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Begin with a preface to a meaningful event that
could change the entire US landscape, a redux of
what happened four years ago. Consider
the next Wall Street financial firm failure. It is in progress. It is not
avoidable. It will have numerous ramifications. It will open the door to
account thefts, the burial of documents, the ransack
of undesired leveraged positions, the concealment of wrecked derivatives, and
a path toward the merger of surviving (selected core) firms. It will urge an
extreme defensive posture. Back in 2008, both Bear Stearns and Lehman
Brothers fell. The former because they had too much gold exposure with anti-US$
hedges. The latter because they led in mortgage exposure. Both failures were
greatly exploited. My favorite item was the reload given to JPMorgan on a
quiet Saturday morning (convened at 6am no less) at the Bankruptcy court of
Manhattan. The shadowy syndicate titan was handed $138 billion to handle the
private accounts from the fallen banks. Instead, the funds represented a
reload for JPMorgan to continue their gold suppression game. Of course, they
have been defending American freedom with vigor, preserving the integrity of
the US banking system, and assuring the way of life in the nation, while
leeching $billions from the public trough. Since their grant, the
unassailable JPM has seen fit to gobble private accounts at both MFGlobal and PFG-Best, with regulatory blessing as the
courts sprinkled fascist holy water.
In the background across
the globe, numerous currency storm centers have arisen under the noses of
every major central bank and their elaborate connected paper factories. The
sovereign bond foundation is full of cracks and rotten planks, upon which the
entire global currency system rests. The only people who could have imagined
such a grand mess in 2006 and 2007 were the Sound Money crowd, the advocates
of gold-backed money, the opponents to debt
foundational systems. But then again, we are the nutballs,
without a clue, who maintain a myopic view of the world, and see a conspiracy
under every rock. Rather, we are the insightful, the alert, the rational
clear thinking bunch, the guardians against hidden confiscation through
inflation, the intrepid defenders of life savings.
We identify the corruption and thus are discredited. Gold will return to its
rightful place as the core of monetary systems and trade systems, all in
time. The system is imploding at a more rapid pace with each passing month.
MORGAN STANLEY IMPLOSION
The insider conversation,
often called chatter when it become deafening in
tone, is that Morgan Stanley faces imminent failure and ruin. Almost two
weeks ago, the Jackass provided a tip to Bill Murphy of GATA to post on his
popular LeMetropole Cafe that Morgan Stanley fund
managers and high ranking employees were preparing for the firm's implosion.
A subscriber to the Hat Trick Letter has a good friend whose father works as
a fund manager and provided the story. It was not detailed, and bore no
follow-up after my request. The older employees are selling all of their
stock, some legacy stock from one or two decades ago. Many workers are making
contingency plans for their next positions in another firm. When Lehman
Brothers was killed, thousands of employees had to find new jobs, some
without success. In the last week, the shock waves are being heard from
internal Wall Street sources in an unequivocal manner. The implosion is in
progress, like the collapse of several platforms and structural cables. The
inside is caving in, and the ranking members recognize it, even talk about it
openly. Much discussion swirls about a transition to antiquated software that
is greatly disturbing the trading desks, causing tremendous problems at
precisely the wrong time. A redux of the Knight
disaster could be in progress.
Some like Rick Wiles of TruNews report that MS is heading for the sacrificial
altar. Such an event would imply an expected benefit hoped for and beseeched.
My view is in parallel but more of a harmful implosion that cannot be
prevented, one that the Wall Street titans will face grand challenges to
control, one they will not be able to exploit in the
hidden corners where they operate. MS is going to the slaughterhouse, not the
altar. Its implosion will result from lost control, and the reversion to
antiquated systems will only hasten their demise. Wall Street will wish to exploit the failure, like stealing
funds, like destroying documents, like concealing derivative positions, like
receiving government slush funds for slimy patch projects, their usual Modus
Operandi. In criminal parlance, they will create a black hole into which
things vanish. They will attempt to add to the confusion, which might itself
backfire and deliver more lethal challenges to the entire USDollar
& USTreasury complex. This time, the spotlights
will shine more brightly to reveal the activity in the shadows and crevices.
The part that many
analysts might miss is that Morgan Stanley has perhaps over 300 thousand
private stock brokerage accounts, with over 17,500 brokers. In the past two
decades, MS merged with Dean Witter and Smith Barney to become the premier
stock house with the most private accounts of any US-based stock brokerage
firm. The Morgan Stanley failure might
feature the first theft of private stock accounts. The critical jump might
occur in account thefts from futures brokerage to stock brokerage, which
began in November 2011 with MFGlobal, then appeared
in July with Peregrine Financial Group (PFG-Best). All private accounts
from MFG and PFG have been pilfered, with a blessing of the theft by the
courts, seen in the Sentinel Mgmt Group ruling. The
federal Appellate court's August ruling (CLICK HERE) sets precedent for future private segregated
account thefts, which were once considered sacred and untouchable. No more in
the United States, not in the unfolding of criminality that stretches from USGovt offices to top corporate offices, with blessings
sprinkled by the courts. The jump would be a major extension of the Fascist
Business Model that nobody talks about. The major financial firms can rely
upon this appellate court ruling as precedent, so as to protect their legal
right to re-hypothecate client funds in their high risk leveraged positions
and loans. It sure would be nice to use my neighbor's house and car to firm
up my casino weekends. Stay tuned to the ongoing Morgan Stanley implosion,
which could force the vanishing act of 50 to 100 thousand private stock
accounts. The firm is the largest stock brokerage firm in the land. The
dreadful impact will be nasty and might awaken the US masses. MFGlobal and PFG-Best surely did not.
Imagine the hue and cry
from the poorly informed and poorly focused sheeple
masses who have been quick to use the conspiracy nutball labels, when their stock accounts vaporize in
re-hypothecation made legal. The
zillions of IRA and 401k accounts could also become collateral damage.
This has been a Jackass warning for several months, largely unheeded. If one
is to search for a hidden impact from the Morgan Stanley implosion, look no
further than their large gaggle of dangerous and highly deceptive Interest
Rate Swap contract book. They appear in the ledger item of interest rate
derivatives in the usually ignored Office of Comptroller to the Currency
report issued periodically. In early 2011, Morgan Stanley stuck out like a
huge iridescent purple thumb with their $8 trillion in new interest rate
derivatives, believed to be 90% Interest Rate Swap contracts. You see, that
is precisely when the false flight to safe haven was engineered. The USTreasury was in danger of rising, seen in January 2011
as the TNX went from 3.3% to 3.75% on a touch. Enter the powerful IRSwaps run by the dark control room at trusty Morgan
Stanley, and poof, the flight to safety was fabricated from artificial demand
of USTBonds with no basis in tangible investment
flows. The application of $8 trillion in Interest Rate Swap contracts pushed
the 10-year UST yield from over 3.5% to 2.0% flat in the space of a mere five
months. The sheep followed the Wall Street lead without knowledge of the IRSwap heavy lifting. The USGovt
could not afford a bout with bond market reality in a relentless move over
4.0% on the all-important sovereign bond for the nation looking more and more
Third World that has corrupted the global reserve currency beyond recognition
while the annual $1.3 to $1.5 trillion deficits must be financed, alongside
the endless 1984-like war costs.
Hundreds of questions
will come, but the big questions to pose regarding the ongoing implosion of
Morgan Stanley are:
HOW
MANY PRIVATE STOCK ACCOUNTS WILL GO MISSING ??
WILL
THE INTEREST RATE SWAP GAME BE EXPOSED ??
WILL
MOVEMENT OF STOLEN WORLD TRADE ASSETS SURFACE ??
WHICH
EUROPEAN BANKS WOULD FOLD IN SYMPATHY ??
My European banker source
indicates that as Morgan Stanley suffers the spectacle of failure, so will
both Deutsche Bank in Germany and Credit Agricole
in France collapse. The three failures
will bring about other failures, like in London, as the entire Western banking
system will be brought to its knees. In short, this event could serve as
a jump in thefts from segregated futures brokerage to stock brokerage
accounts, causing more collapses and certain bank runs. Witness the full
glory of the Fascist Business Model. Much discussion has come from corners
like Steve Quayle, concerning the potential merger of all surviving Wall
Street banks into JPMorgan and Goldman Sachs. That would mean Citigroup and
Bank of America would fold under the new twin towers of financial tyranny, as
the Jackass prefers to call them. So after eleven years since the well
planned and highly coordinated collapse of the Twin Towers to conceal the
grandest bank heist in US history, the emergence of the new Twin Towers with
deep intricate financial root cellars is being hatched. It will fail.
Some very bright contacts
have suggested that such a last ditch merger feat could not be pulled off in
the current environment. Many reasons can be cited. The insolvency of the big
US banks demands some consolidation if not liquidation. However, they are
under siege. They are all under scrutiny for LIBOR price collusion and
violations. They are all involved in court deals over bond market fraud. They
are all involved in court deals over mortgage contract fraud. They might
appear to evade the law in blatant manner if they attempted to merge. The
LIBOR case effectively isolated the big US banks in a way not visible. In an
environment where they do not talk to each other under legal counsel, they
will hardly climb the enormous hill of merger talks. A hidden reason might
lurk to explain why the big US banks cannot merge under the twin tower JPM/GS
roof. They all struggle under the grand de-leverage process to contain the
derivative monsters in their basements, which hold together vast systems with
high pressure cable lines. Any merger attempt would result in mindboggling
pressures, unavoidable failures, and incredible confusion DURING THE
TRANSITION in merger. No way! No how! Too late!
CENTRAL BANKS FAILURE OBVIOUS
A tour around the world
leaves a person's head spinning. The financial system spun out of control
long ago. The central banks cannot control the mayhem in the currency market.
The confirmation is that for over three full years, the official interest
rate in the Untied States, Britain, Europe, and
Japan has been near zero. This is unprecedented, and serves as a massive
signal flare of systemic failure. The stimulus is nowhere except to
speculate, surely not to conduct enduring capital buildout.
USFed Chairman Bernanke has announced more open
Quantitative Easing, which never stopped. Worse, the Jackass is of the
opinion that nobody really knows what QE means anymore, except that it will
save the financial markets, save our life savings, save pensions, and save the
planet. All hail Prince Benjamin! The Operation Twist is being seen for the
sham it is. The ugly fact of life for the USFed
balance sheet is that the clumsy Chairman Ben has run out of short-term USTBills with which to offset the long-term USTBond purchases. The self-styled Twister has exhausted
its fuel. To keep the game going, the
secretly desperate USFed must resort to
unsterilized pure hyper monetary inflation of the nasty variety. See the TFMetals Report on how the USFed
is out of bullets, with no more USTBills in its
arsenal. See the TFMetals Reports (CLICK HERE).
The other major central
banks are in extreme defensive postures. The
announced cap on European sovereign bond yields on its face sounds absurd.
No free market there, certainly not with any equilibrium basis. Lacking the
advantage of a global reserve currency, the Euro bankers wish to impose by
force the cancerous benefit of the USTBond safe
haven phony bunker. The bond yield cap by Draghi
should be seen as a massive signal flare of systemic failure to those with
open eyes. The deed was done in the open, and follows suit with the cap on US
yields done in hidden manner with the IRSwaps.
Hardly in view for the
mainstream minions, the Japanese central bank has been a major buyer of USTBonds, in a new twist. The volume of the Bank of Japan purchases is essentially equal to the
sales by China, so net zero Asian effect. That leaves the USFed alone on a net basis, as only buyer of US toxic
toilet paper that quickly shows brown stains from bruised banker wounds and
red stains from endless war battlefield wounds. The USFed
is financing almost the entire USGovt debt, and the
dumkopfs in the pits, in front of screens, and from
household dens are wondering when the next QE will come. They are more
gullible and dumber than any English words can be used to describe them. If
the USFed financed 100% of the USGovt
deficit via debt monetization, just exactly when might the American
professionals and public notice?? Probably never!! Observe the movement up in
the Japanese Yen currency. Its rise serves as further motive for them to
invest in USTBonds, even if increasingly toxic with
each passing month, even if supported by a vast derivative machinery that
reveals itself slowly, even if the USGovt deficits
remain fixed over $1.3 trillion. As footnote, the nation of Japan has more diaper sales for adults than
babies. The sun is setting on Japan Inc.
PAPER SOLUTION DELUSION
A strongly held Jackass
belief goes contrary to many simplistic viewpoints by some smart people
within the gold camp. My source has taught me well, but my comprehension is
surely lacking in spots. Let it be known that many smart people do not
comprehend this phenomenon. A few key
colleagues have stated that the big Western banks could be fixed overnight by
grand cash dispensation on a grand scale from the Printing Pre$$ by the USFed and Euro Central Bank. Not so, emphatically not
so! The big broken banks of the US, London, and Europe cannot be fixed by
printed money. They have vast and complex broken paper asset structural
problems that cannot be repaired. It is like a poorly designed car with badly
calibrated cylinder strokes, misaligned transmission drive shaft, an
inadequate cooling system, and poorly designed torsion bars going into the
shop. The best mechanics could not repair it, as they would suggest scrapping
the entire mess. Such are the big banks. They possess wrong sided positions
that have started a chain reaction of disasters. Their positions constantly
trigger margin calls. Cash cannot fix their predicaments. Their margin credit
extension is abnormal, outside the usual channels. They are stuck, unable to
comply with arranged contracts from years ago under different rules. Their
lattice work is broken and not repairable, not with cash.
The Eastern Coalition is
busily applying the screws, confronting the deeply decayed margin inadequacy,
and forcing relinquishment of gold bullion. The loss of gold loudly signifies
that gold is money, and cash is not. The big banks have broken pieces that
invite opponent attacks, like the JPMorgan position with sovereign bonds and
their complex USTBond structure defending the
artificial 0% rate by the Interest Rate Swaps. The big banks also have major
unresolvable problems with allocated gold taken, that the owners want back,
including extremely powerful people.
Put the two extreme extraordinary problems together and one can
conclude that gold from Allocated Accounts was improperly used as collateral
on leveraged trades gone bad!! They face margin
calls that are satisfied only by relinquishment of gold bullion. The smoking
gun will slowly come into view to launch a new banker scandal. The scandal
over Allocated Gold accounts will eclipse the MFGlobal
case, and lead to the Gold price rising over $5000 per ounce. Over 40
thousand metric tons of gold have been improperly used, much in this manner,
laced throughout the banking structures. No hyperbole here.
Printed money cannot and
will not fix any of such problems. The big banks are ruined and realize
finally they are lined up for a slaughterhouse. Their only remaining option
is to cut deals with the new masters and their sheriff. In time they will not
be able to locate sufficient volumes of gold bullion to make the margin calls
go away. Since February 29th, they have forfeited over 6000 metric tons of
gold. Eventually they will run out of gold from Swiss castles and Roman
catacombs. Then the game is over and a new dangerous chapter begins.
USDOLLAR GLOBAL SHUN
The many moving parts of
the isolation of the USDollar are in progress
still. However, it has taken some dangerous turns, hardly noticed by the
intrepid American Idol populace. The USDollar collapse will come from a foundation of trade
settlement no longer conducted in US$ terms. The stench of hyper monetary
inflation by collusion between governments and their central bank masters,
combined with obscene gargantuan banker aid packages serve as the motive to
continue the abandonment by global players. Before too many more months, a
critical line will be crossed. More global trade will be conducted outside
the US$ settlement sphere. The line will be crossed in non-oil transactions
first, then in overall transactions. The American Dome dwellers are not
prepared for this development. In every conversation done by the Jackass with
ordinary US citizens over several years, not one has any concept of the USDollar and its exchange rate. It is an assumed entity
without discussion or consideration. Such is a precarious position to conduct
life and business under.
The Petro-Dollar is set
to be abandoned, as the Saudi Royal family is deposed. Two and three years
ago, my firm belief was that the Saudis would choose to switch chariots as
the Eastern horses would be favored. The Saudis would see the Anglos are
losing their grip on the global helm, suffering from insolvency and rot from
corruption. Instead, it seems the Saudis are soon to endure a surprising
backlash blow from the Arab Spring uprisings. Not well reported in the
controlled panels of the Western press are the high level Syrian deaths. A
real battle clearly features the tyrant Assad against his people, striving
for freedom. Another battle is between HezBollah
and the Saudi security teams. No details will be offered, since not much is
known except some of the wretched unfolding of events. By many accounts,
their Minister of Security Prince Bandar was just assassinated, perhaps two
to three weeks ago. A photograph from mid-August was doctored to show Bandar
Bush still alive, according to a source in the Persian Gulf. The apparent
kill was revenge for the targeted hits done on the Assad regime. Things are
all coming apart in Saudi Land, hardly called collateral damage. What
incredible irony if the Petro-Dollar is collateral damage from the Syrian
projects. What irony if the Arab Spring begun by the QE1 with blowback from
rising food prices, encouraged by the US security agencies, delivers a
blowback to knock the USDollar of its oil studded
throne.
Many questions persist,
beyond the scope of this newsletter. The
ultimate cost could eventually be the Fall of the House of Saud after almost
60 years reign, and the deposed USDollar as global
reserve currency. My best source of information in the region has for 18
months stressed the importance of Yemen for Saudi stability. Yemen is a
furious hotbed, as is Djibouti and Ethiopia, where soldiers clash between the
SuperPowers.
TROUBLE IN MINING CAMPS
Certain events are highly
disturbing, not at all connected. South African miners are on strike in
scattered locations, such as across Latin America. It is not orchestrated,
since a reaction to global economic decline. The miners want a bigger share
of the pie, and resist the signs of exploitation even if it is not blatant.
In some sites in South America, good fair deals are struck with reasonable
royalty paid to governments. In other sites, the violence is in the open,
with claims of dangerous worker conditions, water pollution, and worse. But
in South Africa, once the global stellar leader in gold production, police
and corporate security officials fired upon the crowd and killed dozens of
workers during a demonstration. The hostile positions of
miners versus the corporate firms is becoming stark and clear. The
unfortunate outcome is that gold and silver mine output will surely go into
worse decline. The Jackass forecast is
that from the global mine output factor alone, the physical precious metal
prices will rise, while the mining stock share
prices will fall. Output risk joins jurisdiction risk and dilution risk for
the mining companies. For every mining stock winner, expect 20 to 30
losers.
THE STUN GUN & SINKING SAND
The USEconomy
is suffering from three powerful effects, none obvious, but all deadly. They
continue to plague the nation, to drag it down, and to assure a systemic
failure. Many readers send critical notes about my view of a systemic
failure, arguing that remedy is going to succeed, given enough time. They
cannot foresee a USGovt
debt default, even colleagues in discussion. Some expect a nasty price
inflation bout like a rising blister. But the Jackass expectation is of an
unwieldy US$/USTBond complex that falls apart from
internal stresses that render management absolutely impossible. We have begun
to see this effect, like in colossal applications of Interest Rate Swap
contracts, like in growing announced JPMorgan losses, like in MFG and PFG
account thefts, like in ruined corporate paper, like in draconian money
market rules, like in shattered pension funds. These are the blisters and
boils from the US$/USTBond complex gone amok. They
are not reported as such. They are all reported as isolated treatable
ailments. They are not perceived as systemic breakdown symptoms. They are
very much effluent from the failure in progress.
1) Like from a stun gun
across applied across the land, recognition of a failed system has entered
the public consciousness. Three years of 0% stimulus, $trillions in rescue
aid, countless federal home loan programs, ongoing bond monetizations,
nationalized companies, and more have accomplished nothing. The corporate
response has not been to invest and rebuild. The housing market remains in ruins, unaffected by the sub-4%
mortgage rates and revived reckless federal home loan offerings (subprime
again) with minimal down payments. No more home equity ATM machines to
support the national consumerism mantras. Imagine in 2008 to be told that
the US housing market would be unable to respond to 3.55% fixed 30-year
mortgage rates. The experts might have claimed that such a development would
indicate a ruined market. The states and cities are in fiscal ruins. The
federal deficit is out of control. The wars will not be brought to an end.
The public population finally is standing up and taking notice. They are
frightened. Their futures are seen as bleak. College graduates face
bankruptcy almost immediately. The smart among the population expect rising
prices and growing shortages.
2) From the zero percent
interest rate policy (ZIRP) over three full ugly long years, the entire USEconomy corporate landscape is sinking from higher
costs and shrinking profits. Capital is failing to produce. Next will be
imposed the cost of the national Health Care system, which has its ulterior
motives to be sure. Some call it the Insurance TARP. After chip ID implants
are enforced, the view might change. Aside from the amplified stress on the
business sector, the entire cost structure continues to rise. Notwithstanding
the attempts in the last year to smother final demand via economic decline,
the costs remain resilient and rising. The
most frightening tidbits from the field point to a 50% gasoline demand
decline by volume in the last five years, and a 40% decline in California
sales tax collected in just the last 12 months. The stubbornly high costs
render profit margins as difficult to maintain. The response is to shut down
unprofitable business segments, to retire equipment, and to liquidate
components of the business. Such is
the rancid bitter fruit of the 0% supposed stimulus, more like a two-ton
millstone around the nation's capital neck. US-based businesses are not expanding,
except for care for the aged, for bankruptcy counseling, for estate
liquidation, for divorce attorneys, and for auctioneers.
3) The attack on money market funds
is moving apace, in a stealth capital control concept. Systemic risk is posed
by a run on money market funds. Oddly, money market funds are no longer the
staid boring type sitting on an inert shelf. They are suddenly not cash, by
official declaration. The Powerz cannot afford to see that liquidity removed.
An attack on the $2.7 trillion in money market funds has come in response.
The money market funds serve as scarce capital, a liquidity source that holds
together the insolvent banking system. Given how money market funds are
the last pool of liquidity that holds together the entire Western banking
system, it is under attack to stay put. New rules could force a maintenance
of a minimum amount in each account. The new rule concept is called Minimum
Balance at Risk (MBR) and is direct capital control applied domestically
within the United States. The MBR would be a small fraction (like 5 percent)
of each shareholder's recent balances that could be redeemed but with a
delay.
The item#1 is recoverable
but not with any current Administration or USFed in
leadership. It is urgently necessary to liquidate the big US banks, to
liquidate the home inventory, and to encourage domestic industry to return to
US shores. These three tenets are Jackass cornerstones for recovery. None is
pursued actively, none! The enduring policy is to attempt to inflate the
debts away, to inflate the bank balance sheets, and to re-inflate the
collapsed assets that were so recklessly depended upon in past cycles. Even
higher inflation will not solve systemic insolvency. Eventually the
confidence in the entire bond system which backs the currency will implode,
whose signals are being noticed. Nothing poisons a system more than ruin of
money itself. It works like a contamination of the entire blood system for
the body economic, which rots all organs and institutions.
The item#2 is not
fixable, emphatically so, since a rise in interest rate kills the entire
system, resulting in game over. The 0% ZIRP regime will remain in place as
long as the current power structure remains in place. It is that simple. And
while in power, the current 0% policy will assure a
continuing erosion in profit margins for business. The asset bubble
games are over, the wreckage obvious to anyone with open eyes. We have been watching the housing &
mortgage conjob, which led to the Lehman Brothers killjob, followed by the Bernanke Fed handjob,
all the while the USCongress missing on the job. The
entire USEconomy is sinking into capital quicksand
from rising costs. No return on capital, no cost of capital, no preservation
of capital, while capital continues to be retired and die. The insane and
utterly desperate response by the USFed is to kill
demand. They will succeed. But in doing so, they will assure the systemic
failure forecasted by the Jackass, to coincide with the USGovt
debt default from chaos and unmanageable high winds.
The
item#3 does not pertain to remedy or fixable, but rather stands as a
billboard signal of imminent banking system implosion. The impact will hit
the most insolvent and most illiquid, such as Morgan Stanley, Deutsche Bank,
and Credit Agricole. Expect another bank in London to fall, unsure which is
most vulnerable. The domino aftermath will be the stuff that makes history
books in unalterable prose. A progression of risk has hit mortgage bonds a
few years ago, sovereign bonds in the last year, and finally money market
accounts, which hold together the entire banking system as the last element
of liquidity. The Exter Pyramid is at work. The end game is to hold gold, the
last asset standing, the only survivor. The restricted money market funds are
being corralled by the banking leaders, to make sure they do not exit and
roam the fields in search of gold in better pasture. Observe the stealth
action toward capital controls in a last ditch to avoid a flood into gold. So
bank runs will just be slower in pace.
NUMEROUS CURRENCY TWISTERS
China might be making
overt moves toward a convertible Yuan currency. The steady decline in their
Current Account surplus could prompt a bold move to introduce a gold-backed
currency a lot sooner than even the alert observers expect. The latest
shocker story is that the Chinese Govt is planning
to accumulate another 6000 metric tons of gold in the near future, whose
veracity is being questioned. Consider
the recent acceleration in Chinese gold accumulation, either the basis core
for a gold-backed Yuan alternative to the crippled toxic USDollar,
or the basis core for a new global trade settlement system to be introduced
very soon. The usually patient Beijing leaders are showing signs of no
longer possessing patience. The gold imports from Hong Kong are not simply
rising; they are exploding in unprecedented fashion. Something big is going
on. The Chinese are diversifying away from USTBonds
and into Gold. They are locking up African gold supply and other important
industrial metals.
The Swiss Franc pegged to the Euro
currency is a disaster waiting to happen. The water will overflow the imposed dam wall
constructed of paper mache. A tidal wave of European money is seeking safety
from the ruptured Euro currency and fast deterioration of the big Euro banks.
The Euro will suffer a sudden breakdown just like the USDollar when reality
strikes. In order to prevent the Franc from appreciating, the Euro is being
bought in droves. In response, the Swiss National Bank (central bank) must
buy Euros to prevent their Franc from appreciating from the capital flight.
The Swiss central bank sales of the Euro to rebalance its reserves are
reinforcing pressure on the broken unified currency. The Swiss central bank
is setting itself up to become a bagholder of nightmarish proportions. As the
Euro currency becomes a Southern European device to secure PIIGS on a leash,
the pressure will build on the more viable currencies like the Swiss Franc.
Eventually the peg will break and the Swissy will suddenly be priced 20% to
30% higher, with the Swiss banks the losers. They will be losers at the same
time that the big Allocated Gold account class action lawsuits will be
ordering awards to the victims. The wreckage and corruption of the Swiss
banking system will serve as tomorrow's headlines.
Ordinary Germans are already using
Deutsche Marks again. They do
not wish to anger the Euro Royalty in Brussels, so it is keep quiet. The
nation's populace was forced officially to trade in the currency for Euro
bills and coins when the 2002 year began. At that time the DMark immediately
ceased to be legal tender. However, that did not stop 13.2 billion in DMarks,
worth EUR 6.75 billion (=US$8.3bn) from remaining tucked in mattresses,
basement strongboxes, old books, coat pockets in closets, wall crevices, or
in bank safety boxers. It has begun to re-enter the circulation, according to
the Bundesbank. The cash volume is more than the EuroZone's 16 other former currencies
combined. From pharmacies to private shopkeepers, the DMark is honored. The
Euro currency is on its last legs in Germany. As the European bond crisis
rages on, as the big Euro banks teeter without end, as the bank runs pick up
steam, the DMark is making a comeback, just like the Lira is in Italy.
The USDept Treasury is using its
Exchange Stabilization Fund as a secretive $2.4 trillion mutual fund
guarantee. In
contrast, the Chinese are taking their $3.0 trillion in reserves to offer a
trade settlement fund. They wish to establish a core fund to facilitate in
trade, but in reality the gesture is intended to grease the next move toward
non-US$ payments in trade settlement. The US pension funds see the USTBonds
as dead money, since earning next to nothing in interest. Details about a
secretive USGovt program to bail out money market mutual funds are finally
coming to light. Acting without any explicit congressional authority, the
USTreasury has extended guarantees in excess of $2.4 trillion for money market
funds. In the 12 months following the infamous failure of Lehman Brothers,
the huge official Reserve Primary Fund was depleted. The program ended in
September 2009, having prevented a previous run by money market fund
investors. Usually, the USDept Treasury has kept the identities of the funds
secret that are pulled out for use in emergencies, as well as the total tab.
Strange developments are holding the US financial structure together.
Be sure
to know of three types of USDollars on the global tables and temple
cauldrons. A) There are USDollars held inside the United States. They are the
most vulnerable to writedowns. Until now, the process has been indirect via
price inflation felt the hardest in rising costs. The flat wages tend to
aggravate the situation at a time when home equity and pensions are fast
doing a vanishing act. Any coordinated movement to write down the USTBonds in
the future will result in a direct whack to US wealth, as the impact will be
distributed widely within the 50 states. B) There are USDollars held outside
the US borders. My best sources tell that this collection of accounted assets
will be preserved in value. Interpret that to mean the externally held
USDollars will enjoy a fair exchange rate in translation when the time comes
for its long dreaded retirement. Despite being unforeseen by large blocks of
the masses, the process will occur to their shock and amazement. The shock
will be worse felt inside the US Dome since the treatment outside the US will
be far more generous than inside. C) There is lastly the USDollars that
arrive from trade settlement, from the letters of credit attached to contract
satisfaction. Watch the trend grow for non-US$ payments. The new financial
structure that will have a clear barter characteristic is waiting in the
wings for the more recognized collapse of the current system. At that time,
the USDollar credits from trade settlement will go away like water
evaporating on a Saudi street.
GOLD
Gold
& Silver are awakening from a deep sleep after a year-long price
consolidation. While the physical story leans toward growing demand and
declining supply, all bullish for the precious metals prices, the paper story
continues to reek of strongarms, naked shorting, propaganda, and other
devious devices. Prepare for a grand divergence between the physical and
paper Gold price, as described and warned in this newsletter for many months.
Rumblings continue about JPMorgan being in far more trouble than simply CFTC
position limits. They struggle under the gradual breakdown of their
derivative machinery that extends far beyond the USTreasury Bond complex, to
the currencies and gold market. Renewed hope from August has come for a
resurgent price as seasonal factors join with other conditions whereby the
bank cartel has weaker hands. Recall the gold cartel has been forced to
relinquish over 6000 metric tons in the last six months. The real
battleground is with the Gold price in Euro terms, which is pushing for a
breakout. That makes sense, since the obvious breakdown is of the European
sovereign bonds, the Euro currency, the European big banks, and the Euro
Central Bank monetary policy. Notice how the Crude Oil price reveals
significant hedging against the USDollar, stubbornly near the $100 per barrel
mark despite a fierce global recession. The high cost structure will be
maintained, with little relief from relaxation. Recovery will remain an illusion.
The
Eastern Coalition has not gone away. They still pursue Gold. Perhaps their
agents in acquisition are on European holiday. Soon it is back to the desks
at work. Expect a price move toward $1800 very soon. Expect a Silver price
move also, as it more clearly has broken out from the year-long
consolidation, back over $30/oz. Moves in the two metals could come fast and
furious. The Eastern world has consistently been big buyers, but now the
Western world is seeking safe haven from the ruin in banks and bonds.
Jim Willie CB, editor of the “HAT TRICK LETTER”
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burdened by numerous imbalances aggravated by global village forces. An historically unprecedented mess has been created by
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has irreversibly altered and damaged the world financial system, urgently
pushed after the removed anchor of money to gold. Analysis features Gold,
Crude Oil, USDollar, Treasury bonds, and
inter-market dynamics with the US Economy and US Federal Reserve monetary
policy.
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