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The recent decision by the US Federal Reserve to
contaminate the financial body until it responds favorably was the last straw
in my book. Witness a declaration of
permanent QE and hyper monetary inflation of the most virulent strain,
unsterilized. The USFed is essentially admitting
failure. The signal serves as the loudest death knell for the USDollar among many in a sequence. On a similar parallel
note, lighter and more humorous, one might be reminded of the pirate swash
buckling style of yelling at the swabbies that the
beatings will continue until morale improves. The QE bond monetization of USGovt debt has turned viral and entrenched. It is sold
as stimulus, when in fact it acts like a giant wet blanket on the USEconomy. It is intended as stimulus to businesses, but
the effect is felt on the financial speculation and on Asian direct business
investment. In the past the emergency lever device had been successful only
because it was used on a temporary basis. But now the USFed
high priest assures it is a permanent fixture, a sign of their failure. The
public is too ignorant to comprehend the ruin. They can only see the threat
to their personal ruin.
The bankers are determined to ruin the entire
system in order to retain power, all while dispensing increasingly
nonsensical dogma like from heretical high priests about the effectiveness of
their solutions. Theirs is heresy built upon alchemy laced with arrogance,
with no precedent of success in past history. A definition of insanity comes
to mind, offered by a psychologist who works in a clinical practice. Let's
stick with the layman translation. Insanity is defined as repeating the same
action but expecting a different result. So the USFed
conducted QE, then QE2, then Operation Twist (a deceptive QE), now is set for
QE3. It expects a different result from the rising costs and debasement of
the currencies. Somehow by enlisting the cooperation of the Euro Central
Bank, the Bank of England, the Bank of Japan, and the Swiss National Bank,
together they can pull off QE3 in a veritable ongoing QE to Infinity when all
previous efforts have failed to produce a solution or economic recovery. The
high priests from the central bank altars do admit that liquidity does not
address the insolvency ills, yet they hit the monetary levers and
accelerators more quickly. The central bankers are in a panic, and it is
beginning to show clearly. Their solutions solve nothing. They will next
attempt to rule more formally over the ruins.
MONEY VELOCITY
Money velocity is going down as
quickly as money supply is going up. This report card is a grand
contradiction of the USFed actions for a generation. The American Weimar experiment
is turning into a tornado of financial ruin with inadequate recognition. As
industry was dispatched and forfeited to Asia, the USEconomy lost its base
for traction. New money has lost its effect in producing economic activity
following a series of asset bubble busts, a spinning of capitalist gears, now
stripped gears. New money is devoted to the financial sector in perverse
fashion, as a reward for the past destruction of capital itself. The
central bankers cannot dictate the speed at which money moves. They can only
create it and drop it in the mix, speak their incantations, sprinkle
pixie dust, offer some loony fiat prayer to the duped public, and continue
with the next paper dump. The Untied States will gradually achieve systemic
failure from redoubled efforts, suffer debt default from inability to manage
the debt structure, and fall into the Third World. The nation will experience
the monsters of high prices and acute shortage without comprehension of its
source. It is toxic money.
The growth of the monetary base
has been staggering high since the financial crisis broke in September 2008
with the collapse of Lehman Brothers. Since the end of August 2008, the
monetary base has risen from $877 billion to $2,651 billion as of September
2012. That is a giant 3-fold rise. Witness the American Weimar era, its
final chapter. The massive increase in new money has done nothing to foster
growth in the USEconomy. The main reason is that fiat paper money destroys
capital, a concept the hapless corrupted US economists cannot comprehend,
either from compromise to their masters or lack of intellect due to years of
exposure to the ass backwards preachings. The USEconomy is stuck in a
powerful recession based in grotesque insolvency and bond fraud. As the
USFed is poised to kick in another round of QE bond monetization, the money
supply will ramp sharply up again. Do not expect much of any economic
benefit, since the cost structure will rise again, then shrink profit
margins. This capital destruction factor is a great blind spot to the hack
economists who operate more as marketing harlots for Wall Street and the
USGovt than analysts and advisors. The Ponzi Scheme theory dictates that an
acceleration in new money is required to keep a constant speed. Expect more
wreckage from the stripped gears of the USEconomic engine.
![](http://www.24hgold.com/24hpmdata/articles/img/20120927CLA06101.jpg)
The money velocity chart shows a
deadly decline since 1980, and a powerful decline since the 2007 outbreak of
the absolute bond crisis. The new money is going to the big banks in bond
redemption, derivative coverage, and Black Hole (Fannie Mae, AIG) fills under
the USGovt supervision. The money is not finding its way into the USEconomy
for further circulation. The plague is insolvency, soaked by endless
applications of tainted money from central bank fire hoses. The velocity
of money has been falling for years, in reflection of an economy that is not
turning over much at all. Think of a car missing its cylinders, spinning its
gears, burning itself out, going nowhere. The above chart serves as pictorial
evidence that the root cause of ruined money was the war. In the current
decade, the wars are endless. America chose war over industry. A fuller
explanation is offered in the September Hat Trick Letter.
Three eras are worth identifying
in my view. The Vietnam War era and its aftermath saw huge expansion in money
supply, huge nominal income growth, and huge increases in price inflation.
The USFed did not interrupt the expanded USGovt debt from reaching Main
Street, simply put. For consecutive years, the Consumer Price Index rose over
10%, which led to big worker pay hikes. The result was that US corporations
began to send industry overseas. It started with Intel going to the Pacific
Rim. The money velocity fell, as income fell on a real basis. The climax
event was China being given the Most Favored Nation status in 1999, which
released the gates for foreign direct investment. China made a deal with the
Wall Street devils that has yet to gain publicity. The hidden motive was
for Wall Street firms to borrow the Chinese gold hoard from the Chairman Mao
era, so as to continue the great gold suppression game that has bankrupted
the Untied States and betrayed the nation. US and London bankers skimmed
and stole the gold.
HOUSE OF SAUD
STARTS TO UNRAVEL
More loyal Jackass wannabee
followers will recall a story (repeated often) that on the Easter Sunday
weekend of April 2010, a secret gathering of over 200 Arab billionaires
convened in Abu Dhabi. They arrived in unmarked jets. My source was one of
only two or three white faces in the crowd, invited by his clients. One
result of the meeting was an accord struck between the Persian Gulf oil
producers, led by the Saudis, to work toward a pact with Russia and China as
protector of the gulf in return for financial cooperation, economic
construction, and forward progress. The implicit message was that the Untied States would be phased out in the protectorate. In
the balance would lie the Petro-Dollar defacto
standard as victim. Events continue to this day in movement toward that end.
However, since the Syrian uprising, a new lethal
element has entered the mix. Account will be kept brief, since so volatile and
controversial. Just some bare notes. The Assad family in Syria has suffered
some assassinations. Apparently, the Saudis had a hand in the killings. HezBollah has vowed retaliation. Their ties to Iran might
be longstanding, but perhaps are exaggerated. My view is their home is in
Lebanon. In August, Prince Bandar was assassinated. He was the Saudi head of
security, and long-time ally to the USGovt. The
Saudi regime is concealing his death, with outdated photos and false
statements. They are working toward a transition. The House of Saud has been
unstable from threats to the south in Yemen. It is unstable from internal
threats tied to the fundamentalists. Although cooperation and respect has
been shown between Riyadh and Tehran, the Bandar hit has created an entirely
new environment. The Saudi regime with high likelihood is in its final
months.
More
importantly, the Petro-Dollar is losing its all important
Saudi leg. Implications are vast. The US public takes the USDollar for granted, with almost no concept of FOREX
exchange rates. If the House of Saud falls, when it falls, the impact crater
will include the entire waistline of the USEconomy
and its financial dog tail that wags it. The USGovt
and its banker handlers have relied heavily upon the Petro-Dollar in general,
and on the Saudis in particular, ever since Henry Kissinger signed an accord
that governs over the grand surplus recycling back in the 1973-1974 era.
Watch the Saudis convert USTBonds to Gold, then bug out of the desert to their new mansions in
Southern Spain.
CHINA AS
INTERMEDIARY AGAINST PETRO-DOLLAR
Reports swirl that China is
attempting to act as intermediary in global oil transactions, for Yuan
currency settlement. The rebellion globally is picking up momentum against
the USDollar. The Petro-Dollar defacto standard is slowly unraveling. The
denizens of the Untied States have no idea the ravaging impact of a lost
global reserve currency. It will unleash price inflation when the USFed
central bank is letting loose the monetary flood gates. This declaration is
an act of financial war directed at the US by China. To fortify the rear
flank, Russia has promised to meet all requests for crude oil made by China,
with settlement in Yuan and Ruble currencies. Take the pledge as a protection
from any sudden USGovt threat or retaliation. The Russia-China Axis is
forming more clearly in opposition to the USDollar, the Syndicate behind it,
the many Embassies that offer sanctuary for espionage, and the global rules
that enforce its hegemony.
Crude oil payments are the
critical core of global trade. The rest of global trade will follow in
non-USDollar payments, all in time. Entire banking systems will gradually
make a transition away from the USTreasury Bond in its reserves managements.
The banking practices will follow the trade payment structures, as it should
be. The profound effect on the USEconomy will be clear, as blame is shifted
as usual to external factors, even to extremists. In reality the US is up
against vengeful Cossacks and the angry Mongol Horde. The entire world is
moving against the USDollar, seen increasingly as a toxic agent within their
internal domestic systems. They see the lack of solutions, the spreading bank
insolvency, the accelerated debasement of currency, and the corrupted grants
of multi-$trillion banker grants. They are taking action in response. They
are following the Chinese lead with the Russians acting as a quasi-Rasputin.
Gerald Celente reported in early
September, "On September the
6th of 2012, China officially announced that any country in the world that
wishes to sell crude oil using its currency the Renminbi instead of the
USDollar can do so. The following day September the 7th, Russia announced
that the nation will sell China all the crude oil they need, no limitations
whatsoever. They will not use the USDollar for their trade." The
claim by Celente is far reaching. The USDollar is dying a slow death. Its
antagonists do not wish to speed the death process too rapidly, for fear of
quickening the ravage to their own nations. They also do not wish to invoke
the wrath of the USGovt, which since 2003 has enforced the USDollar as global
reserve currency via its war machinery.
What China is offering is an intermediary clearing house
role to sidestep the Petro-Dollar, where crude oil payments can be made in
the Chinese Yuan currency. This
offer is a financial act of war against the Untied States currency, where
China will backstop all transactions. It is a violent offer to disrupt the
USDollar. Look to see if any Saudi oil sales are settled in Yuan currency as
alternative, even the Euro currency as expedient. The superpowers are openly
attempting to isolate the USDollar, the clear victim to be the USEconomy, the
land of consumption excess. The move is a tacit push of the US into an
isolated place where it can very easily slide into the Third World.
MEXICO CUTS A
DEAL WITH CHINA FOR OIL
Mexico is in the process to make concrete a major
deal to sell crude oil to China, but not in USDollar
terms. The Chinese declaration of financial war against the Untied States has reached both the northern border in
Canada and the southern border in Mexico. To be sure, the Canadian oil is not
sold outside the USDollar. But other factors are
hard at work. The bulk of Athabasca oil produced from the oil sands in
Western Canada (Alberta) output is directed to China, by way of the Vancouver
ports owned 100% by China. In fact, the Chinese influence is so strong in the
beautiful city on the Pacific coast that it has earned the nickname of Hongkouver. Some shallow analysts attribute a wayward
motive to the decision by the USGovt to abandon the
Keystone Oil Pipeline several months ago. The more realistic hidden motive
was to assure the Western Canada oil output would be sent to China. The
cutoff to the pipeline came with spurious official accounts, all quite
humorous to the informed. The pipeline was abandoned to accommodate China,
owner of significant USTBond holdings. They are the
largest USGovt creditor. The tipping point was
passed many years ago when the majority of USGovt
debt was held by foreign creditors. Its consequence is vivid and
unmistakable. The Untied States is converted into a
colony, a killing field, as pathways are fashioned for entry into the Third
World.
China through
closed door negotiations is sealing deals to purchase Mexican crude oil
without using USDollars as its trading currency. The Yuan is
slowly moving toward global reserve status, not by a summit meeting and
signed accord, but rather by numerous bilateral deals. Consider the bilateral
swap accords signed by China with partners in Brazil, Japan, and elsewhere.
The list grows, and beyond oil trade. As it does, the net is cast over the USDollar in isolation. Officials claim meetings were held
with the Mexican Govt and PEMEX, the state owned
oil giant. They are in progress with a brokered secret deal to purchase crude
oil using currency means other than the USDollar.
Expect a public announcement soon by Chinese Govt
and PEMEX firms. In the past decade, China has planted seeds in trade while
ignoring politics with numerous major players in global trade. The USGovt prefers the heavy handed financial banking games,
backed by the heavy handed military maneuvers, all part of the sickening Full
Spectrum Dominance that has blossomed in ruin. The Chinese have responded
with an archipelago of trade pacts, best viewed as a Full Spectrum
Encirclement of the USDollar. It cannot be
conquered. So their plan apparently is to isolate it, to starve it, to let it
suffer the Weimar consequences of its own high pitched debasement, and to
permit it to become a Third World currency by default.
Over the past ten years with new trade agreements
China has invested $billions inside Mexico. China has helped the Mexican Govt create jobs and has financially supported
investments in the privatization of ports and infrastructure throughout
Mexico. As the movement toward privatization of large sectors of its economy
continues, China is in line to benefit from additional investments inside
Mexico. Since the 2009 global economic crisis, Mexico's central bank has been
quietly purchasing large quantities of gold. In fact, some of the recent boost in May for Mexico Central Bank gold
holdings was gold purchased from Chinese sources. The gold sales belie a
closer relationship building with Mexico on the southern US border. While
the USGovt is occupied with the Mexican Govt on matters pertaining to gun running, to handling
illegal immigrants, and to shielding vast narcotics sales, the Chinese are
busily working on trade, with a gold foundation and crude oil blood system.
Those are the stuff of a stable currency. Perhaps Mexican leaders are
preparing for the imminent and unavoidable devaluation of the USDollar. In more practical terms, regard the movement as
the collapse of the USDollar in a vast sea of
liquidity, better identified as toxic fiat paper currency.
STRIKES
HINDER GOLD OUTPUT
Not in sufficient focus is the radical impact on
gold supply. The gold investment demand has been on a tear in recent months.
A sinister effect has been realized from the vast QE bond monetization
conducted by the USFed and its partners at the Euro
Central Bank and the Bank of Japan. The effect is of rising food and energy
costs. The impact is particularly hard felt in poorer areas of the world. The
great majority of major gold and silver mines are located in the poorer
nations. The labor strikes at mining facilities are as much based upon unsafe
worker conditions as they are based upon a higher cost of living, centered on
food costs. The workers need more to survive at home, as they provide more
precious metal output that satisfies mining company production targets. The
end result is lower output in pockets of South America such as Bolivia, but
more importantly in South Africa. A whopping 39% of South African Gold
production has been taken offline. The impact on global output will be seen
in the next few quarters. The fast
rising investment Gold demand will be met by a significant decline in Gold
supply. Price pressures will force a much higher Gold price. But first comes the depletion of the COMEX, as its paper contract
merchants continue to ply their trade. Their new specialty is stealing client
accounts that stand ready for contract delivery. See MFGlobal
and the JPMorgan thefts, all fully blessed by the tainted US Court system.
THIRD WORLD
THREAT
The implications are vast. A lost Petro-Dollar
standard would mean a grand shift in payment for oil transactions, the most
important of all global trade. In the last 20 years, all has been turned
upside down. A global phenomenon of a powerful nature has been at work since
the Lehman Brother failure, the Fannie Mae adoption, and the AIG redemption
in 2008. The entire world is losing trust in the USGovt
and its financial institutions. Personal email exchanges cite a regular
occurrence of US corporations not receiving return phone calls, and of open
disrespect in Europe for American businesses. The debt rating agencies do
their part in upholding the paper fortress walls, but they must over time
deliver the downgrades. An important catalyst took place when the USGovt imposed trade sanctions against Iran. The result
was angering US trade partners more than anything else, well, except for
causing severe price inflation on the Iranian Economy. The movement in
reaction has been swift by global trade partners, in establishing bypass
routes for payment systems between nations. The workarounds against the SWIFT
bank payment system have been remarkable. The climax will be the non-US$ payment
system to emerge, with no centralization, complete independence, relying upon
non-bank devices like mobile communications.
Another bypass event just hit the news wires. The Swiss-based Vitol is the latest oil
firm bypassing the USGovt sanctions against Iran.
They exploit a legal loophole in Swiss law, since the nation did not abide by
the US-led sanctions, a notable resistance. Vitol boasts being the largest
oil trader in the world. It buys and sells Iranian fuel oil, undermining
Western efforts to choke the flow of flow of money to Tehran. In August
alone, Vitol purchased two million barrels of fuel oil, used for power
generation, from Iran and offered it to Chinese traders. The Vitol firm is
not obliged to comply with a ban imposed in July by the European Union on
trading oil. The tale of the cargo for
Iranian fuel oil involves tanker tracking systems being switched off,
frequent ship-to-ship transfers, and the blending of the oil with fuel from
another source to alter the physical specification of the cargo. How
crafty.
Global finical markets are acutely aware that oil
trade outside the USDollar will rapidly destabilize
the USDollar even further. With Russia and China
having entered into an agreement to trade crude oil using their own
currencies, the Mexican news of a Chinese oil deal has potentially
devastating consequences. The eventual effect is that the USDollar
will lose its prestigious reserve currency status. In the process, it will
lose value gradually. My view is that
the defense of the USDollar will lead to all major
fiat paper currencies to implode, step by step, taking down the banking
systems and economies of major nations. The prevailing currency will be
what is used in global trade. All signposts point to Gold. A new global trade
system is ready to be installed, based upon gold in special notes. The
transition awaits further collapse of the current currency regimes, the
further collapse of the sovereign bonds, and the further collapse of the
banking systems, which all assures the collapse of the global economy.
The QE fallout by the desperate central bankers
has been seen in fast rising demand for gold bars and gold coins. The
phenomenon is primarily in the Eastern world but also in Europe. The American
crowds remain transfixed on their dwindling paper assets locked in stock
accounts, many not easily altered due to tax rules. They remain transfixed on
home equity losses, in a mindnumbing effect that
the Jackass described in years 2005 and 2006 and 2007. The American Home was
not a hard asset at all. Since its value was largely determined by the
mortgage loans and mortgage bonds, together with the vast network of devices
like MERS among bankers and the hidden caches with slush funds at Fannie Mae.
The entire criminal history of Fannie Mae has been safely buried under the USGovt roof. Ten years ago, people would laugh at
comments that the largest and most powerful criminal syndicate was operating
under the USGovt label. They do not laugh anymore,
including my own family. They protect themselves with the real deal currency
for storing life savings, GOLD. They will soon enjoy the benefits, safety,
and efficiency of trade systems based upon GOLD also.
GOLD PRICE READY TO EXPLODE UPWARD
Gold
market instability could be a tremor before a burst upward. The same appears
true for the silver market. On a single day last week, JPMorgan dumped two years worth of US silver mine output in the form of paper
silver supply on the COMEX market. The corruption went largely unnoticed.
They defend the important $36 level. Volatility has returned to the Gold
price. The current pause could be interrupted very quickly with a strong
upward leg in both precious metals. The announced QE3 bond monetization
program cannot be sterilized any longer. A powerful USDollar
decline is imminent. As the USDollar reserve status
is threatened, the gold price will zoom upward. Notice the occasional
propaganda and basic lies regarding sterilization of new bond purchases. The USFed is fast running out of short-term USTBills to fund long-term USTBonds
in the Quantitative Easing shell game that is more reminiscent of the Weimar
Republic.
Fortunately
for the USFed paper mache
artisans, the American public is a lousy student of history and especially
the concept of money, even the nature of economics and capitalism. The
dumbing down of the public has reached a critical mass, but hope lies in the
Gold sanctuary if people have any savings left after the busted bubbles and
the parade of banners to join. They joined asset bubble parades instead of lines
to enter factories. Across the world, an army of Gold soldiers is awakening
after a 16-month slumber. They react to the stark awareness that QE not only
ruins money, but its purpose is to redeem the toxic bonds owned by banks. The QE programs are not intended to
bolster, stimulate, or fortify the economy. In fact, they render the USEconomy incredibly deep harm by raising the cost
structure, reducing profit margins, wrecking business segments, and killing
jobs. But the hard sell sure is fun to watch, as the central bankers squirm.
The Jackson Hole conference was a gathering of buffoons without the clown
suits. The public must seek refuge in Gold & Silver or face personal
ruin.
The
USFed mandate on inflation moves next to an absurd
mandate on jobs. They will fail on both. Inflation
will be permitted by the USFed central bank in
order to produce jobs, in the most heretic and misguided folly ever seen in
modern times. The 0% rate will stick until economic growth arrives, but
it will never arrive, due to the damaging effect from the 0% rate itself. The
dog's tail is eating the entire dog in a perverse reverse effect of modern
alchemy. The USFed ignores all Weimar chapters,
after having rewritten the Great Depression chapter. The nation emerged from
the depression only due to the Gold Standard and ample industry. The nation
has neither today, and will therefore plunge into a systemic failure. The
Third World awaits. Watch for the pressure points of
tens of thousands of gasoline stations and food supermarkets, certain to
erupt as the frustration and disorder spread.
![](http://www.24hgold.com/24hpmdata/articles/img/20120927CLA06102.jpg)
The
response in the Gold price has smelled a QE3 in bond monetization since the
summer months. The difference is that
this time, unlike the deceptive Operation Twist, the bond purchases will be
unsterilized with new money injected into the system. That is a Golden
supercharge to recognizable inflation. A major intermediate reversal is
underway, with a 1570 base, a 1780 top, which indicates a 1990 Gold price
target. The kicker in the market is the broad mining industry strike, which
extends from South Africa to South America. Gold supply will be inhibited.
Expect some regrouping with a pause at the 1720-1770 area, as a critical
consolidation takes place before a breakout that captures the world's
attention. The right side handle is being formed, carved out. During this
time, the doubters are tossed off the train. The new believers join. A
recycle process is underway, as the monetary dumb are unloaded and new
intelligent soldiers join the ranks. The renewal will permit a run over
$2000. Once over 1800 price level, the 1900 resistance will be overrun like a
paper fortress by angry mobs bearing torches and sticks. But in the meantime,
a big battle is being waged at the right side handle, a consolidation before
breakout.
Jim Willie CB, editor of
the “HAT TRICK LETTER”
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