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Mohammed
El-Erian is given credit for the phrase 'The New
Normal' to mean an altered state of perceived instability within the normalcy
realm, as in crisis being called normal, like endless crisis. As buddy Jim
Mess in Europe says, just like trying to redefine what debt default is, it
sounds like high octane prevarication. El-Erian is
considered one of the good guys. He managed to slip away from Harvard
University without much smear, where he served on the management team of the
giant multi-$billion endowment fund. If truth be told, Harvard hatched the
Enron monster from its Business School as a project, funded by Citigroup,
where JPMorgan created all the off-shore companies to hide their dealings.
Building #7 in Lower Manhattan contained the records until it fell from
structural sympathy. Harvard successfully made money all the way on the Enron
runup, but also successfully shorted Enron all the
way down. So El-Erian is hardly squeaky clean. He
does give a good interview though, does not deal much in varnished truths,
and is an avid NYMets baseball fan. At PIMCO, he
worked on the team to direct the biggest bond fund in the world to turn its
back on the entire USTreasury Bond complex. In
fact, their Total Return Fund, its flagship bond fund, is net short on USTreasurys as a group. That means they own a raft of
Credit Default Swaps for USGovt debt default and an
assortment of other vehicles like the TNX and TYX that track the 10-year and
30-year bond yield. They recognize an asset bubble when they see one, and
even invest in Gold.
The
other person relevant to the article title is Nassim
Taleb, who coined the term Black Swan. Generally it
refers to the extreme oddity that passes through view, shows up on the radar,
the extreme warning signal being dire, but is largely ignored by the masses,
regarded as the exception or outlier event. THE BLACK SWAN HAS BECOME THE
NATIONAL BIRD!! When a few black swans appear, the alert analysts pay heed
and express their warnings. When an armada of black swans appear, the message
is clear. A systemic failure is in progress, and the important foundations
are crumbling. In 2009 and 2010, it was clear that numerous black swans were
sighted and identified. In 2011, something highly unusual and extraordinary
has occurred. The black swans can be
organized into groups. They are numerous within each important economic and
financial camp. The Armada of Black Swans, well organized into regiments, has
become dominant enough to be considered the New Normal. During the global
financial crisis (which has earned a widely used GFC acronym), tragically the
state of crisis has become an engrained latticework on the reality mosaic. A
quick review at a high level should cause alarm, except for the gradual
pathogenesis that dictates the pace of systemic failure in progress. If the
list below were presented as a Wall Street Journal forecast in 2006, the
author would have been subjected to laughter, derision, and mockery. Yet here
and now, the organized groups of black swans are visible everywhere one
looks. Worse, they are carrying nuclear slingshots, and defecate
highly toxic green blobs into the liquidity streams that we have grown so
dependent upon.
QE TO INFINITY
Quantitative
Easing will continue for obvious reasons. Many were outlined in the last two
articles. The QE2 will continue seamlessly, extending beyond the June 30th
deadline. It will change in complexion slightly to become QE3, with some
added twists like to include some municipal bonds. Later the entire financial initiatives will morph into a Global QE,
since all major central banks will face the same plight. They will all
purchase USTreasury Bonds or face extinction, in
order to support their own balance sheets. The credibility of the US
Federal Reserve has undergone major damage. In the next year, it will be
totally destroyed. The factor ignored by many analysts is that the USFed balance sheet has expanded recklessly, and
insolvency is its unavoidable condition. If the US housing market does not
revive, then the US banks will go deeper into insolvency, carrying perhaps
two million homes on their books at some point in the future. The resulting
effect on the USFed balance sheet is permanent
ruin.
The
USTreasury Bond default might possibly come, as
warned by a great reliable inside source in 2008, from the USFed resignation as central bank for the USGovt. They are not subject to bank regulations, to
reserves ratios, to collateral requirements on loans, or to anything for that
matter. They managed the secret handouts of $12 trillion under the cover of
TARP Fund dispensation. They rescued foreign banks even though that is not
under their charter. They orchestrate the narcotics money laundering
effectively, certainly not in their charter either. The USFed
does have owners, and they cannot be pleased. The turnaround in the housing
market never occurred. Its prospects look worse with each passing month. If
the USGovt or the Elite operating as handlers for
the captive USGovt decide to convert private
property into collectivized syndicate ownership, and use their Fannie Mae
device as agent for the process, then perhaps the USFed
might serve as a facilitator to the vast Collectivism project. The United
States Government might someday own the majority of homes in the nation,
maybe even commercial buildings and shopping malls too. The disenfranchised
can always go camping, as in the Favored Environmental Managerie
Amorphous camps.
ARMADA OF BLACK SWANS
Consider
the following black swan specimens, each of which is astounding, each
alarming, each serving as one more added element to
the ruined situation. The swan organization is admittedly rough, but the
regiments are put in sensible order. Any small handful of these signals would
qualify as forewarning a profound crisis. Not anymore, since crisis is the
new normal. Not anymore, since black swans adorn the entire landscape. A
healthy white swan gradually suffers from toxic exposure, quickly to turn
black from a putrefaction process. Apologies for overlooking at least a dozen
other important other black swans, as time and space did not permit the
exhaustive catalogue process. Emphasis was given to the United States ponds
and its migratory bird population.
USTREASURY BOND SWANS
- USGovt debt ceiling
standoff, with actual violations
- Over 75% of USTreasurys
auctioned bought by the USFed in debt
monetization
- Turnaround from primary bond dealers to POMO
repurchase by the USFed is 3 weeks
- Foreign banks form 12 of 21 primary bond
dealers
- PIMCO owns no USTreasury
Bonds, even short
- Global boycott of USTBond
by creditors, some net sellers
- Foreign creditors owns the majority of USGovt debt
- A fixture of $1.5 trillion annual USGovt deficits
- Greenspan and David Stockman warn of USGovt debt catastrophe
- USMint officers admit Fort
Knox has been shut down for 30 years, as in zero gold
USFED SWANS
- QE permanence, otherwise called QE to Infinity,
worked into standard policy
- Bank of England urges more bond buying
- Cost of money 0% for two full years,
implication being destroyed capital
- Chairman regards monetary hyper-inflation as
being zero cost
- Ron Paul pushes for a USFed
audit, an end run to pay down USGovt debt
- USFed owns more USTBonds than any other creditor
- Competing Currency War has Euro weakness mean USDollar as all circle the toilet
USGOVT SWANS
- USGovt could shut all
operations but still be have a budget deficit
- USGovt could confiscate
all income but still have a budget deficit
- USGovt must cover AIG
payouts on Greek Govt debt default from CDSwaps
- US Postal Service stops all payments into their
pension system
- New York Fed refuses to disclose the
destination of $6.6 billion stolen from Iraqi Reconstruction Fund
- Federal Worker Pension Funds and G-Funds
confiscated (called borrowed)
- USMint runs out of gold
& silver metal to make coins
- Endless war accepted as sacred, whose costs are
crippling
- Council on Foreign Relations enables a foreign
nation to control US foreign policy
- Breaches to USGovt
communications via WikiLeaks
COMEX SWANS
- GATA Gold Rush 2011 in London Savoy Hotel on
August 4th will feature the COMEX whisteblower
Andrew Maguire
- Silver futures contracts settled almost
exclusively in cash, often with 25% vig bonus
- Gold & silver futures contracts often
settled with GLD & SLV shares
- Umpteen margin increases for gold & silver
futures contracts, but reductions in USTBond
futures contract margin requirements
- Brent versus West Texas crude oil price has a
$20 spread
- Every time Bernanke assures US financial
markets, gold & silver rise in price
- Elimination of Over The Counter gold &
silver contracts due in mid-July
BANK SWANS
- Chronically insolvent USFed
and EuroCB, balance sheets ruined
- FASB accounting rules permit banks to grade
their own test exams
- Stress Test for banks had almost no stress, a
sham
- Dependence by Wall Street banks on naked
shorting USTBonds and narco
funds, the former called Failures to Deliver, the latter recognized by
the United Nations
- Shadow housing inventory held by banks over one
million homes
- Wall Street firms in court on the defensive,
JPMorgan foreclosed soldiers
- Wall Street firms banned in Europe on bond
securitization and issuance
- Strategic mortgage defaults by homeowners on
the fast rise
- Gold holdings by tyrant Arab rulers targeted by
New York & London banks
- War over Libya grabbed $90 billion in Qaddafi
money by New York & London
- PIGS sovereign debt default in Europe to have
impact ripples that reach US banks
- Standard & Poors
reminds the players what constitutes a debt default
- No liquidation of big US or London or European
banks since Lehman Brothers
- Much of dimwitted US population believes the
propaganda that Gold is a bubble
USECONOMY SWANS
- USEconomic indexes fall off
the cliff, see Philly Fed, Empire State, ISMs
- Rampant systemic insolvency in banks, homes,
federal government
- US housing resumes its powerful bear market
- US land title system in the disintegration
process, see MERS on mortgage titles
- Unemployment at 20% across the Western world,
economic misery index hit 30%
- USGovt economic stimulus
never contains stimulus
- Main non-military innovation in the United
States is bond fraud
- Shrinking US trucker industry from $4 gasoline
and diesel
- China begins to export price inflation to the
United States
- Killing state worker union pensions as part of
the state budget shortfalls
- Gulf of Mexico off limits for oil drilling
- 1 in 7 Americans is on Food Stamps, whose debit
cards are good JPMorgan business
- media blackout on the Fort Calhoun near nuclear
plant meltdown in Nebraska
FOOD & WEATHER SWANS
- Food price inflation is staggering but denied
- Floods across Midwest & Plains states to
interrupt with planting & harvest
- Australian floods have interfered with coal
industry and agriculture
- Fukushima and Northwest US infant mortality,
with vulnerable milk next
- Big volcanoes like in Chile and Iceland disrupt weather and air travel
EUROPEAN SWANS
- German bankers at war with Euro Central Bank
- Germans abandon the EuroCB,
leaving it to Goldman Sachs, see Draghi
- Spanish banking system has yet to write down
squat on housing credit assets
- Portugal, Italy, and Spain sure to follow
Greece into a debt default
- Belgium has had no government for a full year
- Ireland prints more money per capita than the USFed
- US & NATO to part ways
CHINESE SWANS
- G-8 Meeting is pushed aside, as the Anglos deal
with broad insolvency
- G-20 Meeting takes center stage in a power
play, led by China and the BRICs
- China buys discounted PIGS sovereign debt, to
redeem later in central bank gold
- Chinese FX reserves exceed $3 trillion held in
sovereign wealth funds
- China owns most world major ports, as part of a
strangulation process
- China conducts the great Idaho experiment, toward
re-industrialization of America
HIDDEN SWANS
- Swiss faces hundreds of $million lawsuits, for
refusal to deliver Allocated gold
- Saudi Arabia cuts new deal for Persian Gulf
security protection, see Petro-Dollar
- Citigroup has high hidden exposure to Greek Govt debt default
- Chinese vengeance over reneged USGovt gold & silver lease, as part of the Most
Favored Nation granted status, has motivated its extreme pursuit of
precious metals
- Containers hold $300 to $500 billion in EuroNotes at Greek port warehouses
- Internet strides light years ahead of USGovt regulatory hounds at syndicate offices
- Chemtrails, storm steering,
lingering droughts, fallout falling, haarps a
playing
GOLD & SILVER BREAKOUT IN ALL CURRENCIES
The
great spring 2011 precious metals consolidation is coming to an end. In no
way is the Quantitative Easing program coming to an end, otherwise known as
hyper monetary inflation. Printed money is being abused to cover bank
insolvency and to redeem toxic bank assets. The central banks are taking down
the QE billboards. They will continue
with their debt monetization in order to manage the financial system collapse
in an orderly manner. As David Malpass adroitly
said on Bloomberg Financial News, the debt monetization known as quantitative
easing will quietly become an integral but hidden part of the USFed monetary policy. The central bank must find a
way to cover the $200 billion in monthly USTreasury
auctions, to roll over the obligated primary bond dealer inventory, and to
lap up the mountain of toxic mortgage bonds that prevent an all-out cave-in
of the bank balance sheets. The reality is that nothing has been fixed, nor attempted
in solution. The grotesque insolvency of banks, households, and government is
the marquee message. Without continued monetization, the system would
collapse rapidly and disorderly. However, with continued monetization, with a
QE chapter by another name or conducted behind the same curtains, the system
will collapse in a gradual and orderly manner. The USFed
has no more credibility. The announcement on Wednesday that the New York Fed
refused to provide details on stolen Iraqi Reconstruction Funds is the latest
blatant syndicate action that screams criminality. Witness the early stage of
another uniformly applied global Gold bull market breakout.
The
Gold price has hit record highs in the British Pound Sterling, where their
banks are insolvent, their economy is in reverse, price inflation is ramping
up, and their currency is facing grandiose debasement. The SterlingGold price smells monetary ruin. The global
breakout is manifested first in the most broken non-American locations, since
the spring ambush orchestrated in the COMEX has put huge pressure on foreign
currencies. The Competing Currency War still leads the desperate USFed officials to slam foreign currencies and to place
financial press attention on their declines.
The
EuroGold price smells monetary ruin. The attention
has been squarely on the Greek battle to avoid debt default. Every news story
about the USEconomy faltering is following
immediately by a story of Greek bailout impasse or Athens challenge to ingest
suicidal austerity pills or riots on the Athens streets. The differentiation
of EuroBonds with greatly varying bond yields has
permitted the Euro to trade on speculative merit. The Greek default threat
surely pushes down the Euro. But the prospect of a higher Euro Central Bank
interest rate leaves speculators to buy the Euro, since proper pricing
mechanisms are in place on the sovereign bond yields. The European investors
are clearly flocking to Swiss banks on the paper investment side, but their
pursuit of Gold is enormous. The Euro Monetary Union is running on fumes. The
pain in Spain is hardly on the wane. The Gold price will rise and break out
soon enough.
The
YenGold price smells monetary ruin. The situation
in Japan is terrible, complicated, and tragic. The advent of trade deficits
will aggravate the outsized cumulative debt burden on the nation. The paradox
is starting to show itself. Their trade deficits will force the national
insurance firms and banks, even the Bank of Japan, to sell existing US$-based
assets in a political compromise. They do not want to monetize more debts.
They do not want to create worse federal budget deficits. They will
compromise by selling foreign assets to finance the reconstruction and
dislocation costs. The paradox will manifest itself with a rising Yen
currency in the face of worsening deficits in every conceivable crevice. As
their nation slides into the sea, both literally and with red ink, and the
salt on the wounds coming in the form of price inflation, the Gold price will
rise and break out soon enough.
Last
to break out will be Gold in US$ terms. The Gold price smells monetary ruin
on home turf, not to be deceived by any USFed head
fakes. Perhaps a sudden awakening to the obvious continuation of QE2 and
merge into QE3 could enable a Gold breakout in double quick fashion, ahead of
other currencies. Much more stability is seen in the Gold price rise in US$
terms, as the destruction is more stable, the monetary ruin more understood,
the federal budget debate more openly futile, and the national insolvency more
publicized. The early May high of 1563 will easily be surpassed, all in time.
The impetus might be QE163 or a liberated USGovt
deficit from a raised debt limit or a failed USTreasury
auction or a big US bank failure or a spike in mortgage rates or a plummet in
housing prices or a longer parade than the current stream of miserable USEconomic data. The Gold price rose toward $1550
following the vacant FOMC meeting on Wednesday, where the main purpose was to
put us to sleep.
Jim Willie CB
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