As Global Debt reached a new record high of $250 trillion this year, gold and silver came briefly back on the radar for investors. After five long years, the precious metals finally broke through key technical levels this summer. However, after the Fed started the Repo Operations in September and the $60 billion a month of “Not-QE” in October, the focus returned once again to the Bloated Stock and Bond markets.
What a drastic change from the Fed’s policy last year when it was reducing the size of its balance sheet until the stock market crashed in December 2018. Since then, the huge stock market reversal and all the additional gains have been Fed liquidity induced. Sven Heinrich continues to write and talk about this on his website, the Northmantrader.com. Here is a recent chart from his article, System Failure:
At the bottom left hand of the chart corresponds to the bottom of the stock market in January 2019 when Fed Chairman Powell caved in by ending the reduction of the Fed’s balance sheet. Since then, there have been three rate cuts, Repo Magic and $60 billion a month of U.S. Treasury purchases because there aren’t enough suckers to absorb all the new U.S. Govt issued debt.
The U.S. economy isn’t even in a recession, and the Fed is acting as if it was 2008-2009 all over again. What happens when the U.S. economy finally rolls over?? It’s going to be terrible news, especially considering the record amount of global debt. According to the IIF, the Institute of International Finance, global debt reached a record high of $250 trillion in the first half of the year. However, the IIF estimates that global debt will reach $255 trillion by yearend.
In just ten years since the 2008-2009 financial crisis, the world added another $100 trillion in debt. Now, the majority of that debt went into the Stock, Bond, and Real Estate Markets. This is precisely why the U.S. stock market has reached an all-time new high. Unfortunately, when the U.S. and the global economy finally enters into a recession-depression, the asset values will crash while the debts remain.
GOD hath a sense of humor.
We saw this happen during the U.S. Subprime Housing Bust. After millions of Americans refinanced their homes by cashing in on the equity, they were upside down with their mortgages when real estate prices plunged. The brutal truth of the market is that the DEBTS will remain while ASSETS evaporate.
In just the first half of 2019, total Global Debt increased by $7.5 trillion. Thus, global debt jumped by more than twice the value of all world gold and silver investment of $3.5 trillion:
According to the World Gold Council, World Silver Survey, and my estimate of additional privately held silver bullion, the total value of global gold investment is $3,450 billion, while silver trails way behind at $90 billion. These figures are based on 2.3 billion ounces of global gold investment and an estimated 5 billion ounces of silver. The World Silver Survey reported that above-ground silver stocks in 2018 were 2.5 billion ounces. I added 2.5 billion oz more of possible private held silver bars and coins. I doubt there is that much privately held silver, but even if we say there was 5 billion oz of silver investment held, it’s only worth $90 billion based on an $18 spot price.
As we can see in the chart above, total global debt will reach $255 trillion by the end of 2019 versus $3.4 trillion worth of gold and $90 billion in silver. Thus, the total world gold investment holdings are only 1.3% of the outstanding global debt, while world silver investment is a measly 2.6% that of gold.
Currently, the massive Global Debt Time-Bomb isn’t impacting the values of the precious metals. This is because the mentality driving the market isn’t considering the FUTURE ENERGY needed to pay back all this debt. We must remember that Debt represents future obligations that can be paid back only when the global economy BURNS ENERGY.
The following chart from Louis Arnoux, based on work from the Hills Group provide the MAIN FACTOR that is pushing the global economic and financial economy to the brink:
This chart is very easy to understand. All one has to know is that as the NET ENERGY from oil delivered to the market (Orange line) has declined, the total World Debt to GDP (Red line) has increased. The data in the chart is a bit old, but the trend continues in the same direction. Based on the total global debt reaching $255 trillion by the end of 2019 and the estimated $88 trillion in world GDP, that equals a World Debt to GDP of 290%, much higher than the 240% shown in the chart. So, as you can see… the world continues to head towards the ENERGY CLIFF.
Ignore The MainStream & Alt Media White Noise & Focus On the Energy
Let me provide the reader with a good piece of advice. Ignore the WHITE NOISE coming from the Mainstream and Alt-Media and pay attention to what’s happening in the oil industry and market. If you spend a lot of your time trying to figure out the “Manipulation” of the precious metals, including all the new conspiracy theories about the Elite, etc, you are wasting your life away.
The entire Political Circus from the LEFT or the RIGHT is a complete waste of time. If you have been watching the Impeachment hearings hoping and praying that President Trump is forced out of office, you are WASTING YOUR LIFE AWAY. If you are listening to the RIGHT or Alt-Media about all the conspiracies in regards to the DEEP STATE, you are WASTING YOUR LIFE AWAY.
The two political parties are not going to help you survive the next financial and economic collapse phase that is coming. Thus, the extreme Left AOC New Green Party and the extreme Right-Wing Divide and Conquer Regime of Global Dominiation will become totally meaningless when the ENERGY CLIFF arrives.
The coming ENERGY CLIFF isn’t biased. It doesn’t care about the color of your skin, your religious preference, your political brainwashing, or if you are rich, middle-class, or poor. The ENERGY CLIFF will change the way of life for everyone. Sure, there will be a few that find a way to enrich themselves while everyone else tries to survive, but that isn’t anything new. That’s been going on for thousands and thousands of years on the back of rising and falling civilizations.
However, the one place that the ENERGY CLIFF will be biased is to those individuals who were smart enough to purchase physical gold and silver. While there is $255 trillion in unpayable debt in the world propping up the $470+ trillion Global Asset Universe, if you own your gold and silver outright, there is no debt or liability tied to the metals.
Basically, the $3.5 trillion worth of global gold and silver investment holdings are the only real BANKS of “Economic Energy” in the entire world. The major commercial banks with trillions of dollars of deposits do no represent “Economic Energy.” Rather, they are “ENERGY IOUs.” While I have repeated this over and over again, it seems that many people still don’t get it or that they may be new to the SRSrocco Report website.
Moreover, the focus on the typical Supply and Demand forces in the Gold and Silver Industry should also be ignored. While I spent some time analyzing and writing articles on the supply and demand aspects in the gold and silver industry, it will become totally meaningless when the ENERGY CLIFF arrives. So, if you are counting on surging high-tech silver demand to push silver to $50 or $100, you are WASTING YOUR LIFE AWAY.
We are well past the age-old fundamental analysis of the markets. Its time has come and gone. When the Central banks are no longer able to control the financial system, then the ENERGY CLIFF will take over in glorious 3D Techno-Color… and it won’t be pretty. Virtually, no one is prepared for what’s coming. Sure, we have some time left before DEBT Grim Reaper comes, but it’s not going to be decades away.
I know this because we already see troubling signs in the U.S. Shale Oil Industry.
The U.S. Shale Oil Industry Is Pulling The Energy Cliff Closer
I had a good laugh hearing this quote from the new U.S. Energy Secretary during an interview with Bloomberg about the Shale Industry:
The golden age of U.S. shale is far from over, with an expected slowdown in the Permian Basin likely to be temporary, according to the new U.S. Energy Secretary.
Has the new U.S. Energy Secretary, Dan Brouillette, seen the huge annual decline rates taking place in the industry?? While it was easy to add 2,000-3,000 wells a year to increase production, it now takes nearly 10,000 new wells. When do we start to reach 15,000+ wells a year and when does it become completely insane?? Furthermore, the largest shale oil producer in the U.S., EOG Resources, has one of the highest first-year decline rates in the industry.
For example, according to the excellent data from Shaleprofile.com, EOG’s 831 shale wells completed in 2018 experienced an 82% first-year decline rate:
EOG’s 831 wells reached peak production of 960 barrels of oil per day (bopd) by the second month and then declined 82% to 170 bopd by month 12, or one year. That’s one hell of a first-year decline rate. Why is this interesting?? Well, in 2011, EOG’s wells only declined by 66% in the first year. Sure, EOG’s wells are more powerful today, but if we assume a conservative $6 million a well, the company invested $5 billion to watch 82% of its production evaporate in just one year.
Of course, the “sophisticated” energy analysts will suggest that this is just part of doing business. BULL-CRAPOLA. Let’s look at the Net Energy Chart again:
It doesn’t’ matter how much oil the U.S. Shale Industry produces if the amount of NET ENERGY delivered to the market continues to decline. Shale Oil is a DESTROYER of net energy. So, the more we produce of it, the more debt and more fragile the overall system becomes.
Welcome to OIL THERMODYNAMICS 101
So, we, as humans, have a choice. We can either get lost in all the WHITE NOISE, and complete nonsense taking place in society or learn about what is happening with the oil industry and market. Forget Renewable Energy. If you are spending a great deal of your time in the (Un)Renewable Energy Industry, you are WASTING YOUR LIFE AWAY.
Also, if you are one of those individuals who is considering buying the new Tesla CyberTruck, I recommend you watch this video on the truck’s failure to tow a trailer up a mountain for only 100 miles. The guy in the video explains with the math and science that the Tesla CyberTruck wouldn’t have enough energy to pull a trailer up 100 miles in the mountains.
So, the world will continue to be duped by the new religion of TECHNOLOGY, right up until we hit the ENERGY CLIFF.
Lastly, the precious metals are the only real store of value, money, or, more importantly, Economic Energy that will offer the individual with better options in the future than 99% of Stocks, Bonds, and Real Estate.