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Let me start the
article with a personal note. For the last six years, my pen has put forth a
public article almost every week. Since the end of 2009, a change has come
from that pattern, for four reasons. First, articles take time and serve as
free volleys sent into cyberspace. They are attempts to raise awareness of a
broken corrupt system, to encourage increased investment protection by the
investment community, and to make repetitive messages that can sink in.
Second, many of the warnings have come true of a monetary system in tatters,
an insolvent banking system, a failed central bank franchise system, and a discredited
amalgam of sovereign bond markets. There is no need to repeat warnings of
further events toward breakdown when the forecasted breakdown has arrived in
full glory. Third, I wanted to both digest the crisis myself, to discuss and
ruminate over the disaster with my trusted colleagues, and to permit folks to
digest the disaster, ruin, and continued breakdown themselves. Fourth, more
time has been devoted to Hat Trick Letter subscribers, and less to the
public. Events never occur according to a script, or forecast, or plan. Too
many unintended consequences come. Too many complex elements take a toll
within the system. Too many corrupt players defect or are badly weakened.
This is history in the making, a highly important chapter of history being
written before our eyes. This is World War in Finance with the AngloSphere
under great pressure of losing its hegemony in the control of global
financial structures. Entire national economies are at high risk. These are
historic times.
THE USDOLLAR SWAP
FACILITY
USDollar swap
lines have been revived, rejuvenated, and applied. They are critical in
sharing the workload in monetary expansion, the inflation machinery. The US
Federal Reserve issued the following press release on May 9th, heralding the
facility. It enabled the printing of money for immediate usage by foreign
nations, as they essentially print their own money but use the USDollar
wellspring as conduit. See the USFed press story (CLICK HERE). This announcement should be viewed as
a response to debt abuse, and an open license to continue the great game. The
public balance sheets have systematically built up greater debt in order to
rescue private banks from ruin. The government leverage upward has
enabled a private bank leverage downward, with little success however, as
perception of wreckage is pervasive and turning universal. The bond
market recognizes the ruin has shifted attacks from banks to sovereign
accounts, the government debt arena. So the USFed will produce mountains of
new money, and gold notices the debasement process. The USFed press release
read as follows.
"In response
to the reemergence of strains in US dollar short-term funding markets in
Europe, the Bank of Canada, the Bank of England, the European Central Bank,
the Federal Reserve, and the Swiss National Bank are announcing the
re-establishment of temporary US dollar liquidity swap facilities. These
facilities are designed to help improve liquidity conditions in US dollar
funding markets and to prevent the spread of strains to other markets and
financial centers. The Bank of Japan
will be considering similar measures soon. Central banks will continue to
work together closely as needed to address pressures in funding markets.
The Federal Open
Market Committee has authorized temporary reciprocal currency arrangements
(swap lines) with the Bank of Canada,
the Bank of England,
the European Central Bank (ECB), and the Swiss National Bank. The arrangements
with the Bank of England,
the ECB, and the Swiss National Bank will provide these central banks with
the capacity to conduct tenders of US dollars in their local markets at fixed
rates for full allotment, similar to arrangements that had been in place
previously. The arrangement with the Bank of Canada
would support drawings of up to $30 billion, as was the case previously.
These swap arrangements have been authorized through January 2011. Further
details on these arrangements will be available shortly."
This spigot is
precisely what lifts the gold price along the powerful long-term trend. It is
the great monetary inflation lever. However, in the last two weeks, the
easy credit lines have been taken advantage of to supply funds to central
bank agents who have a constant habit of selling huge contracts of gold
futures, of course often naked short selling. It should come as no
surprise that the gold price was pushed down $60 and the silver price pushed
down $2.20 after the Dollar Swap Facility kicked in, yet the gold community
seems unaware. Harken back to the autumn 2008, to the crisis acceleration
events and banking system demise. Recall the $132 billion payment made to
JPMorgan on a Saturday morning before dawn before a crooked bankruptcy court
judge in Manhattan.
The official story was a diversion, claiming the private Lehman accounts were
compensated for. In the following two weeks after the giant slush fund was
delivered to JPMorgan, the gold price and silver price plummeted. The gold
cartel had money to put to work immediately to suppress precious metals, the
enemy of the USDollar. Last week was a sort of replay with the slush funds
similarly reloaded with Dollar Swap Facility funds, courtesy of the USFed.
OPTIONS EXPIRATION
If the Commodity
Trading Futures Commission truly wished to do their job, and identify
manipulation in the precious metals market, they need only to open their eyes
and monitor the Big Four trades in this current week when futures options
expired for gold. The gold cartel illicitly pushed down the gold price so
that options expire worthless. Notice the cartel kept the gold price below
the critical $1200 waterline until Tuesday afternoon. Poof, a heap of
options go worthless, and whoosh, the gold price moves over $1200 in the wake
of the criminal event. Some analysts actually made sneid comments like the
gold traders "had it coming to them" or some such. So if a
band of Florida
retirees goes to Vegas on a field trip, eager to double their money at the
casino tables, do they also have it coming to them to be victimized? The
Florida Suckers face crooked blackjack tables and altered roulette wheels,
and their greedy grubby plans are rightfully stripped by corrupt operators?
Never should greedy gold traders who expect monumental mammoth monstrous
monetary inflation to push gold toward $1300 per ounce, be considered cannon
fodder. The CFTC is just another Goldman Sachs office, obedient to their
masters on Wall Street and the USDept Treasury. Referring to options
expiration day of Tuesday May 25th, Jesse of the Cafe Americain said "Gold
traded all day below 1200, at times rising to within fifty cents of the key
strike price of 1200 where a large concentration of call options were
clustered. Well, since the call options at 1200 have expired worthless, why
bother using the energy to continue to suppress the price?" The
games, tactics, and devices to suppress illicitly the gold price are fully
out in the open. One must wonder if the CFTC officials are asleep. We know
Larry Summers is asleep on the job.
DOLLAR SWAP
RESCUED USTREASURYS
The USTreasury
Bond functions with two roles. It competes as safe haven with gold during
crises and sudden asset price stormy declines. But it also serves as funding
agent for the powerful monetary inflation. Confidence in the USTreasury
market had to be restored. Notice the IEF bond index fund of long-term
7-10 year USTreasurys, lifted at a critical juncture. It was at the point
of decision, breakdown or rally. The Dollar Swap Facility was used to bail
out big banks with a heavy inventory of Greek and other PIGS nation sovereign
debt. The banks turned around with their impaired bonds redeemed handsomely,
and placed a great deal of the final funds in USTreasurys. That might have
been an actual requirement for participation in the Swap Facility in the
first place. So the Bond Vigilantes appeared at the barn door, but were
scattered by a flurry of machinery. A bond rally ensued, aided and abetted by
the Dollar Swap Facility. So did the USFed have motive to aid European banks
or the USTreasurys at the precipice?
MORONIC GOLD
BUBBLE TALK
Whenever talk
turns to gold being a bubble, regard the syndicate message as one of
desperation. The true bubble is USTreasurys, if not all government debt
including UKGilts, the PIGS national debt, and much more. The AngloSphere
is replete with asset bubbles in the last 20 years. From tech stocks to
housing & mortgage bonds to USTreasurys in a march over the cliff under
the aegis of fiat folly. The phenomenon most striking in the last two to
three years has been the transfer of wrecked assets from private banker
balance sheets to the government balance sheets, now wrecked also. The
tragedy is that the private banks remain deeply mired in insolvency, while
the debt ratios and extreme leverage of the sovereign debt is coming to
light. Thus gold has begun to be openly recognized as a legitimate safe
haven in full competition with the USTreasurys and the major currencies. The
rout of the Euro currency has opened the floodgate of criticism against
ruinous governmental policies centered upon bailouts for banks and futile
stimulus plans. Each and every grand error by policy makers is followed by
bigger grander policy errors, working toward a climax. They double down like
in a poker game with a losing hand, and double down repeatedly, stuck without
alternatives.
The untold story
of the gold correction in the last two weeks has been that it was funded by
the Dollar Swap Facility, but the good news is that its price movement abides
by the parameters of a breakout correction. The 1180 level
has been honored, not broken. The moving averages are still in uptrend. The
powerful reversal since the Dubai
and Greek crises were unleashed has resulted in a breakout, a correction that
typically revisits the point of breakout, and a continuation. The ruined
monetary system continues in ruins. The broken central bank franchise model
continues in wreckage. The discredited sovereign debt continues to be
rejected. The entire globe seeks a solution, but the buffoons in charge can
only reach for the same liquor that turned the brains of monetary leaders
into vinegar and rotted the body economic. They have ordered $1 trillion more
liquor for distribution, totally ignorant of its ineffectiveness. Worse, they
are unaware how the destructive effect of continued monetary excess kills
capital formation and leads to enduring recessions that morph to depression.
Each new round of
Quantitative Easing and gold price suppression assures an even higher
potential gold price as long-term forecast target. The official policies are
ruinous, and even destroy capital, eroding capital formation, and circumvent
job creation. The eventual gold target in my view has moved from $5000 to
$7000 in the last few months. No remedy is in the works. No solution is even
pursued. No liquidation of toxic assets is underway. More stimulus is planned
for the USEconomy, as home foreclosures continue and bankruptcies continue
and bank closures continue and lending is obstructed. The more money the
syndicates and governments in partnership create in futility, the higher the
gold target becomes. Their ship is but a derelict at sea. The lifeboats
consist of golden vessels. Soon no more lifeboats will be available. The
clowns on the helm will be the last drowning victims.
FINANCIAL
REGULATION & THE FLASH CRASH
Hats off to the
Wall Street financial syndicate. They arranged a 1000-point stock market
descent precisely on the day (May 6th) the Financial Regulatory bill had a
key provision being scripted for auditing the US Federal Reserve. The US
Senators blinked, watered down the provision, and will force an audit but
only for certain TARP-related events. At least it is a foot in the door to
the corrupted halls. The Flash Crash, as it is known, has turned the US
stock market even more into a round robin competitive backyard for Wall
Street firms, where 73% of the NYSE trading volume used to be derived from
their computer program trades. Figure even more now. The US
stock market has become the butt of jokes. Miraculous recoveries after 3:30pm
are standard these days, like Tuesday. Even the NASDAQ was 3.3% down late in
the day, only to stage a recovery. The Plunge Protection Team is operating
much more in the open. As they ply their trade, they have rendered the US
stock market into one of the most irrelevant of all financial markets. Recall
its foundation for recovery one year ago was relaxation of the financial
accounting rules, thus converting equity valuation into over $1 trillion
fluff. The most striking and predictable aspects of the Fin-Reg Bill are
how the USFed has even more power than before. The original plan was to
limit its power. So again, hats off to the syndicate. They took the honorable
motive to limit syndicate powers and to audit the USFed, and turned it into
even more USFed powers, like the rod to dissolve any financial firm that
endangers the US
financial system. Or should it be said endangers the syndicate? Goldman Sachs
bribery to the US
Congressional members must have played a prominent role. That is the
capitalism at work in the United
States. One should demand to see mainstream
economists provide a Supply & Demand curve for USCongress members.
INTERPOL &
THE LIST
Word has come to
the Jackass desk from a very different location, two of whose university
chums serve on an elite commission in Central Europe.
Recall the stories of a mid-December landing of a planeload of Interpol
agents and cops. Recall the announcement by President Obama in January of
strong subpoena power granted to Interpol operating in the United
States, a story that should have sent shivers
through the press networks. Instead, it was duly reported and forgotten, a
typical syndicate tactic. The subpoena power is not to be dismissed. It
enables Interpol agents and cops to obtain documents, to force testimony, and
to investigate with some teeth. My source tells of how the Interpol has
been ON THE GROUND IN THE UNITED STATES FOR MONTHS doing their work, building
a case against corrupt bankers. The same source told of how last August 2009,
at least thirty former USDept Treasury officials and Wall Street executives
together appealed to Interpol, turned state's evidence, and were granted
asylum. They arrived with much damaging evidence in the form of documents,
emails, CDs, trading logs, and personal testimony. The information gained has
been used for several months in criminal investigations of very high order.
Much progress has come, but it is not shared publicly. Finally, lists are
being compiled for Arrest Warrants of US & UK & West Europe bankers
and politicians complicit with banking center corruption. The story mentioned
London
bankers working for Goldman Sachs as having their passports lifted. More to
come on this showdown. It begs the question who delivers the warrants and
what happens if an F.U. is given in reply, especially if armed bodyguards are
present. The list reportedly reads like a Who's Who, not yet seen by Jackass
eyes though. A
climax is coming, but unclear when.
ENDLESS Q.E.
ROUNDS
The public is
told that each Quantitative Easing round is the last, the one and only. Just
as my forecast was for absolute bond contagion two years ago, and my forecast
was for frequent unending AIG & Fannie Mae bailouts, and my forecast was
for no Exit Strategy with a steady unerring path of 0% policy, next my
forecast recently has been for numerous announced formal QE rounds.
In fact, they will become a global round robin, as each continent announces
theirs, which opens the door politically for a redux on ours. Then ours
invites another of theirs like a merry-go-round with exposed knives cutting
capital and its engines. Great
Britain is on course for a powerful second
QE round. The US
by virtue of the revived Dollar Swap Facility has its second QE round,
although hidden, the first being in the autumn months of 2008. This month we
see the first big QE round in Europe.
Combine these QE rounds with government stimulus designed to resuscitate the
many moribund economies that stand unresponsive, and surely monetary
destruction is on a clear path.
MORE ECONOMIC
STIMULUS DIRECTLY AHEAD
Meet Lawrence
Summers, head of the White House Council of Economic Advisors. His reputation
is of brilliance, but laden with obnoxious and arrogant behavior. He tends to
become bored at policy meetings. He is reported to be pushing for another
USGovt stimulus package. He must not be reading about the nascent economic
recovery that blesses the US
nation, endorsed and promoted by USGovt agencies and the President himself,
echoed by his Cabinet of extinguished business minds. Perhaps Summers read
the recovery reports and was put to sleep. Perhaps the policies seem more
like Politburo pablum, certain sedatives. We the People can count on Summers
to serve as vigilantly and diligently. Wake up, Larry! There is a crisis to
manage!!
GREEK DRAIN PLUG
& FAILURE PLAN
Key provisions
are outlined in the European Union Bank Bailout plan that permit backdoor
scuttles. The first provision states that the aid package will be "immediately
and irrevocably cancelled" if it is found to breach the EU Treaty's
official No Bail-out clause. Such finding can come in a ruling by the
European court or the Constitutional courts of any EuroZone nation. The
second provision states that if any country finds it cannot raise funding for
the rescue at interest rates below the 5% level agreed for Greece,
it may opt out of the bail-out. One might soon observe the biggest sellers
of European Govt debt and speculators in the EuroBond sovereign Credit
Default Swap contracts might be the governments themselves. That includes
both the distressed nations in the PIGS pen, and the core healthier nations
themselves which have born the brunt of the intramural welfare system in
fracture. In my view, the Greek Govt debt crisis has been used as a
distraction from the extreme problems not only in Spain,
Italy, and Portugal,
but in the United Kingdom
as well. The sovereign debt rejection in the bond markets serves as an
indirect repudiation of the global monetary system, whose backbone is not
gold but rather debt. The climax will be the UKGilt default followed
by its partner default in the USTreasurys. The primary truth in the sovereign
debt market is that these bonds cannot be rescued, since the device for any
rescue under consideration is more fiat currency, whose basis is indebted
acid in the mix.
Notice the string
of failed sovereign bond auctions, most notably in Germany.
Rejections are in progress, in lands that do not possess the Printing Pre$$. Expect
the bailout in Europe to fail. Its litmus
test is the Euro currency itself. It has fallen to a lower level than before
the announced bailout. These are band-aids applied to a gaping wound, a fatal
wound that needs far more than tourniquets. It needs a new monetary vehicle
upon which to build a new foundation. Its failure can also be seen in the
separation effect. The rising Euro no longer spreads good tidings or provides
favorable winds for US stocks. See the above graph.
NORTHERN EURO
CURRENCY
Word has come to
the Jackass desk from the War Room itself, where important decisions were
made in a series of meetings inside Germany.
The new Northern Euro currency is finally in its formative stage. Contracts
have been forged. Relationships with the more independent Central European
central banks have been arranged. Market mechanisms with the commodity
markets have been delegated to Finland.
A role for Russia
is being planned, source of many commodities. The timing of the new Northern
Euro is planned for June 2011, with perhaps little if any formal news
releases. The key element of the new Northern Euro will be its gold
component. Permit a Jackass conjecture of a 1% or 2% cover clause,
meaning $100 million in Northern Euros could be redeemed for assets that contain
$1 or $2 million. The new currency will be born in crisis. It will be begged
for. One must wonder if Saudi crude oil will eventually require payment in
Northern Euros. Maybe it will contain not only a gold component but a crude
oil component.
For over a year,
my openly stated belief has been that the first nations to create a monetary
and banking system with clear distance set from the USDollar will be the next
global leaders emerging. It will be Germany
and its cohorts that include the Benelux nations and Austria.
In debate is the future role of France,
which might be assigned squire duty for the Germans who hold 94% of their
sovereign debt. The antics of Sarkozy are as annoying as a mosquito roaming
near the face during bedtime hours. By the way, the Northern Euro as
planned is a USDollar Killer, since the present day world reserve
currency will fall rapidly in valuation, finding its true worthless value, in
reflection with its hemorrhage of USGovt deficits and debt ratios that put it
in the same PIGS manure pen as the Southern Europe nations heaving in
convulsion.
FASCIST BUSINESS MODEL
Take a minute to
be reminded of the model at work for almost two decades, ever since Goldman
Sachs took control of the USDept Treasury under the destructive hand of
Robert Rubin in 1992. Much has been written in the past few years in these
columns about the Fascist Business Model, where large corporate interests are
merged with the state. Federal policy actually melds with those of Wall
Street, or the former is directed by the latter. Much has been written about
the near total lack of remedy, lack of reform, lack of liquidation, and lack
of law enforcement. The key characteristic of the Fascist Business Model
is that its corruption and inefficiency lead to a total breakdown of the
system. Its conclusion is the failure of the state and breakdown of the
economy. The housing market failure and chronic insolvency is its bitter
fruit. The insolvent banking system is its backfire blast. The TARP Fund
fiasco was a huge flag signal of the corruption climax rooted in extortion.
The Louisiana Oil Volcano is just icing on the cake. The ultimate breakdown
will be seen as a USTreasury default, whether technical or actual.
Jim Willie CB
Home
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Jackass website
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Jim
Willie CB is a statistical analyst in marketing research and retail
forecasting. He holds a PhD in Statistics. His career has stretched
over 24 years. He aspires to thrive in the financial editor world,
unencumbered by the limitations of economic credentials. Visit his free
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