The following is commentary that originally appeared at Treasure Chests for the benefit of subscribers on Tuesday, April 22nd, 2014.
It's getting increasingly difficult to survive out there these days for everybody except the top .01% and few of their buddies, which is not what Ayn Rand had in mind when writing on the benefits and attributes of individualism, to both the individual, and society as a whole. Of course Ayn was no stranger to the vulgarities associated with cronyism and oligarchs with her Russian origins, however she would likely be dismayed at what has happened to America today, a place she loved for what it stood for, not what it has become. What's worse, it appears the John Galt's of the world are becoming fewer and far between as process continues to unfold, but it could be argued she saw this coming, being the forward thinker she was, a realization perhaps best captured in her magnum opus, Atlas Shrugged, a must read for all concerned with these ideas - a fruitful life, liberty, and freedom.
As with all extremist / fascist episodes through history however, all good things must come to an end when people can no longer live with compounding inequalities, especially when they begin to tread on the most basic of human rights and privileges. The oligarch's and their dogs (think Animal Farm) found out about this in Nevada a few weeks back when a prominent pig was thwarted in attempting to effectively confiscate Cliven Bundy's cattle and ranch, which still might be a problem, but at least the revolution has begun. It's time for greedy and corrupt politicians to be put in their place. So let's hope Alex Jones is right (this time), and this proves to be a watershed event, where formerly complicit bureaucrats begin to recognize the errors of their ways, and begin working for the people once again increasingly, not crooked oligarchs and their dogs.
A more profound (but abstract) example of this is Russia's defiance regarding Western claims to the Ukraine (under the guise of diplomacy), where the previously vanquished evil doers (think the fall of the Berlin Wall) have also turned the tide in terms of the level of abuse and fraud present evil doers have been getting away with (think artificially low pricing of oil and gas sold to the West), as explained in detail several weeks back in my article entitled "Take That Ivan". To summarize, the idea here, from a completely impartial perspective, is Russia woke up to the fact Western commodity markets are rigged to suppress prices so that consumers would have more disposable income in their budgets to pay bankers ever-increasing amounts of interest payments, which angered them. So, Ivan, being on the receiving end of Western oppression for some time, waited patiently until it was the right time to fight back, allowing the West to weaken itself into the debt laden stupor that now exists.
So essentially, the world has become Atlas bearing all this debt, and recent developments concerning Russia (viewed by most as a weak periphery adversary to be exploited [for its natural resources] prior to more recent events), like that recommended by d'Anconia - the shrug. And Russia, nor its allies, will cease the decentralization process now because it's in their best interest(s) to do so, forging new alliances that will eventually bring Western living standards in line with true economy (proper market commodity prices), led by the US, which has the biggest fall coming. Here, the loss of the petrodollar, and reserve currency status for the dollar($), will cause significant price inflation in America (the world) the likes of which not witnessed in the global core economy since Rome. A weakened Anglo-American banking structure will ensure such outcome, as money printing will need to continue accelerating, which will be the catalyst for a decentralization / regionalization process (look at this item just in) that will become the new macro defining global geopolitics moving forward.
No more will it be a one super-power world populated by a bunch of idiots running around the globe like they own it. A country, and its currency, will actually need tangible wealth to back it, recognized by trading partners as 'hard money', not the 'fluffy fiat' stuffed down throats now at gunpoint. The Chinese are definitely 'on board' with this thinking in accelerating the rate at which they are converting American paper to all things tangible, not to mention beefing up their military. And of course US authorities know of their weakened economic position, which will allow process to continue along these lines until the world geopolitical / economic landscape is a very different place five-years from now, whether we arrive there amenably, or not. First the economics of war heats up as budgets and the populous become strained. Then, larger scale conventional wars appear unavoidable in order to keep the mob(s) distracted. If recent events surrounding the Ukraine are any indication - stay tuned in this regard - things are getting tense.
That being said, the question does arise, if this is all true, that East is at war with the West over economy, is there a manner to measure this in the financial markets to see who is winning? As a matter of fact, there are many different ways in which to measure this in the financial markets, and past body counts, with a plethora of ratios at our disposal. So please, let me tell you a story using a subset of these ratios, and then you can make up your own mind 'who is winning present battles'; and, 'who will likely win the war'.
The first ratio I would like to start with is the Dow / Gold Ratio (DGR) because it's disposition creates controversy - that the West may still be in control. How could this be if the West is weak, as espoused above? Answer? Faulty and fraudulent markets; and, desperation. Long time readers of these pages will know my thoughts on Western pricing mechanisms (markets) from my sentiment based studies, that they based on sentiment and speculator betting practices in the derivatives markets, and not supply and demand. Therein, and as it pertains to gold (and especially silver - see below), Western bankers pay special attention to the monetary metals because of the message(s) they throw off to the public, the barometer of economic conditions, with rising prices indicating stress, and falling prices signaling 'everything is just fine - so keep buying our financial assets - especially our bank stocks'. (See Figure 1)
Figure 1
What's more, the DGR is the most commonly followed definer of Wall Street's health, so not only is the structure of the pricing mechanism flawed via computerized sentiment based biases; but also, various strata of 'prop desks' exist to apply 'grease to the wheels' (liquidity) when needed, led by the New York Fed's operations. This means everything within the West's vast bureaucratic powers is done to prop up financial assets (and suppress gold) because of perceived positive multipliers that keep the party going in good times, which is all the time now apparently. (i.e. because of fiat currency economy related diminishing returns, Western authorities have attempted to eliminate the business cycle.) And conversely, everything within their powers is also done to suppress gold of course, the barometer of barometers, because when it's going up a signal regarding future and currency debasement rates is being thrown off, which is counter to 'Western interests'. This is why the West would like to see the DGR go to new highs again, because in terms of heating up wars, it would be saying 'take that again Ivan'; and, China, 'you better think twice before you stop buying our paper'. (See Figure 2)
Figure 2
Along this line of thinking, you may remember me talking about the importance of the S&P500 (SPX) / iShares Silver Trust (SLV) Ratio because Western bankers use silver to help suppress gold; and, they use silver because it's market is smaller and more regionalized, so it's easier to manipulate. This is why, unlike the DGR, the SPX / SLV Ratio will probably push to new highs soon before seasonal weakness in stocks kicks in. Such an outcome could involve a move to 106 as mentioned previously, a Fibonacci resonance target (not shown) that would see silver get hit to the downside one more time. And sure enough, based on the price action over the past few days, this appears to be the prescription. Based on post expiry open interest put / call ratio distributions, which you can review here, stocks should see modest gains in the next little while, leaving a declining silver price to do most of the work in pushing the SPX / SLV Ratio up to our 106 target. Thus, our assertion last week the best stocks should do into this period of seasonal strength is see a double top at 1900 on the SPX appears to be a reasonable assumption; and, in following up on our assertion above this will also be marked by a reversal of capital flows from financial assets to commodities, from West to East in measurable dimension if you will, expect to see the head and shoulders pattern on the Dow / CCI Ratio pictured below to be triggered soon as well. (See Figure 3)
Figure 3
And it appears Western bureaucrats are in fact 'hell bent' on provoking the East into something more here, perhaps thinking things will be 'OK' if we only strategically attack high level bad guys, where the charts, and more specifically, the above, is telling us such thinking is misplaced. Because if the head and shoulders pattern in the Dow / CCI Ratio traces out, the result will take its toll on their precious stock market. As discussed previously, Russia has been waiting patiently to make this move against the West in order to get control of (up until now) improperly derived commodity pricing via faulty and fraudulent North American pricing mechanisms. Because doing so will get them 'back in the black', and out from behind the Western eight-ball of ever increasing debt that keeps the surfs slaves to bankers indefinitely.
It's war you know.
Making the job easier for the East, and Russia in particular, is the fact the West is in such bad shape in every respect you would like to discuss - fiscally, economically, and morally - making breaking the spirit of the average (spoiled rotten) individual in the West more likely when pressure is applied. It's either that or the citizenry snaps, and starts beating corrupt bureaucrats to death. If Atlas has shrugged in this respect in the West, again, perhaps marked by the Bundy incident (bigot that he is), which appears to be catching on, then we could have a rodeo on our hands moving forward.
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