Why does the copper chart indicate that inflation is coming?

It's been a long standing thesis of mine that during the very end game of this Ponzi that things would stop working like people had gotten used to them working.  Historical relationships between supply and demand would get all screwed up, relationships between interest rates and the economy would get screwed up, you name it.  The result would be the eventual, massive collapse of the derivatives Ponzi which are by far the largest component of the global debt Ponzi.  Their notional value runs into the 700 trillion dollar range which is roughly 10x the global GDP.

We are told not to worry about this because derivatives are just hedges and that most of them will cancel each other out in the event of some kind of shock.  In other words, they are insurance.  Of course I think that is bullshit.  I think they have been used as leveraged bets just as I want to use some inverse VIX as a highly liquid put option, and not for insurance reasons but rather as an "investment thesis".  But even if they have been used as bona fide hedges, the base assumptions will fail because the amount of debt out there now is changing how the system works.  We used to have a system that had mostly capital and then some debt.  Now the system is mostly debt underpinned by some capital.  Yet few if any think this will have any effect on the base assumptions of the derivitives.

A major example of this is that the federal reserve has been printing money like mad, along with every other government of the world.  Some countries have experienced massive inflation as a result but not the US.  At least not yet.  Russia is of course the latest victim with the Ruble having plunged in value as the dollar has soared over the past year.
        Note: Sorry about the link which makes you suffer through some crappy useless video ad prior to getting to the "content" but this was the first link that came up for me when researching ruble plunge.  I could have provided another but the presentation mechanism was informational to me in and of itself.  Here we have a video of pretty young woman with a plunging neckline walking toward the camera with an obvious sexy swagger flipping her hair to the camera even though none of it is in her eyes, etc.  Turn the sound off and watch it.  It is an obvious sell job and it is no accident.  It's the kind of thing that I would expect to see near a reversal.

All the while, the federal reserve sits with a smug look on its face saying that they can keep interest rates low as long as they want to because it really doesn't seem to matter with respect to US inflation.  "King dollar" and all that.

I'm now going to question the infallible strength of the dollar based on little more than the copper chart. We keep talking about "when the deflation comes" but what if it is already here in a relative sense?  If you look at the numbers of people on government dole in the US, the numbers are staggering.  It has been a sort of stealth greater depression.  So many are on food stamps now that this mechanism has clearly become the modern version of food lines.  In understanding how the future might turn out, we have to keep in mind that the current state of technology is such that there is the potential to have plenty for everyone even if 1/3 of the population (101.77mn people without work in a population of 316mn) is sitting on its ass letting the other 2/3 carry the weight.  Productivity increases have afforded us this which was not available during the Great Depression.  The only real question now is whether those carrying the weight want to continue to do it or not.

In any case, check out the price of copper (as measured by the copper miners ETF).

For years now it has been in a falling wedge as the federal reserve has tried to battle deflation.  What's notable about this chart is that it now has put in 5 rail bumps.   There is no guarantee that this is done plunging yet but given that it is in near freefall we are not long for a major bounce if not a commodities reversal.
              Note: It is also possible that this 5th wave rail kiss is just A of C of 5 and that COPX will bounce to $8.50ish and then really plunge hard into C of 5.  If this happens it will take gold and silver down with it because they are still trading as commodities, not money which they actually are.

In any case, if you ignore the EW implications of the falling wedge chart (which according to my new rule would make it a C wave with or without the potential throw under), the price of copper is not important when taken in a vacuum.  What is important is the price relative to stocks on hand.  According to the age old laws of supply and demand, for price to be so low we should have every storage location on the planet stuffed to the gills with the metal.  The the exact opposite is true as you can see from the London Metals Exchange copper warehouse level.  It is just finishing a 5th wave down.  So at this point we have low stocks and low price.  This is not normal folks.  To me it smells like people are taking their ball and going home.



In other words, the market appears to be in a state of reformation.  A similar thing happened to Dell computer not long ago.  Those running the company decided that the market was being unfair to it in terms of valuation and so they bought it back from the market and took it private.

Perhaps this is what is happening with metals as well.  Perhaps the producers think that too many paper versions of their products are underpinned by small amounts of physical stocks at the LME and COMEX.  By not giving their metals to these corrupt organizations which are running a global fractionally reserved metals scam, the producers (who are the main victims of this kind of naked short selling by the metals exchanges) are essentially taking their sales channels private.

It's also happening with gold as everyone and their brother is asking for gold repatriation from the federal reserve which is essentially the COMEX of monetary gold (whereas the COMEX itself is for industrial gold).

This decentralization of control is going to lead to price shocks IMO.  The central controllers of the system have screwed the individual producers too far as if they have no other choice but to participate.  This is an age old mistake because there is always some level of pain beyond which new options become viable for the market place/herd.

There have always been two schools of thought on the inflation/deflation issue and both sides have super bright minds.  On the deflation side you have Prechter and people like Mish and a good number of others.  On the inflation side you have people like Schiff and Marc "be your own central banker" Faber.  Because of the fundamentals that both sides present, my long standing view is that all of them would be right in the long run.  In other words their views are all correct and it is just a matter of timing when they actually arrive.

My view is that first we would get deflation and then massive inflation - what I have long called a "supernova economy".  Well, if you look at the price of silver, oil, copper, natural gas (peaked at ~$8 "wellhead price" in 2006, now $2.80), etc. there has clearly been significant deflation.  Perhaps there is even more to come as COPX plays out C of 5.  But after that people in the US need to prepare for the onset of significant inflation which is why I think everyone should be at least starting to buy something golden right now.  The high risk/high reward items in this category will, like JNUG, be options based and thus not for everyone.  But something like GDX or GDXJ is far closer to a bottom than to a top and once the bottom is finally in (if in fact it is not already in), the gains on these will be significant over the coming years.

The dollar might be king of the corrupt global market place, but kings don't matter once the serfs revolt.  In the long run the dollar is just as value-less as the Ruble, the Euro or the Yen.  All fiat currency/faith based currency will eventually trade at its intrinsic value of zero.