How much time might we have left?

Anyone who knows anything about the global economy knows that it should have corrected in a massive way a long time ago.  Instead, globally coordinated central bank manipulation has kept the Ponzi plate spinning far longer than most people would ever have imagined possible.  It's like there is a global trance, a mass "deer caught in headlights" moment where the herd is paralyzed.  Normal thinking has been suspended while the fed is allowed to perform this grand experiment with our money supply.  We are in uncharted territory by every measure.

The blatant manipulation of interest rates and stock market and real estate valuations have gone on so long now that even the most hardcore members of the herd are starting to think that a new paradigm has emerged.  Long term market bears have been throwing in the towel.  They are starting to actually believe that the fed can drive long term prosperity.  History shows that these are exactly the times when the the truth finally is recognized en masse.

History might not repeat, but it rhymes.  Back during the height of the 1920s stock market boom every "expert" on the planet was completely entranced by the imagined "new normal".  An excellent illustration of this group herd-think can be found at this link to famous pompous prognosticators. 

People with real understanding of the economy know that wealth does not flow from the printing of currency.  It comes from the labor of man.  With global unemployment in many parts of Europe being worse than the Great Depression, how can real wealth be getting generated?  With almost 50% of the US population living in some form or fashion off the debt funded government dole, we have hidden the real poverty that is now in place in the US.   As Forbes magazine wrote, the term "welfare state" doesn't do the situation justice.

To date in the US, the welfare state has been funded by exporting our inflation (which is a sneaky form of taxation) as well as the accumulation of debt.  Obamacare has been the first governmental move to significantly raise taxes on the middle and upper classes in a long time.  And make no mistake, Obamacare is a tax.  If you do the patriotic thing and avoid signing up for the program in the name of civil disobedience, you pay a fine each year that is based off (a percentage of) of your household income (just like any other tax).  If you are a sheeple who gets herded into the program, your tax comes in the form of massively inflated rates driven by government-mandated minimum program coverage.  Insurance companies are not going to just sit there and offer coverage for every possible ailment (including hard to prove psychiatric events) without increasing rates.

Of course, if you are very poor then you basically get free coverage in the form of rebates.  This makes you a compliant, government-loving sheeple who does what he is told initially out of appreciation for getting free stuff but in the long term out of fear of these entitlements being taken away.  In this way the welfare state ruins the middle class, uplifts the weak and infirmed, and treats productive citizens as piggy banks from which withdrawals can be made at will.

While many compliant middle and upper class liberals initially supported Obamacare, they are now getting the sticker shock that we Austrian-aware libertarians always knew was coming.  History will show that Obama is not in favor of liberals.  His handlers (the same ones that controlled Bush and Clinton and all other presidents going back to the death of JFK) simply find them to be useful idiots.  The smarter of the idiots like Orpah Winfrey are now figuring out that they have been betrayed and they are pulling their support for Obama.  No, you really can't fool all of the people all of the time.

The real goal of Obama's handlers is to destroy the middle class and thus destroy personal freedom.  Poor people are not really free.  They do what they are told "or else".  People with private money are therefore a threat to the welfare state because they can fight back legally and if needs be physically.  Alan Greenspan's 1966-7 essay clearly mentioned that those in charge were pushing for a welfare state.  READ IT.  CAREFULLY.  THREE TIMES.  It outlines the situation perfectly: steal your money via inflation to impoverish you until we have a massive welfare state in which there is no freedom.  No freedom equates to slavery. Since all future value comes from the labor of man, he who enslaves the world eventually owns all value.

The bottom line is that additional taxation is not going to work very well in achieving the welfare statists goals.  Demanding money from people comes with great risk.  Instead of it being ethereal taxation, it gives the herd a target, something specific to vent anger at.  The problem with inflation is that it has to occur at a measured, steady pace in order to be an effective taxation scam.  If it goes too high too fast, it produces the same rapid net loss of buying power as massive deflation does.  The key word here is net.  In deflation, commodity prices collapse.  Anyone with a job whose salary is not haircutted due to a poor business environment is very happy because their personal buying power goes up.  But many good people find themselves without work and are in very dire straits.  They either go on the public dole or turn to crime (or some combination of both).  Conversely, with massive inflation more people are employed but their salaries all lose buying power faster than raises can be applied to compensate.  In both cases, the herd is less productive and thus there is less to take from them.  It is like being a bee keeper.  If your bees are left to become too hot or too cold then their production and thus YOUR consumption goes down.  The monied elite are trying to treat us like livestock and so the analogy is a close match.  They don't care a damn about us other than what they can take from us and if we are not overproducing then they are going to see a reduction in their own lifestyles.

To date, the US has been able to avoid having to deal with huge problems associated with deflation or massive inflation.  The reason is that is has been able to make up the delta using low interest rate debt.  That part of our prosperity which we do not earn, we simply borrow from China, Japan, etc.  But borrowing means debt, and debt comes with interest payments.  When interest rates are manipulated artificially low as is only possible when you own the world's reserve currency, you can borrow tons of money without the debt service eating you alive.  The end game come when interest rates rise despite best efforts of the fed to keep them low.

In truth, the fed is neither omniscient nor omnipotent.  It is just the front man for a cabal of monied elite who understand how money works and how the herd works and, most importantly, how to leverage the art of the con to use one to control the other.  But no con ever runs forever and it will not be different this time.  At some point the fed will completely lose control of the bond market (i.e. will not be able to keep interest rates low).  It could happen in many ways. For example, China and Japan might decide to throw off the shackles of global dollar dominance and dump their treasuries en masse.  They might just decide to eat the trillions in losses that they will incur from this and write it off as the price of emancipation.

There are other scenarios that could occur as well including anything that leads to a loss of confidence in the US.  For example, if some jerk sets off a nuke on Wall St and collapses the US markets completely, who could have confidence in the US from that point on?  There are lots of groups out there that have the capability and the US government might actually turn a blind eye to their plans or even assist them as obviously occurred during 911 where 3 steel frame building collapsed straight down into their own footprints at the speed of gravity surrounded by the pyroclastic dust of pulverized concrete within a few hours of each other.  And of course, one of the buildings wasn't even hit by an airplane.  The number of people who have fallen for this BS story boggles my mind.  After having gotten away with that there is no telling and perhaps no limit to what the con men will do next time.

Of course, I don't know what will happen to collapse the confidence in the con game.  But Elliott waves might, once again, allow us to tap into the collective consciousness of the herd regarding this matter.  If we know that interest rates are the control mechanism we can also infer that loss of control of the interest rates is the indication that the con is collapsing, that the con men have been outed and that no amount of additional con will make the herd un-learn this knowledge.  You can't fool all of the people all of the time and during the collapse of the con you can't fool anyone at all.  I should copyright that last part as the Economati corollary to the famous saying attributed to Lincoln.

In any case, below is the chart to TNX which is the ETF which tracks interest rates on 10 year bonds.  While it is faaaaar from being confirmed yet (i.e. still extremely speculative), this is looking suspiciously like an ending diagonal.  As I have reported many times, these ending diagonals are showing up all over the place and, once confirmed, they are excellent indicators of trend change.  In all of my years of day trading and watching charts I have never seen them occur with such frequency as I have seen in the past couple years.

If this speculation turns out to be correct, the likely path will look like one of the blue lines.  The red E wave will either end mid channel (a failed E wave) or it will touch the bottom of the channel and spring up or it will undershoot the bottom of the channel (throw under) and then shoot up.

It is also possible that instead of turning downward too much further that the chart suddenly breaks through the upper resistance line.  While this is possible, it does not seem likely to me at this time.  The reason I think the odds are low is that such a breakout will generally require the power of a 3rd wave.  Also, the A-C line is downward sloping.  There is no inclining double bottom to spring upward from.

In order for interest rates to head down again, the fed, perhaps under Janet "The Dove" Yellen will have to go into overdrive.  Printing $85 bn per month has not kick started the economy and it has also not started massive inflation.  I fear that the fed will just keep expanding its corrupt programs until we see one or the other.

If interest rates take another dive downward then gold and silver will likely be hit in one final shakeout as people pile out of cash and into assets which they perceive to be income producing.  If this occurs, please, please, please do not throw your hands up in the air like a sheeple and say "gold and silver are worthless".  Instead, continue to accumulate more of it at lower prices.  If it happens, revel in the fact that you are getting another chance to increase your savings of real money.  Remember the words that Alan Greenspan wrote in his essay.  Note: I crossed out "standard" in the text of his words below because we know as a result of Nixon's 1971 delinking of gold from paper money that there is no such thing as a gold "standard".  You either have gold or you have Ponzi promises regarding gold.  There really is no middle ground:

"In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.

This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard."

Note: the chart prediction above will be negated if TNX can somehow sustain a break out from the down sloping resistance line.  It will have to do this pretty quickly and it will have to happen with gusto if it is going to happen because a breakdown from the microchannel that it is currently in (parallel green lines) will tell traders that a near term break out is not in the cards.  Such a breakdown will greatly support my model of an ending diagonal in the 10 year bond rate.

A final word of caution for those who might think this post is a call to abandon gold and silver for now because it might go lower at which point you can buy even more.  In other words why not try to time the markets?  In a word: don't.   The high level reason are that models are just models but the fundamentals are going to win in the end and the main fundamental that calls for much higher gold and silver prices in the future is that the US has taken on an un-payable amount of debt.  There is no amount of "political will" that can fix this.  The only options are admission of the fact and immediate collapse or kicking the can down the road until it collapses anyway (but leading to worse consequences for having waited).

Perhaps a more compelling reason is the long term interest rate chart which tells the opposite story of the shorter term chart listed above.  Long time readers will immediately recognize this as a mania chart.  We had the exponential rise on the left and then the collapse on the right.  On the right hand side, the chart ended up lower than where it started.  Once this happens the next move is a dramatic upward swing in the form of short covering.  In other words, a bounce is built into the model, it must happen. 

The trigger for the bounce is a breakout from the the horizontal that is drawn from the starting value.  On the way down, look how that line served as support for double tap test of it back around 2010.  Then it subsequently broke down.  But now it has broken back up through that line.  This pattern does not typically allow for another new stab at the lows (which is what an ending diagonal outcome suggests will happen).  More typically at this point we see a pullback to test the red line from above and that test holds.  I often refer to this by what Prechter calls it which is "the goodbye kiss".  After retesting that line with a downward move from above (i.e. a 2nd wave), the next move is upward and it generally occurs with great and sudden force - a 3rd wave.  It tells the market that the worm has turned.  Instead of easily holding down interest rates as Bernanke seems to have been able to do until now (thus lending to the foolish believe that he is somehow a magickal (sic) or omnipotent hero), NOTHING he (or Yellen) does will make any difference.  The herd will have gotten wise to the scam and he/she, like Greenspan, will become widely discredited.

You will know that the federal reserve has lost control of the bond market when the above long term ten year treasury chart breaks out of the down sloping yellow resistance line.  This, I think, will be the start of the great inflation in the US.  This is when gold and silver will turn around and begin moving upward to new highs.  There is too much human energy and herding experience under this long term curve for it to not play out like this IMO.  It is a fait accompli.  When this happens, the entire global monetary system will fall apart due to US defaulting on our debt and the monied elite will use the carnage to eventually achieve their goal of one world currency.   It will have to be heavily based on gold and perhaps silver as well because no fiat currency can have much value if the USD has been discredited.  They are all joined at the con.