and turned rudder ahead on what would surely have been seen as an unnecessarily expensive exercise in the end, a sentiment the Danish will possibly entertain at some point in the not too distant future.
So while the SNB decision to abandon its cap against the euro was not abandoning ship on the system as it were, again, it is a warning shot across the bow that increasingly desperate measures buy increasing numbers should be anticipated as Mother Nature claws back at these characters, which is definitely a sentiment that is growing (think anti-Western posture) - one that will be perceived by the market at some point that will disseminate to individuals acting in their own defense (against a collapsing West) eventually as well. And once the top 1%'ers get into the act, it will be like the Titanic going down for the Anglo-American Alliance, Central Bankers, and West as we know it today. (i.e. think Europe moving closer to the EurAsian Economic Union, where it is being speculated this is the real reason the SNB acted secretly in the removal of its peg.)
And while the SNB may not have abandoned ship on 'the system' (because they still needs to print money), it does looks like its getting closer to doing so in terms of Western alliances however, which should be viewed as a warning short across the bow for all to see, including Eurozone countries. (i.e. Switzerland is not a member of the European Union [EU], so it can establish new alliances more easily.) Eventually, this sentiment will spread and take on an 'abandon ship' like candor at some point, which is when the dollar($) will be destroyed.
Certainly the fact periphery economies are having to cut rates (think the Danes [see above] and Canada most recently) with all the stimulus that has been injected into the global system since 2009 is testament to the fact that not only does QE not work (only for the top 1%), but the entire Western model comes into question, which is why the SNB is increasingly moving towards Asia. It was not a rash decision on the part of the Swiss last week, but a strategic one.
Why Asia, and more specifically, China? Because unlike Western QE (money printing), when you raise wages 60% overnight for a large part of the workforce, meaningful growth actually occurs in your economy because the money is getting into people's hands. With no deficits the Chinese can do this, whereas an already bloated and over-indebted West cannot. See why the SNB broke their peg to the Euro now? Expect increasing numbers (from entire countries to individuals) to recognize this condition set soon and start thinking in an entirely new manner.
Just look at Iran, who has already de-dollarized (because they were another easy target for the US to pick on), and one can understand why Russia and China have been proactive in building their defenses against the world's biggest bully - America. This is essentially the reason the Dow / Gold Ratio (DGR) cannot hold above the all-important 233-month exponential moving average (EMA), because it may not look like it on the surface, but the world is pulling away from the US. (See Figure 1)
All-important - is the DGR really the all-important technical measure of the world's financial markets? Answer: Yes. I have written on this subject many times before, but I never get tired of it. Of all the symbols of Western power against Mother Nature, who in the end will judge all markets, we have the DGR, with the Dow symbolizing Anglo-American success in capitalizing on 'the system', and gold, the ultimate judge and primary measure of real status quo success in measuring asset prices in real terms. (i.e. what it really costs to produce these prices.) This is why, when the system is in its end game, like it is now, where it takes more printed money to produce the same prices because of diminishing returns acceleration of our fiat currency economy, we get a collapse in the DGR until it reaches the vicinity of unity, essentially removing any optimism from man's desire to overreach his earthly constraints once shown his true state of fragility.
This then, ladies and gentlemen, is why the DGR is 'it' in terms of indicators, taking in all available information about the 'true state' of the economy and giving you a factor to gauge its condition. This is why I spend so much time on the DGR, and why it will be the only chart that will be featured today in our foray into technical analysis. This knowledge does you no good if one does not know how to read the charts / know the important measures, but thankfully I do, an art not properly practiced widely these days. So, what is the DGR telling us at the moment?
In looking at the monthly chart, which is the prescription these days considering the increasingly wild swings in an ever-destabilizing macro-condition, we are actually looking at a possible 'classic set-up' for a reversal, where although the nominal Dow could in fact make new highs in coming days, it may not be confirmed in the DGR, or real terms, suggestive a turn lower in both measures should be expected sooner, rather than later.
Good investing all.