Juxtapose – Debt, Money, Silver And Gold

One of the most compelling ratios describing the true nature of the current economic-financial state of affairs is the current relationship between labor force participation and corporate profits.

Labor participation is at historic lows at a time when corporate profits and equity markets are at all-time highs.

One of many such ratios, this represents the quintessential reflection of the effects of monetary policy gone wild – where asset prices have risen without the promised underlying surge in real economic growth.

Mainstream economists will no doubt rationalize that seven years is ‘not enough time’ to perceive the trickle-down effect of monetary policy. Or they proclaim that we should have done more – even more evidence of the absurdity.

The consequent destruction of labor, in addition to (but also apart from) the turning of demographics, coincides with the demise of culture and can only lead to a more unstable society.

We are beginning to see the effects of this today, where civil unrest slowly feeds the political appetite for the growth of totalitarian statism.

While this relationship between labor force suffrage and the falsity of corporate profits is one relationship, similar dichotomies can be observed in the housing market and, of course, price discovery in commodity markets – with silver being the poster child.

In housing, on average, the relationship between rents and underlying property valuation has once again disconnected beyond the rational.

In many pockets of the world, real estate values have gone up. And has once again, (not with the widespread organic participation of individuals and families, but through the use of investment leverage [debt] and cash as hedge funds and other speculators), swooped in on the tailwind of negative interest rates.

Instead of increasing home ownership, the numbers are in decline. In fact, the rate of home ownership is at a fifteen year low.

In turn, the cost of renting has increased, and yet not enough for the future servicing of landlord debt -  the low-interest rate leverage employed to reflate property values.

Again, this false dawn in housing was fueled by the speculator class – hedge funds and private equity. Because property management requires actual management expertise, the quality and value of housing will likely decline much further and faster as the leveraged private equity realizes losses and abandons ship.

It’s one thing when legions were turning in their keys as valuation fell below the water line for individuals, but quite another when investors walk away, leaving a qualitative dimension to the vacuum left behind.

But the poster child for financial-economic derived mismatch is of course the silver market, where price management has occurred for so long that few recognize it – and this includes a significant portion of the precious metals analysis community.

That every other asset class is overtly manipulated is not yet enough to remove the taboo around gold and silver price manipulation.

As real physical supply becomes further constrained by the failure of new stock from mining to come to market and the continued yet constant baseline sequestration of metal into the myriad of industrial uses, the price should naturally rise. The absence of profit margin in the remnant and battered mining sector should be a flashing neon sign for common sense.

Ultimately, real supply pales in comparison to the sheer volume of paper promises. Instead, we have the illusion of supply from futures markets; represented and managed by the sheer size of the concentrated corner of selling in silver. A selling position maintained by the tiny few investment houses – and equivalent concentration of power that exists above the law. In fact, nothing comes as close to directly determining price.

The big short is like a giant planet orbiting around this planet of paper price discovery, exerting primary influence and controlling the tide of valuation.

It is not some natural law holding it in place – like a new force of gravity. It is artificially dense and held together via belief, faith, and a thin layer of force. A force defending the last gasp of fiat.

The longer it goes on the more visible it becomes and the harder it is to ignore, until ultimately, we get to a galactic implosion and then explosion we’ve all been waiting for.

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